Exhibit 10.1

 

BACKSTOP AGREEMENT

 

This Backstop Agreement (the “Agreement”) is made as of May 29, 2019 by and
between SMTC Corporation, a Delaware corporation (the “Company”) and Gregory
Weaver (“GW”). Except as otherwise indicated herein, capitalized terms used
herein are defined in Section 8 hereof.

 

WHEREAS, the Company has determined to conduct a rights offering (the “Rights
Offering”) to allow its stockholders and the holders of the Company’s 2018
warrants (the “2018 Warrants Holders”, and together with the stockholders, the
“Holders”) (as of record on May 24, 2019) the right to purchase shares of its
common stock, par value $0.01 per share (the “Common Stock”), in proportion to
the number of shares of Common Stock that each Holder of the Company owns (and
in the case of the 2018 Warrants Holders, the shares exercisable by the 2018
Warrants Holders) as of the record date (each a “Right” and, collectively, the
“Rights”), at a price per share of $3.14, which is equal to that offered to
Holders in the Rights Offering (the “Subscription Price”), as to be further
described in a registration statement filed by the Company with the Commission,
the related prospectus to be filed with the Commission (collectively, the “Shelf
Takedown Documents”) and the offering materials related thereto to be provided
to Holders (together, with the Shelf Takedown Documents, the “Offering
Documents”); and

 

WHEREAS, GW has committed to purchase a number of shares of Common Stock having
an aggregate dollar value equal to $750,000, at a price per share equal to the
Subscription Price (the “Total Subscription”).

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

 

Section 1     Subscription Commitment.

 

(a)               Material Terms of the Rights Offering. The material terms of
the Rights Offering shall be as set forth in the Offering Documents, which will
reflect the material terms set forth on Exhibit A. GW, with respect to the
Common Stock it agrees to purchase hereunder, shall be afforded substantially
the same rights, privileges and preferences (including the benefit of any
representations and warranties) as those afforded to the Holders pursuant to the
Offering Documents.

 

(b)               Basic Subscription Commitment. Pursuant to the terms and
subject to the conditions of this Agreement, in connection with the Rights
Offering, GW hereby agrees to purchase a number of shares of Common Stock having
an aggregate dollar value equal to the Basic Subscription Amount.

 

(c)               Over-Subscription Commitment. Pursuant to the terms and
subject to the conditions of this Agreement, in connection with the Rights
Offering, GW hereby agrees to purchase in connection with its over-subscription
rights in the Rights Offering a number of shares of Common Stock up to an
aggregate dollar value calculated by subtracting the Basic Subscription Amount
(expressed in dollars) from the Total Subscription (expressed in dollars). As
soon as reasonably practicable following the expiration date for receipt of
subscriptions to the Rights Offering (the “Response Deadline”), the Company and
the Subscription Agent shall determine the Over-Subscription Amount and provide
notice thereof to GW. In connection with providing its completed subscription
documentation to the Subscription Agent, GW will tender the Total Subscription
amount to the Subscription Agent in accordance with the directions of the
Subscription Agent, with such amounts to be applied to satisfy the commitment
obligations set forth herein.

 

 

 

 

(d)               Backstop Commitment. Pursuant to the terms and subject to the
conditions of this Agreement, to the extent that the aggregate value of the
Basic Subscription Amount plus the Over-Subscription Amount is less than the
Total Subscription, GW hereby agrees to purchase a number of shares of Common
Stock, at a price per share equal to the Subscription Price, having an aggregate
dollar value equal to the Backstop Amount. As soon as reasonably practicable
following the Response Deadline, the Company and the Subscription Agent shall
determine the Backstop Amount and provide notice thereof to GW.

 

(e)               Cutback. Upon written notice to GW, the Company may reduce the
Total Subscription amount to a number, expressed in dollars, calculated by
subtracting from the Total Offering Size the following: (i) the dollar value of
all shares purchased by participants in the Rights Offering other than GW
(exclusive of any other backstop commitments from other participants in the
Rights Offering) plus (ii) the Pro Rata Backstop Participation of all parties
other than GW multiplied by the Total Offering Backstop; provided, however, that
in no event shall the Backstop Subscription Amount be reduced. To the extent the
Total Subscription amount is reduced, the Subscription Agent shall return unused
funds to GW.

