EXHIBIT 10.3 Execution Copy
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Management Agreement
This Management Agreement (this "Agreement") dated as of July 30, 1999
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among SMTC Corporation, a Delaware corporation (the "Company"), Xxxx Capital
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Partners VI, L.P., a Delaware limited partnership ("Bain"), Celerity Management
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Co., Inc., a Delaware corporation ("Celerity") and Xxxxxx Electronics Group
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Limited, an Ontario corporation ("KEGL").
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WHEREAS, pursuant to the Reorganization and Merger Agreement dated as
of July 26, 1999 among The Surface Mount Technology Centre Inc, an Ontario
corporation, the Company, HTM Holdings, Inc., a Delaware corporation
("HTM") and their respective stockholders (the "Merger Agreement"), HTM is
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to be merged into a newly organized subsidiary of the Company;
WHEREAS, funds (the "Bain Funds") affiliated with Bain and Celerity
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EMSIcon, LLC (the "Celerity Fund"), an affiliate of Celerity will provide
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equity financing in connection with the transactions contemplated by the
Merger Agreement and the Bain Funds, the Celerity Fund and KEGL each,
directly or indirectly, will be holders of equity interests in the Company
upon consummation of such transactions;
WHEREAS, subject to the terms and conditions of this Agreement, the
Company desires to retain each of Bain, Celerity and KEGL (each a "Service
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Provider" and collectively, the "Service Providers") to provide certain
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management and advisory services to the Company, and each of Bain, Celerity
and KEGL desire to provide such services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Services. Each Service Provider hereby severally agrees that, during the
term of this Agreement (the "Term"), it will:
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a. provide the Company with advice in connection with the negotiation and
consummation of agreements, contracts, documents and instruments
necessary to provide the Company with financing from banks or other
financial institutions or other entities on terms and conditions
satisfactory to the Company; and
b. provide the Company with financial, managerial and operational advice
in connection with its day-to-day operations, including, without
limitation:
i. advice with respect to the investment of funds; and
ii. advice with respect to the development and implementation of
strategies for improving the operating, marketing and financial
performance of the Company.
2. Payment of Fees. The Company hereby agrees to:
a. during the Term, pay to each Service Provider (or, in each case, an
affiliate designated by it) a management fee in an amount equal to its
Pro Rata Share of $625,000 per annum in exchange for the services
provided to the Company by such Service Provider, as more fully
described in Section 1 of this Agreement, such fee being payable by
the Company quarterly in advance, the first such payment to be made on
the Merger Closing Date (as defined in the Merger Agreement); and
b. during the Term, allow each Service Provider to participate in the
negotiation and consummation of senior financing for any acquisition
transactions by the Company or any of its direct or indirect
subsidiaries, and pay to each Service Provider (or, in each case, an
affiliate designated by it) a fee in connection therewith equal to its
Pro Rata Share of one percent (1%) of the gross purchase price of the
transaction (including all liabilities assumed or otherwise included
in the transaction), such fee to be due and payable for the foregoing
services at the closing of such transaction, whether or not any such
senior financing is actually committed or drawn upon.
For purposes of this Agreement, Xxxx'x "Pro Rata Share" shall be equal to
40%, Celerity's "Pro Rata Share" shall be equal to 40% and KEGL's "Pro Rata
Share" shall be equal to 20%.
The Company further agrees to pay on demand all expenses incurred by the
Service Providers in connection with this Agreement and any out-of-pocket
expenses incurred by the Service Providers in connection with the provision
of services hereunder.
Each payment made to a Service Provider pursuant to this Section 2 shall be
paid by wire transfer of immediately available federal funds to the account
specified on Schedule 1 hereto, or to such other account(s) as such Service
Provider may specify to the Company in writing prior to such payment.
