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                                                                  Exhibit 10.26

This FUNDING AGREEMENT is made on the   26th   day of July, 2000, between Gary
Elwood Walker (the "VENDOR") and SMTC CORPORATION ("SMTC-US").

RECITALS

A.  The Vendor, SMTC Nova Scotia Company (the "PURCHASER") and SMTC-US have
entered into a share purchase agreement dated July 26, 2000 (the "SHARE PURCHASE
AGREEMENT").

B.  In accordance with the terms of the Share Purchase Agreement, the
Transferred Shares have been transferred by the Vendor to the Purchaser.

C.  The sale of the Transferred Shares to the Purchaser in exchange for the
Share Payment in accordance with the terms of the Share Purchase Agreement will
be a taxable event for the Vendor for both Canadian and United States income tax
purposes.

D.  SMTC-US has agreed to provide a series of loans to the Vendor in the manner
contemplated in this Agreement in order to fund the Taxes owing by the Vendor as
a result of the sale of the Transferred Shares.

FOR VALUE RECEIVED, the parties agree as follows:

1.  DEFINITIONS.

    (a)  In this Agreement, the following terms shall have the meanings set out
         below:

         (i)    CALCULATION NOTICE has the meaning given to it in section 2(d);

         (ii)   CANADIAN TAXES has the meaning given to it in section 2(d);

         (iii)  CASH PROCEEDS has the meaning given to it in section 2(i);

         (iv)   CERTIFICATE has the meaning given to it in section 6 of the
                Share Purchase Agreement;

         (v)    CLASS Y SHARE PROVISIONS means the rights, privileges,
                restrictions and conditions attaching to the Class Y Shares as
                set out in the Corporation's articles of amalgamation dated
                August 31, 1994, as amended to the date of this Agreement;

         (vi)   CLASS Y SHARES means the Class Y non-voting preferred shares in
                the capital of the Corporation;

         (vii)  CLOSING means the closing of the Initial Public Offering;
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         (viii) CORPORATION means SMTC Manufacturing Corporation of Canada;

         (ix)   EFFECTIVE DATE means the day immediately preceding the Closing;

         (x)    FINAL LOAN has the meaning given to it in section 2(g);

         (xi)   FIRST LOAN has the meaning given to it in section 2(b);

         (xii)  INDEPENDENT ACCOUNTANT means a mutually acceptable independent
                accounting firm;

         (xiii) INITIAL PUBLIC OFFERING means the offering of exchangeable
                shares by the Corporation pursuant to a prospectus dated July
                20, 2000 and the offering by SMTC-US of shares of common stock
                pursuant to a registration statement dated July 20, 2000;

         (xiv)  INTERIM LOAN has the meaning given to it in section 2(c);

         (xv)   LOANS has the meaning given to it in section 2(g);

         (xvi)  PLEDGED SHARES has the meaning given to in section 2(i);

         (xvii) RELEVANT PROPORTION means the proportion of shares of SMTC-US
                common stock ultimately received by the Vendor as a result of
                the exchange of Class Y Shares for Class L shares of SMTC-US
                under the Share Purchase Agreement, compared with the total
                number of shares of SMTC-US common stock that the Vendor holds
                on Closing;

         (xviii) SHARE PAYMENT has the meaning given to it in section 4 of the
                 Share Purchase Agreement;

         (xix)   SHARE PURCHASE AGREEMENT has the meaning given to it in recital
                 A above;

         (xx)    SMTC-US means SMTC Corporation, a corporation existing under
                 the laws of Delaware;

         (xxi)   TAXES means all taxes on income or profit imposed by a Canadian
                 or US federal, provincial or state taxing authority and any
                 interest or penalties thereon and TAX has a corresponding
                 meaning;

         (xxii)  TAXES AMOUNT has the meaning given to it in section 2(d);

         (xxiii) TAX AMOUNT PER SHARE means an amount equal to the Taxes Amount
                 divided by the total number of shares of SMTC-US common stock
                 that the Vendor holds on Closing;

         (xxiv)  TRANSFERRED SHARES has the meaning given to it in recital A of
                 the Share Purchase Agreement;
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         (xxv)   US DOLLAR EQUIVALENT means, in respect of an amount expressed
                 in Canadian currency (the "CANADIAN CURRENCY AMOUNT") at any
                 date, the product obtained by multiplying (i) the Canadian
                 Currency Amount by (ii) the noon buying rate on such date for
                 such Canadian currency expressed in U.S. dollars as certified
                 for customs purposes by the Federal Reserve Bank of New York;
                 and

         (xxvi)  US TAXES has the meaning given to it in section 2(c).