 

Section 2     The Closing. Except as otherwise set forth in the Offering
Documents, the closing of GW’s subscription for the Basic Subscription Amount,
Over-Subscription Amount, and Backstop Amount, as applicable, shall take place
as soon as reasonably practicable following the Response Deadline at a place
mutually agreeable to the Company and GW (the “Closing”). At the Closing, the
Company shall deliver to GW the certificates evidencing the shares of Common
Stock subscribed for pursuant to Section 1 (or, if GW shall so request in
writing at least three (3) business days before the Closing, such shares of
Common Stock shall be delivered in electronic format), and the Subscription
Agent shall disburse to the Company (i) the Basic Subscription Amount, (ii) the
Over-Subscription Amount and, if any, (iii) the Backstop Amount.

 

Section 3     Representations and Warranties of the Company. As a material
inducement to GW to enter into this Agreement and subscribe for the Rights, the
Company hereby represents and warrants that:

 

(a)               Organization and Corporate Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of Delaware
and is qualified to do business in every jurisdiction in which its ownership of
property or conduct of business requires it to qualify. The Company has all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own and operate its properties and to carry on its
business as now conducted and presently proposed to be conducted, and all
requisite corporate power and authority to carry out the transactions
contemplated by this Agreement, including, without limitation, the Rights
Offering.

 

- 2 -

 

 

(b)               Capital Stock. All of the issued and outstanding shares of
capital stock of the Company have been duly and validly authorized and issued.
The Company has reserved sufficient authorized but unissued shares of Common
Stock to consummate the Rights Offering on the terms set forth on Exhibit A
hereto and the transactions contemplated hereby. All shares of Common Stock to
be purchased by GW from the Company pursuant to this Agreement have been duly
authorized for issuance and sale pursuant to this Agreement and, when issued and
delivered by the Company pursuant to this Agreement against payment therefor,
will be validly issued, fully paid and nonassessable.

 

(c)               Authorization; No Breach; Compliance with Laws. The execution,
delivery and performance of this Agreement and any other agreement contemplated
hereby to which the Company is a party have been duly authorized by the Company.
The execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby will not (i) conflict with
or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company is a party or by
which the Company is bound or to which any of the property or assets of the
Company is subject, (ii) result in any violation of the provisions of the
charter or by-laws of the Company or (iii) result in any violation of any
statute, including, without limitation, the (x) Delaware General Corporation
Law, (y) any applicable securities laws, or (z) any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the Company or
any of its properties or assets. Except for the registration of the offer and
sale of the Rights under the Securities Act and such consents, approvals,
authorizations, registrations or qualifications as may be required under the
Exchange Act and applicable state securities laws in connection with the Rights
Offering, no consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is required for
the execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby.

 

(d)               Broker’s Fees. There is no investment banker, broker, finder
or other intermediary or advisor that has been retained by or is authorized to
act on behalf of the Company or any of its Affiliates who might be entitled to
any fee, commission or reimbursement of expenses from GW as a result of the
consummation of the transactions contemplated hereby (including, without
limitation, the Rights Offering).

 

Section 4     Representations and Warranties of GW. As a material inducement to
the Company to enter into this Agreement, GW hereby represents and warrants
that:

 

(a)               Organization and Power. GW is an individual duly organized,
validly existing and in good standing and is qualified to do business in every
jurisdiction in which its ownership of property or conduct of business requires
it to qualify. GW has all requisite power and authority and all material
licenses, permits and authorizations necessary to own and operate its properties
and to carry on its business as now conducted and presently proposed to be
conducted.

 

- 3 -

 

 

(b)               Authorization; No Breach. The execution of this Agreement by
GW and the consummation by GW of the transactions contemplated hereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which GW is a party or
by which GW is bound or to which any of its property or assets is subject, nor
will such actions result in any violation of the provisions of any statute or
any order, rule or regulation of any court or governmental agency or body having
jurisdiction over GW or its property or assets in each case in a manner that
would adversely impact GW’s ability to subscribe for the Rights hereunder; and,
except for the registration of the offer and sale of the Rights under the
Securities Act and such consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and applicable state
securities laws in connection with the Rights Offering, no consent, approval,
authorization or order of, or filing or registration with, any such court or
governmental agency or body is required for the execution, delivery and
performance of this Agreement by GW and the consummation by GW of the
transactions contemplated hereby in each case in a manner that would adversely
impact GW’s ability to subscribe for the Rights and perform its obligations
hereunder.

