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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of thethe Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant | ||
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Preliminary Proxy Statement | ||
Confidential, | ||
Definitive Proxy Statement | ||
Definitive Additional Materials | ||
Soliciting Material Under Rule 14a-12 |
Sanmina Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
No fee required. | |||||||
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||||||
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2) Aggregate number of securities to which transaction applies: | |||||||
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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 | |||||||
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2) Form, Schedule or Registration Statement No.: | |||||||
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4) Date Filed: |
Notice of 2021 Annual Meeting of Stockholders and Proxy Statement |
ABOUT SANMINA CORPORATION Sanmina Corporation is a leading global provider of integrated manufacturing solutions, components, products and repair, logistics and after-market services. We provide these comprehensive offerings primarily to original equipment manufacturers, or OEMs, in the communications networks, cloud solutions, medical, defense and aerospace, industrial and automotive industries. The combination of our advanced technologies, extensive manufacturing expertise and economies of scale enables us to meet the specialized needs of our customers. | OUR COMPETITIVE STRENGTHS ●customer focused organization with 37,000 employees; ●mission critical end-to-end solutions; ●product design and engineering resources; ●vertically integrated manufacturing global capabilities; ●advanced component technologies; ●global manufacturing capabilities, supported by comprehensive IT systems and a global supplier base; ●expertise in serving diverse end markets; and ●expertise in industry standards and regulatory requirements. |
LETTER FROM THE CHAIRMAN AND CEO |
To Our Stockholders,
The Sanmina Board of Directors thanks you for your investment in Sanmina Corporation and for your continued support. We have enhanced our capabilities and fine-tuned our operations to drive operational and financial efficiencies that position Sanmina to deliver compelling long-term value for our stockholders. The Board represents you as stockholders and we take this role very seriously. We appreciate the trust you place in our Board to oversee your investment in our business. MANAGING THE IMPACT OF COVID-19 PANDEMIC We’ve learned a lot, accomplished a lot and we have a great deal to be proud of. Fiscal 2020 illustrated the importance of a focused strategy and a dynamic and dedicated team as we faced unprecedented challenges brought on by the COVID-19 global pandemic. Since the pandemic unfolded, Sanmina’s manufacturing operations have remained open across various regions in the world, producing products that are essential to our daily lives. During this difficult time, our priorities have been to protect the health, safety and well-being of our employees, while continuing to serve our global customers. To that end, we implemented robust safety measures in our workplaces, including personal protective equipment (“PPE”) for our employees, social distancing protocols, work-from-home policies and contact tracing practices at our sites. | JURE SOLA | |||
Chairman and CEO |
PERFORMANCE AND STOCKHOLDER VALUE CREATION
Sanmina delivers innovative, mission critical, high technology and cost-efficient manufacturing solutions to diversified end markets from a strong financial position. Our results-driven culture recognizes employee achievement and fosters integrity, trust and collaboration. Our entire team is customer focused and committed to delivering superior results to both our customers and stockholders.
TableThe extraordinary work of Contents
SANMINA CORPORATIONNOTICE OF ANNUAL MEETING OF STOCKHOLDERSTo Be Held on March 5, 2018
The Annual Meeting of Stockholders of Sanmina Corporation will be held on March 5, 2018, at 11:00 a.m., Pacific Standard Time, at Sanmina Corporation's corporate offices, located at 30 E. Plumeria Drive, San Jose, California 95134, for the following purposes (as more fully describedour teams, who remained agile and resilient in the Proxy Statement accompanying this Notice):
Looking ahead to FY21, we remain focused on disciplined execution and sustainable growth. We have a seasoned and experienced leadership team and a solid foundation to drive long-term sustainable results. We are committed to delivering industry-leading operating margins and healthy cash generation. Our plan to unlock untapped potential as we execute on our strategy, coupled with our strong balance sheet, will propel us into the next phase of 1,800,000our evolution, while providing long-term value to our stockholders, employees and customers.
2021 Proxy Statement 1
Letter from the Chairman and CEO
STOCKHOLDER ENGAGEMENT
Our Board and Management are committed to ongoing engagement with our stockholders. Our board-driven stockholder outreach program and feedback are shared with the Board and respective Committees to determine actionable items. In 2020, we reached out to stockholders representing 69% of our outstanding shares, while speaking with holders of common stockapproximately 29% of our shares. Our discussions spanned a variety of topics, including our compensation programs, corporate governance, sustainability practices, and our current strategy for issuance under the 2009 Incentive Plan of Sanmina Corporation.
Our 2021 compensation of Sanmina Corporation's named executive officers.
On behalf of Sanmina Corporation's named executive officers.the entire Board, we value feedback from our stockholders and remain committed to open dialogue going forward. We are excited about Sanmina’s future and value the trust you place in our Board.
Thank you for your continued trust and support in Sanmina.
2 SANMINA CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
WHEN | WHERE | RECORD DATE | |||||
Monday, March 15, 2021; 11:00 A.M., Pacific Daylight Time | Virtual Meeting www.virtualshareholdermeeting.com/SANM2021 | January 21, 2021 |
ITEMS OF BUSINESS
Board Recommendation | |||
Proposal 1: | FOR each director nominee | ||
Proposal 2: | FOR | ||
Proposal 3: | FOR | ||
Proposal 4: | FOR |
Stockholders will also transact such other business as may properly come before the meeting.
These items of business are more fully described in the Proxy Statement accompanying this Notice of Annual Meeting.
Pursuant to the Internet proxy rules promulgated by the Securities and Exchange Commission (the “SEC”), Sanmina Corporation has elected to provide access to its proxy materials over the Internet. Accordingly, stockholders of record at the close of business on January 12, 201821, 2021 will receive a Notice of Internet Availability of Proxy Materials and may vote at the Annual Meeting and any adjournment or postponement of the meeting. Sanmina Corporation expects to mail the Notice of Internet Availability of Proxy Materials on or about January 24, 2018.28, 2021.
All stockholders are cordially invited to attend the Annual Meeting in person. You should bring a brokerage statement or other evidence of your Sanmina shareholdings for entrance to the Annual Meeting. Even if you plan to attend the Annual Meeting, please vote, as instructed in the Notice of Internet Availability of Proxy Materials, via the Internet or the telephone as promptly as possible to ensure that your vote is recorded. Alternatively, you may follow the procedures outlined in the Notice of Internet Availability of Proxy Materials to request a paper proxy card to submit your vote by mail. Any stockholder attending the Annual Meeting may vote in person even if he or she previously voted by another method.
FOR THE BOARD OF DIRECTORS
CHRISTOPHER K. SADEGHIAN
Corporate Secretary
2021 Proxy Statement 3
PROXY SUMMARY |
This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information you should consider, and you should read the entire Proxy Statement carefully before voting.
What We Do
Sanmina designs, manufactures and repairs some of the most complex and innovative optical, electronic and mechanical products in the world. Recognized as a technology leader, Sanmina provides end-to-end design, manufacturing and logistics solutions, delivering superior quality and support to Original Equipment Manufacturers primarily in the communications networks, cloud solutions, medical, defense and aerospace, industrial and automotive technology sectors.
Our Vision, Mission and Values
We recognize the importance of doing business the right way. At Sanmina we foster a work environment that is built on the beliefs of our vision, mission and values. We believe our core values can help ensure our employees, from top leadership to entry-level, are working towards the same common goal, and share in a bigger purpose.
We believe our culture is embedded in everything we do as we strive to exceed customer expectations, build strong supplier partnerships and consistently deliver superior technology and performance.
Vision: To be the trusted leader in providing products, services and supply chain solutions to accelerate customer success.
Mission: Provide competitive advantage for customers with mission critical products, services and supply chain needs while driving value for customers, employees, and investors.
Values: Our core values revolve around honesty, integrity and openness to guide our behavior. We encourage innovation and foster a collaborative culture that is committed to personal accountability, ethical business practices and good corporate citizenship.
Sustainability
Since Sanmina’s founding forty years ago, our culture has been based on professional integrity and doing the right thing. We take our sustainability and corporate social responsibility initiatives seriously, knowing that this work results in positive changes to our working environment, our people and the communities where we do business. We are committed to making our workforce inclusive, our business sustainable and our stakeholders engaged by maintaining strong environmental and social practices. We strive to do our part, while providing value to our stockholders.
Diversity and Inclusion
Recognizing and respecting our global presence, we strive to maintain a diverse and inclusive workforce everywhere we operate. Almost 50% of our employees worldwide are female and, in the U.S., non-Caucasian employees account for more than 50% of the employee base. Our diversity and inclusion principles are also reflected in our employee training, in particular with respect to our policies against harassment and bullying and the elimination of bias in the workplace.
4 SANMINA CORPORATION
Proxy Summary
Fiscal 2020 was an unprecedented year as the COVID-19 pandemic disrupted our operations and those of our customers in the end markets we serve. The extraordinary work of our teams who remained agile and resilient in this challenging environment is evident in our financial performance for the fiscal year. Although revenue and non-GAAP EPS were down compared to the prior year due to the global pandemic, revenue and non-GAAP EPS grew sequentially in the last two quarters of the fiscal year. Despite challenging market dynamics we were able to increase our operating efficiencies and leverage our advanced technology and manufacturing capabilities to deliver improved non-GAAP operating margins, pre-tax non-GAAP ROIC and non-GAAP EBITDA margin and generate strong cash flow from operations.
REVENUE & NON-GAAP OPERATING MARGIN* | NON-GAAP EARNINGS PER SHARE (EPS)* | |
($ in Millions) | ||
NON-GAAP EBITDA* | CASH FLOW FROM OPERATIONS | |||
($ in Millions) | ($ in Millions) | |||
* | See Appendix B for reconciliation of non-GAAP financial information provided in this proxy statement to their most directly comparable GAAP measures. |
2021 Proxy Statement 5
Proxy Summary
Board and Governance Highlights
Director Nominees
Board committees | |||||||||||||||
Name and principal position | Age | Independent | Director since | Tenure | AC | CC | NGC | ||||||||
Jure Sola | 70 | No | 1989 | 32 | |||||||||||
Chairman and Chief Executive Officer of Sanmina Corporation | |||||||||||||||
Eugene A. Delaney | 64 | Yes | 2013 | 8 | |||||||||||
Consultant | |||||||||||||||
John P. Goldsberry | 66 | Yes | 2008 | 13 | |||||||||||
Former Chief Financial Officer, GLOBALFOUNDRIES Inc. | |||||||||||||||
Rita S. Lane | 58 | Yes | 2016 | 5 | |||||||||||
Consultant | |||||||||||||||
Joseph G. Licata, Jr. | 60 | Yes | 2007 | 14 | |||||||||||
Managing Partner, BlueArc Capital Management | |||||||||||||||
Krish Prabhu | 66 | Yes | 2019 | 2 | |||||||||||
Consultant | |||||||||||||||
Mario M. Rosati | 74 | Yes | 1997 | 24 | |||||||||||
Retired Member, Wilson Sonsini Goodrich & Rosati | |||||||||||||||
Jackie M. Ward (Lead Independent Director) | 82 | Yes | 2001 | 20 | |||||||||||
Former Chair of the Board of Sysco Corporation and Chair of the Board of Luna C Clothing |
AC | Audit Committee | CC | Compensation Committee | NGC | Nominating and Governance Committee | Chair | Member |
6 SANMINA CORPORATION
Proxy Summary
Board Snapshot
SKILLS AND EXPERIENCE
Type of Experience | |||
Electronics manufacturing services and similar manufacturing companies | |||
Other technology/information technology | |||
Public company board membership | |||
Executive or senior management | |||
International business | |||
Strategic planning | |||
Accounting, audit and corporate finance | |||
Board governance, including board nominations | |||
Risk management, compliance and regulatory |
2021 Proxy Statement 7
Proxy Summary
Good Governance Practices
BOARD INDEPENDENCE | BOARD EFFECTIVENESS | GOOD CORPORATE | |||||
●7 of our 8 director nominees are independent ●Lead Independent Director ●All Nasdaq-required Board committees consist solely of independent directors ●Independent Committee Chairs ●Independent directors regularly meet in executive session, without members of management | ●95% or greater Board and Committee meeting attendance in 2020 by each director ●100% director attendance at our 2020 Annual Meeting of Stockholders ●Board oversight of strategy ●Board oversight of risk management processes ●Updates to the Board on investor engagement | ●Annual election of directors ●Comprehensive Code of Conduct and Corporate Governance Guidelines ●Compensation clawback policy covering both cash and equity incentives ●Stock ownership and holding guidelines for directors and executive officers ●Policies prohibiting hedging and pledging of our shares by directors and executive officers ●Expansive shareholder outreach program to gauge support for our executive compensation practices and corporate governance policies and to respond to stockholder input |
Stockholder Outreach
We believe that effective corporate governance should include regular, constructive conversations with our stockholders. In 2020, we invited stockholders representing 69% of our outstanding shares to meet with our management and members of the Board to solicit feedback about our business, corporate governance, and our executive compensation programs, speaking with holders of 29% of our shares (the remaining 40% did not require a meeting or did not respond). In addition to input on current governance and executive compensation topics specific to Sanmina, we invited discussion on any other topics or trends stockholders wished to share with us. Additionally, we engaged with a key proxy advisory firm to explain and reinforce our executive compensation program and philosophy and to understand any comments they had.
