46  Benchmark.Benchmark Electronics, Inc.•2022 Proxy Statement |
PROPOSAL 4 — APPROVAL OF
AMENDMENT TO THE BENCHMARK ELECTRONICS, INC.
2019 OMNIBUS INCENTIVE COMPENSATION PLAN
General
On March 25, 2019, the Board approved, subject to the approval of our shareholders, the Benchmark Electronics, Inc. 2019 Omnibus Incentive Compensation Plan (the “2019 Omnibus Plan”). The 2019 Omnibus Plan was approved by our shareholders at our 2019 annual meeting of shareholders on May 15, 2019.
As of March 31, 2022, only 1,529,393 Common Shares remained available for grant under the 2019 Omnibus Plan and, assuming the current usage rate, the Company expects these remaining Common Shares to be depleted by the end of 2023. In order to continue to have an appropriate supply of shares available for grant under the 2019 Omnibus Plan, on April 5, 2022, the Board adopted, subject to shareholder approval, an amendment to the 2019 Omnibus Plan that would increase the total number of shares of common stock reserved and available for grant by 1,375,000 shares (the “EXPENSES OF SOLICITATIONFirst Amendment”). If shareholder approval is obtained, the First Amendment will be effective as of the date of the Annual Meeting.
Equity compensation awards are an important part of our overall compensation program and the Company wants to ensure that there is a sufficient number of shares available to adequately incentivize our officers, employees, directors and consultants. Our fully-diluted capital structure (excluding awards outstanding under our equity compensation plans) as of March 31, 2022 consisted of:
Common Shares | | | 35,257,685 | |
Common Shares issuable upon conversion of Preferred Stock | | | — | |
Fully-Diluted Common Shares Outstanding | | | 35,257,685 | |
| |
The table below represents our potential fully-diluted overhang levels as of March 31, 2022 based on our fully-diluted Common Shares outstanding, as shown above, awards outstanding under our equity compensation plans and our request of the 1,375,000 additional shares subject to the First Amendment.
| | | | | | | | |
Potential Overhang with 1,375,000 Additional Shares: | | | | | | | | |
Outstanding Awards under Equity Compensation Plans as of March 31, 2022 | | | | | | | 1,899,677 | |
Outstanding unvested full value awards under 2019 Omnibus Plan | | | 1,808,776 | | | | | |
Outstanding unexercised options | | | 90,901 | | | | | |
Weighted average remaining term | | | 1.87 | | | | | |
Weighted average exercise price | | $ | 21.75 | | | | | |
Common Shares available for future grant under the 2019 Omnibus Plan as of March 31, 2022 | | | | | | | 1,529,393 | |
Additional requested Common Shares under the First Amendment | | | | | | | 1,375,000 | |
Total Potential Dilution, or Overhang | | | | | | | 4,804,070 | |
Potential Dilution as a Percentage of Fully-Diluted Common Shares Outstanding | | | | | | | 13.63 | % |
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Our burn rate for the last three years (the “Burn Rate”), which we define as the total number of shares subject to awards granted in a calendar year expressed as a percentage of our basic weighted average shares outstanding, was 2.01% for 2021, 1.58% for 2020, and 1.55% for 2019, and the average Burn Rate over the last three years was 1.71%.
The Board and management believe that the additional shares from the First Amendment will be sufficient to cover the Company’s equity compensation needs for the next three years, although this could change based on factors including merger and acquisition activity. The Board believes the potential dilution from equity issuances to be made under the 2019 Omnibus Plan, as amended by the First Amendment, is reasonable and that approval of the First Amendment is important in that it allows us to continue awarding equity incentives, which are an important component of our overall compensation program. If the First Amendment is not approved by the shareholders, awards will continue to be made under the 2019 Omnibus Plan as currently in effect to the extent shares are available.
The closing price of our common stock, as reported on the NYSE on March 31, 2022 was $25.04 per share. If the First Amendment is approved by the shareholders, we anticipate filing a Form S-8 registration statement with the SEC shortly after the Annual Meeting to register the shares authorized for issuance under the First Amendment.
Set forth below is a summary of the 2019 Omnibus Plan, as amended by the proposed First Amendment, which is qualified in its entirety by the specific language of the First Amendment, a copy of which is attached to this proxy statement as Annex A.