    (b)  Unless the context indicates otherwise, capitalized terms used but not
         defined in this Agreement shall have the meanings given to them in the
         Class Y Share Provisions and the Share Purchase Agreement.

2.  LOANS FOR TAXES.

    (a)  The Vendor's obligation to sell the Transferred Shares and to deliver
         share certificates for the Transferred Shares to the Purchaser in
         accordance with the Share Purchase Agreement is conditional upon SMTC-
         US and the Vendor entering into this Agreement.

    (b)  The parties acknowledge that in order to obtain the Certificate, the
         Vendor will be required to (i) make a payment to the Canadian tax
         authorities on account of the Vendor's liability for Taxes under the
         Income Tax Act (Canada) or (ii) provide security of an equal amount in
         the form of a bank guarantee. On or before the day that is 28 days
         after the Effective Date, SMTC-US shall provide: (iii) a loan to the
         Vendor (the "FIRST LOAN") in the U.S. Dollar Equivalent of an amount
         equal to the amount the Vendor is required to pay to the Canadian tax
         authorities in order to obtain the Certificate or (iv) a bank guarantee
         equal to the amount in (iii) above to the Canadian tax authorities on
         the Vendor's behalf. The Purchaser shall be responsible for all costs
         and expenses related to any bank guarantee provided in accordance with
         this section 2(b).

    (c)  On or before each of September 5, 2000 and January 6, 2001, SMTC-US
         shall make a loan (each, an "INTERIM LOAN") to the Vendor in an amount
         equal to the US federal and state Taxes ("US TAXES") which must be paid
         by the Vendor in respect of the sale of the Transferred Shares on each
         of September 15, 2000 and January 16, 2001, respectively, in order to
         avoid incurring a penalty or interest charges for underpayment of such
         Taxes or instalments relating thereto. The determination of the US
         Taxes payable on each of the foregoing dates shall be made by the
         Vendor and the Vendor shall provide SMTC-US with written notification
         of such determinations in each case not later than five (5) business
         days prior to the last date on which the applicable Interim Loan is to
         be advanced.

    (d)  On or before March 1, 2001 but not earlier than January 20, 2001, the
         Vendor shall deliver to SMTC-US a notice (the "CALCULATION NOTICE")
         specifying the total amount of Taxes payable by him as a consequence of
         the sale of the Transferred Shares to the Purchaser in accordance with
         the Share Purchase
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         Agreement (the "TAXES AMOUNT") and setting out in reasonable detail the
         basis upon which such amount was calculated. The Calculation Notice
         shall separately identify the amount of Canadian Taxes ("CANADIAN
         TAXES") and the amount of US Taxes included in the Taxes Amount.

    (e)  Within five (5) business days after receipt by SMTC-US of the
         Calculation Notice, SMTC-US shall provide written notice to the Vendor
         stating that it (i) accepts the Taxes Amount set out in the Calculation
         Notice or (ii) disputes the amount set out in the Calculation Notice
         and elects to have the Taxes Amount calculated by an Independent
         Accountant in accordance with section 2(f). If SMTC-US fails to provide
         written notice to the Vendor in accordance with and within the time
         specified in this paragraph, SMTC-US shall be deemed to have accepted
         the Taxes Amount in the Calculation Notice.

    (f)  If SMTC-US makes an election under section 2(e)(ii), the Independent
         Accountant shall calculate the Taxes Amount. The Independent
         Accountant's calculation of the Taxes Amount shall, in the absence of
         manifest error, be conclusive and binding.

