DESCRIPTION OF CAPITAL STOCK

General Matters

The total amount of our authorized capital stock consists of 60,000,000 shares of common stock and 5,000,000 shares of one or more series of preferred stock. As of April 15, 2004, we had 28,689,779 shares of common stock outstanding (consisting of our common stock and exchangeable shares issued by SMTC Canada that may be exchangeable into our common stock). We have no shares of any series of preferred stock outstanding, other than the one share of special voting stock described below.

Our Board of Directors has approved and is soliciting stockholder approval at the Company’s 2004 Annual Meeting of Stockholders to be held on May 20, 2004 of an amendment to our Amended and Restated Certificate of Incorporation, which we refer to as our “charter,” to increase the number of shares of common stock that SMTC is authorized to issue from 60,000,000 to 130,000,000. Subject to stockholder approval, SMTC Canada will issue 33,350,000 exchangeable shares and warrants to purchase 16,675,000 exchangeable shares, and SMTC will issue to its current lenders approximately 11,100,000 shares of common stock and warrants to purchase approximately 5,550,000 shares of common stock. Each of the exchangeable shares will be exchangeable into one share of common stock. In order to be able to issue all of the common stock that may be issued in connection with the transactions described above, SMTC must increase its authorized number of shares of common stock. In addition to those shares that may be issued upon the exercise and exchange of the securities issued in the Offering and to the current lenders, the Board believes that it is desirable to have available a substantial number of authorized but unissued shares of common stock that may be issued from time to time without further action by the stockholders to provide for stock splits or stock dividends, stock options and other equity incentives, to be able to take advantage of acquisition opportunities, to facilitate the consummation of commercial agreements, to meet future capital needs and for other general corporate purposes.

In addition, our Board of Directors has approved and is soliciting stockholder approval at the Company’s 2004 Annual Meeting of Stockholders of an amendment to the charter to effect a reverse stock split of one for three, one for four or one for five (the “Reverse Stock Split”). The Reverse Stock Split, if approved, will include approval of the combination of any whole number of shares of common stock between and including three and five into one share of common stock and will grant the Board the authority to select which of the approved exchange ratios within that range will be implemented. The par value of the common stock would remain unchanged at $0.01 per share. The number of authorized shares of common stock would be reduced by the Reverse Stock Split ratio, although this reduction would occur after giving effect to the increase in the number of authorized shares as described above. If the stockholders approve the Reverse Stock Split, the Board will have the authority, in its sole discretion, and without further action on the part of the stockholders, to select one of the approved Reverse Stock Split ratios and effect the approved Reverse Stock Split by filing an amendment with the Delaware Secretary of State at any time after the approval of the Reverse Stock Split but on or before December 31, 2004 or to abandon the Reverse Stock Split at any time prior to implementation.

If the Reverse Stock Split becomes effective, the exchangeable shares will be combined on the same basis so that one exchangeable share will continue to be exchangeable for one share of common stock.

If approved and effected, the Reverse Stock Split would have the following effects:

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If approved and effected, the Reverse Stock Split will be effected simultaneously for all of the common stock and exchangeable shares and the ratio will be the same for all of the common stock and exchangeable shares. The Reverse Stock Split will affect all of SMTC’s stockholders uniformly. The Reverse Stock Split will not change the terms of the common stock or the exchangeable shares. The shares of common stock will have the same voting rights and rights to dividends and distributions and will be identical in all other respects after the Reverse Stock Split. No stockholder’s percentage ownership of common stock or exchangeable shares will be altered except for the effect of the elimination of fractional shares.

The charter and by-laws contain provisions that are intended to enhance the likelihood of continuity and stability in the composition of the Board of Directors and which may have the effect of delaying, deferring or preventing a future takeover or change in control of our company unless such takeover or change in control is approved by our Board of Directors.

The following summary of provisions of our capital stock describes all material provisions of, but does not purport to be complete and is subject to, and qualified in its entirety by, our charter and our by-laws, and by the provisions of applicable law.

Common Stock

The issued and outstanding shares of our common stock are validly issued, fully paid and nonassessable. Subject to the prior rights of the holders of any series of preferred stock, the holders of outstanding shares of common stock are entitled to receive dividends out of assets legally available therefor at such time and in such amounts as the Board of Directors may from time to time determine. Please see “Dividend Policy.” The shares of common stock are not convertible and the holders thereof have no preemptive or subscription rights to purchase any of our securities. Upon liquidation, dissolution or winding up of our company, the holders of common stock are entitled to receive pro rata our assets which are legally available for distribution, after payment of all debts and other liabilities and subject to the prior rights of any holders of any series of preferred stock then outstanding. Each outstanding share of common stock is entitled to one vote on all matters submitted to a vote of stockholders. There is no cumulative voting. Except as otherwise required by law or our charter, the holders of common stock vote together as a single class on all matters submitted to a vote of stockholders.