Benchmark Electronics, Inc. • 2022 Proxy Statement Benchmark.47 |
Summary of the 2019 Omnibus Plan
Types of Awards. The 2019 Omnibus Plan provides for the grant of options intended to qualify as incentive stock options (“ISOs”) under Section 422 of the Code, nonqualified stock options (“NSOs”), stock appreciation rights (“SARs”), restricted share awards, restricted stock units (“RSUs”), performance shares, performance units, cash incentive awards, deferred share units and other equity-based and equity-related awards.
Plan Administration. The 2019 Omnibus Plan is administered by the Compensation Committee of our Board (the “Committee”). Subject to the terms of the 2019 Omnibus Plan and applicable law, the Committee has the sole authority to administer the 2019 Omnibus Plan, including, but not limited to, the authority to (1) designate participants, (2) determine the type or types of awards to be granted to a participant, (3) determine the number of Common Shares to be covered by, or with respect to which payments, rights or other matters are to be calculated in connection with, awards, (4) determine the terms and conditions of any awards, (5) determine the vesting schedules of awards and, if certain performance goals must be attained in order for an award to vest or be settled or paid, establish such performance goals and determine whether, and to what extent, such performance goals have been attained, (6) determine whether, to what extent and under what circumstances awards may be settled or exercised in cash, Common Shares, other securities, other awards or other property, or canceled, forfeited or suspended and the method or methods by which awards may be settled, exercised, canceled, forfeited or suspended, (7) determine whether, to what extent and under what circumstances cash, Common Shares, other securities, other awards, other property and other amounts payable with respect to an award will be deferred either automatically or at the election of the holder thereof or of the Committee, (8) interpret, administer, reconcile any inconsistency in, correct any default in and/or supply any omission in, the 2019 Omnibus Plan and any instrument or agreement relating to, or award made under, the 2019 Omnibus Plan, (9) establish, amend, suspend or waive such rules and regulations and appoint such agents as it deems appropriate for the proper administration of the 2019 Omnibus Plan, (10) accelerate the vesting or exercisability of, payment for or lapse of restrictions on, awards, (11) amend an outstanding award or grant a replacement award for an award previously granted under the 2019 Omnibus Plan if, in its sole discretion, the Committee determines that (A) the tax consequences of such award to us or the participant differ from those consequences that were expected to occur on the date the award was granted or (B) clarifications or interpretations of, or changes to, tax law or regulations permit awards to be granted that have more favorable tax consequences than initially anticipated, and (12) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the 2019 Omnibus Plan. However, the Committee does not have the authority to accelerate vesting of an award other than (x) in connection with the participant’s death or disability or (y) in connection with a termination following a change of control of us.
Shares Available For Awards. Subject to adjustment for changes in capitalization, the maximum aggregate number of Common Shares that may be delivered pursuant to awards granted under the 2019 Omnibus Plan, as amended by the First Amendment, is equal to the sum of (i) 3,075,000, (ii) the number of any Common Shares remaining available for future grants of awards under the 2010 Plan as of the date the 2019 Omnibus Plan was approved by our shareholders and (iii) the number of any Common Shares with respect to awards granted under the 2010 Plan that are forfeited following the date that the 2019 Omnibus Plan was approved by our shareholders (such sum, the “Plan Share Limit”). The number of shares with respect to forfeited awards under the 2010 Plan (x) would be determined based on the number of Common Shares subject to such award (and not by the number of Common Shares that reduced the maximum aggregate number of Common Shares available under the 2010 Plan upon grant of such award) and (y) would not include any Common Shares with respect to awards granted under the 2010 Plan that are withheld or tendered to the Company to satisfy the applicable tax withholding obligation or in payment of the exercise price of such award. A maximum of 3,075,000 Common Shares may be delivered pursuant to ISOs granted under the 2019 Omnibus Plan.
Each Common Share with respect to which any award denominated in Common Shares is granted under the 2019 Omnibus Plan reduces the Plan Share Limit by one Common Share. Upon grant of a stock-settled SAR, each share with respect to which such stock-settled SAR is exercisable is counted as one share against the Plan Share Limit, regardless of the number of Common Shares actually delivered upon settlement of such stock-settled SAR. Awards that are required to be settled in cash do not reduce the Plan Share Limit. If any award granted under the 2019 Omnibus Plan is (A) forfeited, or otherwise expires, terminates or is canceled without the delivery of all Common Shares subject thereto, or (B) settled other than by the delivery of Common Shares (including, without limitation, cash settlement), then, in each case, the number of Common Shares subject to such award that were not issued with respect to such award are not treated as issued and the Plan Share Limit is increased by the number of Common Shares by which the Plan Share Limit was reduced upon issuance of such award. Notwithstanding the foregoing, the Plan Share Limit is not increased as a result of the surrender or tender of Common Shares in payment of the exercise price of an award or any taxes required to be withheld in respect of an award.