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3. Term. This Agreement shall continue in full force and effect with respect
to each Service Provider for so long as such Service Provider (or any
successor or permitted assign, as the case may be) continues to carry on
the business of providing services of the type described in Section 1
above; provided, however, that (a) this Agreement shall terminate upon the
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earlier of (i) a Change of Control (as defined in the Stockholders
Agreement dated as of the date hereof among the Company and the
stockholders listed on the signature pages thereto, as amended or otherwise
modified from time to time) and (ii) the fifth anniversary of the Merger
Closing Date (as defined in the Merger Agreement), (b) the Company may
terminate this Agreement with respect to any Service Provider following a
material breach of the terms of this Agreement by such Service Provider and
a failure to cure such breach within 30 days following written notice
thereof and (c) each Service Provider may terminate this Agreement with
respect to itself (i) following a material breach of this Agreement by the
Company and failure to cure such breach within 30 days following written
notice thereof or (ii) at any time upon not less than 60 days written
notice to the Company; and provided further that each of (x) the
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obligations of the Company under Section 4 below, (y) any and all accrued
and unpaid obligations of the Company owed under Section 2 above and (z)
the provisions of Section 7 shall survive any termination of this Agreement
to the maximum extent permitted under applicable law.
4. Indemnification. In consideration of the execution and delivery of this
Agreement by each Service Provider, the Company hereby agrees to indemnify,
exonerate and hold each of Bain, Xxxx Capital, Inc., each Bain Fund,
Celerity, the Celerity Fund and KEGL, and each of their respective
partners, shareholders, members, affiliates, directors, officers,
fiduciaries, employees and agents and each of the partners, shareholders,
members, affiliates, directors, officers, fiduciaries, employees and agents
of each of the foregoing (collectively, the "Indemnitees") free and
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harmless from and against any and all actions, causes of action, suits,
losses, liabilities and damages, and expenses in connection therewith,
including without limitation reasonable attorneys' fees and disbursements
(collectively, the "Indemnified Liabilities"), incurred by the Indemnitees
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or any of them as a result of, or arising out of, or relating to the
execution, delivery, performance, enforcement or existence of this
Agreement or the provision of services hereunder except for any such
Indemnified Liabilities arising on account of such Indemnitee's gross
negligence or willful misconduct, and if and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Company
hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law.
5. Assignment, etc. Except as provided below, no party shall have the right
to assign this Agreement. Each Service Provider acknowledges that its
services under this Agreement are unique. Accordingly, any purported
assignment by a Service Provider (other than as provided below) shall be
void. Notwithstanding the foregoing, (a) a
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Service Provider may assign all or part of its rights and obligations
hereunder to any affiliate of such Service Provider which provides services
similar to those called for by this Agreement, in which event such Service
Provider shall be released of all of its rights and obligations hereunder
and (b) the provisions hereof for the benefit of the Bain Funds and the
Celerity Fund shall inure to the benefit of their successors and assigns.
6. Amendments and Waivers. No amendment or waiver of any term, provision or
condition of this Agreement shall be effective as against any party, unless
in writing and executed such party. No waiver on any one occasion shall
extend to or effect or be construed as a waiver of any right or remedy on
any future occasion. No course of dealing of any person nor any delay or
omission in exercising any right or remedy shall constitute an amendment of
this Agreement or a waiver of any right or remedy of any party hereto.
7. Miscellaneous.
a. Freedom to Pursue Opportunities, Etc. In anticipation that the
Company and one or more of the Service Providers (or one or more of
their respective affiliates, associated investment funds or portfolio
companies, or clients) may engage in the same or similar activities or
lines of business and have an interest in the same areas of corporate
opportunities, and in recognition of the benefits to be derived by the
Company under this Agreement and in recognition of the difficulties
which may confront any advisor who desires and endeavors fully to
satisfy such advisor's duties in determining the full scope of such
duties in any particular situation, the provisions of this clause (a)
are set forth to regulate, define and guide the conduct of certain
affairs of the Company as they may involve any Service Provider.
