SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant []
Check the appropriate box:
[] Preliminary proxy statement [] Confidential, For Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive proxy statement
[] Definitive additional materials
[] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
SMTC CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(s) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
---------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction.
---------------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------------
[] Fee paid previously with preliminary materials:
-----------------------------------------------------------------
[] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
(1) Amount previously paid:
---------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------------------
(4) DATE FILED:
---------------------------------------------------------------------------
[LOGO] smtc
defining manufacturing solutions
635 HOOD ROAD
MARKHAM, ONTARIO
CANADA L3R 4N6
April 5, 2002
Dear Stockholder:
You are cordially invited to attend the 2002 Annual Meeting of Stockholders
(the "Annual Meeting") of SMTC Corporation to be held at the Crowne Plaza
Toronto Centre, located at 225 Front Street West, Toronto, Ontario, Canada M5V
2X3 on Tuesday, May 7, 2002, at 2:00 p.m., Eastern Daylight Time.
Details of the business to be conducted at the Annual Meeting are given in
the attached proxy statement and Notice of Annual Meeting of Stockholders. You
should read with care the proxy statement that describes the nominees for
director and presents other important information about the proposals.
Whether or not you plan to attend, and regardless of the number of shares
you own, it is important that your shares be represented at the Annual Meeting.
You are accordingly urged to complete, sign, date and promptly return the
accompanying proxy in the enclosed postage-prepaid envelope. If you send in
your proxy card and then decide to attend the Annual Meeting to vote your
shares in person, you may still do so. Your proxy is revocable in accordance
with the procedures set forth in the proxy statement.
On behalf of the Board of Directors, I would like to express our
appreciation for your continued interest in our Company. We look forward to
seeing you at the Annual Meeting.
Sincerely,
/s/ Paul Walker
Paul Walker
President and
Chief Executive Officer
SMTC Corporation
[LOGO] smtc
defining manufacturing solutions
SMTC CORPORATION
635 HOOD ROAD
MARKHAM, ONTARIO
CANADA L3R 4N6
-----------------
NOTICE OF 2002 ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD MAY 7, 2002
The Annual Meeting of Stockholders (the "Annual Meeting") of SMTC
Corporation, a Delaware corporation (the "Company"), will be held at the Crowne
Plaza Toronto Centre, located at 225 Front Street West, Toronto, Ontario,
Canada M5V 2X3 on Tuesday, May 7, 2002, at 2:00 p.m., Eastern Daylight Time,
for the following purposes:
1. To elect three Class II directors to serve until the 2005 Annual
Meeting of Stockholders and until their successors are elected and qualified
in accordance with the by-laws of the Company.
2. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
The foregoing items of business are more fully described in the proxy
statement which is attached and made a part hereof.
The Board of Directors has fixed the close of business on Tuesday, March 19,
2002 as the record date for determining the stockholders entitled to notice of
and to vote at the Annual Meeting and any adjournment or postponement thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
URGED TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE IN THE POSTAGE-PREPAID ENVELOPE PROVIDED TO ENSURE YOUR REPRESENTATION
AND THE PRESENCE OF A QUORUM AT THE ANNUAL MEETING. IF YOU SEND IN YOUR PROXY
CARD AND THEN DECIDE TO ATTEND THE ANNUAL MEETING TO VOTE YOUR SHARES IN
PERSON, YOU MAY STILL DO SO. YOUR PROXY IS REVOCABLE IN ACCORDANCE WITH THE
PROCEDURES SET FORTH IN THE PROXY STATEMENT.
By Order of the Board of Directors,
/s/ Derrick D' Andrade
Derrick D'Andrade
Secretary
Markham, Ontario
April 5, 2002
SMTC CORPORATION
635 HOOD ROAD
MARKHAM, ONTARIO
CANADA L3R 4N6
-----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
General Information
The Board of Directors of SMTC Corporation, a Delaware corporation (the
"Company"), is soliciting the enclosed proxy form from our stockholders. The
proxy will be used at our 2002 Annual Meeting of Stockholders to be held at
2:00 p.m., Eastern Daylight Time on Tuesday, May 7, 2002, at the Crowne Plaza
Toronto Centre, 225 Front Street West, Toronto, Ontario, Canada M5V 2X3.
This Proxy Statement contains important information regarding our annual
meeting. Specifically, it identifies the proposal on which you are being asked
to vote, provides information that you may find useful in determining how to
vote, and describes voting procedures.
We use several abbreviations in this proxy statement. We refer to our
company as "SMTC" or the "Company." We call our board of directors the "Board."
References to "fiscal 2001" mean our 2001 fiscal year, which began on January
1, 2001 and ended on December 31, 2001.
This Proxy Statement and the accompanying proxy are being sent by mail to
common stockholders, the trustee for the special voting share and holders of
exchangeable shares on or about April 5, 2002. The solicitation of proxies will
be conducted by mail and the Company will bear all attendant costs. The Company
will reimburse brokerage firms and other persons representing beneficial owners
of shares for their expenses in forwarding solicitation materials to such
beneficial owners. Proxies may be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation,
personally or by telephone, facsimile or telegram.
Who May Attend And Vote?
Each holder of the Company's common stock, par value $.01 per share ("Common
Stock"), is entitled to one vote for each share of Common Stock owned as of the
record date, and CIBC Mellon Trust Company (the "Trustee"), the holder of the
Company's special voting share (the "Special Voting Share"), is entitled to one
vote for each exchangeable share (an "Exchangeable Share") of SMTC
Manufacturing Corporation of Canada ("SMTC Canada"), a subsidiary of the
Company, outstanding as of the record date, March 19, 2002 (other than
Exchangeable Shares owned by the Company and its affiliates). Holders of Common
Stock and the Special Voting Share are collectively referred to as
"Stockholders." Votes cast with respect to Exchangeable Shares will be voted
through the Special Voting Share by the Trustee as directed by the holders of
Exchangeable Shares, except votes cast with respect to Exchangeable Shares
whose holders request to vote directly in person as proxy for the Trustee at
the Annual Meeting. On the record date, 23,132,220 shares of our Common Stock
were issued and outstanding, one share of the Company's Special Voting Stock
was issued and outstanding and 5,557,559 Exchangeable Shares of SMTC Canada
were issued and outstanding (excluding Exchangeable Shares owned by the Company
and its affiliates, which are not voted). Each Exchangeable Share is
exchangeable at any time, at the option of its holder, for one share of Common
Stock.
At least ten days before the 2002 Annual Meeting of Stockholders, SMTC will
make a complete list of the Stockholders entitled to vote at the Annual Meeting
open to the examination of any Stockholder for any purpose germane to the
Annual Meeting at its principal executive offices at 635 Hood Road, Markham,
Ontario, Canada L3R 4N6. The list will also be made available to Stockholders
present at the Annual Meeting.
1
How Do I Vote?
As a Stockholder, you have the right to vote on certain business matters
affecting the Company. The proposal that will be presented at the Annual
Meeting, and upon which you are being asked to vote, is discussed in the
section entitled "The Proposal". Each share of SMTC Common Stock you own
entitles you to one vote. The Trustee is entitled to one vote for each
Exchangeable Share of SMTC Canada outstanding as of the record date (other than
Exchangeable Shares owned by the Company and its affiliates). The enclosed
proxy card indicates the number of shares you own.
By signing and returning the proxy card according to the enclosed
instructions, you are enabling the individuals named on the proxy card to vote
your shares at the meeting in the manner you indicate. We encourage you to sign
and return the proxy card even if you plan to attend the meeting. In this way,
your shares will be voted even if you are unable to attend the meeting. Your
shares will be voted as you direct on the proxy card. If you attend the
meeting, you may deliver your completed proxy card in person or fill out and
return a ballot that will be supplied to you. In the absence of instructions on
a properly executed proxy, proxies from holders of Common Stock will be voted
FOR the Proposal.
Votes with respect to Exchangeable Shares represented by valid voting
instructions received by the Trustee will be cast by the Trustee in accordance
with those instructions. If a properly executed voting instruction card is not
received by the Trustee from a holder of Exchangeable Shares, the votes to
which such holder is entitled will not be exercised.
What Does the Board of Directors Recommend?
If you submit the proxy card but do not indicate your voting instructions,
the persons named as proxies on your proxy card will vote in accordance with
the recommendations of the Board of Directors. The Board recommends that you
vote FOR the three nominees for director identified in the Proposal.
What Vote Is Required For The Proposal?
A majority of the shares entitled to vote, present in person or represented
by proxy, constitutes a quorum for the transaction of business at the Annual
Meeting. For the election of directors, the three candidates receiving the
greatest number of affirmative votes (a "plurality vote") of the votes attached
to shares of Common Stock and the Special Voting Share will be elected.
An automated system administered by the Company's transfer agent will
tabulate votes cast by proxy at the Annual Meeting, and an officer of the
Company will tabulate votes cast in person at the Annual Meeting.
Shares represented by proxies that indicate an abstention or a "broker
non-vote" will be counted as shares that are present and entitled to vote on
the matter for purposes of determining the presence or absence of a quorum. A
"broker non-vote" exists with respect to any shares represented at the Annual
Meeting held by brokers or nominees as to which (i) instructions have not been
received from the beneficial owners or persons entitled to vote and (ii) the
broker or nominee does not have discretionary voting power on a particular
matter. With respect to the Proposal requiring a plurality vote, broker
non-votes will have no effect. Further, an abstention will have no effect on
the outcome of the vote on the Proposal.
May I Change My Vote After I Return My Proxy Card?
Yes. A proxy may be revoked by the Stockholder giving the proxy at any time
before it is voted by written notice of revocation delivered to the Company
prior to the meeting, and a prior proxy is automatically revoked by a
Stockholder giving a subsequent proxy or attending and voting at the Annual
Meeting. Attendance at the Annual Meeting in and of itself does not revoke a
prior proxy.