Subject to adjustment as described below, (1) in the case of awards that are settled in Common Shares, the maximum aggregate number of Common Shares with respect to which awards may be granted to any participant (other than awards granted to non-employee directors) in any fiscal year under the 2019 Omnibus Plan is 300,000 and (2) in the case of awards that are settled in cash based on the fair market value of a Common Share, the maximum aggregate amount of cash that may be paid pursuant to awards granted to any participant (other than awards granted to non-employee directors) in any fiscal year under the 2019 Omnibus Plan is equal to the per-Common Share fair market value (as defined in the 2019 Omnibus Plan) as of the relevant vesting, payment or settlement date multiplied by 300,000. In the case of all awards other than those described in the preceding sentence, the maximum aggregate amount of cash and other property (valued at its fair market value) other than Common Shares that may be paid or delivered pursuant to awards under the 2019 Omnibus Plan to any participant (other than awards granted to non-employee directors) in any fiscal year is equal to $6,000,000.
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Subject to adjustment as described below, (1) in the case of awards that are settled in Common Shares, the maximum aggregate number of Common Shares with respect to which awards may be granted to any non-employee director in any fiscal year under the 2019 Omnibus Plan is 25,000 and (2) in the case of awards that are settled in cash based on the fair market value of a Common Share, the maximum aggregate amount of cash that may be paid pursuant to awards granted to any non-employee director in any fiscal year under the 2019 Omnibus Plan is equal to the per-Common Share fair market value as of the relevant vesting, payment or settlement date multiplied by 25,000. In the case of all awards other than those described in the preceding sentence, and including cash retainer fees, the maximum aggregate amount of cash and other property (valued at its fair market value) other than Common Shares that may be paid or delivered pursuant to awards under the 2019 Omnibus Plan to any non-employee director participant in any fiscal year is $600,000.
Changes in Capitalization. In the event of any extraordinary dividend or other extraordinary distribution, recapitalization, rights offering, stock split, reverse stock split, split-up or spin-off affecting the Common Shares, the Committee will make adjustments and other substitutions to awards, as permitted under the 2019 Omnibus Plan, in the manner it determined to be appropriate or desirable. In the event of any reorganization, merger, consolidation, combination, repurchase or exchange of our Common Shares or other similar corporate transactions, the Committee in its discretion is permitted to make such adjustments and other substitutions to the 2019 Omnibus Plan and awards, as permitted under the 2019 Omnibus Plan, as it deemed appropriate or desirable.
Substitute Awards. The Committee is permitted to grant awards in assumption of, or in substitution for, outstanding awards previously granted by us or any of our affiliates or a company that we acquired or with which we combined. Any Common Shares issued by us through the assumption of or substitution for outstanding awards granted by a company that we acquired would not reduce the aggregate number of Common Shares available for awards under the 2019 Omnibus Plan, except that awards issued in substitution for ISOs would reduce the number of Common Shares available for ISOs under the 2019 Omnibus Plan.
Source of Shares. Any shares issued under the 2019 Omnibus Plan, as amended by the First Amendment, will consist, in whole or in part, of authorized and unissued Common Shares or of treasury shares.
Minimum Vesting Requirements. Awards granted under the 2019 Omnibus Plan are not be permitted to vest any earlier than the first anniversary of the date of grant of the applicable award; provided that the following awards are not be subject to the minimum vesting requirement: (i) substitute awards (described above), (ii) awards granted to non-employee directors in connection with an annual shareholder meeting that vest on the earlier of the one-year anniversary of the date of grant and the next annual meeting of shareholders which is at least 50 weeks after the immediately preceding annual shareholder meeting and (iii) awards in respect of up to a maximum of 5% of the aggregate number of Common Shares that become available for grant under the 2019 Omnibus Plan (subject to adjustment as described above). Notwithstanding the foregoing, the minimum vesting requirements do not apply to or limit the Committee’s authority under the 2019 Omnibus Plan to vest awards earlier, as the Committee deems appropriate, upon the occurrence of a change of control or in the event of a participant’s termination of employment or service, in each case, as permitted by the 2019 Omnibus Plan.