8 SANMINA CORPORATION
Proxy Summary
Executive Compensation HighlightsTABLE OF CONTENTS
Components of CEO Compensation - 2020 and 2021
Component | 2020 % of Total Target | 2021 % of Total Target | Purpose | Key Characteristics | |||||||||
Base Salary | ●Attract and retain talent with a competitive level of pay | ●Determined in consideration of individual performance, experience level and peer group compensation data ●Targeted below 50th percentile of our peers | |||||||||||
| ●Incentivize and reward for corporate and individual performance over shorter time periods and to aid in retention ●Drive achievement of specific goals in line with our strategy | ●Two financial goals (revenue and non-GAAP operating margin) ●One modifier (cash flow from operations) ●Allows for total cash compensation to become more competitive compared to peers when high levels of corporate and individual performance are achieved | |||||||||||
Long-Term Equity Incentives | ●Align incentives of management with interests of stockholders ●Align realized pay with stockholder value creation ●Support long-term retention of critical talent | ●High degree of performance-based PSUs and time-based RSUs (86%/14%) ●Cumulative three-year non-GAAP earnings per share measured at end of performance period ●Variable payout based upon level of achievement (65% to 135%) and, at discretion of Compensation Committee, relative TSR compared to peers, with minimum threshold for any payout ●Allows for total compensation to become more competitive to peers when high levels of corporate and individual performance are achieved |
2021 Proxy Statement 9
Table of Contents Proxy Summary Compensation Practices WHAT WE ARE DOING: WHAT WE DON’T DO 10 SANMINA CORPORATION Proxy Summary Compensation Changes Related to COVID-19 In fiscal 2020, the Company’s operations were negatively impacted by the worldwide COVID-19 pandemic, which reduced end market demand for our customers’ products (and therefore our revenue) and resulted in supply chain constraints and temporary plant closures and suspension of manufacturing. As a result, the Company’s revenue for fiscal 2020 fell short of the minimum threshold for payout under the 2020 Bonus Plan. The Compensation Committee determined that the pandemic represented an extraordinary event outside of management’s control and that it was important to consider a number of other factors that are important to the ongoing success of the Company. In particular, key management and operations staff had done an admirable job pivoting to continue to meet customer requirements while working diligently to keep the Company’s plants open worldwide, subject to government restrictions in some places, and also prioritizing the health safety and well-being of its employees. As a result of management’s efforts, the Company was able to: In addition, fourth quarter non-GAAP operating margin, non-GAAP EPS and full year non-GAAP EBITDA margin were the highest since at least 2007 and pre-tax non-GAAP ROIC was the highest since the company began reporting such metric five years ago. In light of these facts and the Compensation Committee’s desire to recognize and reward management performance for its efforts during the pandemic, the Compensation Committee determined to exercise the discretion afforded to it under the 2020 Bonus Plan to adjust the plan in order for management to receive bonuses under the 2020 Bonus Plan. Based on its assessment of the impact of the pandemic, the Compensation Committee determined that the 2020 Plan would have yielded a Corporate Performance Factor of approximately 80% excluding such impact. NEO’s made up less than 5% of total fiscal 2020 bonuses, while approximately 22% was allocated to certain plant-based employees in North America in recognition of their contribution and efforts during the pandemic. For additional details, please see “Compensation Discussion and Analysis – Executive Officer Compensation Decisions for 2020,” on page 42. 2021 Proxy Statement 11 12 SANMINA CORPORATIONQUESTIONS AND ANSWERS ABOUT PROCEDURAL MATTERS 1 PROPOSAL ONE: ELECTION OF DIRECTORS●No guaranteed bonus payments for CEO or other NEO’s. 8TABLE OF CONTENTS
PROPOSAL | ||||
Unless otherwise instructed, the proxy holders will vote the proxies received by them for Jure Sola, Eugene A. Delaney, John P. Goldsberry, Rita S. Lane, Joseph G. Licata, Jr., Krish Prabhu, Mario M. Rosati and Jackie M. Ward. If any such nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who shall be designated by the Nominating and Governance Committee to fill the vacancy. If stockholders nominate additional persons for election as directors, the proxy holders will vote all proxies received by them to assure the election of as many of the nominees listed below as possible, with the proxy holder making any required selection of specific nominees to be voted for. The term of office of each person elected as a director will continue until that person’s successor has been elected by the holders of the outstanding shares of common stock and qualified, or until his or her earlier death, resignation or removal in the manner provided in our bylaws. | ||||
The Board unanimously recommends a vote FOR the election of the following Director nominees. |
2021 Proxy Statement 13
Proposal One: Election of Directors
Principal occupation: Chairman and Chief Executive Officer of Sanmina Corporation Director since: 1989 | Jure Sola Biographical Information ●Has served as Sanmina’s Chief Executive Officer since August 2020 and from April 1991 to October 2017, Chairman of Sanmina’s Board since August 2020 and from April 1991 to December 2001 and from December 2002 to October 2017, Sanmina’s Executive Chairman from October 2017 to August 2020, and Co-Chairman of Sanmina’s Board from December 2001 to December 2002. ●Co-founded Sanmina Corporation and initially held the position of Vice President of Sales in 1980. ●Became Vice President and General Manager of Sanmina Corporation, responsible for manufacturing operations and sales and marketing. ●Elected as a director and in October 1989 was appointed as President of Sanmina Corporation. Board Nominating Factor Mr. Sola’s role as the co-founder of Sanmina as well as his more than 40 years of experience in the electronics manufacturing industry and deep knowledge of the Company and its operations. |
Principal occupation: Consultant Director since: 2013 Board committees: Audit, Compensation (Chair) | Eugene A. Delaney Biographical Information ●Has served as a director of Sanmina since December 2013. ●Previously served as Executive Vice President, Product and Business Operations of Motorola Solutions, Inc., a worldwide provider of communications infrastructure, devices, software and services to government and enterprise customers, from January 2011 through July 2013. ●Held the positions of Executive Vice President, President, Enterprise Mobility Solutions, Motorola Inc. from January 2009 to August 2010; Senior Vice President, President, Government and Public Safety from May 2007 to January 2009; and Senior Vice President, International Sales Operations, Networks and Enterprise from May 2006 to May 2007 with Motorola, Inc. ●Served in other senior management roles with Motorola, Inc., including Senior Vice President of the Cellular Infrastructure Group, and President of Asia/Pacific region and Chairman of Motorola China Ltd. Board Nominating Factor Mr. Delaney’s more than 25 years of senior management experience with a major global communications technology company, particularly in the areas of business transformation and corporate finance. |
14 SANMINA CORPORATION
Proposal One: Election of Directors
Principal occupation: Former Chief Financial Officer, GLOBALFOUNDRIES Inc. Director since: 2008 Board committees: Audit (Chair) | John P. Goldsberry Biographical Information ●Has served as a director of Sanmina since January 2008. ●Served as Chief Financial Officer of GLOBALFOUNDRIES Inc., a semiconductor foundry company from January 2016 to January 2018 and as Chief Accounting Officer from June 2013 until January 2016. ●Served as Chief Financial Officer of American Traffic Solutions, Inc., the leading traffic camera services company, from July 2010 until November 2012, and as Chief Financial Officer of TPI Composites, Inc., a manufacturer of composites products for the wind energy markets, from July 2008 until July 2010. ●Previously served as Senior Vice President and Chief Financial Officer of Gateway, Inc., a computer manufacturer, from August 2005 to April 2008. ●Served as Senior Vice President, Operations, Customer Care and Information Technology from April 2005 to August 2005, as Senior Vice President, Strategy and Business Development from March 2004 to April 2005 and as Chief Financial Officer of eMachines, Inc., a PC manufacturer acquired by Gateway, from January 2004 until March 2004. ●Held Chief Financial Officer positions at TrueSpectra, Inc., an imaging solutions company, Calibre, Inc., a wireless technology company, Quality Semiconductor, Inc., a semiconductor company, DSP Group, Inc., a semiconductor company, and The Good Guys, Inc., an electronics retailer, and worked for Salomon Brothers and Morgan Stanley in a number of corporate finance positions. Board Nominating Factor Mr. Goldsberry’s deep financial expertise, CFO experience, understanding of hardware and manufacturing businesses (computers, renewable energy, electronic equipment and semiconductors), providing knowledge to help Sanmina refine and improve its strategy and execution. |
2021 Proxy Statement 15
Proposal One: Election of Directors
Principal occupation: Consultant Director since: 2016 Board committees: Audit, Nominating and Governance (Chair) Other public boards: Amphenol Signify Holdings L3Harris Technologies, Inc. | Rita S. Lane Biographical Information ●Has served as a director of Sanmina since September 2016. ●Has been the Principal at Hajime, LLC a supply chain advisor for start-up companies since January 2014. ●Serves as a Supervisory Board member of Signify Holdings (formerly Philips Lighting), a global lighting systems manufacturer, as a Board member of L3Harris Technologies, Inc., a provider of aerospace, communication, electronic and sensor systems and as a Board member of Amphenol, an electronic components supplier. ●Served as Vice President, Operations, for Apple Inc. from July 2008 through January 2014. ●Was Senior Vice President, Integrated Supply Chain/Chief Procurement Officer for Motorola Solutions, Inc. and prior to that time held senior supply chain positions at International Business Machines Corporation for more than ten years. ●Served for five years in the United States Air Force as a Captain. Board Nominating Factor Ms. Lane’s more than 30 years of experience in global supply chain, technology products and hardware operations for Fortune 100 companies. |
Principal occupation: Managing Partner, BlueArc Capital Management Director since: 2007 Board committees: Audit, Compensation | Joseph G. Licata, Jr. Biographical Information ●Has served as a director of Sanmina since August 2007. ●Is the Managing Partner—Private Equity, of BlueArc Capital Management since April 2014. ●Currently Chairman of the Board of Choice Adhesives Corp. and Brunswick Bowling Products, both privately held companies. ●Past Chief Executive Officer of Synergy Leadership, LLC, a firm specializing in Board and CEO advisory services in the areas of corporate and growth strategy, operational full potential and enterprise value creation, a company which he also founded, from January 2011 until April 2014. ●Served as Chief Executive Officer of Peopleclick Authoria, Inc., a vendor of human resources process management software and services, from April 2010 through November 2010. ●Served as President and Chief Executive Officer of SER Solutions, Inc., a global call management and speech analytics solutions company, from July 2007 through October 2008 when the company was acquired. ●Served as President and Chief Executive Officer of Siemens Enterprise Networks, LLC, a leader of enterprise communications solutions, from 2001 to 2006. Board Nominating Factor Mr. Licata’s more than 19 years of experience as chief executive officer and chairman of companies in diverse industries provides him excellent visibility into operational and financial issues. |
16 SANMINA CORPORATION
Proposal One: Election of Directors
Principal occupation: Consultant Director since: 2019 Board committees: Compensation Other public boards: Ribbon Communications Inc. | Krish Prabhu Biographical Information ●Has served as a director of Sanmina since September 2019. ●Has been an independent technology consultant since retiring from AT&T, a telecommunications service provider, in September 2016, where he had served as Chief Technology Officer and President of AT&T Labs since June 2011. ●Held senior management positions at Tellabs, Inc., a telecommunications equipment provider, as President and Chief Executive Officer, from 2004 until 2008, and at Alcatel, also a telecommunications equipment provider, between 1991 and 2001. ●Was a venture partner at Morganthaler Ventures between 2001 and 2004. ●Serves as a director of Ribbon Communications Inc., a provider of networked software solutions, and as a director of several private companies; served on the board of Altera Corporation between 2007 and 2015. Board Nominating Factor Mr. Prabhu’s more than 30 years of industry experience and senior leadership roles at global public corporations. |
Principal occupation: Retired Member, Wilson Sonsini Goodrich & Rosati Director since: 1997 Board committees: Nominating and Governance Other public boards: Aehr Test Systems | Mario M. Rosati Biographical Information ●Has served as a director of Sanmina since 1997. ●Member of the law firm of Wilson Sonsini Goodrich & Rosati from 1971 until January 2020. ●Serves as a director of Aehr Test Systems, a provider of semiconductor testing equipment. Board Nominating Factor Mr. Rosati’s senior and significant role in a major Silicon Valley law firm serving technology companies and service on multiple company boards, giving him unique viewpoints on the technology industry and strategies for growth. |
2021 Proxy Statement 17
Proposal One: Election of Directors
Principal occupation: Former Chair of the Board of Sysco Corporation and Chair of the Board of Luna C Clothing Director since: 2001 Board committees: Compensation, Nominating and Governance | ||||
| ||||
| ||||
Served as a director of SCI from 1992 until December 2001 when Sanmina and SCI Systems, Inc. merged. ●Former director of Sysco Corporation (Chair of the Board). ●Serves as Chair of the Board of Luna C Clothing, a sports clothing company. ●Was the Outside Managing Director of Intec Telecom Systems, USA, a provider of turnkey telecommunication systems and products, from December 2000 to October 2006. ●Served as President, Chief Executive Officer and Chairman of the Board of Computer Generation Incorporated, which company she also co-founded. Board Nominating Factor Ms. Ward’s wealth of experience as a current or former board member of a number of leading Fortune 500 companies and her long-term service as a technology company chief executive officer. |
18 SANMINA CORPORATION
Proposal One: Election of Directors
SANMINA CORPORATION30 E. Plumeria DriveSan Jose, California 95134PROXY STATEMENTFOR THE 2018 ANNUAL MEETING OF STOCKHOLDERSQUESTIONS AND ANSWERS ABOUT PROCEDURAL MATTERS
We expect to mail the Notice of Internet Availability on or about January 24, 2018, to all stockholders entitled to vote at the Annual Meeting. On the date of mailing of the Notice of Internet Availability, all stockholders and beneficial owners will have the ability to access all of our proxy materials on a website referred to in the Notice of Internet Availability. These proxy materials will be available free of charge.
Stock Ownership
shares, the stockholder of record, and the Notice of Internet Availability has been sent directly to you.
Beneficial Owners. Many stockholders hold their shares through a broker, trustee or other nominee, rather than directly in their own name. If your shares are held in a brokerage account or by a bank or another nominee, you are considered the "beneficial owner" of shares held in "street name." The Notice of Internet Availability should be forwarded to you by your broker, trustee or nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, trustee or other nominee on how to vote your shares. For directions on how to vote shares beneficially held in street name, please refer to the voting instruction card provided by your broker, trustee or nominee. Because a beneficial owner is not the stockholder of record, you may not vote these shares in person at the Annual Meeting unless you obtain a "legal proxy" from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the Annual Meeting.
Quorum and Voting
Under the General Corporation Law of the State of Delaware, abstentions and broker "non-votes" are counted as present and entitled to vote and are, therefore, included for purposes of determining whether a quorum is present at the Annual Meeting.
Stockholders of Record. Shares held in your name as the stockholder of record may be voted in person at the Annual Meeting even if previously voted by another method.
Beneficial Owners. Shares held beneficially in street name may be voted in person at the Annual Meeting only if you obtain a legal proxy from the broker, trustee or other nominee that holds your shares giving you the right to vote the shares.
Even if you plan to attend the Annual Meeting, we recommend that you submit your vote as described in the Notice of Internet Availability and below, so that your vote will be counted if you later decide not to attend the Annual Meeting.
Internet. Stockholders of record with Internet access may submit proxies by following the "Vote by Internet" instructions on the Notice of Internet Availability until 11:59 p.m., Eastern Standard Time, on March 4, 2018 or by following the instructions atwww.proxyvote.com. Most of our stockholders who hold shares beneficially in street name may vote by accessing the website specified in the voting instructions provided by their brokers, trustees or nominees. A large number of banks and brokerage firms are participating in the Broadridge Financial Solutions, Inc. ("Broadridge") online program. This program provides eligible stockholders the opportunity to vote over the Internet or by telephone. Voting forms will provide instructions for stockholders whose bank or brokerage firm is participating in the Broadridge program.
Telephone. Depending on how your shares are held, you may be able to vote by telephone. If this option is available to you, you will have received information with the Notice of Internet Availability explaining this procedure.
Mail. If you are a record holder (i.e. you own your shares directly and not through a broker), you may request a proxy card from Sanmina on which you can indicate your vote by completing, signing and dating the card where indicated and by returning it in the prepaid envelope that will be included with the proxy card. If you hold your shares in street name, the voting instructions provided by your broker, trustee or nominee will indicate how you may vote by mail.
Stockholders of Record. If you are a stockholder of record, you may change your vote by:
Any written notice of revocation or subsequent proxy card must be received by Sanmina's Corporate Secretary prior to the taking of the vote at the Annual Meeting.
A stockholder of record who has voted via the Internet or by telephone may also change his or her vote by making a timely and valid Internet or telephone vote no later than 11:59 p.m., Eastern Standard Time, on March 4, 2018.
Beneficial Owners. If you are a beneficial owner of shares held in street name, you may change your vote by submitting new voting instructions to your broker, trustee or other nominee, or if you have obtained a legal proxy from the broker, trustee or other nominee that holds your shares giving you the right to vote the shares, by attending the Annual Meeting and voting in person.
Proposal One. The election of eleven directors to hold office until the 2019 Annual Meeting of Stockholders or until their respective successors have been duly elected and qualified;
Proposal Two. The ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending September 29, 2018;
Proposal Three. The approval of the reservation of 1,800,000 shares of common stock for issuance under our 2009 Incentive Plan; and
Proposal Four. The approval on an advisory (non-binding) basis of the compensation of our named executive officers.
Proposal Five. The approval on an advisory (non-binding) basis of the frequency of future advisory (non-binding) votes on the compensation of Sanmina Corporation's named executive officers.
You may vote "FOR," "AGAINST" or "ABSTAIN" on each of the eleven nominees for election as director.The Board of Directors recommends that you vote your shares "FOR" each of the eleven nominees listed in Proposal One.
Proposal Two. The affirmative vote of a majority of the votes cast is required to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm. Abstentions have the same effect as a vote against this proposal. However, broker non-votes are not deemed to be votes cast and, therefore, have no effect on the outcome of this proposal.
You may vote "FOR," "AGAINST" or "ABSTAIN" on this proposal.The Board of Directors recommends that you vote your shares "FOR" Proposal Two.
Proposal Three. The affirmative vote of a majority of the votes cast is required to approve the reservation of an additional 1,800,000 shares of common stock for issuance under our 2009 Incentive Plan. Abstentions have the same effect as a vote against this proposal. However, broker non-votes are not deemed to be votes cast and, therefore, have no effect on the outcome of this proposal.
You may vote "FOR," "AGAINST" or "ABSTAIN" on this proposal.The Board of Directors recommends that you vote your shares "FOR" Proposal Three.
Proposal Four. The affirmative vote of a majority of the votes cast is required to approve on an advisory (non-binding) basis the compensation of our named executive officers, as disclosed in the Proxy Statement for the 2018 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and the other related disclosure. Abstentions have the same effect as a vote against this proposal. However, broker non-votes are not deemed to be votes cast and, therefore, have no effect on the outcome of this proposal.
You may vote "FOR," "AGAINST" or "ABSTAIN" on this proposal.The Board of Directors recommends that you vote your shares "FOR" Proposal Four.
Proposal Five. The option of once every year, two years or three years that receives the highest number of votes cast will be determined to be the preferred frequency with which we are to hold future advisory (non-binding) votes on the compensation of our named executive officers. Abstentions and broker non-votes are not deemed to be votes cast and, therefore, have no effect on the outcome of this proposal.
You may vote once every "ONE YEAR," "TWO YEARS," "THREE YEARS" or "ABSTAIN" on this proposal.The Board of Directors recommends that you vote your shares "ONE YEAR" on Proposal Five
Stockholder Proposals and Director Nominations
Requirements for stockholder proposals to be considered for inclusion in our proxy materials. Stockholders may present proper proposals to be considered for inclusion in Sanmina's proxy statement and for consideration at the next Annual Meeting of Stockholders by submitting their proposals in writing to our Corporate Secretary in a timely manner. In order to be considered for inclusion in the proxy statement for the 2019 Annual Meeting of Stockholders, stockholder proposals must be received by Sanmina's Corporate Secretary no later than September 21, 2018 and must otherwise comply with the requirements of Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Requirements forstockholder proposals to be brought before an Annual Meeting of Stockholders. In addition, our bylaws establish an advance notice procedure for stockholders who wish to present certain matters before an Annual Meeting of Stockholders, provided that the stockholders are stockholders of record when notice is given and on the record date for the determination of the stockholders entitled to vote at the Annual Meeting, even though these proposals are not included in the Annual Meeting proxy statement. To be timely for the 2019 Annual Meeting, a stockholder's notice must be delivered to or mailed and received by our Corporate Secretary at our principal executive offices between November 5, 2018 and December 5, 2018. For all matters that a stockholder proposes to bring before the Annual Meeting, the notice must set forth:
Additional Information
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED AND THE DELIVERY OF THIS PROXY STATEMENT SHALL, UNDER NO CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF SANMINA SINCE THE DATE OF THIS PROXY STATEMENT.