    (g)  If the Taxes Amount (as finally determined in accordance with sections
         2(d)-(f) above) is less than the aggregate of all funds advanced by
         SMTC-US under the First Loan, if any, and the Interim Loans, if any,
         the Vendor shall forthwith repay such difference to SMTC-US on account
         of such loans. In all other cases, on or before April 5, 2001, SMTC-US
         shall make a loan (the "FINAL LOAN" and, together with the First Loan,
         if any, and each Interim Loan, if any, the "LOANS") to the Vendor in an
         amount equal to the excess of the Taxes Amount over the aggregate
         amount, if any, of the First Loan and the Interim Loans.

    (h)  The Vendor shall use all proceeds from the Loans to pay the Taxes
         Amount;

    (i)  The Loans made by SMTC-US to the Vendor in accordance with this section
         2 shall be on the following terms and conditions:

        (i)    the Vendor shall deliver to SMTC-US on each date on which a Loan
               is made a promissory note, in the form attached hereto as
               Schedule "A", having a principal amount equal to the amount
               advanced under such Loan;

        (ii)   the Loans shall bear interest at the applicable federal rate;
               such interest shall be payable by the Vendor to SMTC-US on an
               annual basis or on such other basis as the parties may agree;

        (iii)  the term of each Loan shall be twenty (20) years;

        (iv)   the Loans shall be repayable at the option of the Vendor in whole
               or in part at any time or from time to time without notice or
               penalty;

        (v)    as security for the Loans to be made hereunder, the Vendor shall,
               on the date of this Agreement, pledge all of the shares of SMTC-
               US that he holds,
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               including those shares received in the Share Payment and
               substitutions therefor (the "PLEDGED SHARES") to SMTC-US, and the
               pledge shall be in the form attached hereto as Schedule "B";

        (vi)   if the Vendor receives a refund of any amount paid to the
               Canadian or US tax authorities for or on account of Taxes payable
               by the Vendor as a consequence of the sale of the Transferred
               Shares to the Purchaser, the Vendor shall apply such refund
               within ten (10) business days of receipt thereof to the repayment
               of the Loans;

        (vii)  the Vendor shall be required to repay the First Loan in the event
               of a material breach or violation of section 6 of the Share
               Purchase Agreement;

        (viii) on each sale or other transfer of a Pledged Share (including any
               securities substituted therefore) for proceeds which include cash
               or cash equivalents ("CASH PROCEEDS"), the Vendor will pay to
               SMTC-US, as a repayment of the Loans, on a pro rata basis or
               otherwise as SMTC-US in its discretion shall determine, an amount
               equal to the lesser of (A) the Tax Amount Per Share, (B) the
               after-Tax Cash Proceeds received by the Vendor and (C) the amount
               outstanding under the Loans immediately prior to such sale or
               other transfer. For greater certainty, the Vendor shall not be
               required under any circumstances to apply any proceeds received
               on a sale or other transfer of Pledged Shares (including any
               securities substituted therefore) which are not in the form of
               cash (or cash equivalents) to the repayment of the Loans; and

        (ix)   notwithstanding any other provision in this Agreement, SMTC-US
               shall not be required to provide Loans to the Vendor in an
               aggregate amount exceeding $2,500,000.

    (j)  SMTC-US shall, in a timely manner, increase the compensation payable to
         the Vendor in his capacity as an employee of SMTC-US or any affiliate
         of SMTC-US by an amount sufficient to fund, on an after-Tax basis, the
         interest payable by the Vendor on the Loans under any applicable
         Canadian or US Tax law or the interpretation or administration thereof.
         If the Vendor ceases to be employed by SMTC-US or any affiliate of
         SMTC-US at any time the Loans, or any portion of the Loans, continue to
         be outstanding, SMTC-US shall fully indemnify the Vendor, on an after-
         Tax basis, for any such Taxes or interest amounts.