Eligible Participants. Any director, officer, employee or consultant (including any prospective director, officer, employee or consultant) of us or our affiliates, in each case, within the meaning of Form S-8, who the Committee selects to receive an award under the 2019 Omnibus Plan or who receives a substitute award are eligible to participate in the 2019 Omnibus Plan. The Company currently has approximately 600 employees and eight non-employee directors eligible to participant in the 2019 Omnibus Plan and currently expects that awards will be generally limited to approximately 300 employees [(including nine officers), zero consultants] and eight non-employee directors.
Stock Options. The Committee is permitted to grant both ISOs and NSOs under the 2019 Omnibus Plan. The exercise price for options may not be less than the fair market value of Common Shares on the grant date. The Committee is not permitted to reprice any option granted under the 2019 Omnibus Plan without the approval of our shareholders. All options granted under the 2019 Omnibus Plan are NSOs unless the applicable award agreement expressly stated that the option was intended to be an ISO.
Each option will vest and become exercisable at such times, and in such manner and subject to such terms and conditions as the Committee may, in its sole discretion, specify in the applicable award agreement or thereafter. Unless otherwise set forth in the applicable award agreement, each option will expire upon the earlier of (a) the tenth anniversary of the date the option was granted and (b) (i), in the case of participants who are not non-employee directors, three months after the participant who was holding the option ceased to be an officer, employee or consultant for us or one of our affiliates or (ii) in the case of participants who are non-employee directors, two years after the participant who was holding the option ceased to be a non-employee directors. The exercise price is permitted to be paid (1) with cash (or its equivalent), (2) in the sole discretion of the Committee, with previously acquired Common Shares or through delivery of irrevocable instructions to a broker to sell our Common Shares otherwise deliverable upon the exercise of the option (provided that there was a public market for our Common Shares at such time) or (3) any other method or combination of methods approved by the Committee, provided that the combined value of all cash and cash equivalents and the fair market value of any such shares so tendered to us as of the date of such tender, together with any shares withheld by us in respect of taxes relating to an option, was at least equal to such aggregate exercise price plus taxes.
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Stock Appreciation Rights. The Committee is permitted to grant SARs under the 2019 Omnibus Plan. The exercise price for SARs may not be less than the fair market value of our Common Shares on the grant date. The Committee is not permitted to reprice any SAR granted under the 2019 Omnibus Plan without the approval of our shareholders. Upon exercise of a SAR, the holder will receive cash, Common Shares, other securities, other awards, other property or a combination of any of the foregoing, as determined by the Committee, equal in value to the excess, if any, of the fair market value of a Common Share on the date of exercise of the SAR over the exercise price of the SAR. Subject to the provisions of the 2019 Omnibus Plan and the applicable award agreement, the Committee will determine, at or after the grant of a SAR, the vesting criteria, term, methods of exercise, methods and form of settlement and any other terms and conditions of any SAR. Unless otherwise set forth in the applicable award agreement, each SAR will expire upon the earlier of (a) the tenth anniversary of the date the SAR was granted and (b) (i), in the case of participants who are not non-employee directors, three months after the participant who was holding the SAR ceased to be an officer, employee or consultant for us or one of our affiliates or (ii) in the case of participants who are non-employee directors, two years after the participant who was holding the SAR ceased to be a non-employee directors.
Restricted Shares and Restricted Stock Units. Subject to the provisions of the 2019 Omnibus Plan, the Committee is permitted to grant restricted shares and RSUs. Restricted shares and RSUs will not be permitted to be sold, assigned, transferred, pledged or otherwise encumbered except as provided in the 2019 Omnibus Plan or the applicable award agreement, except that the Committee could determine that restricted shares and RSUs will be permitted to be transferred by the participant for no consideration. Each RSU will be granted with respect to one Common Share or have a value equal to the fair market value of one such Common Share. Upon the lapse of restrictions applicable to an RSU, the RSU could be paid in cash, Common Shares, other securities, other awards or other property, or any combination thereof, as determined by the Committee, or in accordance with the applicable award agreement. In connection with each grant of restricted shares, except as provided in the applicable award agreement, the holder will be entitled to the rights of a shareholder in respect of such restricted shares, including the right to vote and receive dividends.