Holders of Exchangeable Shares who wish to direct the Trustee to cast the
votes attached to the Special Voting Share on their behalf should follow
carefully the instructions provided by the Trustee, which accompany this Proxy
Statement. The procedure for instructing the Trustee differs in certain
respects from the procedure for delivering a proxy, including the place for
depositing the instructions and the manner for revoking the proxy.
2
THE PROPOSAL: ELECTION OF DIRECTORS
The number of directors on the Board is currently fixed at nine. The
Company's Amended and Restated Certificate of Incorporation and By-laws divide
the Company's Board of Directors into three classes. The members of each class
of directors serve staggered three year terms.
In July 2001, David Dominik resigned from our Board of Directors and from
the Audit Committee of the Board. The Board accepted his resignation and
appointed Blair Hendrix to fill the vacancy created by Mr. Dominik's
resignation from each of the Board and the Audit Committee and to serve for the
remainder of Mr. Dominik's term, which expires at the annual meeting of
stockholders in 2004.
In August 2001, Prescott Ashe informed the Company that he was resigning as
a member of the Board of Directors of the Company and as a member of the
Compensation Committee. In October 2001, the Board appointed William Brock to
the Board of Directors to fill the vacancy created by the resignation of Mr.
Ashe from the Board for the remainder of Mr. Ashe's term, which expires at the
annual meeting of stockholders in 2002. The Board also appointed Mr. Brock to
the Audit Committee of the Board.
In January 2002, Anthony Sigel resigned from the Board of Directors and as a
member of the Nominating Committee and the Audit Committee. In March 2002, the
Board of Directors appointed Khalil Barsoum to fill the vacancy on the Board
created by Mr. Sigel's resignation for the remainder of Mr. Sigel's term, which
expires at the annual meeting of stockholders in 2002.
The Board is composed of three Class I directors (Blair Hendrix, Gary Walker
and Paul Walker), three Class II directors (Khalil Barsoum, Mark Benham and
William Brock) and three Class III directors (Stephen Adamson, Michael
Griffiths and Ian Loring), whose terms will expire upon the election and
qualification of directors at the Annual Meeting of Stockholders held in 2004,
2002 and 2003, respectively. At each Annual Meeting of Stockholders, directors
will be elected for a full term of three years to succeed those directors whose
terms are expiring.
At this Annual Meeting, the Stockholders will elect three Class II
directors, each to serve a three year term until the 2005 Annual Meeting of
Stockholders and until a qualified successor is elected and qualified or until
the director's earlier resignation or removal. The three directors whose terms
of office expire at the 2002 Annual Meeting have been nominated for re-election
to our Board of Directors. The Board has no reason to believe that any of the
nominees named below will be unable or unwilling to serve as a director if
elected. If, however, any nominee cannot or will not serve as a director, the
persons named on your proxy card may vote for a substitute nominee designated
by the Board.
Certain information about the Board nominees is furnished below.
Class II Director Nominees
Khalil Barsoum has served as a director since March 2002. Mr. Barsoum
retired from IBM Corporation in October 2001 as General Manager, Communications
Sector, after a career of 35 years. In the capacity of General Manager,
Communications Sector, Mr. Barsoum had global responsibility for serving
clients in telecommunications, service provider, utilities, media and
entertainment industries. During his 35 year tenure at IBM, he also held the
positions of Chairman and Chief Executive of IBM UK Holdings (1997) and
President and CEO of IBM Canada (1995-1996).
Mark Benham has served as a director since July 1999. Mr. Benham was a
co-founder of Celerity Partners, Inc., a private equity investment firm, and
has been a Partner of that firm since 1992. Previously he was a Senior
Investment Officer of Citicorp Venture Capital, Ltd., and prior to that he was
an advisor to Yamaichi UniVen Co., Ltd., the venture capital subsidiary of
Yamaichi Securities International. Mr. Benham is also a director of DDi Corp.
3
William Brock has served as a director since October 2001. Mr. Brock retired
from The Toronto-Dominion Bank in January 2000 as Deputy Chairman and Director,
after a career of 37 years. From March 2000 to February 2001, he was President
and CEO of Dover Industries, a Toronto Stock Exchange listed company, which
manufactures ice cream cones, flour, and assorted disposable fast food paper
products. Presently, he is also a director of Dynacare Inc., a leading provider
of clinical laboratory services in North America; Chairman, Board of Trustees,
Heritage Trust at the University of Guelph; and Chairman of The University of
Western Ontario's Capital Campaign.
The three nominees receiving the highest number of affirmative votes of the
votes attached to the Common Stock and the Special Voting Share, voting
together as a single class, represented and voting on the Proposal at the
Annual Meeting will be elected Class II directors of the Company to serve their
respective terms or until their successors have been elected and duly qualified.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE NOMINEES NAMED
ABOVE.
4
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth our directors and executive officers, their
ages as of March 31, 2002, the positions currently held by each person and
their place of residence. All of the directors and executives have been with us
since the former SMTC Corporation ("Surface Mount") combined with HTM Holdings,
Inc. ("HTM") in July 1999 to form the current SMTC Corporation, except in the
case of certain directors and officers as indicated in their biographies.
Name and Place of Residence Age Office
--------------------------- --- ------
Paul Walker.................. 44 President, Chief Executive
Unionville, Ontario Officer and Director (1)(2)(5)
Philip Woodard............... 47 Chief Operating Officer (2)
Newmarket, Ontario
Gary Walker.................. 41 Executive Vice President,
Monte Sereno, California Business Programs Management
and Director (2)
Derrick D'Andrade............ 48 Executive Vice President,
Richmond Hill, Ontario Engineering and Quality and
Secretary (2)
Stanley Plzak................ 54 Executive Vice President,
Appleton, Wisconsin North American Operations
Gary Itenson................. 42 Senior Vice President,
Toronto, Ontario Business Development and
Supplier Strategy
Frank Burke.................. 48 Chief Financial Officer and
Toronto, Ontario Treasurer (2)
Blair Hendrix................ 37 Director (3)(4)
Wellesley, Massachusetts
William Brock................ 65 Director (1)(3)(4)*
Toronto, Ontario
Ian Loring................... 35 Director (5)
San Francisco, California
Stephen Adamson.............. 45 Director (4)(5)
Los Angeles, California
Mark Benham.................. 50 Director*
Woodside, California
Michael Griffiths............ 50 Director (1)(3)
Toronto, Ontario
Khalil Barsoum............... 57 Director*
Toronto, Ontario
--------
(1) Also a member of the board of directors of SMTC Canada.
(2) Also an officer of SMTC Canada.
(3) Member of the Audit Committee.
(4) Member of the Compensation Committee.
(5) Member of the Nominating Committee.
* Biography appears above under "The Proposal."
5
Paul Walker has served as President and Chief Executive Officer and as a
director of SMTC since its inception in 1998. He is also an officer and
director of SMTC Canada. He co-founded Surface Mount, a predecessor to SMTC
Corporation, in 1985. Previously he was employed at Brock Electronics, a
manufacturer and distributor of production equipment for the electronics
industry, as Director of Business Management from 1982 to 1985 and at Motorola
Canada, an integrated communications and embedded electronics solutions
provider, as Program Director from 1979 to 1982. Paul Walker is the brother of
SMTC's Executive Vice President, Business Programs Management, Gary Walker.
Philip Woodard joined Surface Mount in 1992 as Vice President, Materials. He
currently serves as our Chief Operating Officer. Previously he was employed at
Motorola Canada, an integrated communications and embedded electronics
solutions provider, from 1977 to 1992 where he progressed through various
positions to Director of Materials.
Gary Walker currently serves as Executive Vice President, Business Programs
Management. He has been a director of SMTC since its inception in 1998. He is
also an officer of SMTC Canada. He co-founded Surface Mount, a predecessor to
SMTC Corporation, in 1985. Previously he was employed at Brock Electronics, a
manufacturer and distributor of production equipment for the electronics
industry, as a Manufacturers Representative from 1982 to 1985 and at Motorola
Canada, an integrated communications and embedded electronics solutions
provider, from 1980 to 1982. Gary Walker is Paul Walker's brother.
Derrick D'Andrade co-founded Surface Mount in 1985. Formerly Vice President,
Engineering, he was previously employed at Motorola Canada as Manufacturing
Engineering Manager from 1979 to 1985 and at Sunbeam Canada, a manufacturer of
home appliances, as Manufacturing Manager from 1975 to 1979.
Stanley Plzak joined SMTC as our Executive Vice President, Design and
Sub-Assembly Operations, upon our acquisition of Pensar Corporation in July
2000, and since May 2001, he has served as our Executive Vice President, North
American Operations. Mr. Plzak was a founder and director of Pensar and served
as its President and Chief Executive Officer since its inception in 1983. His
career includes various technical, managerial, and executive positions in
industrial controls, medical, marine propulsion and electronics manufacturing
services industries, and he has served as a member of the adjunct faculty of
the University of Wisconsin. He is currently a director and the chairman of the
board of the IPC (Association Connecting the Electronics Industries).
Gary Itenson joined Surface Mount in April 1996. Previously, he was employed
at Future Electronics, an electronics components distributor, from 1981 to 1996
where his career progressed from field sales to sales management to strategic
account/multi-region sales management to division general management.
Frank Burke joined SMTC as Chief Financial Officer in October 2001. He also
serves as Chief Financial Officer of SMTC Canada. Previously, he was employed
at Magna International Inc., the world's largest integrated manufacturer of
automotive parts to original equipment manufacturers, from 1987 to 2001, where
he progressed from Manager, Corporate Finance to Vice-President and Treasurer.
Blair Hendrix has served as a director since July 2001. Mr. Hendrix joined
Bain Capital, LLC, a private equity investment firm, in 2000 as a Vice
President. Prior to joining Bain Capital he was Executive Vice President and
Chief Operating Officer of DigiTrace, Inc., a medical technology and service
company. Previously Mr. Hendrix was a management consultant with Corporate
Decisions, Inc., working in the specialty manufacturing, retail and healthcare
industries. Mr. Hendrix also serves as a director of Dade Behring, Inc., Trade,
Inc. and Vivra Asthma and Allergy.