PROPOSAL ONE:ELECTION OF DIRECTORS
IdentificationQualification of Nominees
Our Board of Directors (the "Board") currently consists of eleven members. The Nominating and Governance Committee of the Board has nominated the eleven members of the Board listed below for reelection at this meeting.
Unless otherwise instructed, the proxy holders will vote the proxies received by them for Jure Sola, Michael J. Clarke, Eugene A. Delaney, William J. DeLaney, Robert K. Eulau, John P. Goldsberry, Rita S. Lane, Joseph G. Licata, Jr., Mario M. Rosati, Wayne Shortridge and Jackie M. Ward. If any such nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who shall be designated by the Nominating and Governance Committee to fill the vacancy. If stockholders nominate additional persons for election as directors, the proxy holders will vote all proxies received by them to assure the election of as many of the nominees listed below as possible, with the proxy holder making any required selection of specific nominees to be voted for. The term of office of each person elected as a director will continue until that person's successor has been elected by the holders of the outstanding shares of Common Stock and qualified, or until his or her earlier death, resignation or removal in the manner provided in our bylaws.
Name of Nominee | Age | Principal Occupation | Director Since | ||||||
---|---|---|---|---|---|---|---|---|---|
Jure Sola | 67 | Executive Chairman of Sanmina Corporation | 1989 | ||||||
Michael J. Clarke | 63 | Consultant | 2013 | ||||||
Eugene A. Delaney | 61 | Consultant | 2013 | ||||||
William J. DeLaney | 62 | Former Chief Executive Officer, Sysco Corporation | 2018 | ||||||
Robert K. Eulau | 56 | Chief Executive Officer of Sanmina Corporation | 2017 | ||||||
John P. Goldsberry | 63 | Former Chief Financial Officer, GLOBALFOUNDRIES Inc. | 2008 | ||||||
Rita S. Lane | 55 | Consultant | 2016 | ||||||
Joseph G. Licata, Jr. | 57 | Senior Operating Partner, BlueArc Capital Management | 2007 | ||||||
Mario M. Rosati | 71 | Member, Wilson Sonsini Goodrich & Rosati, P.C. | 1997 | ||||||
Wayne Shortridge | 79 | Consultant | 2001 | ||||||
Jackie M. Ward | 79 | Chair of the Board of Sysco Corporation and Luna-C Clothing | 2001 |
Jure Sola has served as Sanmina's Executive Chairman since October 2017, Chief Executive Officer from April 1991 to October 2017, as Chairman of Sanmina's Board from April 1991 to December 2001 and from December 2002 to October 2017, and Co-Chairman of Sanmina's Board from December 2001 to December 2002. In 1980, Mr. Sola co-founded Sanmina Corporation and initially held the position of Vice President of Sales. In October 1987, he became Vice President and General Manager of Sanmina Corporation, responsible for manufacturing operations and sales and marketing. In July 1989, Mr. Sola was elected as a director and in October 1989 was appointed as President of Sanmina Corporation.
Michael J. Clarke has served as a director of Sanmina since December 2013. From December 2011 through July 2016, Mr. Clarke was a member of the Board of Directors, President and Chief Executive Officer of Nortek, Inc., a manufacturer of products for remodeling, residential and new construction, manufactured housing and personal and enterprise computer markets. From 2005 until joining Nortek, Mr. Clarke served as President, Flex Infrastructure and Group President of Integrated Network Solutions of Flextronics International, Ltd, a publicly traded provider of design and electronics manufacturing services to original equipment manufacturers.
Eugene A. Delaney has served as a director of Sanmina since December 2013. Mr. Delaney previously served as Executive Vice President, Product and Business Operations of Motorola Solutions, Inc., a worldwide provider of communications infrastructure, devices, software and services to government and enterprise customers, from January 2011 through July 2013. Prior to that time, Mr. Delaney held the positions of Executive Vice President, Product and Business Operations, Enterprise Mobility Solutions, Motorola, Inc., from August 2010 to January 2011; Executive Vice President, President, Enterprise Mobility Solutions from January 2009 to August 2010; Senior Vice President, Government and Public Safety from May 2007 to January 2009; and Senior Vice President, International Sales Operations, Networks and Enterprise from May 2006 to May 2007. Prior to that time, Mr. Delaney served in other senior management roles with Motorola, Inc., including Senior Vice President of the Cellular Infrastructure Group, President of Asia/Pacific region and Chairman of Motorola China Ltd.
William J. DeLaney has served as a director of Sanmina since January 2018. Mr. DeLaney served as Chief Executive Officer of Sysco Corporation, a food marketing and distribution company, from March 2009 until December 2017 and as a director of Sysco from January 2009 until December 2017. He held the additional title of President from March 2010 through December 2015. Previously, Mr. DeLaney held various finance, management and executive positions with Sysco, which he joined in 1987. Mr. Delaney also serves as a director of Express Scripts Holding Company, a pharmacy benefit management company.
Robert K. Eulau has served as the Chief Executive Officer and a director of Sanmina Corporation since October 2017. Prior to that time, he served as Sanmina's Executive Vice President and Chief Financial Officer from September 2009 until October 2017. Prior to joining Sanmina, Mr. Eulau was the Executive Vice President, Chief Operating Officer and Chief Financial Officer of privately-owned Alien Technology Corporation, a developer of radio frequency identification products, from March 2006 to June 2008. Previously, he was Senior Vice President and Chief Financial Officer of publicly-traded Rambus Inc., a technology licensing company, from May 2001 to March 2006. Prior to Rambus, Mr. Eulau served over 15 years with Hewlett Packard Company in various leadership roles, including Vice President and Chief Financial Officer of HP's Business Customer Organization, and Vice President and Chief Financial Officer of HP's Computing Products business.
John P. Goldsberry has served as a director of Sanmina since January 2008. Mr. Goldsberry recently retired as Chief Financial Officer of GLOBALFOUNDRIES Inc., a semiconductor foundry company, a position he held from January 2016 to January 2018, having previously been Chief Accounting Officer since June 2013. Mr. Goldsberry served as Chief Financial Officer of American Traffic Solutions, Inc., the leading traffic camera services company, from July 2010 until November 2012, and as Chief Financial Officer of TPI Composites, Inc., a manufacturer of composites products for the wind energy markets, from July 2008 until July 2010. Mr. Goldsberry previously served as Senior Vice President and Chief Financial Officer of Gateway, Inc., a computer manufacturer, from August 2005 to April 2008. He also served as Senior Vice President, Operations, Customer Care and Information Technology from April 2005 to August 2005, as Senior Vice President, Strategy and Business Development from March 2004 to April 2005 and as Chief Financial Officer of eMachines, Inc., a PC manufacturer acquired by Gateway, from January 2004 until March 2004. Previously, Mr. Goldsberry held Chief Financial Officer positions at TrueSpectra, Inc., an imaging solutions company, Calibre, Inc., a wireless technology company, Quality Semiconductor, Inc., a semiconductor company, DSP Group, Inc., a semiconductor company and The Good Guys, Inc., an electronics retailer, and worked for Salomon Brothers and Morgan Stanley in a number of corporate finance positions.
Rita S. Lane has served as a director of Sanmina since September 2016. Since January 2014, she has been the Principal at Hajime, LLC a supply chain advisor for start-up companies. Ms. Lane also serves as a Supervisory Board member of Philips Lighting N.V., a publicly-traded global lighting systems manufacturer. She served as Vice President, Operations, for Apple Inc. from July 2008 through January
2014. From June 2006 through July 2008, she was Senior Vice President, Integrated Supply Chain/Chief Procurement Officer for Motorola Solutions, Inc. and prior to that time held senior supply chain positions at International Business Machines Corporation for more than ten years. Ms. Lane also served for five years in the United States Air Force as a Captain.
Joseph G. Licata, Jr. has served as a director of Sanmina since August 2007. Since April 2014, he has been the Senior Operating Partner—Private Equity, of BlueArc Capital Management. Further, since 2015, Mr. Licata has been Chairman of the Board, Brunswick Bowling Products, and Chairman of the Board, HealPros Corp. From January 2011 until April 2014, he was the Chief Executive Officer of Synergy Leadership, LLC, a firm specializing in Board and CEO advisory services in the areas of corporate and growth strategy, sales, performance improvement, operational full potential and customer value creation, a company which he also founded. He served as Chief Executive Officer of Peopleclick Authoria, Inc., a vendor of human resources process management software and services, from April 2010 through November 2010. He also served as President and Chief Executive Officer of SER Solutions, Inc., a global call management and speech analytics solutions company, from July 2007 through October 2008 when the company was acquired. Mr. Licata also served as President of Siemens Enterprise Networks, LLC, a leader of open communications solutions for enterprises, from 2001 to 2006.
Mario M. Rosati has served as a director of Sanmina since 1997. He has been an attorney with the law firm of Wilson Sonsini Goodrich & Rosati, Professional Corporation, since 1971. Mr. Rosati serves as a member of the Board of Directors of Aehr Test Systems, a manufacturer of electronics device testing equipment. Mr. Rosati also serves as a director of several privately held companies.
Wayne Shortridge has served as a director of Sanmina since December 2001 and has served as our lead independent director since December 2006. Mr. Shortridge also served as a director of SCI Systems, Inc. from 1992 until December 2001, when SCI merged with Sanmina. Mr. Shortridge is an attorney. From May 2012 until March 2014, he served as a Director of Business Development of The Partners Group, an attorney placement firm. From March 2004 to December 2011, Mr. Shortridge served as Atlanta Office Managing Shareholder of the law firm of Carlton Fields, PA. From 1994 to 2004, he was a partner in the law firm of Paul, Hastings, Janofsky & Walker, LLP, in Atlanta, Georgia.
Jackie M. Ward has served as a director of Sanmina since December 2001. From 1992 until December 2001 when we merged with SCI Systems, Inc., she served as a director of SCI. Ms. Ward also serves as a director of Sysco Corporation (Chair of the Board). During the past five years, Ms. Ward also served as a director of Anthem, Inc.(Chair of the Board) and Flowers Foods, Inc. (Lead Director). Ms. Ward also serves as Chair of the Board of Luna-C Clothing, a sports clothing company. From December 2000 to October 2006, Ms. Ward was the Outside Managing Director of Intec Telecom Systems, USA, a provider of turnkey telecommunication systems and products. From 1968 to 2000, she served as President, Chief Executive Officer and Chairman of the Board of Computer Generation Incorporated, which company she also co- founded.
Qualifications of Nominees
The Nominating and Governance Committee believes itsthis slate of nominees possesspossesses the strategic development, financial, operational and industry-specific skills necessary to effectively guide and oversee our business. In evaluating the qualifications of the nominees listed above, the Nominating and
Governance Committee considered a number of factors, including the nominees'nominees’ experience as shown in the following chart:
SKILLS AND EXPERIENCE
Type of Experience | ||
Electronics manufacturing services and similar manufacturing companies | ||
Other technology/information technology | ||
Public company board membership | ||
Executive or senior management | ||
International business | ||
Strategic planning | ||
Accounting, audit and corporate finance | ||
Board governance, including board nominations | ||
Risk management, compliance and regulatory |
The Nominating and Governance Committee does not require that each nominee have experience in each of these areas, instead evaluating nominees as a group to ensure that the Board as a whole possesses the appropriate mix of experience and knowledge. The Nominating and Governance Committee does not explicitly consider diversity in indentifying nominees for director. Below are listed the primary factors considered by the Nominating and Governance Committee with respect to each nominee in determining to nominate him or her for election to the Board and for service as a member of one of our Board committees, if applicable.
Vote Required; Recommendation of the Board ofIndependent Directors
A nominee for director shall be elected to the Board if the votes cast for such nominee's election exceed the votes cast against such nominee's election. Abstentions and broker non-votes do not count as "votes cast" with respect to this proposal and therefore will not affect the outcome of the election. Pursuant to our Corporate Governance Guidelines, should a nominee for director fail to receive the required number of votes for election, he or she is required to tender his or her resignation to the Board. In such a case, the Nominating and Governance Committee of the Board has the option of accepting or declining such resignation, considering any factors that the Nominating and Governance Committee deems relevant.
OUR BOARD UNANIMOUSLY RECOMMENDS VOTING "FOR" THE NOMINEES LISTED ABOVE FOR ELECTION TO THE BOARD.
PROPOSAL TWO:RATIFICATION OF APPOINTMENT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has approved the engagement of PricewaterhouseCoopers LLP ("PwC") as our independent registered public accounting firm for the fiscal year ending September 29, 2018. In the event stockholders do not ratify the Audit Committee's selection of PwC as our independent registered public accounting firm, the Audit Committee may reconsider its selection. Representatives of PwC are expected to be present at the Annual Meeting, with the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.
The following is a summary of fees billed by our independent registered public accounting firm for the fiscal years ended October 1, 2016 ("fiscal 2016") and September 30, 2017 ("fiscal 2017"). The Audit Committee considers the non-audit and tax fees in its assessment of the independence of the Company's independent registered public accounting firm. Fiscal 2017 fees reflect the results of the Company's competitive review process.
Audit Fees
The aggregate fees billed for professional services rendered by PwC for the audit of our annual consolidated financial statements, various statutory audits and reviews of the condensed consolidated financial statements included in our Quarterly Reports on Form 10-Q for fiscal 2016 and fiscal 2017 were as follows:
Fiscal 2016 | Fiscal 2017 | ||||
---|---|---|---|---|---|
$ | 2,756,000 | $ | 3,027,000 |
Audit-Related Fees
The aggregate fees billed for audit-related services, exclusive of the fees disclosed above relating to audit fees, rendered by PwC during fiscal 2016 and fiscal 2017 were as follows:
Fiscal 2016 | Fiscal 2017 | ||||
---|---|---|---|---|---|
$ | — | $ | 51,000 |
Tax Fees
The aggregate fees billed for tax services rendered by PwC during fiscal 2016 and fiscal 2017 are set forth below. These services consisted primarily of tax compliance and tax consultation services. Tax fees increased in fiscal 2017 as a result of the transition of tax services from our prior independent registered public accounting firm to PwC.
Fiscal 2016 | Fiscal 2017 | ||||
---|---|---|---|---|---|
$ | 40,000 | $ | 667,000 |
All Other Fees
Fiscal 2016 | Fiscal 2017 | ||||
---|---|---|---|---|---|
$ | 17,000 | $ | 4,000 |
The Audit Committee has concluded that the non-audit services provided by PwC were compatible with maintaining the independence of PwC.
Audit Committee Pre-Approval Policy with Respect to Audit Services and Permissible Non-Audit Services
All services provided by our independent registered public accounting firm require prior approval of the Audit Committee, with limited exceptions as permitted by the SEC's Rule 2-01 of Regulation S-X. Our independent registered public accounting firm periodically reports to the Audit Committee services for which the independent registered public accounting firm has been engaged and the aggregate fees incurred and to be incurred. During fiscal 2017, all services provided by our independent registered public accounting firm were pre-approved in accordance with this policy.
Vote Required; Recommendation of the Board of Directors
The affirmative vote of a majority of the votes duly cast is required to ratify the appointment of PwC as our independent registered public accounting firm. Abstentions have the same effect as a vote against this proposal. However, broker non-votes are not deemed to be votes cast and, therefore, have no effect on the outcome of this proposal.
THE BOARD BELIEVES THE APPOINTMENT OF PRICEWATERHOUSE COOPERS LLP IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS VOTING "FOR" THE RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING SEPTEMBER 29, 2018.
PROPOSAL THREE:APPROVAL OF THE RESERVATION OF 1,800,000 SHARES OF COMMON STOCKFOR ISSUANCE UNDER THE 2009 INCENTIVE PLAN
The Board believes that equity compensation programs align the interests of management, directors and the stockholders to increase long-term stockholder value by giving directors, executives and other key employees a stake in our success. By permitting us to grant equity in our company, our 2009 Incentive Plan, as amended (the "Incentive Plan") is a key tool for attracting, rewarding, motivating and retaining the key personnel necessary for us to achieve our business objectives and increase stockholder value. At the Annual Meeting, we are requesting that stockholders approve the reservation of an additional 1,800,000 shares for issuance under the Incentive Plan in order to ensure that we have sufficient shares available during 2018 and through the date of our 2019 annual meeting of stockholders for (1) our annual grant to non-executive employees, which is typically made in May of each year, (2) grants to new executive hires, (3) an annual grant to executive management, which typically takes place in November or December of each year, (4) grants made in connection with acquisitions, and (5) grants made to our non-employee Board members. We believe this increase is reasonable for the following reasons:
For these reasons, Sanmina requests stockholders approve the reservation of 1,800,000 additional shares for issuance under the Incentive Plan. We anticipate such number of shares, when added to our remaining reserve, will be sufficient to attract and retain key employees through at least the date of our 2019 stockholder meeting. However, should the Incentive Plan not be approved by stockholders, we could be unable to make sufficient equity awards to executive and non-executive level employees, which would hurt our ability to retain such individuals (and to attract new hires), who are necessary to grow and improve our business and, therefore stockholder value. In addition, Sanmina could in such case be required to provide additional cash compensation in lieu of equity compensation, which would increase our operating expense and reduce our cash.