3.  VENDOR'S REPRESENTATIONS.  The Vendor represents and warrants to the
    Purchaser and SMTC-US as follows:

    (a)  the Vendor legally and beneficially owns all of the Transferred Shares
         with a good and marketable title thereto free and clear of any liens,
         pledges, charges, mortgages, encumbrances and other security interests
         or claims of others;

    (b)  the Vendor has the power and capacity to execute and deliver this
         Agreement and to perform his obligations hereunder;
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    (c)  the Vendor represents and warrants that he is a resident of the United
         States of America; and

    (d)  this Agreement has been duly and validly executed and delivered by the
         Vendor and is a valid and legally binding obligation of the Vendor
         enforceable against him in accordance with its terms, subject, as to
         enforcement, to bankruptcy, insolvency and other laws affecting
         creditors' rights generally and to general principles of equity.

4.  PURCHASER'S REPRESENTATIONS.  The Purchaser represents and warrants to the
    Vendor and SMTC-US as follows:

    (a)  the Purchaser has the corporate power and capacity to execute and
         deliver this Agreement and to perform its obligations hereunder;

    (b)  the execution and delivery of this Agreement, and the performance by
         the Purchaser of its obligations hereunder have been duly and validly
         authorized by it and no other corporate proceedings or approvals on its
         part or on the part of its directors or shareholders (if necessary) are
         required to authorize this Agreement; and

    (c)  this Agreement has been duly and validly executed and delivered by the
         Purchaser and is a valid and legally binding obligation of the
         Purchaser enforceable against the Purchaser in accordance with its
         terms, subject, as to enforcement, to bankruptcy, insolvency and other
         laws affecting creditors' rights generally and to general principles of
         equity.

5.  SMTC-US'S REPRESENTATIONS.  SMTC-US represents and warrants to the Vendor
    and the Purchaser as follows:

    (a)  SMTC-US has the corporate power and capacity to execute and deliver
         this Agreement and to perform its obligations hereunder;

    (b)  the execution and delivery of this Agreement, and the performance by
         SMTC-US of its obligations hereunder have been duly and validly
         authorized by it and no other corporate proceedings or approvals on its
         part or on the part of its directors or shareholders (if necessary) are
         required to authorize this Agreement; and

    (c)  this Agreement has been duly and validly executed and delivered by
         SMTC-US and is a valid and legally binding obligation of SMTC-US
         enforceable against SMTC-US in accordance with its terms, subject, as
         to enforcement, to bankruptcy, insolvency and other laws affecting
         creditors' rights generally and to general principles of equity.

6.  GENERAL.

    (a)  The representations and warranties of the parties contained in this
         Agreement shall survive the completion of the transactions contemplated
         by this Agreement.
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    (b)  Each of the parties shall, from time to time, take or cause to be taken
         such action and execute and deliver or cause to be executed and
         delivered to the other such documents and further assurances as may, in
         the reasonable opinion of the other party, be necessary or advisable to
         give effect to this Agreement.

    (c)  Time shall be of the essence in this Agreement.

    (d)  No party may assign this Agreement without the written consent of the
         other parties. This Agreement shall enure to the benefit of and be
         binding upon the parties and their respective successors and permitted
         assigns.

    (e)  This Agreement constitutes the entire agreement between the parties
         with respect to the subject matter hereof and supersedes all prior
         negotiations and understandings.

    (f)  No provision in this Agreement may be amended or waived except in
         writing.

    (g)  This Agreement shall be governed by and interpreted in accordance with
         the laws of the State of Delaware and each of the parties hereby
         irrevocably submits to the jurisdiction of the state or federal courts
         sitting in Delaware.

    (h)  Any provision of this Agreement which is invalid or unenforceable shall
         not affect any other provision and shall be deemed to be severable.

                           - SIGNATURE PAGE FOLLOWS -
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IN WITNESS WHEREOF the parties have duly executed this Agreement.

SMTC CORPORATION



By: Paul Walker
    ----------------------
      Paul Walker


By: /s/ Richard Smith
    ----------------------
      Richard J. Smith



                                      /s/ Gary Walker
                                      ----------------------
                                      GARY ELWOOD WALKER