Except as any Service Provider may otherwise agree in writing (solely
as to itself), after the date hereof:
i. each Service Provider shall have the right to, and shall have no
duty (contractual or otherwise) not to, directly or indirectly:
(A) engage in the same or similar business activities or lines
of business as the Company, including those competing with the
Company and (B) do business with any client or customer of the
Company;
ii. No Service Provider nor any officer, director, employee,
partner, affiliate or associated entity thereof shall be liable
to the Company or its affiliates for breach of any duty
(contractual or otherwise) by reason of any such activities of
or of such person's participation therein; and
iii In the event that any Service Provider acquires knowledge of a
potential transaction or matter that may be a corporate
opportunity for both the
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Company and one or more Service Providers or any other person,
such Service Provider shall have no duty (contractual or
otherwise) to communicate or present such corporate opportunity
to the Company and, notwithstanding any provision of this
Agreement to the contrary, shall not be liable to the Company or
its affiliates for breach of any duty (contractual or otherwise)
by reason of the fact that Bain directly or indirectly pursues or
acquires such opportunity for itself, directs such opportunity to
another person, or does not present such opportunity to the
Company.
b. Limitation of Liability. In no event will any party hereto be liable
to any other party hereto for any indirect, special, incidental or
consequential damages, including lost profits or savings, whether or
not such damages are foreseeable, or for any third party claims
(whether based in contract, tort or otherwise), relating to the
services to be provided by any Service Provider hereunder.
c. Choice of Law. This Agreement shall be governed by and construed in
accordance with the domestic substantive laws of the State of Delaware
without giving effect to any choice or conflict of law provision or
rule that would cause the application of the domestic substantive laws
of any other jurisdiction.
d. Consent to Jurisdiction. Each of the parties agrees that all actions,
suits or proceedings arising out of or based upon this Agreement or
the subject matter hereof shall be brought and maintained exclusively
in the federal and state courts of the State of Delaware. Each of the
parties hereto by execution hereof (i) hereby irrevocably submits to
the jurisdiction of the federal and state courts in the State of
Delaware for the purpose of any action, suit or proceeding arising out
of or based upon this Agreement or the subject matter hereof and (ii)
hereby waives to the extent not prohibited by applicable law, and
agrees not to assert, by way of motion, as a defense or otherwise, in
any such action, suit or proceeding, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that it is
immune from extraterritorial injunctive relief or other injunctive
relief, that its property is exempt or immune from attachment or
execution, that any such action, suit or proceeding may not be brought
or maintained in one of the above-named courts, that any such action,
suit or proceeding brought or maintained in one of the above-named
courts should be dismissed on grounds of forum non conveniens, should
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be transferred to any court other than one of the above-named courts,
should be stayed by virtue of the pendency of any other action, suit
or proceeding in any court other than one of the above-named courts,
or that this Agreement or the subject matter hereof may not be
enforced in or by any of the above-named courts. Each of the parties
hereto hereby consents to service of process in any such suit, action
or proceeding in any manner permitted by the laws of the State of
Delaware,
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agrees that service of process by registered or certified mail, return
receipt requested, at the address specified in or pursuant to Section
9 is reasonably calculated to give actual notice and waives and agrees
not to assert by way of motion, as a defense or otherwise, in any such
action, suit or proceeding any claim that service of process made in
accordance with Section 9 does not constitute good and sufficient
service of process. The provisions of this Section 7(b) shall not
restrict the ability of any party to enforce in any court any judgment
obtained in a federal or state court of the State of Delaware.
e. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND
COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT, OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY
ISSUE, CLAIM, DEMAND, CAUSE OF ACTION, ACTION, SUIT OR PROCEEDING
ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER
HEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND
WHETHER IN CONTRACT OR TORT OR OTHERWISE. Each of the parties hereto
acknowledges that it has been informed by each other party that the
provisions of this Section 7(c) constitute a material inducement upon
which such party is relying and will rely in entering into this
Agreement and the transactions contemplated hereby. Any of the
parties hereto may file an original counterpart or a copy of this
Agreement with any court as written evidence of the consent of each of
the parties hereto to the waiver of its right to trial by jury.
8. Merger/Entire Agreement. This Agreement contains the entire understanding
of the parties with respect to the subject matter hereof and supersedes any
prior communication or agreement with respect thereto.