Description of the Incentive Plan
The following is a summary of the principal features of the Incentive Plan. The summary is qualified in its entirety by reference to the Incentive Plan itself set forth inAppendix A.
General
The Incentive Plan provides for the grant of the following types of incentive awards:
Each of these is referred to individually as an "Award." Those eligible for Awards under the Incentive Plan include employees, directors and consultants who provide services to Sanmina and its affiliates. As of September 30, 2017, we had 34,637 full-time employees who were eligible to participate in the Incentive Plan.
Number of Shares of Common Stock Available Under the Incentive Plan
An aggregate of 23,500,000 shares have been previously reserved by the Board and approved by the stockholders for issuance under the Incentive Plan since its initial adoption in 2009. If stockholders
approve this proposal, the number of shares reserved for issuance under the Incentive Plan will be increased by 1,800,000 to 25,300,000. All of such shares may be authorized, but unissued, or reacquired common stock.
All awards other than options and stock appreciation rights count against the share reserve as 1.36 shares for every share of common stock subject to such an Award. To the extent that a share that was subject to an Award that counted as 1.36 shares of common stock against the Incentive Plan reserve is returned to the Incentive Plan, the Incentive Plan reserve will be credited with 1.36 shares of common stock that will thereafter be available for issuance under the Incentive Plan.
If an Award expires or becomes unexercisable without having been exercised in full, or, with respect to restricted stock, restricted stock units, performance shares or performance units which are to be settled in shares of common stock, is forfeited to or repurchased by Sanmina, the unpurchased shares of common stock (or for Awards other than options and stock appreciation rights, the forfeited or repurchased shares) will become available for future grant or sale under the Incentive Plan (unless the Incentive Plan has terminated). The following shares of common stock may not again be made available for issuance as Awards under the Incentive Plan: (i) upon exercise of a stock appreciation right settled in shares, the gross number of shares covered by the portion of the Award so exercised and (ii) shares used to pay the exercise price or withholding taxes related to an outstanding Award. Awards paid out in cash rather than shares will not reduce the number of shares available for issuance under the Incentive Plan.
If Sanmina declares a dividend or other distribution or engages in a recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of shares of common stock or other securities of Sanmina, or other change in the corporate structure of Sanmina affecting Sanmina's common stock, the Administrator will adjust the number and class of shares that may be delivered under the Incentive Plan, the number, class, and price of shares covered by each outstanding Award, and the numerical per-person limits on Awards.
Administration of the Incentive Plan
The Board, or a committee of directors or of other individuals satisfying applicable laws and appointed by the Board (referred to herein as the "Administrator"), will administer the Incentive Plan. To make grants to certain of Sanmina's officers and key employees, the members of the committee must qualify as "non-employee directors" under Rule 16b-3 of the Securities Exchange Act of 1934, and as "outside directors" under Code Section 162(m) so that Sanmina can receive a federal tax deduction for certain compensation paid under the Incentive Plan. The Board may delegate to one or more officers of Sanmina the authority to grant Awards of options, restricted stock and restricted stock units and the terms thereof, including the number of shares of common stock subject to such Awards, to certain non- officer employees or consultants. However, the Board's resolutions regarding such delegation will specify the total number of shares of common stock that may be subject to Awards granted by such officer. Subject to the terms of the Incentive Plan, the Administrator has the sole discretion to select the employees, consultants, and directors who will receive Awards, determine the terms and conditions of Awards, and to interpret the provisions of the Incentive Plan and outstanding Awards. In addition, the Administrator may not modify or amend an option or stock appreciation right to reduce the exercise price of that Award after it has been granted and neither may the Administrator cancel any outstanding option or stock appreciation right in exchange for cash, other awards or new options or stock appreciation rights with a lower exercise price, unless such action is approved by stockholders in advance.
Options
The Administrator is able to grant nonstatutory stock options and incentive stock options under the Incentive Plan. The Administrator determines the number of shares of common stock subject to each option, although the Incentive Plan provides that a participant may not receive options for more than 833,333 shares of common stock in any fiscal year, except in connection with his or her initial service as an employee with Sanmina, in which case he or she may be granted options to purchase up to an additional 833,333 shares of common stock.
The Administrator determines the exercise price of options granted under the Incentive Plan, provided the exercise price must be at least equal to 100% of the fair market value of Sanmina's common stock on the date of grant. In addition, the exercise price of an incentive stock option granted to any participant who owns more than 10% of the total voting power of all classes of Sanmina's outstanding stock must be at least 110% of the fair market value of the common stock on the grant date.
The term of an option may not exceed ten years, except that, with respect to any participant who owns 10% of the voting power of all classes of Sanmina's outstanding capital stock, the term of an incentive stock option may not exceed five years.
After a termination of service with Sanmina for any reason other than death, a participant will be able to exercise the vested portion of his or her option for the period of time stated in the Award agreement. If no such period of time is stated in the participant's Award agreement, the participant will generally be able to exercise his or her option for (i) three months following his or her termination for reasons other than death or disability, and (ii) five years following his or her termination due to death or disability. In the case of termination of service as a result of death, the participant's beneficiary may exercise the option for shares that were unvested on the date of death. In no event may an option be exercised later than the expiration of its term.
No adjustment will be made for a dividend or other right for which the record date is prior to the date shares are issued upon exercise of an option.
Stock Appreciation Rights
The Administrator will be able to grant stock appreciation rights, which are the rights to receive the appreciation in fair market value of common stock between the grant date and the exercise date. Sanmina can pay the appreciation in either cash or shares of common stock or a combination of both. Stock appreciation rights will become exercisable at the times and on the terms established by the Administrator, subject to the terms of the Incentive Plan. The Administrator, subject to the terms of the Incentive Plan, will have complete discretion to determine the terms and conditions of stock appreciation rights granted under the Incentive Plan; provided, however, that the exercise price will not be less than 100% of the fair market value of a share on the date of grant. The term of a stock appreciation right may not exceed ten years. No participant will be granted stock appreciation rights covering more than 833,333 shares of common stock during any fiscal year, except that a participant may be granted stock appreciation rights covering up to an additional 833,333 shares of common stock in connection with his or her initial service as an employee with Sanmina.
After termination of service with Sanmina for any reason other than death, a participant will be able to exercise the vested portion of his or her stock appreciation right for the period of time stated in the Award agreement. If no such period of time is stated in a participant's Award agreement, a participant will generally be able to exercise his or her stock appreciation right for (i) three months following his or her termination for reasons other than death or disability, and (ii) five years following his or her termination due to death or disability. In the case of termination of service as a result of
death, the participant's beneficiary may exercise the unvested portion of the stock appreciation right. In no event will a stock appreciation right be exercised later than the expiration of its term.
Participants holding unvested stock appreciation rights shall not be entitled to receive dividends or other distributions in respect of such Awards until the time specified for payout of the stock appreciation rights in the Award Agreement.
Restricted Stock
Awards of restricted stock are rights to acquire or purchase shares of Sanmina's common stock, which vest in accordance with the terms and conditions established by the Administrator in its sole discretion. Grants of restricted stock are typically made without receipt of consideration (other than the recipient's continued service). The Administrator may set restrictions based on the achievement of specific performance goals. Vesting can also be time-based. Until the Administrator determines otherwise, shares of restricted stock will be held by Sanmina as escrow agent until the restrictions lapse. After the grant of restricted stock, the Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed.
The Award agreement will generally grant Sanmina a right to repurchase or reacquire the shares upon the termination of the participant's service with Sanmina for any reason at the cost, if any, paid by the recipient, other than in the case of termination of service as a result of death, in which case all restricted stock shall become fully vested. With respect to restricted stock intended to qualify as "performance-based compensation" under Section 162(m) of the Code, no participant will be granted a right to purchase or acquire more than 333,333 shares of restricted stock during any fiscal year, except that a participant may be granted up to an additional 333,333 shares of restricted stock in connection with his or her initial employment with Sanmina.
Restricted Stock Units
Awards of restricted stock units result in a payment to a participant only if the vesting criteria the Administrator establishes is satisfied, which may be time-based or based on company or divisional performance. Upon satisfying the applicable vesting criteria, the participant will be entitled to the payout specified in the Award agreement. After the grant of restricted stock units, the Administrator, in its sole discretion, may reduce or waive any vesting criteria that must be met to receive a payout.
The Administrator, in its sole discretion, may provide in the Award agreement that earned restricted stock units shall be paid in cash, shares of common stock, or a combination thereof. Restricted stock units that are fully paid in cash will not reduce the number of shares of common stock available for grant under the Incentive Plan. All unearned restricted stock units will be forfeited to Sanmina in the event of termination of service by the recipient, other than termination of service as a result of death, in which case the Award will become fully vested. With respect to restricted stock units intended to qualify as "performance-based compensation" under Section 162(m) of the Code, no participant may be granted more than 333,333 restricted stock units during any fiscal year, except that the participant may be granted up to an additional 333,333 restricted stock units in connection with his or her initial employment with Sanmina.
Performance Units and Performance Shares
The Administrator will be able to grant performance units and performance shares, which are Awards that will result in a payment to a participant only if the performance goals or other vesting criteria the Administrator may establish are achieved or the Awards otherwise vest. The Administrator will establish performance goals or other vesting criteria (including, without limitation, continued service to Sanmina) in its discretion, which, depending on the extent to which they are met, will determine the number and/or the value of performance units and performance shares to be paid out to
participants. After the grant of performance units or performance shares, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such Award.
The Administrator determines the number of performance units and performance shares granted to any participant. With respect to performance units and performance shares intended to qualify as "performance-based compensation" under Section 162(m) of the Code, during any fiscal year, no participant will receive more than 333,333 performance shares and no participant will receive performance units having an initial value greater than $5,000,000 except that a participant may be granted performance shares covering up to an additional 333,333 shares of common stock and performance units having an initial value up to an additional $5,000,000 in connection with his or her initial employment with Sanmina. Performance units will have an initial dollar value established by the Administrator on or before the date of grant. Performance shares are deemed to have an initial value equal to the fair market value of the number of shares of Sanmina's common stock subject to the Award on the grant date.
Performance Bonus Awards
The Board's compensation committee ("Compensation Committee") may use the Incentive Plan to provide for cash bonuses intended to qualify as "performance- based compensation" under Section 162(m) of the Code and that are payable upon the attainment of performance goals established by the Compensation Committee for a given performance period prior to a determination date. Performance-based awards in the form of cash bonuses granted under the Incentive Plan may not exceed more than $5,000,000 in any fiscal year.
Performance Goals
The granting and/or the vesting of Awards of options, restricted stock, restricted stock units, performance shares, performance units (including performance units payable in cash), cash bonuses and other incentives under the Incentive Plan may be made subject to the attainment of performance goals relating to one or more business criteria within the meaning of Section 162(m) of the Code and may provide for a targeted level or levels of achievement of goals relating to: (a) accounts payable days; (b) accounts payable turns; (c) annual revenue; (d) cash collections; (e) cash cycle days; (f) customer satisfaction MBOs; (g) days sales outstanding; (h) earnings per share; (i) free cash flow; (j) gross margin; (k) gross profit; (l) inventory turns; (m) net income; (n) new orders; (o) operating income; (p) pro forma net income; (q) return on designated assets; (r) return on equity; (s) return on sales; and (t) product shipments.
Any performance goals may be used to measure the performance of Sanmina as a whole or a business unit of Sanmina, and may be measured relative to a peer group or index. The performance goals may differ from participant to participant and from Award to Award. The Compensation Committee may provide that partial achievement of performance goals may result in the payment or vesting corresponding to a partial (but not necessarily proportional) portion of an Award. The determination date is the latest possible date that the Compensation Committee can make adjustments to the method of calculating the attainment of performance goals for a performance period without jeopardizing the tax treatment of the award as performance-based. Prior to the determination date, the Compensation Committee is authorized to make adjustments in the method of calculating the attainment of performance goals for a performance period as follows: (i) to exclude restructuring and integration charges (including employee severance and benefits costs and charges related to excess facilities and assets); (ii) to exclude impairment charges for goodwill and intangible assets and amortization expense; (iii) to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated net sales and operating earnings; (iv) to exclude the effects of changes to generally accepted accounting principles required by the Financial Accounting Standards Board; (v) to exclude the effects of any statutory adjustments to corporate tax rates; (vi) to exclude stock-based compensation
expense determined under generally accepted accounting principles; (vii) to exclude any other unusual, non-recurring gain or loss or extraordinary item; (viii) to respond to, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development; (ix) to respond to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions; (x) to exclude the dilutive effects of acquisitions or joint ventures; (xi) to assume that any business divested by Sanmina achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; (xii) to reflect a corporate transaction, such as a merger, consolidation, separation (including a spin-off or other distribution of stock or property by a corporation), or reorganization (whether or not such reorganization comes within the definition of such term in Code Section 368); and (xiii) to reflect any partial or complete corporate liquidation. The Compensation Committee also retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of performance goals.
Terms and Conditions of Awards Intended to Qualify as "Performance-Based Compensation" under Section 162(m)
The Incentive Plan permits the Compensation Committee to grant "performance-based" Awards to "covered employees," as such terms are defined under Code Section 162(m). Performance-based awards are generally not subject to the cap on the deductibility of compensation paid to covered employees contained in Code Section 162(m). Covered employees are defined as the Chief Executive Officer and the next three most highly compensated executive officers of Sanmina other than the Chief Financial Officer.
If the Compensation Committee grants an Award to a covered employee intended to qualify as "performance-based compensation," certain rules of the Incentive Plan control over any other provisions of the Incentive Plan. To the extent necessary to comply with the requirements of Code Section 162(m), with respect to any Award granted subject to performance goals, within the determination date, the Compensation Committee will, in writing, (a) designate the participants who are covered employees, (b) select the performance goals applicable to the performance period, (c) establish the performance goals, and amounts or methods of computation of such Awards, as applicable which may be earned for such performance period, and (d) specify the relationship between the performance goals and the amounts or methods of computation of such Awards, as applicable, to be earned by each covered employee for such performance period. For purposes of the Incentive Plan, a performance period is the fiscal year of Sanmina or such other period determined by the Administrator.
Following the completion of a performance period, the Compensation Committee must certify whether the applicable performance goals have been achieved for such performance period. In determining amounts earned by a "covered employee," the Compensation Committee will have the right to reduce or eliminate (but not increase) the amount payment at a given level of performance to take into account additional factors that the Compensation Committee may deem relevant to the assessment of individual or corporate performance for the performance period.
Unless otherwise provided in an Award agreement, a "covered employee" must be employed by Sanmina or any affiliate on the day an Award intended to qualify as "performance-based compensation" is paid. Further, a "covered employee" will be eligible to receive a payment intended to qualify as "performance-based compensation" only if the performance goals for such period are achieved.
Limits on Awards Granted to Non-Employee Directors.
The Incentive Plan provides that in any given fiscal year, a non-employee director may not receive under the Incentive Plan awards having a grant date fair value greater than $900,000, as grant date fair value is determined under generally accepted accounting principles. The value of equity actually granted to our directors, inclusive of equity granted in lieu of cash retainers, during fiscal 2017 is shown on page 59.
Transferability of Awards
Awards granted under the Incentive Plan are generally not transferable, and all rights with respect to an Award granted to a participant generally will be available during a participant's lifetime only to the participant. The Administrator may approve certain transfers as specified in the Incentive Plan.
Change in Control
In the event of a change in control of Sanmina, each outstanding Award will be assumed or an equivalent option or right substituted by the successor corporation or a parent or subsidiary of the successor corporation. In the event that the successor corporation, or the parent or subsidiary of the successor corporation, does not assume or substitute for the Award, the participant will fully vest in and have the right to exercise all of his or her outstanding options or stock appreciation rights, including shares of common stock as to which such Awards would not otherwise be vested or exercisable, all restrictions on restricted stock will lapse, and, with respect to restricted stock units, performance shares and performance units, all performance goals or other vesting criteria will be deemed achieved at target levels and all other terms and conditions met. In addition, if an option or stock appreciation right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a change of control, the Administrator will notify the participant in writing or electronically that the option or stock appreciation right will be fully vested and exercisable for a period of time determined by the Administrator in its sole discretion, and the option or stock appreciation right will terminate upon the expiration of such period.
Amendment and Termination of the Incentive Plan
The Administrator will have the authority to amend, alter, suspend or terminate the Incentive Plan, except that stockholder approval will be required for any amendment to the Incentive Plan to the extent required by any applicable laws. No amendment, alteration, suspension or termination of the Incentive Plan will impair the rights of any participant, unless mutually agreed otherwise between the participant and the Administrator and which agreement must be in writing and signed by the participant and Sanmina. The Incentive Plan will terminate on January 26, 2019, unless the Board terminates it earlier.