Our common stock is listed for quotation on the Nasdaq National Market under the symbol “SMTX,” and we submitted a “Notification Form: Listing of Additional Shares” with Nasdaq on February 17, 2004 regarding the shares of common stock being registered by this prospectus and issuable upon exchange of the exchangeable shares.

Preferred Stock

Our Board of Directors may, without further action by our stockholders, from time to time, direct the issuance of shares of preferred stock in a series and may, at the time of issuance, determine the rights, preferences and limitations of each series. Satisfaction of any dividend preferences of outstanding shares of preferred stock would reduce the amount of funds available for the payment of dividends on shares of common stock. Holders of shares of preferred stock may be entitled to receive a preference payment in the event of any liquidation, dissolution or winding-up of our company before any payment is made to the holders of shares of common stock. The issuance of shares of preferred stock may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of our securities or the removal of incumbent management. Upon the affirmative vote of a majority of the total number of directors

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then in office, the Board of Directors, without stockholder approval, may issue shares of preferred stock with voting and conversion rights which could adversely affect the holders of shares of common stock.

There are no shares of preferred stock outstanding, and we have no current intention to issue any of our unissued, authorized shares of preferred stock, other than the one share of special voting stock described below. However, the issuance of any shares of preferred stock in the future could adversely affect the rights of the holders of common stock.

SMTC Canada Share Capital

Each of the exchangeable shares of SMTC Canada issued is exchangeable, at the option of the holder, at any time for one share of our common stock. Holders of the exchangeable shares are entitled to dividend and liquidation rights that are, as nearly as practicable, economically equivalent to those of holders of shares of our common stock. However, the exchangeable shares generally do not have any voting rights in respect of SMTC Canada. Holders of exchangeable shares have certain rights to receive common stock in the event of any liquidation, dissolution or winding-up of SMTC Canada or SMTC or any other distribution of the assets of SMTC Canada or SMTC for the purpose of winding-up its respective affairs.

On closing of our initial public offering in July 2000, we entered into a voting and exchange trust agreement and issued one share of SMTC special voting stock to a trustee to be held for the benefit of the holders of exchangeable shares, other than companies with which we are affiliated. By furnishing instructions to the trustee, holders of exchangeable shares are able to exercise essentially the same voting rights with respect to SMTC as they would have if they had exchanged their exchangeable shares for shares of our common stock.

On closing of our initial public offering in July 2000, we also entered into a support agreement under which we agreed to maintain the economic equivalency of the exchangeable shares and the common stock by, among other things, not declaring and paying dividends on the common stock unless SMTC Canada is able to declare and pay economically equivalent dividends on the SMTC Canada exchangeable shares in accordance with the terms of those shares. SMTC Canada may also declare stock dividends from time to time as necessary to maintain the one-for-one economic equivalence between SMTC Canada exchangeable shares and shares of common stock. The SMTC Canada exchangeable shares do not carry any other right to receive dividends from SMTC Canada.

The support agreement provides that, in the event that a tender offer, share exchange offer, issuer bid, take-over bid or similar transaction with respect to the common stock is proposed by SMTC or is proposed to SMTC or its stockholders and is recommended by the Board of Directors of SMTC, or is otherwise effected or to be effected with the consent or approval of the Board of Directors of SMTC, and the exchangeable shares are not otherwise redeemed by SMTC Canada or SMTC Nova Scotia Company (“SMTC Nova Scotia”), SMTC will use its reasonable efforts to enable and permit holders of exchangeable shares to participate in such an offer to the same extent and on an economically equivalent basis as the holders of SMTC common stock. Without limiting the generality of the foregoing, SMTC will use its reasonable efforts to ensure that holders of exchangeable shares may participate in all such offers without being required to exercise their right to retract their exchangeable shares or, if so required, to ensure that any such retraction shall be effective only upon, and shall be conditional upon, the closing of the offer and only to the extent necessary to tender to or deposit under the offer; however, the rights of SMTC Canada to redeem, or SMTC Nova Scotia to purchase exchangeable shares, as described below under “Details of the Exchangeable Shares,” in the event of an SMTC Control Transaction, as defined below under “Details of the Exchangeable Shares-Definitions,” remain unaffected by the foregoing.

