Document:

Deferred Share Units Agreement

 EXHIBIT 10.2 
  
 SMTC MANUFACTURING CORPORATION OF CANADA 
 DEFERRED SHARE UNITS 
 AGREEMENT 
  
 In recognition of the important contributions that John Caldwell (the “Executive”) can make to the success of SMTC
Corporation and its Affiliates, SMTC Manufacturing Corporation of Canada (the “Corporation”) hereby grants to the Executive the deferred share units award described below. 
  
 1. The Deferred Share Unit Award. The Corporation hereby grants to the Executive Sixty-six Thousand (66,000) Units
(the “Award”). A “Unit” is an amount equal to the Fair Market Value (as defined below) of a single share of Common Stock (as defined below) on the Grant Date (as defined below). 
  
 a. The Executive is not entitled to any dividends payable on the Common
Stock. 
  
 b. The Award shall not be interpreted to bestow upon
the Executive any equity interest or ownership in the Corporation or any Affiliate. 
  
 c. The Executive acknowledges that the Board of Directors of SMTC Corporation shall continue to manage SMTC Corporation as such Board of Directors deems appropriate, and that such Board of Directors is under no
obligation to manage SMTC Corporation or take any action so as to maximize the value of the Award or avoid any diminution in value of the Award. 
  
 d. The Board of Directors, in its sole discretion, may make additional grants of Units to the Executive from time to time. 
  
 2. Definitions. The following definitions will apply for purposes of
this Agreement. 
  
 a. “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. 
  
 b. “Board of Directors” means the board of directors of SMTC
Corporation. 
  
 c. “Cause” shall have the meaning as
set forth in section 4.8 of the Employment Agreement. 

 d. “Common Stock” means a share of common stock, $0.01 par value per share, of SMTC
Corporation. 
  
 e. “Employment Agreement” means the
employment agreement between the Corporation and the Executive, dated February 7, 2005. 
  
 f. “Fair Market Value” means the closing price of the Common Stock for the day immediately preceding the Payment Date; provided, that if such day is not a trading day, fair market value shall mean the
closing price of the Common Stock for the next preceding day which is a trading day. For this purpose, the “closing price” of the Common Stock on any trading day will be the last sale price with respect to such Common Stock, or, in case no
such sale takes place on such day, the average of the high bid and low asked prices in the over-the-counter market with respect to such Common Stock, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or
such other similar system then in use; or, if on any such date such Common Stock is not quoted by any such organization, the average of the closing bid and asked prices with respect to such Common Stock, as furnished by a professional market maker
making a market in such Common Stock selected by the Board of Directors of SMTC Corporation in good faith; or, if no such market maker is available, the fair market value of such Common Stock as of such day as determined in good faith by the Board
of Directors of SMTC Corporation. 
  
 g. “Grant Date”
means the date on which this Agreement was executed as indicated on the signature page hereof. 
  
 h. “Payment Date” means a date determined by the Board of Directors in its sole discretion that is within sixty (60) days of the occurrence of a Termination Event, subject to adjustment pursuant to Sections
5b and 6 hereof. 
  
 i. “Termination Event” means the
Executive’s termination of employment by reason of death, disability, voluntary resignation with the Corporation and its Affiliates or termination of employment by the Corporation or its Affiliates other than for Cause. 
  
 3. Vesting. Subject to Section 5b, the entire Award shall be fully
vested on the Grant Date. 
  
 4. Adjustments Based on Certain
Changes in the Common Stock. In the event of any stock split, reverse stock split, stock dividend, recapitalization or similar change affecting the Common Stock, the Award shall be equitably adjusted. 
  
 5. Termination of Employment. On the Payment Date, the Corporation
shall pay to the Executive the Fair Market Value of the Award in a single cash lump sum payment. 
  
 6. Change of Control. In the event that of a Change of Control (as defined in Section 4.4 of the Employment Agreement), a Termination Event will be
deemed to have 

 occurred on the date of the closing of the Change of Control (or series of transactions constituting the Change of
Control), and the Payment Date shall be adjusted to be ten (10) days after such closing date. 
  
 7. Determination by the Board of Directors. Any determination by the Board of Directors in its reasonable discretion concerning any provision hereto shall be binding upon the Corporation, SMTC Corporation, and
the Executive. 
  
 8. Designation of Beneficiary. The
Executive may designate or change the designation of a beneficiary or beneficiaries to receive any payment due hereunder upon his death by filing a written designation with the Corporation. The Corporation shall be bound by the last designation
filed with it by the Executive. In the absence of such designation of a beneficiary by the Executive, or if no beneficiary so designated shall survive him, the Executive’s beneficiary shall be his or her estate. Any amounts due hereunder
payable to the beneficiary or beneficiaries shall be made on the same terms and shall be subject to the same conditions as if such amounts were paid to the Executive. 
  
 9. Employment Rights. This Deferred Share Units Agreement shall not create any right of the Executive to continued
employment with the Corporation or its Affiliates or limit the right of Corporation or its Affiliates to terminate the Executive’s employment at any time and shall not create any right of the Executive to employment with the Corporation or any
of its Affiliates. Except to the extent required by applicable law that cannot be waived, the loss of the Award shall not constitute an element of damages in the event of termination of the Executive’s employment even if the termination is
determined to be in violation of an obligation of the Corporation or its Affiliates to the Executive by contract or otherwise. 
  
 10. Unfunded Status. The obligations of the Corporation and its Affiliates hereunder shall be contractual only and all such payments shall be made
from the general assets of the Corporation or its Affiliates. The Executive shall rely solely on the unsecured promise of the Corporation and nothing herein shall be construed to give the Executive or any other person or persons any right, title,
interest or claim in or to any specific asset, fund, reserve, account or property of any kind whatsoever owned by the Corporation or any Affiliate. 
  
 11. No Assignment. No right or benefit or payment under the Plan shall be subject to assignment or other transfer nor shall it be liable or subject
in any manner to attachment, garnishment or execution. 
  
 12.
Withholding. The Corporation and its Affiliates shall have the right to withhold from any payment made under this Deferred Share Units Agreement any U.S., Canadian, state, provincial, local or other taxes required by law to be withheld with
respect to the payment. 
  
 13. Amendment or Termination.
This Deferred Share Units Agreement may be amended by mutual written agreement of the parties; provided, however, that the Corporation may in its sole discretion deem a Termination Event to have occurred, terminate this Deferred Share Units
Agreement and accelerate the payment of benefits hereunder. 

 IN WITNESS WHEREOF, SMTC Manufacturing Corporation of Canada has executed this Deferred Share Units
Agreement as of the 7th day of February, 2005. 
  

			
	 SMTC MANUFACTURING CORPORATION OF CANADA

		
	 By:
	 	 /s/ William Brock

	 Title:
	 	 Director

  

	
	Acknowledged and agreed:
	
	 /s/ John Caldwell

	John Caldwell

  

			
	 SMTC CORPORATION

		
	 By:
	 	 /s/ William Brock

	 Title:
	 	 DirectorBonus Plan

 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. 

 “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. 

	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. 

	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

	 Title:
	 	 Director

	
	SMTC MANUFACTURING CORPORATION OF CANADA
		
	 By:
	 	 /s/ William Brock

	 Title:
	 	 Director

  

	
	 Acknowledged:

	
	 /s/ John Caldwell

	 John Caldwell

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