Number of Awards Granted to Employees, Consultants, and Directors
The number of Awards that an employee, director or consultant may receive under the Incentive Plan is in the discretion of the Administrator and therefore cannot be determined in advance. Therefore, the following table sets forth the aggregate number of shares of common stock subject to stock options and the aggregate number of shares of common stock subject to restricted stock units granted during fiscal 2017 with respect to (i) each of our named executive officers, (ii) all of our
executive officers as a group, (iii) our non-executive officer directors as a group, and (iv) all employees other than executive officers as a group:
Name of Individual or Group | Number of Options | Number of Restricted Stock Units | Dollar Value of Restricted Stock Units(1) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Jure Sola,Chairman of the Board and Chief Executive Officer | — | 400,000 | $ | 12,960,000 | ||||||
Robert K. Eulau,Executive Vice President and Chief Financial Officer | — | 150,000 | $ | 4,920,000 | ||||||
Gerry Fay,Chief Business Officer | — | 85,000 | $ | 3,098,250 | ||||||
Dennis R. Young,Executive Vice President, Worldwide Sales and Marketing | — | 14,000 | $ | 436,800 | ||||||
Alan McW. Reid,Executive Vice President, Global Human Resources | — | 10,000 | $ | 312,000 | ||||||
All executive officers, as a group | — | 659,000 | $ | 21,727,050 | ||||||
All directors who are not executive officers, as a group | — | 62,191 | $ | 2,456,806 | ||||||
All employees who are not executive officers, as a group | — | 656,900 | $ | 22,827,995 |
Other Equity Compensation Plan Information
The following table summarizes the number of shares issuable upon exercise of outstanding options and deliverable upon vesting of restricted stock units granted to our service providers and directors, as well as the number of shares of common stock remaining available for future issuance under Sanmina's equity compensation plans as of September 30, 2017. Sanmina has no stock appreciation rights or other awards outstanding that are convertible into or exchangeable for common stock. Additionally, there are no awards outstanding under equity compensation plans not approved by stockholders.
Plan Category | Number of Common Shares to be Issued Upon Exercise of Outstanding Options and Rights | Weighted-Average Exercise Price of Outstanding Options | Number of Common Shares Remaining Available for Future Issuance Under Equity Compensation Plans | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Equity compensation plans approved by stockholders | 6,926,809 | (1) | $ | 11.83 | (2) | 3,308,008 |
Federal Tax Aspects
The following paragraphs are a summary of the general federal income tax consequences to U.S. taxpayers and Sanmina of Awards granted under the Incentive Plan. Tax consequences for any particular individual may be different.
Nonstatutory Stock Options. No taxable income is reportable when a nonstatutory stock option with an exercise price equal to the fair market value of the underlying stock on the date of grant is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the excess of the fair market value (on the exercise date) of the shares of common stock purchased over the exercise price of the option. Any taxable income recognized in connection with an
option exercise by an employee of Sanmina is subject to tax withholding by Sanmina. Any additional gain or loss recognized upon any later disposition of the shares of common stock would be capital gain or loss.
Incentive Stock Options. No taxable income is reportable when an incentive stock option is granted or exercised (except for purposes of the alternative minimum tax, in which case taxation is the same as for nonstatutory stock options). If the participant exercises the option and then later sells or otherwise disposes of the shares of common stock more than two years after the grant date and more than one year after the exercise date, the difference between the sale price and the exercise price will be taxed as capital gain or loss. If the participant exercises the option and then later sells or otherwise disposes of the shares of common stock before the end of the two- or one-year holding periods described above, he or she generally will have ordinary income at the time of the sale equal to the fair market value of the shares of common stock on the exercise date (or the sale price, if less) minus the exercise price of the option and short-term capital gains equal to the sales price minus the fair market value of the shares on the exercise date.
Stock Appreciation Rights. No taxable income is reportable when a stock appreciation right with an exercise price equal to the fair market value of the underlying stock on the date of grant is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the amount of cash received and the fair market value of any shares of common stock received. Any additional gain or loss recognized upon any later disposition of the shares of common stock would be capital gain or loss.
Restricted Stock, Restricted Stock Units, Performance Units and Performance Shares. A participant generally will not have taxable income at the time an Award of restricted stock, restricted stock units, performance shares or performance units are granted. Instead, he or she will recognize ordinary income in the first taxable year in which his or her interest in the shares underlying the Award becomes either (i) freely transferable, or (ii) no longer subject to substantial risk of forfeiture (generally, when the Award vests). However, the recipient of a restricted stock Award may elect to recognize income at the time he or she receives the Award in an amount equal to the fair market value of the shares of common stock underlying the Award (less any cash paid for the shares) on the date the Award is granted.
Tax Effect for Sanmina. Sanmina generally will be entitled to a tax deduction in connection with an Award under the Incentive Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for example, the exercise of a nonstatutory stock option). Special rules limit the deductibility of compensation paid to Sanmina's Chief Executive Officer and to each of its three most highly compensated executive officers, excluding the Chief Financial Officer. Under Section 162(m) of the Code, the annual compensation paid to any of these specified executives will be deductible only to the extent that it does not exceed $1,000,000. However, Sanmina can preserve the deductibility of certain compensation in excess of $1,000,000 if the conditions of Section 162(m) are met. These conditions include stockholder approval of the Incentive Plan, the number of Awards that any individual may receive and, for Awards other than certain stock options, the types of performance criteria on which vesting can depend. The Incentive Plan has been designed to permit the Administrator to grant Awards that qualify as performance-based for purposes of satisfying the conditions of Section 162(m), thereby permitting Sanmina to continue to receive the maximum federal income tax deduction in connection with such Awards.
Section 409A. Section 409A of the Code provides that certain non-qualified deferred compensation arrangements must meet certain requirements to avoid additional income taxes for those deferring compensation. These include requirements with respect to an individual's election to defer compensation and the individual's selection of the timing and form of distribution of the deferred compensation. Section 409A also generally provides that distributions must be made on or following the
occurrence of certain events (e.g., the individual's separation from service, a predetermined date, or the individual's death). Section 409A imposes restrictions on an individual's ability to change his or her distribution timing or form after the compensation has been deferred. For certain individuals who are officers, Section 409A requires that such individual's distribution commence no earlier than six months after such officer's separation from service.
Awards granted under the Incentive Plan with a deferral feature will be subject to the requirements of Section 409A. If an Award is subject to and fails to satisfy the requirements of Section 409A, the recipient of that Award will recognize ordinary income on the amounts deferred under the Award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an Award that is subject to Section 409A fails to comply with Section 409A's provisions, Section 409A imposes an additional 20% federal income tax on compensation recognized as ordinary income, as well as possible interest charges and penalties. Certain states have enacted laws similar to Section 409A which impose additional taxes, interest and penalties on non-qualified deferred compensation arrangements. Sanmina will also have withholding and reporting requirements with respect to such amounts.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION UPON PARTICIPANTS AND SANMINA WITH RESPECT TO THE GRANT AND EXERCISE OF AWARDS UNDER THE INCENTIVE PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF A PARTICIPANT'S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.
Vote Required; Recommendation of the Board of Directors
The affirmative vote of a majority of the votes duly cast is required to approve this proposal to increase the number of shares of common stock reserved for issuance under the Incentive Plan by 1,800,000 shares. Abstentions are deemed to be votes cast and have the same effect as a vote against this proposal. However, broker non-votes are not deemed to be votes cast and, therefore, have no effect on the outcome of this proposal.
THE BOARD UNANIMOUSLY RECOMMENDS VOTING "FOR" APPROVAL OF THE RESERVATION OF 1,800,000 SHARES FOR ISSUANCE UNDER THE INCENTIVE PLAN.
PROPOSAL FOUR:APPROVAL, ON AN ADVISORY (NON-BINDING) BASIS, OF COMPENSATION OFNAMED EXECUTIVE OFFICERS
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, requires that we provide our stockholders an opportunity to vote to approve, on an advisory or non-binding basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the SEC's rules. This proposal, commonly known as a "say-on-pay" proposal, gives our stockholders the opportunity to express their views on our named executive officers' compensation as a whole. This vote is not intended to address any specific item of compensation or any specific named executive officer, but rather the overall compensation of all of our named executive officers and the philosophy, policies and practices described in this proxy statement.
The say-on-pay vote is advisory, and therefore not binding on us, the Compensation Committee or our Board of Directors. However, our Board of Directors and our Compensation Committee value the opinions of our stockholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in our proxy statement, we will consider our stockholders' concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
As described under the heading "Compensation Discussion and Analysis," our executive compensation programs are designed to reward executives for improvement in our financial results and shareholder value and to provide alignment between the interests of executives and our stockholders.
See "Compensation Discussion and Analysis" on page 35, the tabular disclosure regarding such compensation and the accompanying narrative disclosure set forth in this proxy statement for additional details about our executive compensation programs, including information about the fiscal 2017 compensation of our named executive officers.
Accordingly, our Board of Directors is asking our stockholders to cast a non-binding advisory vote "FOR" the following resolution at the annual meeting:
"RESOLVED, that the Company's stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Proxy Statement for the 2018 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 2017 Summary Compensation Table and other related tables and disclosure."
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE COMPENSATION FOR OUR NAMED EXECUTIVE OFFICERS.
PROPOSAL FIVE:APPROVAL, ON AN ADVISORY (NON-BINDING) BASIS, OF FREQUENCY OF VOTE ONEXECUTIVE COMPENSATION
The Dodd-Frank Act also enables our stockholders to indicate, at least once every six years, how frequently we should seek an advisory or non-binding vote on the compensation of our named executive officers, as disclosed pursuant to the SEC's compensation disclosure rules. In this Proposal 5, our Board of Directors is asking our stockholders to cast a non-binding advisory vote indicating whether they would prefer an advisory vote on named executive officer compensation, such as that set forth in Proposal 4, once every one, two, or three years. Stockholders last voted on this proposal in 2012, at which time an overwhelming majority of shares voted in favor of an annual non-binding vote on executive compensation.
Our Board of Directors has determined that an advisory vote on executive compensation that occurs every year is the most appropriate alternative for us, and therefore our Board of Directors recommends that you vote for a one-year interval for the advisory vote on executive compensation. An advisory vote every year on executive compensation will facilitate stockholder input on our executive compensation philosophy, policies, and practices that are disclosed in the proxy statement.
We recognize that our stockholders may have differing views on the appropriate frequency for the advisory vote on executive compensation, and you may cast your vote on your preferred voting frequency by choosing the option of one year, two years, three years or abstain from voting when you vote in response to the resolution set forth below:
RESOLVED, the option of once every year, two years or three years that receives the highest number of votes cast for this resolution will be determined to be the preferred frequency with which the company is to hold a stockholder vote to approve the compensationall of the named executive officers, as disclosed pursuant to the compensation disclosure rulesnon-employee members of the SEC, includingBoard satisfy the Compensation Discussion and Analysis, the compensation tables and the other related disclosure."
Our Boarddefinition of Directors will select a vote frequency for this matter taking into the resultsindependence under applicable Nasdaq rules. There are no family relationships among our directors or executive officers. The non-management directors regularly meet in executive session, without members of management, as part of the stockholder vote on this matter and announce its choice within 150 daysnormal agenda of the date of the Annual Meeting.our regularly scheduled board meetings.
THE BOARD OF DIRECTORS RECOMMENDS UNANIMOUSLY THAT THE ADVISORY VOTE ON EXECUTIVE COMPENSATION BE CONDUCTED ONCE EVERY ONE YEAR.2021 Proxy Statement 19
CORPORATE GOVERNANCE AND BOARD MATTERS |
Sanmina has long upheldbeen guided by a set of basic beliefs to guide its actions.beliefs. Among those beliefs is the responsibility to conduct business with the highest standards of ethical behavior when relating to customers, suppliers, employees and investors. Accordingly, we have implemented governance policies and practices which we believe meet or exceed regulatory standards and which reflect current corporate governance best practices.
Board Composition
Process for Selecting Directors
IDENTIFYING CANDIDATES ●Nomination of incumbent directors, as recommended to the Board by the Nominating & Governance Committee ●Can include employees of the Company who are designated as executive officers ●New or replacement members, as recommended to the Board by the Nominating & Governance Committee Can include nominees proposed by stockholders and nominees identified by Board members | IN-DEPTH REVIEW BY THE NOMINATING AND GOVERNANCE COMMITTEE ●Annual review of the composition of the Board as a whole ●Annual review of independence according to the criteria established by Nasdaq ●Annual review of the appropriate skills and characteristics required of Board members ●Consideration of each potential nominee’s experience in areas determined by the Company ●Consideration of diversity ●Review of nominees’ other existing and anticipated future commitments | Nomination by Full Board appoints or | ||||
Director Succession Planning, Tenure and Refreshment
The Board believes that its ability to promote the long term, sustainable growth of Sanmina depends on attracting and retaining board members with a high level of industry-specific experience, who have a deep familiarity with the Company’s business and who will actively engage with management and other stakeholders. The Board seeks to assure these characteristics in board members through regular succession planning activities and through its Board evaluation process intended to identify board members in need of improvement. The Board recognizes concerns expressed in the corporate governance community that long tenured board members can be perceived as less independent than those with shorter tenures. At the same time, the Board does not believe that term limits are an appropriate means of addressing this concern as they can serve to disqualify otherwise knowledgeable, engaged and effective board members. Instead, the Board regularly considers new potential board members as a matter of succession planning.
20 SANMINA CORPORATION
Corporate Governance Guidelinesand Board Matters
Sanmina has adopted a setBoard Structure and Responsibilities
SANMINA BOARD OF DIRECTORS
Jackie M. Ward Lead Independent Director | Role of Lead Independent Director ●Serve as the principal representative of and contact between the independent directors and the Executive Chairman; ●Preside over meetings of the independent directors; ●Assist the Executive Chairman in establishing the agenda for Board and stockholder meetings; ●Monitor the quality, quantity and timeliness of information sent to the Board; ●Ensure that she is available for consultation and direct communication with stockholders; ●Recommend the retention of outside advisors and consultants; ●Provide assistance to Committee Chairs and Committees; and ●Provide assistance and counseling to individual directors as needed following the Board’s annual evaluation process. |
Jure Sola Chairman and Chief Executive Officer | Role of Chairman ●Guide the strategic direction of Sanmina; ●Provide oversight and guidance to Company management on other Company matters as appropriate; ●Develop, in consultation with the Lead Independent Director, agendas for all Board meetings; ●Preside over all meetings of the Board and the stockholders; ●Review matters being considered by Board Committees; ●Communicate with stockholders as needed; and ●Make himself available for consultation and communication with all Board members. |
Assuming the reelection of Corporate Governance Guidelines that are intendedJackie M. Ward at the Annual Meeting, Ms. Ward will continue to serve among other things, as alead independent director in 2021. The charter for the full Board. These guidelines contain various provisions relating to the operation of the Board and set forth the Board's policies regarding various matters. The guidelineslead independent director can be found on our website athttp://s21.q4cdn.com/392851627/files/doc_downloads/gov_doc/Corporate-Governance-Guidelines-04-Dec-2017.pdf.ir.sanmina.com/ investor-relations/corporate-governance/default.aspx. In October 2017, as part of Sanmina’s succession planning process, we separated the roles of Chairman of the Board and Chief Executive Officer and Mr. Sola assumed the role of Executive Chairman. Following the resignation of Hartmut Liebel, former Chief Executive Officer, in August 2020, Jure Sola was appointed Chief Executive Officer and the positions of Chairman and CEO were again held by one person. The Board believes that this leadership structure, coupled with the continued service of Jackie Ward as Lead Independent Director, provides balance, continuity and is in the best interests of Sanmina and its stockholders.
2021 Proxy Statement 21
Corporate Governance and Board Matters
The Board currently maintains three standing committees: an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee.