 

(c)               Broker’s Fees. There is no investment banker, broker, finder
or other intermediary or advisor that has been retained by or is authorized to
act on behalf of GW who might be entitled to any fee, commission or
reimbursement of expenses from either the Company or any of its Affiliates as a
result of consummation of the transactions contemplated hereby (including,
without limitation, the Rights Offering).

 

Section 5     Conditions to Obligations of Each Party to Effect the Closing. The
respective obligations of each party to consummate the transactions contemplated
hereby are subject to the satisfaction on or prior to the Closing of each of the
following conditions:

 

(a)               The Shelf Takedown Documents shall have been filed with the
Commission and declared effective; no stop order suspending the effectiveness of
the Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and any request of the Commission for inclusion of additional
information in the Shelf Takedown Documents or otherwise shall have been
complied with.

 

(b)               No action, suit or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any jurisdiction
or before any arbitrator wherein an unfavorable judgment, decree, injunction,
order or ruling would prevent the performance of this agreement or any of the
transactions contemplated hereby (including, without limitation, the Rights
Offering), declare unlawful the transactions contemplated by this Agreement
(including, without limitation, the Rights Offering) or cause such transactions
to be rescinded.

 

(c)               The Rights Offering shall have been consummated in conformity
with the requirements and conditions set forth in the Offering Documents.

 

- 4 -

 

 

Section 6     Conditions to Obligations of the Company to Effect the Closing.
Subject to Section 5 above, the obligations of the Company to consummate the
transactions contemplated hereby are subject to each of the representations and
warranties of GW contained in this Agreement being true and correct in all
material respects as of the date hereof and at and as of the date of the Closing
as if made at and as of such time, except that, to the extent such
representations and warranties address matters only as of a particular date,
such representations and warranties shall, to such extent, be true and correct
in all material respects at and as of such particular date as if made at and as
of such particular date.

 

Section 7     Conditions to Obligations of GW to Effect the Closing. Subject to
Section 5 above, the obligations of GW to consummate the transactions
contemplated hereby and to purchase the Total Subscription amount are subject to
each of the representations and warranties of the Company contained in this
Agreement being true and correct in all material respects as of the date hereof
and at and as of the date of the Closing as if made at and as of such time,
except that, to the extent such representations and warranties address matters
only as of a particular date, such representations and warranties shall, to such
extent, be true and correct in all material respects at and as of such
particular date as if made at and as of such particular date.

 

Section 8     Definitions. For the purposes of this Agreement, the following
terms have the meanings set forth below:

 

“Affiliate” means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such Person. For purposes of this definition, “control” when used with
respect to any specified Person means the power to direct or cause the direction
of the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by Contract or otherwise, and the
terms “controlling” and “controlled” have meanings correlative of the foregoing.

 

“Backstop Amount” means the amount calculated as follows: Total Subscription
minus the sum of (i) the Basic Subscription Amount and (ii) the
Over-Subscription Amount, which such aggregate dollar amount will be
finally-determined by the Company and the Subscription Agent, as described in
Section 1.

 

“Basic Subscription Amount” means the aggregate dollar amount of the full
pro-rata number of shares of Common Stock offered to GW pursuant to the Rights
Offering before any allocation of over-subscription privileges.

 

“Commission” means the Securities and Exchange Commission or any governmental
body or agency succeeding to the functions thereof.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Over-Subscription Amount” means the aggregate dollar amount of the number of
shares of Common Stock allotted to GW by the Subscription Agent in the Rights
Offering, as described in Section 1; provided, however, that the sum of the
Basic Subscription Amount plus the Over-Subscription Amount shall not exceed the
Total Subscription.

 

- 5 -

 

 

“Person” means an individual, a partnership, a corporation, a limited liability
company, association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.

 

“Pro Rata Backstop Participation” with respect to any participant in the Total
Offering Backstop Amount, is a percentage calculated as follows: the backstop
amount of such participant divided by the Total Offering Backstop Amount.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Subscription Agent” means Computershare Trust Company, N.A.

 

“Total Offering Size” means a number, expressed in dollars, equal to the maximum
aggregate value of securities offered in the Rights Offering.