The exchangeable shares are subject to adjustment or modification in the event of a stock split or other change to our capital structure so as to maintain the initial one-to-one relationship between the exchangeable shares and our common stock. On or after July 27, 2015, subject to acceleration in certain circumstances, the Board of Directors of SMTC Canada may redeem all of the outstanding exchangeable shares by delivering to the holders one share of our common stock for each exchangeable share held.

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The exchangeable shares of SMTC Canada may not be resold or otherwise transferred in the United States except pursuant to an effective registration statement under the Securities Act or an exemption from registration under the Securities Act. This prospectus is included in the registration statement that we have filed with respect to the issuance of the shares of our common stock issuable upon the exercise of the exchange rights granted to the holders of the exchangeable shares of SMTC Canada.

SMTC Nova Scotia owns 2,077,498 exchangeable shares, 6,331,517 Class C preferred shares and 23,092 Class Y shares that have been issued by SMTC Canada. The Class C preferred shares are redeemable at any time at the option of SMTC Canada and entitle the holder to receive fixed preferential non-cumulative cash dividends at a rate of C$0.06 per share per year in priority to the holders of exchangeable shares, Class Y shares and common shares. Holders of Class C preferred shares are also entitled to a preference payment of C$1.00 per share in the event of any liquidation, dissolution or winding-up of SMTC Canada before any payment is made to the holders of SMTC Canada exchangeable shares, Class Y shares and common shares. The Class Y shares of SMTC Canada entitle the holder to dividends based on the dividends payable on the exchangeable shares. Holders of Class Y shares are also entitled to receive, upon liquidation, dissolution or winding-up of SMTC Canada, and subject to the prior rights of Class C preferred shares and the exchangeable shares but in priority to the common shares, an amount based on the value of the exchangeable shares, as determined by the board of directors of SMTC Canada. The holders of the common shares of SMTC Canada are entitled to participate in assets upon the liquidation, dissolution or winding-up of SMTC Canada subject to the prior rights of the holders of Class C preferred shares, exchangeable shares and Class Y shares. The common shares, the exchangeable shares, the Class Y shares and the Class C preferred shares remain the outstanding share capital of SMTC Canada.

The exchangeable shares of SMTC Canada are listed on the Toronto Stock Exchange under the symbol “SMX.”

Registration Rights

Stockholders Agreement

Under the stockholders agreement dated July 30, 1999, as amended, between us and certain of our current stockholders, some of our stockholders will be entitled to rights with respect to the registration under the Securities Act of 1933, as amended, of some or all of their shares as described below.

At any time after 180 days following the effective date of any registration statement filed with respect to an underwritten public offering of our securities for our own account, the holders of a majority of the aggregate number of shares of common stock held by our stockholders who are parties to the stockholders agreement can request that we register all or a portion of their shares. We will only be required to file up to three registration statements on forms other than Form S-3 in response to such demand registration rights.

At any time after July 30, 2003, stockholders holding a majority of the shares of common stock held by the Bain Capital Funds and their affiliates, by Celerity EMSIcon, LLC and its affiliates, and by P. N. Walker Consulting, Inc., Paul Walker, Nichal Inc., Derek D’Andrade, Gary Walker, Philip Woodard and Kilmer Electronics Group Limited, taken as a group, in each case holding at least 15% of our common stock then held by the parties to our stockholders agreement, may request that we register all or a portion of their shares. We will only be required to file up to three registration statements on forms other than Form S-3 in response to such demand registration rights. We will not be required to file a registration statement in response to their demand registration rights within 180 days following the effective date of any registration statement filed by us with respect to an underwritten public offering of our securities for our own account.

If we register any securities for public sale after our initial public offering, the holders of shares of our common stock who are parties to the stockholders agreement will have the right to include their shares in the registration statement. This right does not apply to a registration statement relating to any of our employee benefit plans, a corporate reorganization or certain public offerings unless such public offering has been initiated pursuant to the majority demand registration rights or other demand registration rights described above. The

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managing underwriter of any underwritten offering will have the right to limit the number of shares registered by these holders for marketing reasons.

All shares held by our stockholders who are parties to the stockholders agreement could potentially be required to be registered in connection with the exercise of any of the registration rights described above.

We will pay all reasonable expenses incurred in connection with the demand registrations described above, except for underwriters’ discounts and commissions and applicable transfer taxes, which will be paid by the selling stockholders. We will pay the reasonable expenses of counsel to the selling stockholders in connection with a piggyback registration.