Performance Shares and Performance Units. Subject to the provisions of the 2019 Omnibus Plan, the Committee is permitted to grant performance shares and performance units to participants. Performance units are awards with an initial value established by the Committee (or that was determined by reference to a valuation formula specified by the Committee) at the time of the grant. In its discretion, the Committee will set performance goals that, depending on the extent to which they were met during a specified performance period, will determine the number of performance shares the participant will vest in or the number and/or value of performance units that will be paid out to the participant. The Committee, in its sole discretion, is permitted to pay earned performance units in the form of cash, Common Shares, other securities, other awards, or other property, or any combination thereof that will have an aggregate fair market value equal to the value of the earned performance units at the close of the applicable performance period. The determination of the Committee with respect to the form and timing of payout of performance units will be set forth in the applicable award agreement.
Cash Incentive Awards. Subject to the provisions of the 2019 Omnibus Plan, the Committee is permitted to grant cash incentive awards payable upon the attainment of performance goals.
Other Stock-Based Awards. Subject to the provisions of the 2019 Omnibus Plan, the Committee is permitted to grant to participants other equity-based or equity-related compensation awards, including vested stock. The Committee is permitted to determine the amounts and terms and conditions of any such awards.
Dividends and Dividend Equivalents. Subject to the provisions of the 2019 Omnibus Plan, the Committee is permitted to, on such terms and conditions as it determines, provide a participant with the right to receive dividends or dividend equivalents, payable in cash, Common Shares, other securities, other awards or other property, on a current or deferred basis, on any award granted under the 2019 Omnibus Plan other than stock options, SARs and cash incentive awards. However, a participant will only be eligible to receive dividends or dividend equivalents in respect of any such awards to the extent the applicable vesting criteria for such award have been satisfied and, in the case of any performance-based award that is payable upon the achievement of performance goal(s), a participant will be entitled to dividends or dividend equivalents in respect of such award only to the extent that the performance goal(s) for the applicable performance period are achieved and the Committee determines that all or some portion of such award has been earned for the performance period.
Amendment and Termination of the 2019 Omnibus Plan. Subject to any applicable law or government regulation and to the rules of the applicable stock exchange, the 2019 Omnibus Plan is (a) permitted to be amended, modified or terminated by our Board, or in the case of certain amendments, by the Committee, without the approval of our shareholders, except that shareholder approval will be required for any amendment that will (a) increase the maximum number of Common Shares available for awards under the 2019 Omnibus Plan or increase the maximum number of Common Shares that could be delivered pursuant to ISOs granted under the 2019 Omnibus Plan or (b) change the class of employees or other individuals eligible to participate in the 2019 Omnibus Plan. No modification, amendment or termination of the 2019 Omnibus Plan that will materially and adversely affect the rights of a participant will be effective without the consent of the affected participant, unless otherwise provided by the Committee in the applicable award agreement.
The Committee is permitted to waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate any award previously granted, prospectively or retroactively. However, unless otherwise provided by the Committee in the applicable award agreement or in the 2019 Omnibus Plan, any such waiver, amendment, alteration, suspension, discontinuance, cancelation or termination that will materially and adversely impair the rights of any participant to any award previously granted will not to that extent be effective without the consent of the affected participant.
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The Committee is authorized to make adjustments in the terms and conditions of awards in the event of any unusual or nonrecurring corporate event (including the occurrence of a change of control of us) affecting us, any of our affiliates or our financial statements or the financial statements of any of our affiliates, or of changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange, accounting principles or law whenever the Committee, in its discretion, has determined that those adjustments were appropriate or desirable, including providing for the substitution or assumption of awards, accelerating the exercisability of, lapse of restrictions on, or termination of, awards or providing for a period of time for exercise prior to the occurrence of such event and, in its discretion, the Committee is permitted to provide for a cash payment to the holder of an award in consideration for the cancelation of such award.