Ian Loring has served as a director since June 2000. Mr. Loring joined Bain
Capital, LLC, a private equity investment firm, in 1996. He has been a managing
director at Bain Capital since January 2001 and was a principal there from 1997
to 2000. From 1993 to 1996, Mr. Loring was a Vice President at Berkshire
Partners,
6
where he worked in the speciality manufacturing, technology and retail
industries. Mr. Loring also serves as a director of Therma-Wave, Inc.
Stephen Adamson has served as a director since July 1999. Mr. Adamson is
Managing Partner of Celerity Partners, Inc., a private equity investment firm.
Mr. Adamson has been with Celerity Partners, Inc. since July 1995. Mr. Adamson
is also a director of Financial Pacific Insurance Group, Inc.
Michael Griffiths has served as a director since July 1999. Mr. Griffiths
has been President of Kilmer Van Nostrand Co. Limited, or KVN, a private
investment holding company, since 2000 and has served there in various other
capacities since 1979. Previously, Mr. Griffiths was a manager with Clarkson
Gordon Chartered Accountants (now Ernst & Young), a public accounting firm,
with responsibility for the audit, tax and related management matters of a
variety of public clients.
Information Regarding the Board of Directors and its Committees
During fiscal 2001, the Board held 31 meetings and acted by unanimous
written consent on four occasions. No director, except William Brock, Ian
Loring and Gary Walker, attended fewer than 75% of all of the fiscal 2001
meetings of the Board and its committees on which he served after becoming a
member of the Board.
The Board has three standing committees: the Nominating Committee, the Audit
Committee and the Compensation Committee.
The Nominating Committee of the Board of Directors consists of Stephen
Adamson, Ian Loring and Paul Walker. Prior to his resignation from the Board
and the committees on which he served, Anthony Sigel was a member of the
Nominating Committee. It did not meet in separate session during fiscal 2001.
The Nominating Committee identifies, screens and recommends qualified
candidates to fill vacancies on the Board of Directors. The Nominating
Committee does not consider nominees recommended by stockholders to fill
vacancies on the Board.
The Audit Committee, which met five times in fiscal 2001, consists of
William Brock, Michael Griffiths and Blair Hendrix. Prior to their resignations
from the Board and the committee(s) on which they served, David Dominik and
Anthony Sigel were members of the Audit Committee. The Audit Committee
recommends engagement of the Company's independent auditors and is primarily
responsible for reviewing (i) the scope of the independent auditors' annual
audit and their compensation and independence, (ii) the general policies and
procedures of the Company with respect to accounting and financial controls and
(iii) any change in accounting principles, significant audit adjustments
proposed by the auditors and any recommendations that the auditors may have
with respect to policies and procedures.
The Board adopted and approved a charter for the Audit Committee in July
2000, and the Audit Committee evaluates its sufficiency on an annual basis. In
February 2002, the Board approved a revised charter, a copy of which is
attached hereto as Appendix A.
All Audit Committee members are "independent" as defined under Rule
4200(a)(15) of the National Association of Securities Dealers' ("NASD") listing
standards and as required by Rule 4350(d)(2)(A) of the NASD's listing
standards, except Mr. Hendrix, who serves as a non-independent director of the
Audit Committee. Mr. Hendrix is a Vice President at Bain Capital, LLC.
Investment funds affiliated with Bain Capital, LLC, taken together as a group,
are our largest stockholder. Mr. Hendrix was appointed to serve as a member of
the Board of Directors and as a member of the Audit Committee in July 2001. The
Board of Directors has determined that the addition of Mr. Hendrix to the Audit
Committee is an appropriate and acceptable appointment because of his extensive
industry and financial expertise and background as well as his familiarity with
Company's accounting practices and that his appointment is required by the best
interests of the Company and its stockholders. The Board of Directors has
determined that Mr. Hendrix's appointment to the Audit Committee complies with
the conditions stipulated by Rule 4350(d)(2)(B) of the NASD's listing standards
that allow "one non-independent director" to serve on the Audit Committee of
the Board of Directors under exceptional and limited circumstances.
7
The Compensation Committee currently consists of Stephen Adamson, William
Brock and Blair Hendrix. Prior to his resignation from the Board and the
committee on which he served, Prescott Ashe was a member of the Compensation
Committee. The Compensation Committee did not meet in separate session in 2001.
The general duties of the Compensation Committee are (i) to provide a general
review of the Company's compensation and benefit plans and (ii) to review and
establish compensation practices and policies for the officers of the Company.
Compensation of Directors
We pay no additional remuneration to our employees for serving as directors
or on committees. We generally pay no compensation to our non-employee
directors for serving on the Board or on any committee, except that in October
2001 the Board approved a compensation arrangement for William Brock and in
March 2002 the Board approved a compensation arrangement for Khalil Barsoum.
Under those arrangements, we pay each of Mr. Brock and Mr. Barsoum a $25,000
base fee per year for serving on our Board and meeting fees of $500 for Board
conference calls or Board Committee meetings and $1,000 for full Board
meetings. We also granted to Mr. Brock in October 2001 an option to purchase
25,000 shares of our common stock with an exercise price of $0.80 per share and
to Mr. Barsoum in March 2002 an option to purchase 25,000 shares of our common
stock with an exercise price of $2.31 per share. We expect to grant to each of
Mr. Brock and Mr. Barsoum an option to purchase 2,500 shares on each
anniversary of his appointment as a non-employee director.
Compensation Committee Interlocks and Insider Participation
No interlocking relationship exists between any member of the Company's
Board or Compensation Committee and any member of the Board of Directors or
compensation committee of any other company, nor has any interlocking
relationship existed in the past.
8
AUDIT COMMITTEE REPORT
Notwithstanding anything to the contrary set forth in any of SMTC's previous
filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this proxy statement, in whole or in part, the following report shall
not be incorporated by reference into any such filings.
The Audit Committee of the Board of Directors currently consists of three
directors, William Brock, Michael Griffiths and Blair Hendrix. The duties of
the Audit Committee are (i) to review with management and the independent
auditors the scope and results of any and all audits, the nature of any other
services provided by the independent auditors, the independence of the
auditors, changes in the accounting principles applied to the presentation of
the Company's financial statements, and any comments by the independent
auditors on the Company's policies and procedures with respect to internal
accounting, auditing and financial controls, (ii) to review the consistency and
reasonableness of the financial statements contained in the Company's quarterly
and annual reports prior to filing them with the Securities and Exchange
Commission (or with any other regulatory authority) and discuss the results of
these quarterly reviews, annual audits and any other matters required to be
communicated by the independent auditors under generally accepted auditing
standards, and (iii) to make recommendations to the board of directors on the
engagement of the independent auditors. The Board of Directors has adopted a
written charter of the Audit Committee, the sufficiency of which is evaluated
each year by the Audit Committee.
Consistent with its duties, the Audit Committee has reviewed and discussed
with the Company's management the audited financial statements for the year
ended December 31, 2001. KPMG LLP issued their unqualified report dated
February 12, 2002, except as to note 24 which is as of March 19, 2002, on
SMTC's financial statements.
The Audit Committee has also discussed with KPMG LLP the matters required to
be discussed by AICPA Statement on Auditing Standards No. 61, "Communication
with Audit Committees." The Audit Committee has also received the written
disclosures and the letter from KPMG LLP required by Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees," and has
discussed with KPMG LLP its independence as an auditor. The Audit Committee has
also considered whether KPMG LLP's provision of non-audit services is
compatible with its independence.
Based on these reviews and discussions, the Audit Committee has recommended
to the Board of Directors that SMTC's audited financial statements for the year
ended December 31, 2001 be included in the Annual Report on Form 10-K for the
fiscal year then ended.
By the Audit Committee of the Board of Directors:
William Brock
Michael Griffiths
Blair Hendrix
March 2002
9
RELATED PARTY TRANSACTIONS
Stockholders Agreement
Certain of our current stockholders and optionholders are parties to a
stockholders agreement that, among other things, provides for registration
rights and contains provisions regarding the transfer of shares.
Directors' Relationships with Major Stockholders
Certain of our current directors are affiliated with our major stockholders.
Paul Walker and Gary Walker are executive officers, stockholders and directors.
Blair Hendrix and Ian Loring are affiliated with Bain. Stephen Adamson and Mark
Benham are affiliated with Celerity. Michael Griffiths is affiliated with
Kilmer.
Purchases from an Affiliate of Major Stockholders
Investment funds affiliated with Bain and Celerity are also stockholders of
DDi Corp., one of our suppliers. Our transactions with DDi Corp., which totaled
approximately $3.2 million in 2001, are on equivalent terms as those with our
other suppliers.
Certain Loans and Payments Made to Executive Officers
In connection with the exchange and reclassification of certain of Gary
Walker's shares of stock of SMTC Canada into common stock of SMTC in July 2000,
we agreed to fund any tax liability incurred by Mr. Walker as a result of the
exchange by making an interest-free loan to him and to compensate him for any
tax payable by him on any imputed interest on such loan. As of December 31,
2001, we had lent $690,000 to Mr. Walker under this arrangement. The loan is
secured by a first priority security interest over all of Mr. Walker's shares
of capital stock of SMTC and will be repayable on a pro-rata basis at such time
and to the extent that Mr. Walker receives after-tax cash proceeds in respect
of such shares.
In connection with the acquisition of Pensar, we requested that the former
stockholders of Pensar file an election that allows us to deduct for income tax
purposes the goodwill related to the acquisition. We lent $4,546,000, on an
interest-free basis, to the former stockholders of Pensar, including Stanley
Plzak, to fund the tax liability incurred as a result of the election. The
loans are secured by a first priority security interest over all of the shares
of capital stock of SMTC held by the stockholders and will be repayable on a
pro-rata basis at such time and to the extent that the stockholders receive
cash proceeds in respect of such shares, with the balance due on July 27, 2004.