9. Notice. All notices, demands, and communications of any kind which any
party may require or desire to serve upon any other party under this
Agreement shall be in writing and shall be served upon such other party and
such other party's copied persons as specified below by personal delivery
to the address set forth for it below or to such other address as such
party shall have specified by notice to each other party or by mailing a
copy thereof by certified or registered mail, or by Federal Express or any
other reputable overnight courier service, postage prepaid, with return
receipt requested, addressed to such party and copied persons at such
addresses. In the case of service by personal delivery, it shall be deemed
complete on the first business day after the date of actual delivery to
such address. In case of service by mail or by overnight courier, it shall
be deemed complete, whether or not received, on the third day after the
date of mailing as shown by the registered or certified mail receipt or
courier service receipt. Notwithstanding the foregoing, notice to any party
or copied person of change
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of address shall be deemed complete only upon actual receipt by an officer
or agent of such party or copied person.
If to the Company, to it at:
SMTC Corporation
c/o EMSIcon Investments, LLC
Two Xxxxxx Xxxxx, 0xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Xxxxxxxx Xxxx
with a copy to:
The Surface Mount Technology Centre Inc.
000 Xxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Xxxxxx
Attention: President
If to Bain, to it at:
Two Xxxxxx Xxxxx, 0xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Xxxxxxxx Xxxx
with a copy to:
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxx
If to Celerity, to it at:
Celerity Management Co., Inc.
00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
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with a copy to:
Xxxxxxxxxx, Xxxxx & Xxxxxx, P.C.
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000-0000
Attention: Xxxxxxxxx Xxxxxx
If to KEGL, to it at:
00 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxx X0X 0X0
Xxxxxx
Attention: Xxxxxxx Xxxxxxxxx
with a copy to:
XxXxxxxxx Xxxxx
Royal Bank Plaza South Tower
Suite 3800
Toronto, Ontario X0X 0X0
Xxxxxx
Attention: Xxx Xxxxx
10. Severability. If in any judicial or arbitral proceedings a court or
arbitrator shall refuse to enforce any provision of this Agreement, then
such unenforceable provision shall be deemed eliminated from this Agreement
for the purpose of such proceedings to the extent necessary to permit the
remaining provisions to be enforced. To the full extent, however, that the
provisions of any applicable law may be waived, they are hereby waived to
the end that this Agreement be deemed to be valid and binding agreement
enforceable in accordance with its terms, and in the event that any
provision hereof shall be found to be invalid or unenforceable, such
provision shall be construed by limiting it so as to be valid and
enforceable to the maximum extent consistent with and possible under
applicable law.
11. Counterparts. This Agreement may be executed in any number of counterparts
and by each of the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which
together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as an instrument under seal as of the date first above
written by its officer or representative thereunto duly authorized.
The Company: SMTC CORPORATION
By /s/ Xxxxxxxx Xxxx
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Title:
Bain: Xxxx Capital Partners VI, L.P.
By Xxxx Capital Investors VI, Inc.,
its general partner
By /s/ Xxxxx Xxxxxxx
____________________________
Title:
Celerity: Celerity Management Co., Inc.
By /s/ Xxxxxxx Xxxxxxx
____________________________
Title: President
KEGL: Xxxxxx Electronics Group Limited
By /s/ Xxxxxxx Xxxxxxxxx
____________________________
Title:
Schedule 1 to
Management Agreement
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Wire Transfer Instructions for
Xxxx Capital Partners VI, L.P.
Citibank N.A.
ABA # 021 000 089
For Xxxxx Brothers Xxxxxxxx
Account # 00000000
To Further Credit:
Xxxx Capital Partners VI, L.P.
Acct. # 610276-8
Wire Instructions for
Celerity Management Co., INC.
City National Bank
000 Xxxxx Xxxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
ABA # 122 016 066
For credit to the account of: Celerity Management Co., Inc.
Account: 101 113 531
Wire Instructions for
Xxxxxx Electronics Group Limited
Bank of Montreal
000 Xxxx Xx. Xxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Bank Code: 001
Transit #: 00022
Account #: 0000000
SWIFT #: XXXXXXX0
Beneficiary #: 21027937