Change of Control. The 2019 Omnibus Plan provides that, unless otherwise provided in an award agreement, if provision is made in connection with a change of control of us for assumption of, or substitution for, awards previously granted with appropriate adjustments as to the number and kinds of shares and the exercise prices, if applicable, (such assumption or substitution is referred to as a rollover), all awards that are outstanding and unvested as of immediately prior to the change of control would remain outstanding and unvested immediately thereafter, provided that performance shares, performance units, cash incentive awards and any other performance-based awards would no longer be subject to the achievement of performance goals and would convert to corresponding service-based awards as of the change of control based on the greater of target performance and actual performance levels, which will be determined by the Committee in its sole discretion as of the most recent practicable date prior to the change of control. However, if within 24 months following a change of control, a participant’s employment or services, as applicable, with the Company is terminated without cause (as defined in the 2019 Omnibus Plan):
• | | any outstanding options or SARs then held by such participant would become fully exercisable and vested as of the date of such termination; |
• | | all performance shares, performance units, cash incentive awards and any other performance-based awards held by such participant that were granted following such change of control would vest and be paid out as if (A) the date of such termination were the last day of the applicable performance period and (B) target performance levels had been attained; and |
• | | all other outstanding awards (including performance shares, performance units, cash incentive awards and any other performance-based awards converted to service-based awards in connection with a rollover of awards as of a change of control) then held by such participant would automatically become fully exercisable and vested and all restrictions and forfeiture provisions would lapse as of the date of such termination. |
The 2019 Omnibus Plan further provides that, unless otherwise provided in an award agreement, in the event of a change of control of us, unless provision was made in connection with the change of control for rollover of awards previously granted:
• | | any options and SARs outstanding as of the date the change of control was determined to have occurred would become fully exercisable and vested, as of immediately prior to the change of control; |
• | | all performance shares, performance units, cash incentive awards and any other performance-based awards would vest and be paid out as if the date of the change of control were the last day of the applicable performance period and the greater of target performance and actual performance levels had been attained, which would be determined by the Committee in its sole discretion as of the most recent practicable date prior to the change of control; and |
• | | all other outstanding awards would automatically become fully exercisable and vested and all restrictions and forfeiture provisions related thereto would lapse as of immediately prior to such change of control. |
Unless otherwise provided pursuant to an award agreement, a change of control is defined to mean any of the following events, generally:
• | | during any period of 24 consecutive calendar months, a change in the composition of a majority of the board of directors, as constituted on the first day of such period, that was not supported by a majority of the incumbent board of directors; |
• | | consummation of certain mergers or consolidations of us with any other company following which our shareholders hold 50% or less of the combined voting power of the surviving entity; |
• | | the shareholders approve a plan of complete liquidation or dissolution of us unless such liquidation or dissolution is part of a transaction or series of transactions described in the preceding bullet; or |
• | | certain acquisitions by any individual, entity or group of beneficial ownership of a percentage of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors that was equal to or greater than 50%. |
Clawback/Repayment. All awards are subject to reduction, cancelation, forfeiture, or recoupment to the extent necessary to comply with any clawback, forfeiture, or other similar policy adopted by the Board or the Committee and applicable law. Further, to the extent that a participant receives any amount in excess of the amount that the participant should otherwise have received under the terms of the award for any reason (including, without limitation, by reason of a financial restatement, mistake in calculations, or other administrative error), the Company is permitted to require the participant to repay any such excess amount to the Company.
Term of the 2019 Omnibus Plan. No award is permitted to be granted under the 2019 Omnibus Plan after the tenth anniversary of the date the 2019 Omnibus Plan was approved by our shareholders.
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Certain Federal Tax Aspects of the 2019 Omnibus Plan
The following summary describes the U.S. federal income tax treatment associated with options awarded under the 2019 Omnibus Plan. The summary is based on the law as in effect on December 31, 2021. The summary does not discuss state or local tax consequences or non-U.S. tax consequences.
Incentive Stock Options. Neither the grant nor the exercise of an ISO results in taxable income to the optionee for regular federal income tax purposes. However, an amount equal to (i) the per-share fair market value on the exercise date minus the exercise price at the time of grant multiplied by (ii) the number of shares with respect to which the ISO is being exercised will count as “alternative minimum taxable income” which, depending on the particular facts, could result in liability for the “alternative minimum tax” or AMT. If the optionee does not dispose of the shares issued pursuant to the exercise of an ISO until the later of the two-year anniversary of the date of grant of the ISO and the one-year anniversary of the date of the acquisition of those shares, then (a) upon a later sale or taxable exchange of the shares, any recognized gain or loss would be treated for tax purposes as a long-term capital gain or loss and (b) the Company would not be permitted to take a deduction with respect to that ISO for federal income tax purposes.