The options granted in fiscal 2001 to each of the named executive officers
named in the Summary Compensation Table are indicated in the Long-Term
Compensation column.
The Company and each of Paul Walker, Philip Woodard, Gary Walker, Derrick
D'Andrade and Stanley Plzak have entered into employment agreements as more
fully described under "Employment Arrangements".
SECURITIES OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 15, 2002, information regarding
beneficial ownership. The table sets forth the number of shares beneficially
owned and the percentage ownership for:
. each person who is known by us to own beneficially more than 5% of our
outstanding shares of common stock;
. each executive officer named in our summary compensation table and each
director; and
. all executive officers and directors as a group.
As of March 15, 2002, our outstanding equity securities (including
exchangeable shares of our subsidiary, SMTC Canada) consisted of 28,689,779
shares.
10
Unless otherwise indicated below, to our knowledge, all persons listed below
have sole voting and investment power with respect to their shares of common
stock, except to the extent authority is shared by spouses under applicable
law. Unless otherwise indicated below, each entity or person listed below
maintains a mailing address of c/o SMTC Corporation, 635 Hood Road, Markham,
Ontario, Canada L3R 4N6.
The number of shares beneficially owned by each stockholder is determined
under rules promulgated by the Securities and Exchange Commission. The
information is not necessarily indicative of beneficial ownership for any other
purpose. Under these rules, beneficial ownership includes any shares as to
which the individual or entity has sole or shared voting or investment power
and any shares as to which the individual or entity has the right to acquire
beneficial ownership within 60 days after March 15, 2002 through the exercise
of any stock option, warrant or other right. The inclusion in the following
table of those shares, however, does not constitute an admission that the named
stockholder is a direct or indirect beneficial owner.
Shares Beneficially Owned(*)
---------------------------------------
Percentage
of Shares
Beneficially
Name and Address Shares Options Total Owned
---------------- --------- ------- --------- ------------
Principal Stockholders:
Bain Capital Funds(1)(2).................................... 3,838,137 -- 3,838,137 13.4%
c/o Bain Capital, LLC
111 Huntington Avenue
Boston, Massachusetts 02199
Celerity EMSIcon, LLC(1).................................... 3,480,927 -- 3,480,927 12.1%
c/o Celerity Partners
11111 Santa Monica Boulevard
Suite 1127
Los Angeles, California 90025
Kilmer Electronics Group Limited............................ 2,045,263 -- 2,045,263 7.1%
Scotia Plaza, Suite 2700
P.O. 127
40 King Street West
Toronto, Ontario, Canada M5H 3Y2
RBC Global Investment Management Inc.,...................... 1,512,800 -- 1,512,800 5.2%
RT Investment Management Holdings Inc.,
The Royal Trust Company,
and Royal Mutual Funds Inc.(3)
(addresses are listed in footnote 3)
Directors and Executive Officers:
Paul Walker(4).............................................. 1,376,394 37,500 1,413,894 4.9%
Philip Woodard(5)........................................... 379,483 25,820 405,303 1.4%
Gary Walker................................................. 1,479,904 12,500 1,492,404 5.2%
Derrick D'Andrade(6)........................................ 1,189,894 12,500 1,202,394 4.2%
Stanley Plzak............................................... 356,605 -- 356,605 1.2%
Blair Hendrix............................................... -- -- -- --
William Brock............................................... -- 5,000 5,000 #
Ian Loring(1)(7)............................................ 133,034 -- 133,034 #
Stephen Adamson(1)(8)....................................... 3,480,927 -- 3,480,927 12.1%
Mark Benham(1)(8)........................................... 3,480,927 -- 3,480,927 12.1%
Michael Griffiths........................................... -- -- -- --
Khalil Barsoum.............................................. -- 5,000 5,000 #
All Directors and executive officers as a group (14 persons) 8,403,241 167,890 8,571,131 29.7%
11
--------
* The number of shares of common stock deemed outstanding on March 15, 2002
with respect to a person or group includes (a) 28,689,779 shares outstanding
on such date and (b) all options that are currently exercisable or will be
exercisable within 60 days of March 15, 2002 by the person or group in
question.
# Represents an amount less than 1.0% of shares outstanding.
(1) The shares of common stock included in the table include shares held
through investment in EMSIcon Investments, LLC. Each member of EMSIcon
Investments, LLC has sole voting and investment power as to shares held on
such member's behalf by EMSIcon Investments, LLC.
(2) Includes shares of common stock held by Bain Capital Fund VI, L.P., ("Fund
VI"); BCIP Associates II ("BCIP II"), BCIP Associates II-B ("BCIP II-B"),
BCIP Associates II-C ("BCIP II-C"); Sankaty High Yield Asset Partners, L.P.
("Sankaty"); Bain Capital V Mezzanine Fund, L.P. ("Mezzanine"); BCM Capital
Partners, L.P. ("BCM"); and BCIP Trust Associates II (("BCIP Trust II") and
collectively with Fund VI, BCIP II, BCIP II-B, BCIP II-C, Sankaty,
Mezzanine and BCM, the "Bain Capital Funds"). Does not include shares owned
by other stockholders that are subject to the Stockholders Agreement.
(3) Holdings as of December 31, 2001 as reported on Schedule 13G/A filed with
the Securities and Exchange Commission on February 15, 2002 jointly by RBC
Global Investment Management Inc. ("RBC GIM"), RT Investment Management
Holdings Inc. ("RTIM"), The Royal Trust Company ("RT") and Royal Mutual
Funds Inc. ("RMFI", and collectively, the "RT Entities"). The RT Entities
report each having shared power to vote or to direct the vote of all of
such shares of common stock and shared power to dispose or direct the
disposition of all of such shares. The RT Entities report that accounts
managed on a discretionary basis by RBC GIM, a wholly-owned subsidiary of
RTIM, are known to have the right to receive or the power to direct the
receipt of dividends from, or the proceeds from, the sale of such shares.
(RMFI, a wholly-owned subsidiary of Royal Bank of Canada, is the manager of
accounts and has delegated its investment management duties RBC GIM.) The
Royal Canadian Growth Fund, an account managed by RBC GIM and an account
for which RT serves as trustee, owns more than five percent of SMTC's
common stock. The addresses of the principal business office of each entity
are as follows: RBC Global Investment Management Inc., Royal Trust Tower,
77 King Street West, Suite 3800, Toronto, Ontario M5K 1H1; RT Investment
Management Holdings Inc., Royal Trust Tower, P.O. Box 97, 77 King Street
West, Suite 3900, Toronto, Ontario M5K 1G8; The Royal Trust Company, Royal
Trust Tower, P.O. Box 7500, Station A, 77 King Street West, 6th Floor,
Toronto, Ontario M5W 1P9; and Royal Mutual Funds Inc., Royal Trust Tower,
P.O. Box 7500, Station A, 77 King Street West, Toronto, Ontario M5W 1P9.
(4) Consists of shares owned by P.N. Walker Consulting Inc. Paul Walker is the
sole stockholder of P.N. Walker Consulting Inc. and may be deemed to
beneficially own shares owned by P.N. Walker Consulting Inc. 389,718 of
such shares are exchangeable shares of SMTC Canada.
(5) 141,422 of such shares are exchangeable shares of SMTC Canada.
(6) Consists of shares owned by Nichal, Inc. Derrick D'Andrade is the sole
stockholder of Nichal, Inc. and may be deemed to beneficially own shares
owned by Nichal, Inc. 375,718 of such shares are exchangeable shares of
SMTC Canada.
(7) The shares of common stock included in the table represent shares held by
BCIP II-B. Mr. Loring is a managing director of Bain Capital, LLC and is a
partner of BCIP II-B and accordingly may be deemed to beneficially own
shares owned by such funds. Mr. Loring disclaims beneficial ownership of
any such shares in which he does not have a pecuniary interest. The address
of Mr. Loring is c/o Bain Capital, LLC, 111 Huntington Avenue, Boston,
Massachusetts 02199.
(8) Mr. Benham and Mr. Adamson are both managing members of Celerity EMSIcon,
LLC and accordingly may be deemed to beneficially own shares owned by
Celerity EMSIcon, LLC. Mr. Benham and Mr. Adamson disclaim beneficial
ownership of any such shares in which they do not have a pecuniary
interest. The address for Mr. Benham and Mr. Adamson is c/o Celerity
Partners, 11111 Santa Monica Boulevard, Suite 1127, Los Angeles, California
90025.
12
EXECUTIVE COMPENSATION AND RELATED INFORMATION
Compensation Committee Report
Notwithstanding anything to the contrary set forth in any of SMTC's previous
filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this proxy statement, in whole or in part, the following report and
the performance graph on page 18 shall not be incorporated by reference into
any such filings.
The Compensation Committee is currently composed of three directors: Stephen
Adamson, William Brock and Blair Hendrix. The Compensation Committee is
responsible for providing a general review of the Company's compensation and
benefit plans to ensure that they meet corporate objectives, reviewing the
Chief Executive Officer's recommendations on compensation of all officers,
adopting and changing major compensation policies and practices, reporting its
recommendations to the whole Board of Directors for approval and authorization
and administering the Company's stock plans. The Compensation Committee also
has the power to select directors and officers to receive awards under the SMTC
Corporation/SMTC Manufacturing Corporation of Canada 2000 Equity Incentive
Plan. No member of this committee was an officer or employee of SMTC during
fiscal 2001.
Compensation Philosophy. SMTC has developed and implemented compensation
policies and plans that seek to align the financial interests of SMTC's senior
management with the interests of its stockholders. SMTC seeks to reward
performance in those quantitative areas believed to be important to the
long-term interests of stockholders, namely enhanced profitability, return on
invested capital and the successful implementation of the Company's business
plan. SMTC believes that any success in these quantitative areas also evidences
success in qualitative areas relating to the work environment for SMTC
employees, employee training and employee opportunity for advancement.