Registration Rights Agreement

We entered into a registration rights agreement on December 31, 2002 with our current lenders in connection with an amendment to our credit agreement. Under the registration rights agreement, our current lenders have certain piggyback registration rights and demand registration rights for the registration of shares of common stock issuable upon exercise of warrants issued to them in connection with and following the December 31, 2002 amendment. We expect that all of the warrants previously issued and to be issued to our current lenders will be cancelled in connection with the Recapitalization Transaction and that registration rights with respect to such warrants will be terminated.

New Registration Rights Agreement

We anticipate that we will enter into a new registration rights agreement with our current lenders in connection with the issuance of $10 million of our common stock and warrants to them in exchange for $10 million of debt. We expect that under the terms of the new registration rights agreement we will commit to filing a registration statement to register the common stock issued to our current lenders and the common stock underlying the warrants issued to our lenders.

Other Provisions of our Charter and By-laws

Our charter provides for the Board to be divided into three classes, as nearly equal in number as possible, serving staggered terms. Approximately one-third of the Board will be elected each year. Please see “Management.” Under the Delaware General Corporation Law, directors serving on a classified board can only be removed for cause. The provision for a classified Board could prevent a party who acquires control of a majority of the outstanding voting stock from obtaining control of the Board until the second annual stockholders meeting following the date the acquiror obtains the controlling stock interest. The classified Board provision could have the effect of discouraging a potential acquiror from making a tender offer or otherwise attempting to obtain control of SMTC and could increase the likelihood that incumbent directors will retain their positions.

Our charter provides that stockholder action can be taken only at an annual or special meeting of stockholders and cannot be taken by written consent in lieu of a meeting. The charter and the by-laws provide that, except as otherwise required by law, special meetings of the stockholders can only be called by the Chairman of the Board, the chief executive officer or pursuant to a resolution adopted by a majority of the Board of Directors. Stockholders will not be permitted to call a special meeting or to require the Board to call a special meeting.

The by-laws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to the Board. Stockholders at an annual meeting may only consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of the Board or by a stockholder who was a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has given to our secretary timely written notice, in proper form, of such stockholder’s intention to bring that business before the meeting. Although the by-laws do not give the Board the power to approve or disapprove stockholder nominations of candidates or proposals regarding other business to be conducted at a special or annual meeting, the by-laws may

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have the effect of precluding the conduct of business at a meeting if the proper procedures are not followed or may discourage or defer a potential acquiror from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting to obtain control of SMTC.

The charter and by-laws provide that the affirmative vote of holders of at least 75% of the total votes eligible to be cast in the election of directors is required to amend, alter, change or repeal some of their provisions, unless such amendment or change has been approved by a majority of the directors not affiliated or associated with any person or entity holding 10% or more of the voting power of our outstanding capital stock. For purposes of calculating the votes of directors in such circumstances, neither the Bain Capital Funds, Celerity Partners nor Kilmer Electronics Group shall be deemed at any time to be an entity holding 10% or more of the voting power of SMTC’s outstanding capital stock, without regard to the actual percentage of the voting power SMTC’s capital stock held from time to time by any of them. This requirement of a super-majority vote to approve amendments to the charter and by-laws could enable a minority of our stockholders to exercise veto power over any such amendments.

Provisions of Delaware Law Governing Business Combinations

We are subject to the “business combination” provisions of the Delaware General Corporation Law. In general, such provisions prohibit a publicly held Delaware corporation from engaging in various “business combination” transactions with any “interested stockholder” for a period of three years after the date of the transaction in which the person became an “interested stockholder,” unless:

A “business combination” is defined to include mergers, asset sales and other transactions resulting in financial benefit to a stockholder. In general, an “interested stockholder” is a person who, together with affiliates and associates, owns 15% or more of a corporation’s voting stock or within three years did own 15% or more of a corporation’s voting stock. However, our charter provides that a stockholder affiliated or associated with the Bain Capital Funds, Celerity Partners or Kilmer Electronics Group Limited will not be considered an “interested stockholder,” notwithstanding that stockholder’s percentage of our voting stock. To our knowledge, none of such stockholders has a present intention to engage in any transaction which would constitute a “business combination.” The statute could prohibit or delay mergers or other takeover or change in control attempts with respect to SMTC and, accordingly, may discourage attempts to acquire SMTC.

Limitations on Liability and Indemnification of Officers and Directors

Our charter limits the liability of directors to the fullest extent permitted by the Delaware General Corporation Law. In addition, our charter provides that we will indemnify our directors and officers to the fullest extent permitted by such law.