Audit Committee
Current Members John P. Goldsberry (Chair)* Eugene A. Delaney* Rita S. Lane Joseph G. Licata. Jr.* 8 meetings in fiscal 2020 Attendance | Duties and Responsibilities ●Oversees our corporate financial reporting and external audit, including, among other things, our internal control environment, the results and scope of the annual audit and other services provided by our independent registered public accounting firm and our internal audit function. ●Is responsible for the appointment, compensation, oversight and assessment of the performance of our independent registered public accounting firm and is involved in the selection of the lead audit partner. ●Oversees certain risks relating to the preparation of our financial statements, investment policies, casualty risk insurance policies and legal and regulatory compliance, among others. ●Oversees our ethics program and reviews related party transactions and legal matters that could have a significant impact on our financial statements. | ||
*Meet the definition of a financial expert. The Audit Committee has adopted a written charter approved by the Board, a copy of which is available at our website at http://ir.sanmina.com/investor-relations/corporate-governance/default.aspx. |
Compensation Committee
Current Members Eugene A. Delaney (Chair) Joseph G. Licata. Jr. Krish Prabhu Jackie M. Ward 7 meetings in fiscal 2020 Attendance | Duties and Responsibilities ●Reviews and approves the salaries and equity, incentive and other compensation of our executive officers. ●Administers our equity incentive plan. ●Approves the terms of our annual bonus program, monitors our global compensation policies and practices and serves as the administrator under our equity compensation plans. ●Assists in the oversight of risks relating to recruitment, retention, labor standards compliance and bonus and equity compensation plans and practices and reviews our succession planning process for our executive officers. | ||
The Compensation Committee has adopted a written charter approved by the Board, a copy of which is available at our website at http://ir.sanmina.com/investor-relations/corporate-governance/default.aspx. |
22 SANMINA CORPORATION
Corporate Governance and Board Matters
Nominating and Governance Committee
Current Members Rita S. Lane (Chair) Mario Rosati Jackie M. Ward 4 meetings in fiscal 2020 Attendance | Duties and Responsibilities ●Responsible for evaluating the size and structure of the Board and its committees, determining the appropriate qualifications for directors and nominating candidates for election to the Board. ●Develops overall governance guidelines for the Board, including director succession planning policies, conducts an annual Board and committee evaluation and considers stockholder proposals for action at stockholder meetings, including stockholder nominees for director. ●Reviews and recommends for Board approval our non-employee Board member compensation program. | ||
The Nominating and Governance Committee has adopted a written charter approved by the Board, a copy of which is available at our website at http://ir.sanmina.com/investor-relations/corporate-governance/default.aspx. |
ROLE OF THE BOARD IN RISK MANAGEMENT
The Board has developed an enterprise risk management framework that assigns oversight of various enterprise level risks to either the full Board or one of its committees. Pursuant to this framework, the Board and its Committees regularly receive presentations from management concerning enterprise level risks that could have a significant adverse impact on Sanmina’s business and operations, including economic conditions, strategy, supply chain, trade risks, legal and regulatory matters, compensation programs, cybersecurity and credit exposures. This process permits the Board and its Committees to provide guidance to management in scoping and managing each of the Company’s enterprise risk areas.
COVID-19 RISK OVERSIGHT
In March 2020, the World Health Organization declared COVID-19 to be a pandemic. Since that time, management has briefed our Board on the impact of and the Company’s response to the pandemic on numerous occasions, at special and regular Board meetings and through written communications and updates. These updates and communications focused on employee safety and protective measures, disruptions to the Company’s plant operations, supply chain resilience, impacts on end market demand and key interactions in support customer requests. We implemented protective measures and remote work options across our global locations in an effort to mitigate the impact of the pandemic. The Board expects to continue to receive information from management relating the effect of the pandemic on the Company, its operations and employees on a frequent and regular basis for the foreseeable future.
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee are employees of Sanmina. During fiscal 2020, no executive officer of Sanmina (i) served as a member of the Compensation Committee (or other board committee performing similar functions or, in the absence of any such committee, the board of directors) of another entity, one of whose executive officers served on Sanmina’s Compensation Committee, (ii) served as a director of another entity, one of whose executive officers served on Sanmina’s Compensation Committee, or (iii) served as a member of the Compensation Committee (or other board committee performing similar functions or, in the absence of any such committee, the board of directors) of another entity, one of whose executive officers served as a director of Sanmina.
2021 Proxy Statement 23
Corporate Governance and Board Matters
Code of Business Conduct and Ethics
Sanmina has adopted a Code of Business Conduct and Ethics (the "Code"“Code”) that includes a conflict of interest policy and applies to the Board and all officers and employees. Sanmina provides training to familiarize employees with the requirements of the Code. An ethics reporting resource is available to all employees to enable confidential and anonymous reporting of suspected violations, as well as to the Chairs of the Audit Committee and the Nominating and Governance Committee, if desired. The Code can be found on our website athttp://s21.q4cdn.com/392851627/files/doc_downloads/gov_doc/CODE-OF-BUS-CONDUCT-ETHICS-(ENG)-(Rev-072017-FINAL).pdf.ir.sanmina.com/investor-relations/corporate-governance/default.aspx.
Independent DirectorsBoard Accountability and Processes
STOCKHOLDER ENGAGEMENT
Fall | Winter | Spring | Summer | |||||||
●File Annual Report on Form 10-K ●Solicit input from Investors ●Communicate investor feedback with the Board | ●Board’s annual self-assessment of performance and effectiveness ●Distribute Proxy Statement and Annual Report ●Solicit input from Investors ●Communicate investor feedback to the Board | ●Annual meeting held ●Review results of stockholder voting ●Communicate investor feedback to the Board | ●Enhance disclosures, governance practices and compensation programs, as needed |
Our long-standing commitment to stockholder engagement includes:
● | An engagement program that is management led and overseen by the Board; |
● | Active engagement with stockholders on a variety of topics throughout the year, including status of the business and executive compensation; |
● | Engagement that is designed to address questions and concerns, seek input and provide perspective on Sanmina’s policies and practices. |
Feedback from our stockholder engagement is considered by the Board and reflected in our policies and practices, particularly in the area of executive compensation. The Boardresults of Directorsour stockholder engagement efforts during 2020 are summarized on page 40.
CORPORATE GOVERNANCE GUIDELINES
Sanmina has determinedadopted a set of Corporate Governance Guidelines that all ofare intended to serve as, among other things, a charter for the non-employee membersfull Board. These guidelines contain various provisions relating to the operation of the Board satisfy the definitionand duties and expectations of independence under applicable Nasdaq rules. There are no family relationships among our directors or executive officers.Board members. The non-management directors regularly meet in executive session, without members of management, as part of the normal agenda of our regularly scheduled board meetings.
Lead Independent Director
The Board has appointed director Wayne Shortridge to serve as lead independent director. His duties in that capacity include: serving as the principal contact between the independent directors and the Chairman of the Board; assisting the Chairman of the Board in establishing the agenda for Board meetings; coordinating with the Chairman in regard to meetings with stockholders and, if requested by stockholders, ensuring that he is available for consultation and direct communication; recommending the retention of outside advisors and consultants; and monitoring the quality, quantity and timeliness of information sent to the Board. The charter for the lead independent directorguidelines can be found on our website athttp://s21.q4cdn.com/392851627/files/doc_downloads/gov_doc/Lead-Independent-Director-Charter-as-revised-1200715.pdf.ir.sanmina.com/investor-relations/corporate-governance/default.aspx.
24 SANMINA CORPORATION
Corporate Governance and Board MeetingsMatters
BOARD MEETINGS
The Board held sixseven meetings during fiscal 2017.2020. No director attended fewer than 75 percent75% of the meetings of the Board or of committees on which such person served.served, with attendance averaging over 95%.
TableATTENDANCE AT ANNUAL MEETING OF STOCKHOLDERS BY THE BOARD OF DIRECTORS
Sanmina encourages, but does not require, its Board members to attend the Annual Meeting of Contents
Board Committees
The Board currently maintains three standing committees: an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee.
Audit Committee
During fiscal 2017, the Audit Committee consistedStockholders. Our annual meetings of directors Eugene A. Delaney, John P. Goldsberry, Rita S. Lane, Joseph G. Licata, Jr. and Wayne Shortridge, each of whom is "independent" as that term is defined for Audit Committee members by the Nasdaq listing standards. Mr. Goldsberry served as the Chairman of the Audit Committee. Messrs. Delaney, Goldsberry and Licata all meet the definition of "audit committee financial expert" as defined by the SEC.
The Audit Committee oversees our corporate financial reporting and external audit, including, among other things, our control functions, the results and scope of the annual audit and other services provided by our independent registered public accounting firm and our internal audit function. In addition, the Audit Committee is responsible for the appointment, compensation, oversight and assessment of the performance of our independent registered public accounting firm and is involved in the selection of the lead audit partner. Among the factors considered by the Audit Committee in evaluating the performance of the independent registered public accounting firm are service quality, responsiveness, quality of audit team personnel and lead audit partner, management of the overall annual audit process, and understanding of Sanmina's industry, business and internal control environment. The Audit Committee also oversees certain risks relating to the preparation of our financial statements, investment policies, casualty risk insurance policies and cybersecurity. Finally, the Audit Committee oversees our ethics program and reviews related party transactions and legal matters that could have a significant impact on our financial statements. The Audit Committee held eight formal meetings during fiscal 2017. The Annual Report of the Audit Committee appears in this proxy statement under the caption "Report of the Audit Committee of the Board of Directors."
The Audit Committee has adopted a written charter approved by the Board, a copy of which is available at our website athttp://s21.q4cdn.com/392851627/files/doc_downloads/committee_charters/2017/Audit-Committee-Charter-final-091817.pdf.
Compensation Committee
During fiscal 2017, the Compensation Committee consisted of directors Michael J. Clarke, Joseph G. Licata, Jr., Wayne Shortridge and Jackie M. Ward. Mr. Shortridge served as the Chairman of the Compensation Committee. Each such member of the Committee is an "independent director" and satisfies the requirements for compensation committee membership under the Nasdaq listing requirements and is a "non-employee director" under Rule 16b-3 of the Securities Exchange Act of 1934.
The Compensation Committee reviews and approves the salaries and equity, incentive and other compensation of our executive officers. The Committee also approves the terms of our annual bonus program, monitors our global compensation policies and practices and serves as the administrator under our equity compensation plans. Finally, the Compensation Committee assists in the oversight of our risk management practices and policies insofar as they are impacted by our bonus and equity compensation plans and practices and reviews our succession planning process for our executive officers. The Compensation Committee held nine meetings during fiscal 2017.
The Compensation Committee has adopted a written charter approved by the Board, a copy of which is available at our website athttp://s21.q4cdn.com/392851627/files/doc_downloads/committee_charters/2017/Comp-comm-charter-final-091817.pdf.
In March 2017, the Compensation Committee established the Performance Award Subcommittee consisting of Messrs. Licata and Shortridge and Ms. Ward. Such subcommittee oversees and approves the award of cash and equity compensation that is intended to qualify as "performance-based compensation" under Section 162(m) of the Internal Revenue Code to persons who would be considered "covered employees" within the meaning of such rule. The written charter for such subcommittee is available at our website athttp://s21.q4cdn.com/392851627/files/doc_downloads/committee_charters/2017/Performance-Award-Subcommittee-charter-doc-(2).pdf.
Nominating and Governance Committee
The Nominating and Governance Committee currently consists of directors Michael J. Clarke, Rita S. Lane, Wayne Shortridge and Jackie M. Ward, each of whom is "independent" as that term is defined by the Nasdaq listing standards. Ms. Ward served as the Chairman of the Nominating and Governance Committee during fiscal 2017.
The Nominating and Governance Committee is responsible for evaluating the size and structure of the Board and its committees, determining the appropriate qualifications for directors and nominating candidates for election to the Board. The Nominating and Governance Committee also develops overall governance guidelines for the Board, including director succession planning policies, conducts an annual Board and committee evaluation, considers stockholder proposals for action at stockholder meetings, including stockholder nominees for director, and reviews our management succession planning process. Finally, the Nominating and Governance Committee reviews and recommends for Board approval our non-employee Board member compensation program. The Nominating and Governance Committee held four meetings during fiscal 2017.
The Nominating and Governance Committee has adopted a written charter approved by the Board, a copy of which is available at our website athttp://s21.q4cdn.com/392851627/files/doc_downloads/committee_charters/2017/NGC-charter-final-091817.pdf.
Leadership Structure
Each year, Sanmina's Board selects a Chairman of the Board and Chief Executive Officer. The Chairman of the Board is responsible for helping establish Sanmina's strategic priorities, presiding over Board meetings and communicating the Board's guidance to management. The Chief Executive Officer, on the other hand, is responsible for the day-to-day management of our operations and business and reports directly to the Board.
For more than the past 15 years, the positions of Chairman of the Board and Chief Executive Officer were held by the Mr. Sola. As part of Sanmina's succession planning process, effective as of October 2, 2017, Robert K. Eulau, Sanmina's former Chief Financial Officer, was appointed by the Board as Sanmina's Chief Executive Officer and a director and Mr. Sola assumed the role of Executive Chairman. In addition to the customary duties of Chairman of the Board, Mr. Sola will support the Chief Executive Officer by interacting with current and prospective customers and advising on the strategic direction of Sanmina. The Board believes that this leadership structure, coupled with the continuation of Wayne Shortridge as Lead Independent Director, provides balance, continuity and currently is in the best interest of Sanmina and its stockholders.
Although the Board currently believes that this leadership structure is currently in the best interests of Sanmina and its stockholders the Board will continue to reevaluate its leadership structure from time to time.
Director Succession Planning, Tenure and Refreshment
The Board believes that its ability to promote the long-term, sustainable growth of Sanmina depends on attracting and retaining board memberstypically coincide with a high levelregular Board meeting date, which facilitates the attendance of industry-specific experience who have a deep familiarity withBoard members at the Company's business and who actively engage with management and other stakeholders. Thestockholder meetings. All Board seeks to assure these characteristics in board members through regular succession planning activities and through its Board evaluation process intended to identify board members in needattended the 2020 Annual Meeting of improvement. The Board recognizes concerns expressed in the corporate governance community that long-tenured board members can be perceived as less independent than those with shorter tenures. At the same time, the Board does not believe that term limits are an appropriate means of addressing this concern as they can serve to disqualify otherwise knowledgeable, engaged and effective board members. Instead, the Board regularly considers new potential board members as a matter of succession planningStockholders.
Role of the Board of Directors in Risk Management Practices and PoliciesBOARD STOCK OWNERSHIP GUIDELINES
Under Sanmina's risk management practices and policies, Sanmina's management has primary responsibility for the development and implementation of risk management strategies, with oversight by the Board and its committees. As part of this oversight, the Board and its Committees regularly receive presentations from management concerning enterprise-level risks that could have a significant adverse impact on Sanmina's business and operations. This process permits the Board and its Committees to provide guidance to management in scoping and managing each of the company's enterprise risk areas.
Stock Ownership Guidelines
In order to better align the interests of our Board and executive officers with those of our stockholders, we have adopted stock ownership guidelines. Under these guidelines, Board members must acquire and hold Sanmina shares with a dollar value of at least four times the amount of the cash retainer for Board service within three years of becoming a director. Shares counted towards satisfaction of the guideline include shares held through our frozen non-management director deferred compensation plan, shares issued upon vesting or exercise of restricted stock units orand stock options issued to directors and shares purchased on the open market, if any.market. All of our directors currently meet this standard or are within the period for initial compliance. For executive officers, the guidelines provide that such officers should hold equity with a value equal to a specified multiple of their base salary, as follows: Chief Executive Officer: four times; Chief Financial Officer: three times; and other executive officers: one and one half times. Covered officers have five years from commencement of their service as executive officers, whichever is later, to reach their recommended equity position. The equity counted towards achievement of the executive ownership guidelines includes shares owned outright, shares deemed to be beneficially owned under the rules of the Securities and Exchange Commission and shares underlying unvested time-based restricted stock units. All of our current named executive officers meet this guideline.
Hedging and Pledging of Company SecuritiesHEDGING AND PLEDGING OF COMPANY SECURITIES
Sanmina believes that "hedging,"“hedging,” a term used to describe certain practices taken to reduce the economic risk of Sanmina stock ownership (e.g., to prevent losses if Sanmina'sSanmina’s stock price were to fall) is inappropriate when undertaken by employees, officers or directors as such techniquespractices reduce alignment with the interests of our public stockholders. Similarly, Sanmina believes that "pledging"“pledging” of Sanmina stock by employees, officers or directors (i.e., using Sanmina stock as collateral for a loan, such as in a margin account) can be inappropriate when such practice could cause shares to be sold when the trading window is closed or the individual is in possession of material non-public information and would otherwise be prohibited from selling under this policy. Therefore, Sanmina prohibits employees, officers and directors from (i) purchasing any financial instrument that is designedor engaging in any transaction intended to hedge
or offset any decrease in the market value of Sanmina'sSanmina’s common stock including prepaid variable forward contracts, equity swaps, collars and exchange funds or (ii) engaging in short sales related to Sanmina'sSanmina’s common stock. In addition, Sanmina prohibits officers and directors from (i) depositing any Sanmina common stock in a margin account or (ii) pledging Sanmina securities as collateral for a loan.
Attendance at Annual Meeting of Stockholders by the Board of DirectorsSTOCKHOLDER PROPOSALS
Sanmina encourages, but does not require, its Board members to attend the Annual Meeting of Stockholders. Our annual meetings of stockholders typically coincide with a regular Board meeting date, which facilitates the attendance of Board members at the stockholder meetings. All Board members attended the 2017 Annual Meeting of Stockholders.
Contacting the Board of Directors
Our Board welcomes the submission of any comments or concerns from stockholders. If you wish to submit any comments or express any concerns to the Board, please send them to the Board, c/o Sanmina Corporation, Attention: Corporate Secretary, 30 E. Plumeria Drive, San Jose, California 95134. If a communication does not relate in any way to matters of the Board, our Corporate Secretary will handle the communication as appropriate. If the communication does relate to the Board, the Corporate Secretary will forward the message to the Chair of the Nominating and Governance Committee, who will determine whether to inform the entire Board or the non-management directors.