If shares acquired upon the exercise of an ISO were disposed of prior to the expiration of the later of the two-year and one-year holding periods described above (a disqualifying disposition), generally the optionee would realize ordinary income in the year of disposition in an amount equal to the lesser of (i) any excess of the fair market value of the shares at the time of exercise of the ISO over the amount paid for the shares and (ii) the excess of the amount realized on the disposition of the shares over the participant’s aggregate tax basis in the shares (generally, the exercise price). A deduction would be available to the Company equal to the amount of ordinary income recognized by the optionee. Any further gain realized by the optionee will be taxed as short-term or long-term capital gain and would not result in any deduction by the Company. A disqualifying disposition occurring in the same calendar year as the year of exercise would eliminate the AMT effect of the ISO exercise.
Special rules may apply where all or a portion of the exercise price of an ISO is paid by tendering shares, or if the shares acquired upon exercise of an ISO are subject to substantial forfeiture restrictions. The foregoing summary of tax consequences associated with the exercise of an ISO and the disposition of shares acquired upon exercise of an ISO assumes that the ISO is exercised during employment or within three months following termination of employment. The exercise of an ISO more than three months following termination of employment will result in the tax consequences described below for NSOs, except that special rules apply in the case of disability or death. An individual’s stock options otherwise qualifying as ISOs will be treated for tax purposes as NSOs (not as ISOs) to the extent that, in the aggregate, they first become exercisable in any calendar year for stock having a fair market value (determined as of the date of grant) in excess of $100,000.
Nonqualified Stock Options. An NSO (that is, a stock option that does not qualify as an ISO) would result in no taxable income to the optionee or deduction to the Company at the time it is granted. An optionee exercising an NSO would, at that time, realize taxable income equal to (i) the per-share fair market value on the exercise date minus the exercise price multiplied by (ii) the number of shares with respect to which the option is being exercised. If the NSO was granted in connection with employment, this taxable income would also constitute “wages” subject to withholding and employment taxes. A corresponding deduction would be available to the Company. The foregoing summary assumes that the shares acquired upon exercise of an NSO option are not subject to a substantial risk of forfeiture.
Section 162(m). Section 162(m) of the Code currently provides that if, in any year, the compensation that is paid to our named executive officers (or any person who was a named executive officer for any year beginning with 2017) exceeds $1,000,000 per person, any amounts that exceed the $1,000,000 threshold will not be deductible by us for federal income tax purposes.
Section 409A. Section 409A of the Code imposes restrictions on nonqualified deferred compensation. Failure to satisfy these rules results in accelerated taxation, an additional tax to the holder of the amount equal to 20% of the deferred amount and a possible interest charge. Stock options granted with an exercise price that is not less than the fair market value of the underlying shares on the date of grant will not give rise to “deferred compensation” for this purpose unless they involve additional deferral features. Stock options that would be awarded under the 2019 Omnibus Plan are intended to be eligible for this exception.
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New Plan Benefits
The Company has not approved any awards that are conditioned upon stockholder approval of the First Amendment. Future awards made under the 2019 Omnibus Plan will be determined by the Committee in its discretion. It is, therefore, not possible to predict the awards that will be made to particular officers in the future under the 2019 Omnibus Plan, as amended by the First Amendment. If the proposed First Amendment had been in effect in fiscal year 2021, we expect that our award grants for fiscal year 2021 would not have been different from those actually made in that year under the 2019 Omnibus Plan. For information regarding grants made under the 2019 Omnibus Plan during 2021 to our Named Executive Officers, see the table included under “Compensation Tables and Narratives—2021 Grants of Plan-Based Awards.”
For 2022, we intend to award our non-employee directors an annual grant of RSUs under the 2019 Omnibus Plan. The number of RSUs to be issued to non-employee directors will be determined by dividing the dollar amount of the award (currently anticipated to be $150,000) by the closing market price of the Common Shares on the grant date (which is anticipated to be the date of the Meeting). For information regarding grants made under the 2019 Omnibus Plan during 2021 to our non-employee directors, see the table included under “Compensation Tables and Narratives—2021 Director Summary Compensation Table.”