 

“Total Offering Backstop Amount” means a number, expressed in dollars, equal to
the total backstop commitment of all parties agreeing to provide a backstop to
the Rights Offering substantially similar to the Backstop Commitment, as may be
reduced by cutback provisions substantially similar to those set forth in
Section 1(e) of this Agreement.

 

Section 9     Termination. This Agreement may be terminated at any time prior to
the Closing, as follows:

 

(a)               by mutual written consent of the Company and GW;

 

(b)               by either the Company or GW if any governmental entity shall
institute any suit or action challenging the validity or legality of, or seeking
to restrain the consummation of, the transactions contemplated by this Agreement
(including, without limitation, the issuance of Rights pursuant to the Rights
Offering);

 

(c)               by the Company, in the event GW has breached any
representation, warranty, or covenant contained in this Agreement, in any
material respect, provided that the Company has notified GW of the breach, and
the breach has continued without cure for a period of fifteen (15) days after
the notice of such breach or for such longer period so long as such breach is
curable by GW through the exercise of its reasonable efforts, and GW continues
to exercise such reasonable efforts; and

 

(d)               by GW, in the event that the Company has breached any
representation, warranty, or covenant contained in this Agreement, in any
material respect, provided that GW has notified the Company of the breach, and
the breach has continued without cure for a period of fifteen (15) days after
the notice of such breach or for such longer period so long as such breach is
curable by the Company through the exercise of its reasonable efforts, and the
Company continues to exercise such reasonable efforts.

 

- 6 -

 

 

Section 10 Miscellaneous.

 

(a)               Indemnification. Each party hereby releases and agrees to
indemnify, defend and hold harmless the other party and its Affiliates, from and
against losses resulting from the breach of any of the representations and
warranties provided by such party hereunder; provided, however, the Company
shall not be obligated to indemnify, defend or hold harmless GW or its
Affiliates to the extent (i) GW suffers losses arising out of disclosure of
material, non-public information by GW or its Affiliates to a third party and
(ii) such disclosure has not been disclosed to the Company as of the date of
this Agreement.

 

(b)               Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not; provided that neither this Agreement nor any of the
rights, interests, or obligations hereunder may be assigned by any party without
the prior written consent of the other party.

 

(c)               Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by any party
in connection herewith shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.

 

(d)               Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.

 

(e)               Construction. Whenever the context requires, each term stated
in either the singular or the plural shall include the singular and the plural,
and pronouns stated in either the masculine, the feminine or the neuter gender
shall include the masculine, feminine and neuter. All references to Sections and
Paragraphs refer to sections and paragraphs of this Agreement. The use of the
word “including” in this Agreement shall be by way of example rather than
limitation.

 

(f)                Amendment and Waiver. The provisions of this Agreement may be
amended and waived only with the prior written consent of the parties hereto.

 

(g)               Counterparts; Facsimile Signature. This Agreement may be
executed simultaneously in two or more counterparts, any one of which need not
contain the signatures of more than one party, but all such counterparts taken
together shall constitute one and the same Agreement. This Agreement may be
executed by facsimile signature.

 

- 7 -

 

 

(h)               Governing Law. This Agreement will be governed in all respects
by the laws of the State of Delaware, without regard to the principles of
conflicts of law of such state.

 

(i)                 Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable express courier service
(charges prepaid) or mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid.

 

[Signature Page Follows]

 

 

 

 

 

- 8 -

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Backstop Agreement on
the date first written above.

 

 

SMTC CORPORATION             By: /s/ Edward Smith     Name: Edward Smith    
Title: President and Chief Executive Officer  

 

 

GREGORY A. WEAVER             By: /s/ Gregory A. Weaver     Name: Gregory A.
Weaver  

 

 

 

 

- 9 -

 

 

EXHIBIT A
Material Terms of Rights Offering

 

Issuer SMTC Corporation Rights Pro rata rights to purchase shares of SMTC
Corporation common stock, par value $0.01, by existing stockholders and the 2018
Warrants Holders Transferability Non-transferable and non-assignable Aggregate
Offering Price An amount to be determined by the Company, up to $10,000,000
Offering Price $3.14 per share Offered Shares That number of common shares equal
to the amount calculated by dividing the Aggregate Offering Price by the
Offering Price Standby Commitment GW commitment to purchase the Backstop Amount