SMTC seeks to provide total compensation packages that will attract the best
talent to SMTC, motivate individuals to perform at their highest levels, reward
outstanding performance and retain executives whose skills are critical for
building long-term stockholder value.
Elements of Compensation. The guiding principle of the Compensation
Committee is to provide the Company's senior management with competitive
compensation opportunities based upon their contributions to the financial
success of the Company and their personal performance. It is the Compensation
Committee's objective to make a portion of senior management's compensation
contingent upon the Company's performance as well as upon his or her own level
of performance. Accordingly, the compensation package for senior management is
generally comprised of three components: (i) base salary, which reflects
individual performance and is designed to be competitive with salary levels in
the industry, (ii) discretionary performance awards payable in cash and tied to
the Company's achievement of financial performance targets and (iii) long-term
stock-based incentive awards, which strengthen the alignment of interests
between the executive officers and the Company's stockholders.
General. With respect to SMTC's senior management, compensation is
determined in consultation with the Compensation Committee by the President and
Chief Executive Officer. Compensation of all senior management, including that
of officers party to employment agreements, including the Chief Executive
Officer, is or has been founded on the policies and general guidelines
described below. SMTC's officers serve at the pleasure of the Board.
Base Salary. The base salaries for officers are determined on the basis of
the following factors: experience, personal performance, average salary levels
for comparable positions within and without the industry and changes from year
to year in an officer's functional responsibilities. The weight given to each
of these factors varies from individual to individual.
13
Performance Awards. Bonuses may be earned by executive officers on the
basis of the Company's achievement of certain corporate financial performance
goals established for each fiscal year.
Long-Term Compensation. Executive compensation is generally comprised of a
combination of cash compensation and grants of options under the SMTC
Corporation/SMTC Manufacturing Corporation of Canada 2000 Equity Incentive Plan
(the "Plan"). Stock options are generally awarded during the year on a
discretionary basis. Stock options are intended to offer an equity incentive
for superior performance and to foster the retention of key personnel through
awards structured to vest and become exercisable over time, provided that the
individual remains employed by SMTC. There is no set formula for the award of
options. Factors considered in making option awards to employees and executives
of SMTC generally include prior grants to such individual, the importance of
retaining such individual's services, such employee's potential to contribute
to the success of SMTC and such employee's past contributions to SMTC. The
actual options granted in fiscal 2001 to each of the named executive officers
is indicated in the table labeled "Option Grants in Fiscal 2001" appearing on
page 17 of this proxy statement.
In January 2002, at the recommendation of the Compensation Committee, the
Board gave the holders of options to purchase an aggregate of 1,097,000 shares
of common stock of the Company the opportunity to return their options to the
Company for cancellation. These options, which were granted on August 30, 2000,
had an exercise price of $19.88 (the "$19.88 options"). None of these options
was granted to the named executive officers. The Compensation Committee made
this recommendation to the Board because the $19.88 options had an exercise
price significantly above the Company's trading price at that time and during
several months prior to that time. The Committee believed that the $19.88
options were unlikely to be exercised in the foreseeable future and that, as a
result, they did not function as an adequate incentive. Upon cancellation of
$19.88 options surrendered by various holders, the pool of shares as to which
options may be granted under the Plan was increased by 1,087,000.
The Compensation Committee in 2002 will strive to structure an option grant
program that creates better performance incentives for management and that will
maximize the value of the Company's common stock for its current stockholders.
Employment Agreements with Executive Officers. Each of Paul Walker, our
Chief Executive Officer, Philip Woodard, Gary Walker, Derrick D'Andrade and
Stanley Plzak is party to an employment agreement with the Company. Each of
such officers receives a base salary and, with the exception of Mr. Plzak, is
eligible for an annual bonus based on achievement by the Company of certain
EBITDA (earnings before interest expense, income taxes, depreciation and
amortization) and/or other targets. In this regard, the compensation of each of
such officers, including that of the Chief Executive Officer, is tied to
corporate performance. For details regarding these employment agreements, see
"Employment Arrangements" on page 16 of this proxy statement.
Compensation Committee
Stephen Adamson
William Brock
Blair Hendrix
14
Executive Compensation
The following table sets forth information concerning the compensation for
the years ended December 31, 2001, 2000 and 1999 on a pro forma basis for our
chief executive officer and four other most highly compensated executive
officers at the end of our last fiscal year. For ease of reference, we
collectively refer to these executive officers throughout this section and
elsewhere in this proxy statement as our "named executive officers."
SUMMARY COMPENSATION TABLE
Annual Long Term
Compensation(1) Compensation
------------------ --------------------
Restricted Securities
Stock Underlying All Other
Salary Bonus Awards Options Compensation
Name and Principal Position Year ($) ($) ($) (#) ($)
--------------------------- ---- ------ ------ ---------- ---------- ------------
Paul Walker(2)................ 2001 300,000(4) -- -- -- --
President and Chief 2000 284,339(3) -- -- 150,000(5) --
Executive Officer 1999 168,612 -- -- -- --
Philip Woodard(2)............. 2001 200,000(7) -- -- -- --
Chief Operating Officer 2000 227,471(6) -- -- 50,000(5) --
1999 134,889 -- -- 26,640(8) --
Gary Walker(2)................ 2001 200,000 -- -- -- --
Executive Vice President, 2000 200,000 -- -- 50,000(5) --
Business Programs Management 1999 200,000 -- -- -- --
Derrick D'Andrade(2).......... 2001 200,000(10) -- -- -- --
Executive Vice President, 2000 227,471(9) -- -- 50,000(5) --
Engineering and Quality 1999 134,889 -- -- -- --
Stanley Plzak(11)............. 2001 275,000 -- -- -- --
Executive Vice President, 2000 294,650(12) 58,450(13) -- -- --
North American Operations 1999 -- -- -- -- --
--------
(1) Excludes perquisites and other personal benefits because such compensation
did not exceed the lesser of $50,000 or 10% of the total annual salary and
bonus for any of the named executive officers.
(2) Compensation information for Messrs. Walker, Woodard, Walker and D'Andrade
includes compensation paid by Surface Mount during periods prior to the
July 30, 1999 combination of Surface Mount and HTM, and by SMTC during
periods after the combination.
(3) Includes deferred compensation earned by Mr. Walker in 1999 of $34,339 and
2000 of $81,695.
(4) Includes deferred compensation earned by Mr. Walker in 2001 of $148,029.
(5) Represents options to purchase shares of our common stock at an exercise
price of $16.00 per share.
(6) Includes deferred compensation earned by Mr. Woodard in 1999 of $27,471
and 2000 of $65,356.
(7) Includes deferred compensation earned by Mr. Woodard in 2001 of $70,868.
(8) Represents options to purchase shares of our common stock at an exercise
price of $5.36 per share.
(9) Includes deferred compensation earned by Mr. D'Andrade in 1999 of $27,471
and 2000 of $65,356.
(10) Includes deferred compensation earned by Mr. D'Andrade in 2001 of $70,868.
(11) Mr. Plzak has been with SMTC since the acquisition of Pensar Corporation
in July 2000.
(12) The portion of Mr. Plzak's salary in 2000 paid to him prior to SMTC's
acquisition of Pensar Corporation equals $178,877. The portion of Mr.
Plzak's salary in 2000 paid to him from and after SMTC's acquisition of
Pensar Corporation equals $115,773.
(13) Paid to Mr. Plzak in the period following SMTC's acquisition of Pensar
Corporation.
15
Employment Arrangements
Paul Walker is currently employed as our President and Chief Executive
Officer pursuant to an employment agreement dated July 30, 1999, which was
effective until December 31, 2001 and will automatically renew for successive
one-year terms unless it is terminated by the parties in accordance with its
terms. This agreement has been automatically renewed pursuant to its terms
through December 31, 2002. Under the current terms of his employment agreement,
Mr. Walker receives a salary of $300,000 per year and is eligible for an annual
bonus based upon our achievement of certain EBITDA (earnings before interest
expense, income taxes, depreciation and amortization) targets. Mr. Walker's
employment agreement contains customary confidentiality provisions and a
non-compete clause which is effective during the term of the agreement, for one
year following termination of his employment if he is terminated for cause,
and, under certain other circumstances, for two years following the termination
of his employment. In the event Mr. Walker's employment is terminated by us
without cause, or by Mr. Walker for good reason, the employment agreement
provides that we will pay Mr. Walker his base salary for two years following
such termination.
Philip Woodard is currently employed as our Chief Operating Officer,
pursuant to an employment agreement dated July 30, 1999, which was effective
until December 31, 2001 and will automatically renew for successive one-year
terms unless it is terminated by the parties in accordance with its terms. This
agreement has been automatically renewed pursuant to its terms through December
31, 2002. Under the employment agreement, Mr. Woodard receives a salary of
$200,000 per year and is eligible for an annual bonus based upon our
achievement of certain EBITDA targets. Mr. Woodard's employment agreement
contains customary confidentiality provisions and a non-compete clause which is
effective during the term of the agreement, for one year following termination
of his employment if he is terminated for cause, and, under certain other
circumstances, for two years following the termination of his employment. In
the event Mr. Woodard's employment is terminated by us without cause, or by Mr.
Woodard for good reason, the employment agreement provides that we will pay Mr.
Woodard his base salary for two years following such termination.
Gary Walker is currently employed as our Executive Vice President, Business
Programs Management pursuant to an employment agreement dated July 30, 1999,
which was effective until December 31, 2001 and will automatically renew for
successive one-year terms unless it is terminated by the parties in accordance
with its terms. This agreement has been automatically renewed pursuant to its
terms through December 31, 2002. Under the employment agreement, Mr. Walker
receives a salary of $200,000 per year and is eligible for an annual bonus
based upon our achievement of certain EBITDA targets. Mr. Walker's employment
agreement contains customary confidentiality provisions and a non-compete
clause which is effective during the term of the agreement, for one year
following termination of his employment if he is terminated for cause, and,
under certain other circumstances, for two years following the termination of
his employment. In the event Mr. Walker's employment is terminated without
cause, or by Mr. Walker for good reason, the employment agreement provides that
we will pay Mr. Walker his base salary for two years following such termination.