Stockholder Proposals and Nominations to the Board
Stockholders may submit proposals for inclusion in our proxy statement and may recommend candidates for election to the Board, both of which shall be considered by the Nominating and Governance Committee. Stockholders should send such proposals to Nominating and Governance Committee, c/o Sanmina Corporation, Attention: Corporate Secretary, 30 E. Plumeria Drive, San Jose, California 95134.
Any stockholder submitting the name of a candidate for election to the Board must include all of the following information with their request:
For all other matters that a stockholder proposes to bring before the Annual Meeting, the notice must set forth:
● | A brief description of the business intended to be brought before the Annual Meeting and the reasons for conducting such business at the Annual Meeting; |
● | The name and address, as they appear on our books, of the stockholder proposing the business, and any beneficial owner on whose behalf the stockholder is proposing the business or proposing a director nomination and any person controlling, directly or indirectly, or acting in concert with, the stockholder or beneficial owner (a “Stockholder Associated Person”); |
2021 Proxy Statement 25
Table of the business intended to be brought before the Annual MeetingContents
Corporate Governance and the reasons for conducting such business at the Annual Meeting;Board Matters
● | The class and number of shares of Sanmina that are held of record or are beneficially owned by the stockholder or any Stockholder Associated Person and any derivative positions held or beneficially held by the stockholder or any Stockholder Associated Person; |
● | Whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of the stockholder or any Stockholder Associated Person with respect to any securities of Sanmina, or whether any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares) has been made, the effect or intent of which is to mitigate loss to or manage risk or benefit from share price changes for, or to increase or decrease the voting power of, the stockholder or any Stockholder Associated Person with respect to any securities of Sanmina; |
● | Any material interest of the stockholder or any Stockholder Associated Person in the business intended to be brought before the Annual Meeting; and |
● | A statement whether either the stockholder or any Stockholder Associated Person will deliver a proxy statement and form of proxy to holders of at least the percentage of Sanmina’s voting shares required under applicable law to carry the proposal. |
Stockholders must comply with certain deadlines in order for proposals submitted by them be considered for inclusion in our proxy statement or brought to a vote at the Annual Meeting. Please see “"Q18—What is the deadline to propose actions for consideration at next year'syear’s Annual Meeting of Stockholders or to nominate individuals to serve as directors?" above.” page 80.
26 SANMINA CORPORATION
COMPENSATION OF DIRECTORS |
Director Compensation Committee InterlocksArrangements
The Nominating and Insider Participation
NoneGovernance Committee of the membersBoard reviews and recommends non-employee director pay levels, which are approved by the Board. The Nominating and Governance Committee believes Sanmina’s director compensation pay levels are reasonable in light of benchmarking data prepared by the Nominating and Governance Committee’s independent compensation consultant and reviewed by the Committee.
Cash Compensation
During fiscal 2020, non employee directors were eligible to receive an annual cash retainer of $80,000. Each such director who was a member of the Audit, Compensation or Nominating and Governance Committees of the Board also earned an annual cash retainer of $10,000 and the chairperson of each such committee earned an additional annual cash retainer of $30,000 in the case of the Audit Committee, $25,000 in the case of the Compensation Committee are employeesand $15,000 in the case of Sanmina. the Nominating and Governance Committee. Finally, our lead independent director earned an additional cash retainer of $40,000 for her duties as such during 2020. Directors were permitted to convert their cash retainers into RSUs vesting in one year with the same value as the retainer to which they were entitled.
Equity Compensation
During fiscal 2017, no executive officer2020, non-employee directors received an aggregate of Sanmina (i) served$180,000 in value of restricted stock units granted under our 2019 Equity Incentive Plan vesting as a memberto 25% of the compensation committee (or other board committee performing similar functions or, in the absence of any such committee, the board of directors) of another entity, one of whose executive officers servedshares subject thereto on Sanmina's Compensation Committee, (ii) served as a director of another entity, one of whose executive officers served on Sanmina's Compensation Committee, or (iii) served as a membereach of the compensation committee (or other board committee performing similar functions or,first four quarterly anniversaries of the grant date.
Director Compensation Limits
The 2019 Plan Equity Incentive provides that, in the absence of any such committee, the board of directors) of another entity, one of whose executive officers served as a given fiscal year, a non employee director of Sanmina.may not receive equity awards having a grant date fair market value greater than $900,000. Sanmina believes that having a stockholder-approved limit on equity grants to directors is consistent with best corporate governance practices.
2021 Proxy Statement 27
Compensation of Directors
The following table presents the compensation earned by or paid to our non-employee directors during fiscal 2020.
Name | Fees Earned and Paid in Cash ($) | Stock Awards ($)(1)(2)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | ||||||
Eugene A. Delaney | 125,000 | 180,000 | — | — | 305,000 | ||||||
John P. Goldsberry | 120,000 | 180,000 | — | — | 300,000 | ||||||
Rita S. Lane | 115,000 | 180,000 | — | — | 295.000 | ||||||
Joseph G. Licata, Jr. | 100,000 | 180,000 | — | — | 280,000 | ||||||
Krish Prabhu | 90,000 | 180,000 | — | — | 270,000 | ||||||
Mario M. Rosati | 90,000 | 180,000 | — | — | 270,000 | ||||||
Jackie M. Ward | - | 320,004 | (74,194 | ) | — | 245,810 |
(1) | Represents the grant date fair value of equity awards granted in March 2020, determined in accordance with ASC 718. These amounts do not purport to reflect the value that will be realized upon sale of the underlying securities. |
(2) | Includes the grant date fair value of restricted stock units granted in lieu of cash retainer awards, when applicable. See “Director Compensation Arrangements – Cash Compensation,” above. |
(3) | As of the end of fiscal 2020, the following directors held unvested restricted stock awards and outstanding stock options as follows: Mr. Delaney— 4,802 and 17,145, respectively; Mr. Goldsberry— 4,802 and 7,181, respectively; Ms. Lane— 4,802 and 0, respectively; Mr. Licata— 4,802 and 0, respectively; Mr. Prabhu— 5,476 and 0, respectively; Mr. Rosati— 4,802 and 33,415, respectively; and Ms. Ward— 12,273 and 33,415, respectively. |
28 SANMINA CORPORATION
The Audit Committee has approved the engagement of PricewaterhouseCoopers LLP (“PwC”) as our independent registered public accounting firm for the fiscal year ending October 2, 2021. In the event stockholders do not ratify the Audit Committee’s selection of PwC as our independent registered public accounting firm, the Audit Committee may reconsider its selection. Representatives of PwC are expected to be present at the Annual Meeting, with the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.
The following is a summary of fees billed by our independent registered public accounting firm for the fiscal years ended September 28, 2019 (“fiscal 2019”) and October 3, 2020 (“fiscal 2020”). The Audit Committee considers the non-audit and tax fees in its assessment of the independence of the Company’s independent registered public accounting firm.
Fiscal 2019 | Fiscal 2020 | |||||
Audit Fees | $ | 4,306,000 | $ | 4,340,262 | ||
Audit-Related Fees | $ | 97,000 | $ | 22,000 | ||
Tax Fees | $ | 264,000 | $ | 238,000 | ||
All Other Fees | $ | 4,000 | $ | 4,000 | ||
TOTAL | $ | 4,671,000 | $ | 4,604,262 |
Audit Committee Pre-Approval Policy with Respect to Audit Services and Permissible Non-Audit Services
All services provided by our independent registered public accounting firm require prior approval of the Audit Committee, with limited exceptions as permitted by the SEC’s Rule 2-01 of Regulation S-X. Our independent registered public accounting firm periodically reports to the Audit Committee services for which the independent registered public accounting firm has been engaged and the aggregate fees incurred and to be incurred. During fiscal 2020, all services provided by our independent registered public accounting firm were pre-approved in accordance with this policy.
2021 Proxy Statement 29
Sanmina’s Audit Committee is comprised solely of members who meet the Nasdaq Listing Standard’s independence requirements for audit committee members. The Audit Committee has reviewed the audited financial statements for fiscal 2020 and has met and held discussions with management regarding the audited financial statements and internal controls over financial reporting. Management is responsible for the internal controls and the financial reporting process. Management has represented to the Audit Committee that our financial statements were prepared in accordance with generally accepted accounting principles.
PricewaterhouseCoopers LLP (“PwC”), our independent registered public accounting firm for fiscal 2020, was responsible for performing an independent audit of our financial statements in accordance with the standards of the Public Company Accounting Oversight Board and expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles. PwC was also responsible for performing an audit of the effectiveness of Sanmina’s internal control over financial reporting as of October 3, 2020, in accordance with the standards of the Public Company Accounting Oversight Board. The Audit Committee has discussed with PwC the overall scope of such audits and has met with PwC, with and without management present, to discuss the results of their audits.
The Audit Committee also reviewed with PwC its judgments as to the quality, not just the acceptability, of our accounting principles and has discussed with PwC the matters required to be discussed by professional standards. Finally, the Audit Committee has also received the written disclosures and the letter from PwC as required by applicable requirements of the Public Company Accounting Oversight Board regarding PwC’s communications with the Audit Committee concerning independence, and has discussed with PwC the independence of that firm.
Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board (and the Board approved) that the audited financial statements for fiscal 2020 be included in the Annual Report on Form 10-K for fiscal 2020 for filing with the SEC.
THE AUDIT COMMITTEEEXECUTIVE COMPENSATION AND RELATED INFORMATION
OF THE BOARD OF DIRECTORS OF SANMINA CORPORATION
JOHN P. GOLDSBERRY, Chairman
EUGENE A. DELANEY
RITA S. LANE
JOSEPH G. LICATA
30 SANMINA CORPORATION
2021 Proxy Statement 31
COMPENSATION DISCUSSION AND ANALYSIS |
The Compensation Discussion and Analysis describes the Company’s executive compensation program and the Committee’s process for implementing its executive compensation program. To enable easier navigation of the information provided below, we have organized the disclosure into the following sections:
I | Executive Summary |
II | Compensation Philosophy and Design-Related Features |
III | Executive Officer Compensation Decisions for 2020 |
IV | CEO Compensation Decisions for 2021 |
V | Other Compensation Program Features |
I Executive Summary
Our Named Executive Officers
Throughout this CD&A, the individuals who served as our Executive Chairman, Chief Executive Officer and Chief Financial Officer during fiscal 2020 and the other individuals included in the “Summary Compensation Table” in the Proxy Statement, are referred to as the “named executive officers” or “NEOs” and are listed below. Unless otherwise specified, when we refer in this CD&A to our CEO, we are referring to Mr. Liebel.
Jure Sola(1) | Chairman and Chief Executive Officer | |
Hartmut Liebel(2) | Former Chief Executive Officer | |
Kurt Adzema(3) | Executive Vice President and Chief Financial Officer | |
David R. Anderson(4) | Former Executive Vice President and Chief Financial Officer | |
Dennis R. Young | Executive Vice President, Worldwide Sales | |
Alan McW. Reid | Executive Vice President, Global Human Resources |
(1) | Effective as of August 17, 2020, Mr. Sola was appointed as Chairman and Chief Executive Officer. |
(2) | Mr. Liebel ceased to serve as Chief Executive Officer as of August 17, 2020. |
(3) | Effective as of October 14, 2019, Mr. Adzema was appointed as Executive Vice President and Chief Financial Officer. |
(4) | Mr. Anderson ceased to serve as Chief Financial Officer as of October 13, 2019. |
32 SANMINA CORPORATION
Compensation Discussion and Analysis
Fiscal 2020 Business Highlights
Fiscal 2020 was an unprecedented year as the COVID-19 pandemic disrupted our operations and customers in the end markets we serve. The extraordinary work of our teams who remained agile and resilient in this challenging environment is evident in our financial performance for the fiscal year. While revenue and non-GAAP earnings per share (EPS) were down compared to the prior year due to the global pandemic, revenue and non-GAAP EPS grew sequentially the last two quarters exiting the fiscal year. Despite the challenging market dynamics, we were able to increase our operating efficiencies and leverage our advanced technology and manufacturing capabilities to deliver improved non-GAAP operating margin, pre-tax non-GAAP ROIC, Non-GAAP EBITDA margin and generate strong cash flow from operations.
REVENUE & NON-GAAP OPERATING MARGIN* | NON-GAAP EARNINGS PER SHARE (EPS)* | |
($ in Millions) | ||
NON-GAAP EBITDA* | PRE-TAX NON-GAAP ROIC* | CASH FLOW FROM OPERATIONS | ||
($ in Millions) | ($ in Millions) | |||
* | See Appendix B for reconciliation of non-GAAP financial information to their most directly comparable GAAP measures. |
2021 Proxy Statement 33
Table of Contents COMPENSATION DISCUSSION AND ANALYSIS
Compensation Discussion and Analysis
Fiscal 2020 Executive Compensation Highlights
Management continuedSanmina’s NEO’s are compensated to emphasize sustainabledrive long-term success and profitable growth during fiscal 2017,stockholder value. The compensation package that our CEO and other NEO’s were awarded in 2020 requires them to meet or exceed financial and operational goals not just for 2020, but in future years as well. Our NEO’s are incentivized to build long-term success and return long-term value to stockholders.
TARGET COMPENSATION MIX
A significant portion of target CEO compensation is comprised of components that are based on achieving a seventh consecutive yearpre-determined level of profitabilityfinancial or operational performance and/or stock price. A significant portion of target compensation for all NEOs is dependent on long-term stock price appreciation, incentivizing executives to increase value for our company. Management's efforts ledstockholders.
TARGET COMPENSATION MIX FOR FISCAL 2020
CEO
All other NEOs
OUR COMPENSATION PROGRAM EMPHASIZES PERFORMANCE-BASED AND AT-RISK PAY
Approximately 79% of the CEO’s total target compensation (base, bonus and value of equity incentives at the time of grant) was comprised of performance-based pay opportunities tied to increasesperformance conditions. Approximately 72% of the CEO’s total target compensation and 74% of the other NEOs’ total target compensation was comprised of equity incentives, thereby ensuring alignment with stockholder returns.
Short-Term Incentive Compensation
Annual incentive compensation under Sanmina’s Corporate Bonus Plan is awarded to incentivize and reward the achievement of short-term goals using metrics that are clear and understandable to both management and investors. In 2020 and in financial results in aresponse to stockholder and stockholder advisory group feedback, the Compensation Committee revised the Corporate Bonus Plan to eliminate metrics that were also used under the long-term incentive plan and to reduce the number of areas,metrics under the plan to just two: revenue and non-GAAP operating margin, with cash flow from operations as a modifier.
Long-Term Equity Incentives
The objectives of our long-term incentive program are to incentivize and reward executives for performance that leads to long-term success and stockholder value creation and to promote retention of critical executives to remain with Sanmina in an environment where competition for talent is fierce. For 2020 and in response to stockholder and stockholder advisory group feedback, the Compensation Committee revised the long-term incentive plan to reduce the number of metrics used and to increase the measurement period for achievement from one to three years. And as noted above, our incentive program changes in 2020 eliminated duplication of performance metrics in the annual bonus and long-term incentive plans.
34 SANMINA CORPORATION
Compensation Discussion and Analysis
2020 Long-Term Incentive Mix and Metrics |
Mix: |
CEO — Hartmut Liebel
NEOs
PSU metrics (CEO, NEOs and key managers) ●Non-GAAP earnings per share ●Three-year cumulative metric measured at the end of the performance period ●Variable payout (65% to 135%) based upon level of achievement and, at the discretion of the Compensation Committee, relative TSR compared to peers, with minimum threshold for any payout |
RSU metrics ●Cliff vests in three years (CEO) and one-year to three-year vesting (NEOs) |
2020 Stockholder Engagement and Say-on-Pay Vote
As a result of our pay program changes and stockholder engagement efforts in 2019 and early 2020, we received 94% stockholder support for our pay program at the 2020 annual meeting of stockholders. In 2020 we continued our effort of proactively engaging with stockholders.
In 2020, we invited stockholders representing 69% of our outstanding shares to meet with our management and members of the Board to solicit feedback about our business, corporate governance, and our executive compensation programs. Sanmina management and members of our Board met with stockholders representing 29% of outstanding shares, with stockholders representing the remaining 40% of outstanding shares indicating that they did not require a meeting or not responding. In addition to input on current governance and executive compensation topics specific to Sanmina, we invited discussion on any other topics or trends stockholders wished to share with us. Additionally, we engaged with a key proxy advisory firm to explain and reinforce our executive compensation program and philosophy and understand any comments they had.