✓ | | The Board of Directors recommends a vote FOR the approval of the amendment to the 2019 Omnibus Plan. |
Benchmark Electronics, Inc. • 2022 Proxy Statement Benchmark.53 |
EXPENSES OF SOLICITATION
The cost of soliciting proxies on behalf of the Board will be borne by the Company. SolicitationsThe Company has retained Mediant to assist with the solicitation of proxies are being made by the Company through the mail andfor an estimated fee of $15,000 plus reimbursement for expenses. Proxies may also be madesolicited in person or by mail, telephone or electronic transmission. Directors andtransmission on our behalf by our directors, officers or employees, of the Company may be used in connection with such solicitations, and no additional compensation will be paid to such individuals. The Company will also request brokers and nominees to forward soliciting materials to the beneficial owners of the Common Shares held of record by such persons and will reimburse them for their reasonable forwarding expenses.
DATE OF SUBMISSION OF SHAREHOLDER
PROPOSALS AND DIRECTOR NOMINATIONS
In order for proposals submitted by the shareholders of the Company pursuant to Rule 14a-8 of the General Rules and Regulations under the Exchange Act to be included in the Company’s Proxy Statement and form of proxy relating to the 20192023 annual meeting of shareholders, such proposals must be received at the Company’s principal executive offices no later than November 30, 2018.December 16, 2022. A shareholder choosing not to use the procedures established in Rule 14a-8 but wishing to submit a proposal at the Company’s 20192023 annual meeting of shareholders must deliver written notice of the proposal at the Company’s principal executive offices no later than January 29, 2019,February 14, 2023, pursuant to Article 2, Section 12 of the Bylaws.
The Bylaws provide that shareholders who wish to nominate qualified candidates for election to the Board at the Company’s 20192023 annual meeting of shareholders must deliver written notice of the nomination at the Company’s principal executive offices no later than January 29, 2019,February 14, 2023, pursuant to Article 2, Section 12 of the Bylaws and in accordance with the requirements set forth in Article 3, Section 8 of the Bylaws.
In addition, to comply with the universal proxy rules (once effective), shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than March 26, 2023.
Please refer to the advance notice provisions of the Bylaws for additional information and requirements regarding shareholder nominations or other shareholder proposals. The Company will not consider any proposal or nomination that is not timely or otherwise does not meet the Bylaws and SEC requirements for submitting a proposal or nomination. The Company reserves the right to reject, rule out of order or take other appropriate action with respect to any proposal or nomination that does not comply with these and other applicable requirements.
INTERNET AVAILABILITY OF PROXY MATERIALS AND ANNUAL REPORT
This Proxy Statement and the
54 Benchmark.Benchmark Electronics, Inc. • 2022 Proxy Statement |
The Company’s 2017 Annual Report are available at www.bench.com under “Investors”.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who own more than 10% of a registered class of the Company’s equity securities, to file reports with the SEC regarding their initial beneficial ownership and changes in beneficial ownership of Common Shares and other equity securities of the Company. Directors, officers and greater than 10% shareholders are required by regulation to furnish the Company with copies of all Section 16(a) forms they file. One report on behalf of Mr. Tufano was filed one day late in 2017 relating to one transaction relating to the surrender of shares for tax withholding purposes upon the vesting of RSUs.
To the Company’s knowledge, based solely on review of the copies of the reports furnished to the Company and certain written representations provided to the Company by such persons,Form 10-K for the year ended December 31, 2017, all other Section 16(a) filing requirements applicable to the Company’s directors, officers and greater than 10% beneficial owners were satisfied in a timely manner.
FORM 10-K
A copy of our 2017 Annual Report to Shareholders, which excludes exhibits but includes our financial statements for fiscal year 2017, is enclosed with this Proxy Statement. The Company’s Annual Report on Form 10-K,2021, including all exhibits, has been filed with the SEC. Upon payment of the Company’s reasonable expenses, the Company will furnish a copy of any exhibit to the Form 10-K to any shareholder who makes a written request therefore to Investor Relations, Benchmark Electronics, Inc., 4141 N. Scottsdale Road, Suite 301, Scottsdale,56 South Rockford Drive, Tempe, Arizona 85251.85281. The Annual Report on Form 10-K is also available on our website at www.bench.com
Jeffrey W. Benck
President and Chief Executive Officer of the Company