Derrick D'Andrade is currently employed as our Executive Vice President,
Engineering and Quality pursuant to an employment agreement dated July 30,
1999, which was effective until December 31, 2001 and will automatically renew
for successive one year terms unless it is terminated by the parties in
accordance with its terms. This agreement has been automatically renewed
pursuant to its terms through December 31, 2002. Under the employment
agreement, Mr. D'Andrade receives a salary of $200,000 per year and is eligible
for an annual bonus based upon our achievement of certain EBITDA targets. Mr.
D'Andrade's employment agreement contains customary confidentiality provisions
and a non-compete clause which is effective during the term of the agreement,
for one year following termination of his employment if he is terminated for
cause and, under certain other circumstances, for two years following the
termination of his employment. In the event Mr. D'Andrade's employment is
terminated by us without cause, or by Mr. D'Andrade for good reason, the
employment agreement provides that we will pay Mr. D'Andrade his base salary
for two years following such termination.
Stanley Plzak is currently employed as our Executive Vice President, North
American Operations, pursuant to an employment agreement dated July 27, 2000,
which was effective until December 31, 2001 and will automatically renew for
successive one-year terms unless it is terminated by the parties in accordance
with its
16
terms. This agreement has been automatically renewed pursuant to its terms
through December 31, 2002. Under the employment agreement, Mr. Plzak receives a
salary of $275,000 per year. Mr. Plzak's employment agreement contains
customary confidentiality provisions and a non-compete clause which is
effective during the term of the agreement, for one year following termination
of his employment if he is terminated for cause, and, under certain other
circumstances, for the period during which he continues to receive his base
salary following the termination of his employment. In the event Mr. Plzak's
employment is terminated by us without cause, or by Mr. Plzak for good reason,
the employment agreement provides that we will pay Mr. Plzak his base salary
for one year following such termination.
Option Grants in Last Fiscal Year
The following table sets forth information concerning grants of options to
purchase shares of our common stock made to the named executive officers during
the fiscal year ended December 31, 2001.
OPTION GRANTS IN FISCAL 2001
Individual Grants
--------------------------------------------
Number of Percent of Potential Realizable Value
Securities Total Stock Price Appreciation
Underlying Options for Option Term
Options Granted to Exercise --------------------------
- Granted Employees in Price Per Expiration
Name (#) Fiscal 2001 Share ($) Date 5%($) 10%($)
---- ---------- (%) --------- ---------- ----- ------
Paul Walker...... 0 -- -- -- -- --
Philip Woodard... 0 -- -- -- -- --
Gary Walker...... 0 -- -- -- -- --
Derrick D'Andrade 0 -- -- -- -- --
Stanley Plzak.... 0 -- -- -- -- --
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
The following table sets forth information for the named executive officers
concerning stock option exercises during out last fiscal year.
AGGREGATED OPTION EXERCISES IN FISCAL 2001
AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options At
Shares Acquired Value Options At Fiscal Year-End Fiscal Year-End
On Exercise Realized (Exercisable/Unexercisable) (Exercisable/Unexercisable)
Name (#) ($) (#) ($)(1)
---- --------------- -------- --------------------------- ---------------------------
Paul Walker...... 0 -- 37,500/112,500 0/0
Philip Woodard... 0 -- 25,820/50,820 0/0
Gary Walker...... 0 -- 12,500/37,500 0/0
Derrick D'Andrade 0 -- 12,500/37,500 0/0
Stanley Plzak.... 0 -- 0/0 0/0
--------
(1) The closing price of SMTC's common stock on December 31, 2001, the last
trading day of fiscal 2001, was $1.29.
17
STOCK PERFORMANCE GRAPH
The following graph sets forth the Company's total cumulative stockholder
return as compared to the Nasdaq Composite Index and a peer group chosen by the
Company for fiscal 2001 (the "Peer Group"). The Peer Group is comprised of the
following companies: ACT Manufacturing, Inc., Benchmark Electronics, Inc.,
Manufacturers' Services Ltd., PEMSTAR Inc., Plexus Corp., SMTC Corporation and
Viasystems Group Inc.
The total stockholder return assumes $100 invested on July 21, 2000 in
Common Stock of the Company, the Nasdaq Composite Index and the Peer Group of
companies that, like the Company, (i) are publicly-traded and (ii) are mid-tier
providers of advanced electronics manufacturing services. Total return assumes
reinvestment of dividends. Historical stock price performance is not
necessarily indicative of future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG SMTC CORPORATION,
NASDAQ COMPOSITE INDEX AND PEER GROUP INDEX
[CHART]
SMTC CORPORATION PEER GROUP NASDAQ COMPOSITE INDEX
---------------- ---------- ----------------------
7/21/00 100.00 100.00 100.00
9/30/00 134.38 98.74 89.61
12/31/00 85.16 43.65 60.07
3/31/01 18.75 28.64 45.29
6/30/01 18.07 35.49 53.08
9/30/01 6.49 21.64 36.86
12/31/01 9.50 23.45 48.04
ASSUMES $100 INVESTED ON JULY 21, 2000
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDED DECEMBER 31, 2001
18
INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee, has
selected KPMG LLP as independent auditors for the year ending December 31,
2002. KPMG LLP acted as independent auditors for SMTC for the year ending
December 31, 2001. Fees to SMTC for professional services rendered by KPMG LLP
during fiscal 2001 were as follows: Audit Fees: $379,000; Audit Related Fees:
$398,000, which were in connection with securities filings ($83,000) and
acquisition related services ($315,000); Financial Information Systems Design
and Implementation Fees: $0; and All Other Fees: $360,000, which were in
connection with tax related services. We expect that representatives from KPMG
LLP will be present at the Annual Meeting and will be available to respond to
appropriate questions and have the opportunity to make a statement if they
desire.
ADDITIONAL INFORMATION
Stockholder Proposals
In order for Stockholder proposals that are submitted pursuant to Rule 14a-8
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to be
considered by SMTC for inclusion in the proxy material for SMTC's 2003 Annual
Meeting of Stockholders, they must be received by the Secretary of SMTC on or
before December 3, 2002 at its principal executive office, 635 Hood Road,
Markham, Ontario, Canada L3R 4N6.
For proposals that Stockholders intend to present at the 2003 Annual Meeting
of Stockholders outside the processes of the Rule 14a-8 of the Exchange Act,
unless the Stockholder notifies SMTC of such intent on or before February 16,
2003, any proxy that management solicits for such annual meeting will confer on
the holder of the proxy discretionary authority to vote on the proposal so long
as such proposal is properly presented at the meeting.
Notwithstanding the foregoing, our Amended and Restated By-Laws set forth
procedures Stockholders must comply with to make nominations for election to
the Board of Directors. Such nominations must be made by notice in writing
delivered or mailed to the Secretary of SMTC and received at SMTC's principal
executive office, 635 Hood Road, Markham, Ontario, Canada L3R 4N6 not less than
60 days nor more than 90 days prior to the anniversary date of the immediately
preceding annual meeting of stockholders. If the annual meeting is not held
within 30 days before or after such anniversary date, then such nomination must
have been delivered to or mailed and received by the Secretary not later than
the close of business on the 10th day following the date on which the notice of
the meeting was mailed or such public disclosure was made, whichever occurs
first. Such notice must set forth (a) as to each proposed nominee (i) the name,
age, business address and, if known, residence address of each such nominee,
(ii) the principal occupation or employment of each such nominee, (iii) the
number of shares of stock of SMTC beneficially owned by each such nominee, and
(iv) any other information concerning the nominee that must be disclosed as to
nominees in proxy solicitations pursuant to Regulation 14A under the Exchange
Act, including such person's written consent to be named as a nominee and to
serve as a director if elected; and (b) as to the Stockholder giving the notice
(i) the name and address, as they appear on SMTC's books, of such Stockholder
and (ii) the class and number of shares of SMTC that are beneficially owned by
such Stockholder. SMTC may require any proposed nominee to furnish such other
information as may reasonably be required to determine the eligibility of such
proposed nominee to serve as a director of SMTC. If such procedures are not
complied with, the chairman of the meeting may determine and declare to the
meeting that a nomination was not made in accordance with the foregoing
procedures and the defective nomination will be disregarded.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and any persons who directly or indirectly hold more than
ten percent of the Company's Common Stock ("Reporting Persons") to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission ("SEC") on Forms 3, 4 and 5. Reporting Persons are required by SEC
regulations to furnish the Company with copies of all Forms 3, 4 and 5 they
file.
19
Based on the Company's review of copies of such forms it has received from
its executive officers, directors and greater than ten-percent beneficial
owners, each of Stanley Plzak, William Brock and Frank Burke failed to file
their initial Form 3's on a timely basis. On February 14, 2002 each of William
Brock and Frank Burke filed Form 5's to report their initial holdings. Gary
Itenson filed a Form 5 to report a transaction in the Company's common stock in
2001 that he had not previously reported.
Other Matters
The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters properly come before
the Annual Meeting, it is intended that proxies in the enclosed form will be
voted in respect thereof in accordance with the judgments of the persons voting
the proxies.
It is important that the proxies be returned promptly and that your shares
be represented. Stockholders are urged to mark, date, execute and promptly
return the accompanying proxy card in the enclosed envelope.
Financial Statements and Form 10-K Annual Report
SMTC's audited financial statements for the fiscal year ended December 31,
2001 and certain other related financial and business information of SMTC are
contained in SMTC's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001, as filed by SMTC with the SEC on March 29, 2002 (including
exhibits). Copies of such Annual Report on Form 10-K, including financial
statements, may be obtained without charge by contacting SMTC Corporation, 635
Hood Road, Markham, Ontario, Canada L3R 4N6, Attention: Investor Relations.
20
APPENDIX A
AUDIT COMMITTEE
CHARTER
ORGANIZATION
There shall be a committee of the Board of Directors to be known as the
Audit Committee. The Audit Committee shall be composed of at least three
directors each of whom shall be an "independent director" as defined in Annex A
to this charter unless the Board of Directors shall have determined that
membership on the committee by not more than one individual who is not an
"independent director" is required by the best interests of the corporation and
its shareholders. Each member of the Audit Committee shall be able to read and
understand fundamental financial statements including a company's balance
sheet, income statement and cash flow statement. In addition at least one
member must have had past employment experience in finance or accounting or any
other comparable experience that has resulted in the member's financial
sophistication.
STATEMENT OF POLICY
The Audit Committee shall provide assistance to the Board of Directors in
fulfilling its responsibility to the shareholders, potential shareholders, and
investment community relating to corporate accounting, reporting practices of
the company, and the quality and integrity of the financial reports of the
company. In so doing, it is the responsibility of the Audit Committee to
maintain free and open means of communication between the directors, the
independent auditors, the internal auditors, if any, and the financial
management of the company. The company's independent auditors are ultimately
responsible to the Board of Directors and the Audit Committee, as
representatives of the company's shareholders, and these shareholder
representatives have the ultimate authority and responsibility for selecting,
evaluating, and, where appropriate, replacing the outside auditor (or
nominating the outside auditor to be proposed for shareholder approval in any
proxy statement).
RESPONSIBILITIES
In carrying out its responsibilities, the Audit Committee believes its
policies and procedures should remain flexible, in order to best react to
changing conditions and to ensure to the directors and shareholders that the
corporate accounting and reporting practices of the company are in accordance
with all requirements and are of the highest quality.
In carrying out these responsibilities, the Audit Committee will:
. Elect a member of the Audit Committee to serve as Chairman of the Audit
Committee.
. Meet as a Committee at least four times per year to carry out the
responsibilities outlined in this Charter. The Committee shall also meet
at least once per year in executive session with each of the independent
auditor, the head of the internal audit department, if any, and the
officers of the company.
. Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the company and its
divisions and subsidiaries, if any; and where appropriate replace the
independent auditor.
. Take appropriate action to oversee the independence of the company's
outside auditor including the following:
. Receive from the independent auditors each year a formal written
statement delineating all relationships between the auditor and the
company consistent with Independent Standards Board Standard 1.
A-1
. Actively engage in a dialogue with the auditor regarding any disclosed
relationships or services that may impact the objectivity and
independence of the auditor.
. In consultation with the independent accountants and the internal
auditors, if any, review the integrity of the company's financial
reporting process and consider the independent auditor's judgments about
the quality and appropriateness of the corporation's accounting
principles.
. Review major changes to the company's auditing and accounting principles
and practices as suggested by the independent accountants, management, or
the internal auditing department, if any.
. Meet with the independent auditors and financial management of the
company to review the scope of the proposed audit for the current year
and the audit procedures to be utilized, and at the conclusion thereof
review such audit, including any comments or recommendations of the
independent auditors.
. Review with the independent auditors, the company's internal auditor, if
any, and financial and accounting personnel, the adequacy and
effectiveness of the accounting and financial controls of the company,
and elicit any recommendations for the improvement of such internal
control procedures or particular areas where new or more detailed
controls or procedures are desirable. Particular emphasis should be given
to the adequacy of such internal controls to expose any payments,
transactions, or procedures that might be deemed illegal or otherwise
improper. Further, the Audit Committee periodically should review company
policy statements to determine their adherence to any code of conduct
prescribed by the Board.
. Review the internal audit function of the company, if any, including the
independence and authority of its reporting obligations, the proposed
audit plans for the coming year, and the coordination of such plans with
the independent auditors.
. Receive prior to each meeting, a summary of findings from completed
internal audits, if any, and a progress report on any proposed internal
audit plan, if any, with explanations for any deviations from the
original plan.
. Review the annual audited financial statements and related documents
prior to filing or distribution with management and the independent
auditors to determine that the independent auditors are satisfied with
the disclosure and content of the financial statements to be presented to
the shareholders. Any changes in accounting principles should be reviewed.
. Review with financial management and the external auditors the company's
quarterly financial results and related documents prior to the release of
earnings and the company's quarterly financial statements prior to filing
or distribution. Discuss any significant changes to the Company's
accounting principles.
. Provide sufficient opportunity for the independent auditors and internal
auditors, if any, to meet with the members of the Audit Committee without
members of management present. Among the items to be discussed in these
meetings are the independent auditors' evaluation of the company's
financial, accounting, and auditing personnel, and the cooperation that
the independent auditors received during the course of the audit.
. Review accounting and financial human resources and succession planning
within the company.
. Submit the minutes of all meetings of the Audit Committee to, or discuss
the matters discussed at each committee meeting with, the Board of
Directors.
. Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in
its judgment, that is appropriate.
A-2
ANNEX A
"Independent director" means a person other than an officer or employee of
the company or its subsidiaries or any other individual having a relationship
which, in the opinion of the company's board of directors, would interfere with
the exercise of independent judgment in carrying out the responsibilities of a
director. Without limiting the generality of the foregoing, the following
persons shall not be considered independent:
(a) a director who is employed by the company or any of its affiliates for
the current year or any of the past three years;
(b) a director who accepts any compensation from the company or any of its
affiliates in excess of $60,000 during the previous fiscal year, other
than compensation for board service, benefits under a tax-qualified
retirement plan, or non-discretionary compensation;
(c) a director who is a member of the immediate family of an individual who
is, or has been in any of the past three years, employed by the company
or any of its affiliates as an executive officer. Immediate family
includes a person's spouse, parents, children, siblings, mother-in-law,
father-in-law, brother-in-law, sister-in-law, son-in-law,
daughter-in-law and anyone who resides in such person's home;
(d) a director who is a partner in, or a controlling shareholder or an
executive officer of, any for-profit business organization to which the
company made, or from which the company received, payments (other than
those arising solely from investments in the company's securities) that
exceed 5% of the company's or business organization's consolidated gross
revenues for that year, or $200,000, whichever is more, in any of the
past three years;
(e) a director who is employed as an executive of another entity where any
of the company's executives serve on that entity's compensation
committee.
A-3
FORM OF PROXY CARD FOR SMTC CORPORATION'S 2002 ANNUAL MEETING
SMTC CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SMTC CORPORATION
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 7, 2002
The undersigned, having received the Notice of Annual Meeting of Stockholders
and the Proxy Statement on behalf of the Board of Directors of SMTC Corporation
(the "Company"), hereby appoints each of Paul Walker, Frank Burke and Blair
Hendrix as proxies of the undersigned (with full power of substitution) to
attend the Annual Meeting of Stockholders of SMTC Corporation to be held on May
7, 2002 at 2:00 p.m. Eastern Daylight Time at the Crowne Plaza Toronto Centre,
225 Front Street West, Toronto, Ontario, Canada M5V 2X3 and all adjournments
thereof (the "Annual Meeting") and to vote all shares of Common Stock of SMTC
Corporation that the undersigned would be entitled to vote, if personally
present, in regard to all matters which may come before the Annual Meeting, and
without limiting the general authorization hereby given, the undersigned directs
that his or her vote be cast as specified in this Proxy.
This Proxy when properly executed will be voted in the manner specified herein.
If no specification is made, the Proxies will be voted FOR the nominees. If any
of the nominees are not available to serve, this Proxy may be voted for a
substitute. This Proxy delegates discretionary authority with respect to matters
not known or determined at the time of solicitation of this Proxy. The
undersigned hereby revokes any other proxy previously granted to vote the same
shares of Common Stock at the Annual Meeting.
SEE REVERSE SIDE. If you wish to vote in accordance with the recommendations of
the Board of Directors, just sign on the reverse side. You need not mark any
boxes.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
--------------------------------------------------------------------------------
Please mark your vote as indicated in this example: [X]
The Board of Directors recommends a vote FOR the following matter:
The election of three FOR WITHHELD Nominees: Khalil Barsoum
directors to Class II, for a [_] [_] Mark Benham
term ending 2005. William Brock
INSTRUCTION: To withhold
authority to vote for any
individual nominee, write
that nominee's name in the
space provided below.
-----------------------------
-----------------------------
PLEASE PROMPTLY MARK, SIGN, DATE AND RETURN THIS PROXY FORM USING THE ENCLOSED
ENVELOPE.
I plan to attend the meeting. [_]
I do not plan to attend the meeting. [_]
Signature Date
------------------------------------------ -------------------
Signature Date
------------------------------------------ -------------------
NOTE: Please sign name exactly as it appears on this proxy card. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by an authorized
person.
[LOGO] smtc
defining manufacturing solutions
Notice to Exchangeable Shareholders
Our records show that you own exchangeable shares ("Exchangeable Shares") in
the capital of SMTC Manufacturing Corporation of Canada ("SMTC Canada"), a
Canadian company. The Exchangeable Shares provide you with economic and voting
rights which are, as nearly as practicable, equivalent to those of holders of
shares of common stock of SMTC Corporation, the U.S. parent of SMTC Canada,
including the right to attend and vote at meetings of the common stockholders
of SMTC Corporation. SMTC Corporation (the "Company") will be holding an annual
meeting (the "Annual Meeting") of its common stockholders on May 7, 2002 to
elect three Class II directors to serve until the 2005 Annual Meeting.
At such Annual Meeting you will have voting rights, as described below,
equal to the number of Exchangeable Shares you hold. You are permitted to
instruct CIBC Mellon Trust Company, the Trustee under the Voting and Exchange
Trust Agreement, as to how the Trustee is to vote your Exchangeable Shares at
the Annual Meeting of SMTC Corporation. If you do not give voting instructions,
the Trustee will not be entitled to exercise the voting rights attached to your
Exchangeable Shares. Alternatively, you may instruct the Trustee to give you,
or a person designated by you, a proxy to exercise personally the voting rights
attached to your Exchangeable Shares. To instruct the Trustee as to how you
wish to exercise your voting rights, you must complete, sign, date and return
the enclosed voting instruction card to the Trustee by 5:00 p.m., Eastern
Daylight Time, on May 3, 2002. Whether or not you plan to attend, please sign,
date and return the voting instruction card in the envelope provided in order
to ensure that your Exchangeable Shares will be represented at the Annual
Meeting.
You have the right to revoke any instructions to the Trustee by giving
written notice of revocation to the Trustee or by executing and delivering to
the Trustee a later-dated voting instruction card. No notice of revocation or
later-dated voting instruction card however, will be effective unless received
by the Trustee prior to 5:00 p.m., Eastern Daylight Time, on May 3, 2002.
Non-Registered Holders
Only registered holders of Exchangeable Shares of SMTC Canada are permitted
to instruct the Trustee as to how to vote their Exchangeable Shares at the
Annual Meeting or to attend and vote at the Annual Meeting in person or by
proxy as described above. You may be a beneficial owner of Exchangeable Shares
(a "Non-Registered Holder") if your Exchangeable Shares are registered either:
(i) in the name of an intermediary (an "Intermediary") with whom you deal in
respect of the Exchangeable Shares, such as, among others, banks, trust
companies, securities dealers or brokers and trustees or administrators
of self-administered RRSPs, RRIFs, and similar plans; or
(ii) in the name of a clearing agency (such as The Canadian Depository for
Securities Limited) of which the Intermediary is a participant.
SMTC Corporation has distributed copies of the Notice of Annual Meeting, the
Proxy Statement dated April 5, 2002 and the Notice to Exchangeable Shareholders
(collectively, the "Meeting Materials") to Intermediaries who are required to
forward these Meeting Materials to Non-Registered Holders unless a
Non-Registered Holder has waived the right to receive them. If you are a
Non-Registered Holder who has not waived the right to receive Meeting Materials
you will be given either:
(i) a voting instruction card which has already been signed by the
Intermediary (typically by a facsimile, stamped signature) which is
restricted as to the number of Exchangeable Shares beneficially owned by
you but which is otherwise blank. This voting instruction card need not
be signed by you. In this case, if you wish to direct the voting of the
Exchangeable Shares held by you or attend and vote at the Annual Meeting
(or have another person attend and vote on your behalf) you should
properly complete the voting instruction card and deposit it with CIBC
Mellon Trust Company, Proxy Department, 200 Queens Quay East, Unit 6,
Toronto, Ontario, M5A 4K9 or by fax to (416) 368-2502 prior to 5:00
p.m., Eastern Daylight Time, on May 3, 2002; or
(ii) a voting instruction form which must be completed and signed by you in
accordance with the directions on the voting instruction form.
The purpose of these procedures is to permit you, as a Non-Registered
Holder, to direct the voting of the Exchangeable Shares you beneficially own or
to attend and vote at the Annual Meeting, in person or by proxy. Non-Registered
Holders should carefully follow the instructions of their Intermediaries and
their service companies.
A Non-Registered Holder may revoke a voting instruction card/form given to
an Intermediary at any time by written notice to the Intermediary, except that
an Intermediary is not required to act on a revocation of a voting instruction
card/form that is not received by the Intermediary at least seven days prior to
the Annual Meeting.
Information relating to SMTC Corporation
Exchangeable Shares are exchangeable on a one-for-one basis for shares of
common stock of SMTC Corporation and you, as a holder of Exchangeable Shares,
are entitled to receive dividends from SMTC Canada payable at the same time as
and equivalent to, on a per-share basis, any dividends paid by SMTC Corporation
to holders of its shares of common stock. As a result of the economic and
voting equivalency between the Exchangeable Shares and shares of common stock
of SMTC Corporation you, as a holder of Exchangeable Shares, will have a
participating interest determined by reference to SMTC Corporation not SMTC
Canada. Accordingly, it is information relating to SMTC Corporation that is
relevant to you and enclosed in this package is SMTC Corporation's Proxy
Statement which we urge you to read carefully.
Markham, Ontario
April 5, 2002
VOTING INSTRUCTION CARD
DIRECTION GIVEN BY REGISTERED HOLDERS OF
EXCHANGEABLE SHARES OF SMTC MANUFACTURING CORPORATION
OF CANADA FOR THE MAY 7, 2002 ANNUAL MEETING
OF STOCKHOLDERS OF SMTC CORPORATION
The undersigned, having read the Notice of Annual Meeting of Stockholders
regarding the annual meeting (the "Annual Meeting") of common stockholders of
SMTC Corporation (the "Company") to be held at the Crowne Plaza Toronto Centre,
located at 225 Front Street West, Toronto, Ontario on Tuesday, May 7, 2002 at
2:00 p.m. (Eastern Daylight Time), the Proxy Statement dated April 5, 2002 and
the accompanying Notice to Exchangeable Shareholders, receipt of each of which
is hereby acknowledged, does hereby instruct and direct CIBC Mellon Trust
Company (the "Trustee"), pursuant to the provisions of the Voting and Exchange
Trust Agreement (the "Agreement") dated as of July 27, 2000, among the Company,
SMTC Manufacturing Corporation of Canada ("SMTC Canada"), SMTC Nova Scotia
Company, and the Trustee, as follows:
(PLEASE NOTE: IF NO DIRECTION IS MADE AND YOU SIGN BELOW, THE TRUSTEE IS HEREBY
AUTHORIZED AND DIRECTED TO VOTE FOR ITEM 1 BELOW AND AS TO ANY OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING TO VOTE IN ITS DISCRETION.)
(PLEASE SELECT ONE OF A, B OR C)
A. [_] Exercise or cause to be exercised, whether by proxy given by the
Trustee to a representative of the Company or otherwise, the
undersigned's voting rights at the Annual Meeting, or any postponement
or adjournment thereof, as follows:
(PLEASE COMPLETE THE FOLLOWING ONLY IF YOU HAVE SELECTED ALTERNATIVE A.)
1. To vote FOR [_] or WITHHOLD VOTE [_] or, if no specification is made, to
vote FOR the election of Khalil Barsoum, Mark Benham and William Brock
as Class II directors to serve until the 2005 annual meeting of
stockholders and until their successors are elected and qualified in
accordance with the by-laws of the Company.
To withhold authority to vote for any individual nominee, write that
nominee's name in the space provided below.
----------------------------------------------------------------------
2. To vote, in its discretion, upon any and all matters incident to the
foregoing and such other business as may legally come before the Annual
Meeting or any adjournment or postponement of the Annual Meeting.
(IF YOU HAVE SELECTED ALTERNATIVE A, PLEASE GO DIRECTLY TO THE SIGNATURE
LINE ON THIS PAGE.)
B. [_] Deliver a proxy card to the undersigned at the Annual Meeting with
respect to all Exchangeable Shares of SMTC Canada held by the
undersigned on the record date for the Annual Meeting so that the
undersigned may exercise personally the undersigned's voting rights at
the Annual Meeting or any postponement or adjournment thereof.
(IF YOU HAVE SELECTED ALTERNATIVE B, PLEASE GO DIRECTLY TO THE SIGNATURE
LINE ON THIS PAGE.)
C. [_] Deliver a proxy card to ______________________ to attend and act for
and on behalf of the undersigned at the Annual Meeting with respect to
all the Exchangeable Shares of SMTC Canada held by the undersigned on
the record date for the Annual Meeting with all the powers that the
undersigned would possess if personally present and acting thereat
including the power to exercise the undersigned's voting rights at the
Annual Meeting or any postponement or adjournment thereof.
(IF YOU HAVE SELECTED ALTERNATIVE C, PLEASE GO DIRECTLY TO THE SIGNATURE
LINE ON THIS PAGE.)
Executed on the ______ day of ________________, 2002
Signature: __________________________
Print Name: _________________________
Signature: __________________________
Print Name: _________________________
NOTES:
(1)A shareholder has the right to appoint a person to represent him/her at the
Annual Meeting by inserting in the space provided in Alternative C the name
of the person the shareholder wishes to appoint. Such person need not be a
shareholder.
(2)To be valid, this voting instruction card must be signed and deposited with
CIBC Mellon Trust Company, Proxy Department, 200 Queens Quay East, Unit 6,
Toronto, Ontario, M5A 4K9 in the enclosed return envelope or by fax to (416)
368-2502 prior to 5:00 p.m., Eastern Daylight Time, on Friday, May 3, 2002
or, if the Annual Meeting is adjourned, 48 hours (excluding Saturdays and
holidays) before any adjourned Annual Meeting.
(3)If an individual, please sign exactly as your Exchangeable Shares are
registered.
If the shareholder is a corporation, this voting instruction card must be
executed by a duly authorized officer or attorney of the shareholder and, if
the corporation has a corporate seal, its corporate seal should be affixed.
If Exchangeable Shares are registered in the name of an executor,
administrator or trustee, please sign exactly as the Exchangeable Shares are
registered. If the Exchangeable Shares are registered in the name of the
deceased or other shareholder, the shareholder's name must be printed in the
space provided. This voting instruction card must be signed by the legal
representative with his/her name printed below his/her signature and
evidence of authority to sign on behalf of the shareholder must be attached
to this voting instruction card.
In many cases, Exchangeable Shares beneficially owned by a holder (a
"Non-Registered Holder") are registered in the name of a securities dealer
or broker or other intermediary, or clearing agency. Non-Registered Holders
should, in particular, review the section entitled "Non-Registered Holders"
in the accompanying Notice to Exchangeable Shareholders and carefully follow
the instructions of their intermediaries.
(4)If a share is held by two or more persons, each should sign this voting
instruction card.
(5)If this voting instruction card is not dated in the space provided, it is
deemed to bear the date on which it is mailed to the shareholder.