2021 Proxy Statement 35
Compensation Discussion and Analysis
The 2020 program reflects significant changes to our pay program compared to prior years, including the following:
● | Increasing the CEO’s percentage of total target compensation comprised of performance-based long-term incentives to 62% from 53% in 2019. |
● | Reducing the number of performance metrics in the annual bonus plan and eliminating duplication of annual bonus plan metrics with the long-term incentive awards under the prior program. |
● | Establishing long-term incentive performance goals that cover a full three-year period. |
● | Ceasing to award “all or nothing” long-term incentives, and instead adopting a sloped relationship between performance and earned pay, consistent with market practices. |
● | Approving equity awards with variable payout (65% to 135%) based upon three-year cumulative non-GAAP EPS and, at the discretion of the Compensation Committee, relative TSR compared to peers, with a minimum performance threshold for any payout. |
● | Expanding our Clawback Policy to apply to equity awards. |
Based on the highly positive say-on-pay vote at the 2020 annual meeting and supportive feedback from stockholders, the Compensation Committee is continuing these program elements for 2021. In addition, we continue to provide greater transparency in fiscal 2017
Alignment of Incentive Pay Results with Company Performance
The total compensationA key objective of our executives in 2017 was heavily weighted towards incentive cashexecutive compensation and equity awards that will vest only if Sanmina'sprogram is to align executive pay with performance – both financial performance continues to improve, with approximately 93% and 56% of our Chief Executive Officer'sCompany and long-term stockholder value creation. We believe our other named executive officers' total target compensation, respectively, being at risk. Key features of our performance-based executive pay arrangements include:
36 SANMINA CORPORATION
The tables below summarize our performance during the past three fiscal years compared to the total compensation reported in the Summary Compensation Table for our named executive officers during that period.
The table below shows the extent to which the total target compensation payable to our Chief Executive Officer and our other named executive officers as a group during fiscal 2017 is comprised of equity incentives and target bonus contingent upon Company performance and therefore at risk.
II Compensation Philosophy and Design-Related Features
Adoption of Best Practices
Our executive compensation programs include features that are widely recognized as best practices. Examples include:
WHAT WE ARE DOING: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
●Pay for Performance—Our executive compensation program continues to emphasize performance-based (at risk) compensation, with the majority of the
Compensation Discussion and Analysis
Sanmina’s Executive Compensation Process
The Committee:
ROLE OF EXECUTIVE OFFICERS IN COMPENSATION DECISIONS
38 SANMINA CORPORATION
The Committee retained Exequity, LLP, an executive compensation consulting firm, to provide advice on matters related to executive
We are required to disclose whether the work of our compensation consultant raises any conflict of interest issues and, if so, the nature of the conflict and how the conflict was addressed. The Committee does not believe the retention of Exequity
In addition, Exequity reported solely to the Committee, our management was not involved in the negotiation of fees charged by Exequity or in the determination of the scope of work performed by Exequity and the Committee has the sole authority to hire and terminate compensation consultants, including Exequity. As a result of the foregoing, the Committee believes that Exequity is independent of Sanmina. The Committee has engaged Exequity to conduct a similar review of our executive compensation program for fiscal 2021.
Each year the Committee determines the amount of
2021 Proxy Statement 39 Compensation Discussion and Analysis REVIEW OF PEER GROUP DATA In making compensation decisions for fiscal
HOW WE SET TARGET GOALS
EVALUATIONS OF INDIVIDUAL PERFORMANCE In addition to measuring achievement of the financial goals set forth in our short-term and long-term plans, the Committee conducts annual qualitative evaluations of each NEO’s performance during the year. Such evaluations form the basis for any discretionary adjustments to NEO compensation the Committee may choose to make. STOCKHOLDER OUTREACH PROGRAM We believe that effective corporate governance should include regular, constructive conversations with our stockholders. Each year we engage with a number of stockholders to obtain feedback on their perception and understanding of our business, markets and industry. In 2020, we continued our strong stockholder outreach efforts and reached out to stockholders representing approximately 69% of our outstanding shares and met with stockholders owning approximately 29% of our outstanding shares. 40 SANMINA CORPORATION
Compensation Discussion and Analysis Our annual corporate governance investor outreach cycle is outlined below:
2021 Proxy Statement 41 Compensation Discussion and Analysis Components of 2020 CEO Compensation
WHY WE SELECTED THESE COMPONENTS
The Committee
Base salary compensates named executive officers for their services rendered on a day-to-day 42 SANMINA CORPORATION Compensation Discussion and Analysis During early fiscal
2020 SHORT-TERM INCENTIVE COMPENSATION
Approval of Fiscal Short-term incentives are awarded under an annual Corporate Bonus Plan. In December
Step 3: Final payout for each NEO was determined by this formula:
2021 Proxy Statement 43 Compensation Discussion and Analysis Impact of COVID-19 Pandemic on 2020 Corporate Bonus Plan Achievement In 2020, the Company’s operations were negatively impacted by the COVID-19 pandemic, which reduced end market demand for our customers’ products (and therefore the Company’s revenue) and resulted in supply chain constraints and temporary plant closures and suspension of manufacturing. As a result, the Company’s revenue for fiscal
DETERMINATION OF BASE CORPORATE BONUS FACTOR:
ADDITIONS (15% - 30%):
SUBTRACTIONS (15%)
44 SANMINA CORPORATION Compensation Discussion and Analysis Determination of Individual NEO Bonuses for Fiscal 2020 Shown below are the calculations of bonus payments approved by the Committee for the named executive officers, giving effect to the exercise of discretion described above, and as adjusted for individual and executive performance:
Named executive officer bonuses
2020 LONG-TERM EQUITY-BASED INCENTIVE AWARDS Our practice has always been to subject a substantial 2021 Proxy Statement 45 Compensation Discussion and Analysis executive officers to help maximize stockholder value. The
Our long-term incentive grant practices are designed to provide, when base and incentive cash compensation are also considered, substantially comparable target compensation opportunities for the key For 2020, our long-term equity incentive awards were comprised of:
In fiscal 2020, performance-based PSUs accounted for 86% of the total equity grant value awarded to our CEO, as shown below: CEO LONG-TERM INCENTIVE MIX The table below illustrates the performance conditions applicable to PSUs granted to the NEOs during fiscal 2020. These equity awards will not vest unless the specified criteria are met or exceeded. Differing criteria reflect differing expected contributions to the business by each executive officer.
46 SANMINA CORPORATION Compensation Discussion and Analysis
Restricted Stock Units The Committee also believes that the continued retention of our executive team is supported by awards of time-based restricted stock units. Enhancing retention of valued top executives through such restricted stock awards is typical practice among Silicon Valley-based companies, where talent competition is extreme. The time-based restricted stock units granted during fiscal 2020 vest between one and three years after grant. By combining both performance-based awards containing conditions that the Committee believed to be challenging at the time of grant and time-based awards, the Committee seeks to maximize executives’ contribution to increasing stockholder value while providing retention incentive.
2021 Proxy Statement 47 Compensation Discussion and Analysis IV CEO Compensation Decisions for 2021 As mentioned above, Mr. Sola was appointed as Chief Executive Officer of Sanmina on August 17, 2020. In determining Mr. Sola’s pay arrangements as our new CEO, the Compensation Committee considered all of the same pay philosophy determinants as described above in this CD&A for pay decisions applied to our former CEO. In particular, alignment with peer CEO pay practices and with our pay arrangements for our previous CEOs were important considerations. Consistent with our pay-for-performance philosophy, Mr. Sola’s pay is predominantly comprised of incentive arrangements that are directly tied to financial measures of our success. Responsive to what stockholders shared with us in our stockholder engagement process, the Compensation Committee has maintained an increased percentage of equity awards that are dependent on the achievement of financial goals. The Compensation Committee believes these changes align Mr. Sola’s incentive pay opportunities with stockholder value creation, as well as with those of our other named executive officers.
Mr. Sola’s 2021 compensation package is described below.
Payments in Connection with CEO Departure On August 20, 2020, Sanmina entered into a Separation and Release Agreement with Mr. Liebel under which Mr. Liebel received a lump sum payment of $1,462,500, which the Committee determined to be appropriate separation compensation in light of the duration of Mr. Liebel’s tenure with the Company, Mr. Liebel’s compensation level and other factors. In addition, the vesting of an aggregate of 8,333 unvested time-based restricted stock units previously granted to Mr. Liebel and that were scheduled to vest during the calendar year were accelerated pursuant to the Agreement, with all other equity awards granted to him being canceled. The Agreement also contains customary provisions concerning release of claims, non-solicitation of Company employees and non-disparagement. 48 SANMINA CORPORATION Compensation Discussion and Analysis Other Benefits In addition to the base salary, bonus and equity compensation discussed above, we provide our named executive officers
We do not provide the
IV Other Compensation Program Features Change-in-Control and Severance Arrangements In order to continue to attract and retain key employees and to provide incentive for their continued service in case of an acquisition of Sanmina, the Committee approved a change-in-control plan in December 2009 to provide benefits to such employees, including the named executive officers, in the event that their employment terminates under certain circumstances following a change-in-control of Sanmina.
Policy Regarding Executive Repayment of Compensation Following Misconduct Section 304 of the Sarbanes-Oxley Act of 2002 requires that if misconduct results in a material non-compliance with SEC financial reporting requirements, and as a result of such non-compliance we are required to restate our financial statements, the Chief Executive Officer and Chief Financial Officer must disgorge any incentive compensation received during the 12-month period following the filing of the non-compliant report and profits on the sale of In addition, our Board has adopted a policy for Executive Stock Ownership Guidelines We require our executive officers to hold Sanmina equity equal in value to four times base salary, in the case of our Chief Executive Stock Hedging and Pledging Policy
Section 162(m) of the Internal Revenue Code Accounting rules require us to 50 SANMINA CORPORATION
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis for fiscal THE COMPENSATION COMMITTEE OF THE EUGENE A. DELANEY, Chairman 2021 Proxy Statement 51
The following table presents the compensation earned by the persons who served as our Chief Executive Officer
52 SANMINA CORPORATION
Executive Compensation Tables Grants of Plan Based Awards The following table presents information regarding grants of plan based awards made to each of our named executive officers during fiscal
2021 Proxy Statement 53
Outstanding Equity Awards at Fiscal Stock Options The following table presents certain information concerning outstanding option awards held as of
Executive Compensation Tables Stock Awards The following table presents certain information concerning the outstanding stock awards held as of
2021 Proxy Statement 55
Executive Compensation Tables
Option Exercises and Stock Vested in Last Fiscal Year The following table presents certain information regarding exercises of options and vesting of stock awards for each of our named executive officers during fiscal
56 SANMINA CORPORATION
Executive Compensation Tables Non-Qualified Deferred Compensation Plan Pursuant to
Employment, Termination and Change in Control Arrangements Sanmina does not have employment agreements with any of its 2021 Proxy Statement 57
Executive Compensation Tables
For purposes of the change of control plan, the following definitions apply.Change of controlmeans a person becoming the owner of 50% or more of annual compensation, authority, duties or responsibilities after a change of control compared to compensation, authorities duties or responsibilities before the change of control (provided that less than a 20% reduction of annual compensation shall not constitute a material diminution of annual compensation), a relocation of the executive to a place of business more than 75 miles from the place of business predominantly used by executive before the change of control, or a material breach by Sanmina of Other Employment, Termination and Change of Control Arrangements In addition to the benefits described above, pursuant to an agreement with Alan McW. Reid, our Executive Vice President, Global Human Resources, dated March 28, 2008, as amended, Mr. Reid is entitled to receive a lump sum payment equal to 12 months of his then current salary and certain relocation benefits following any termination of his employment without cause or voluntary termination for good reason. On August 20, 2020, Sanmina entered into a Separation and Release Agreement with Mr. Liebel under which Mr. Liebel received a lump sum payment of $1,462,500. In addition, the vesting of an aggregate of 8,333 unvested time-based restricted stock units previously granted to Mr. Liebel was accelerated pursuant to the Agreement. The Agreement also contains customary provisions concerning release of claims, non-solicitation of Company employees and non-disparagement.
Under SEC rules, we are required to provide the following information regarding the relationship between the annualized total compensation of Jure Sola, our Chief Executive Officer, from August 17, 2020 through October 3, 2020, the period that he served as our Chief Executive Officer during fiscal 2020, and the median annual total compensation of our employees (other than Mr. Sola) for fiscal 2020:
This pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K and is based upon our reasonable judgments and assumptions. The SEC rules do not specify a single methodology for identification of the median employee or calculation of the pay ratio, and other companies may use assumptions and methodologies that are different from those used by us in calculating their pay ratios. Accordingly, the pay ratios disclosed by other companies may not be comparable to our pay ratio as disclosed above. Furthermore, in light of the absence of bonus compensation and performance-based equity paid or awarded to Mr. Sola in fiscal 2020 and the fact that Mr. Sola’s fiscal 2021 compensation package includes both bonus opportunity and performance-based equity, we expect our fiscal 2021 pay ratio to be significantly higher than our fiscal 2020 CEO pay ratio. We determined the median of the annual total compensation of our employees as of October 3, 2020, which was the last day of our last completed fiscal year. For fiscal 2020, we determined our median employee as of October 3, 2020, which was the last day of fiscal 2020, at which time we (including our consolidated subsidiaries) had approximately 30,600 full-time, part-time and temporary employees, approximately 4,900 of whom are U.S. employees, and approximately 25,700 (or approximately 84% of our total employee population) of whom were located outside of the United States, generally in lower cost locations such as China and Mexico. This employee count excludes individuals who are technically classified as independent contractors or “leased” workers as permitted by the applicable SEC rules and are therefore not included in the CEO pay ratio calculations. To find our median employee, we compared the target total cash compensation (base plus target incentive) of all such employees as shown in our global HRIS systems, annualizing the 2021 Proxy Statement 59
60 SANMINA CORPORATION Proposal Four: Approval of the Reservation of an Additional 1,400,000 Shares of
A summary of the principal provisions of the 2019 Plan is set forth below. However, this summary is not a complete description of all of the provisions of the 2019 Plan and is qualified in its entirety by the specific language of the 2019 Plan, which is attached as Appendix A to this proxy statement. General
2021 Proxy Statement 61 Proposal Four: Approval of the Reservation of an Additional 1,400,000 Shares of Administration Our Board of Directors has delegated administration of the 2019 Plan to the Compensation Committee. In addition, our Board of Directors may delegate authority to one or more officers of the Company the authority to do one or both of the following: (i) designate employees or consultants of the Company or any of its subsidiaries who are not Section 16 officers to be recipients of options, restricted stock and restricted stock units under the terms of the 2019 Plan, and (ii) determine the number of shares to be subject to such awards; provided, however, that the Board resolutions regarding such delegation shall specify the maximum number of shares that may be subject to the awards granted by such officer. For purposes of this summary of the 2019 Plan, the term “administrator” will refer to our Board of Directors or any committee designated by our Board of Directors to administer the 2019 Plan. To make grants to certain officers and key employees, the members of the committee must qualify as “non-employee directors” under Rule 16b-3 of the Securities Exchange Act of 1934, as amended. Subject to the terms of the 2019 Plan, the administrator has the authority, in its discretion, to (i) determine the fair market value of a share, (ii) select the service providers to whom awards may be granted, (iii) determine the number of shares to be covered by each award granted under the 2019 Plan, (iv) approve forms of award agreement for use under the 2019 Plan, (v) determine the terms and conditions of any award granted under the 2019 Plan, provided these are not inconsistent with the terms of the 2019 Plan, (vi) construe and interpret the terms of the 2019 Plan and awards granted under the 2019 Plan, (vii) prescribe, amend and rescind rules and regulations relating to the 2019 Plan, (viii) modify or amend each award, subject to the terms of the 2019 Plan; provided that the administrator may not modify or amend an option or stock appreciation right to reduce the exercise price after it has been granted (except for adjustments made pursuant to the terms of the 2019 Plan), and the administrator may not implement any type of exchange program, unless such action is approved by stockholders prior to such action being taken, (ix) allow participants to satisfy tax withholding obligations in a manner prescribed under the terms of the 2019 Plan, (x) authorize any person to execute on Eligibility All types of awards other than incentive stock options may be granted to our non-employee directors and to employees and consultants of the Company or any parent or subsidiary corporation of the Company. Incentive stock options may be granted only to employees of the Company or any parent or subsidiary corporation of the Company. As of October 3, 2020, we had approximately 30,000 eligible participants, including employee directors, outside directors and consultants, subject to compliance with local securities laws. Shares Available for Issuance Subject to the adjustment provisions contained in the 2019 Plan, our stockholders are 62 SANMINA CORPORATION Proposal Four: Approval of the Reservation of an Additional 1,400,000 Shares of Any shares subject to awards other than options or stock appreciation rights will be counted against the numerical limits of the 2019 Plan as 1.36 shares for every one share subject thereto. Further, if shares acquired pursuant to any such award are forfeited or repurchased by the Company and would otherwise return to the 2019 Plan, 1.36 times the number of shares so forfeited or repurchased will return to the 2019 Plan and will again become available for issuance. If an award under the 2019 Plan expires or becomes unexercisable without having been exercised in full, or, with respect to restricted stock, restricted stock units, performance shares or performance units which are Adjustments In the Stock Options An option gives a participant the right to purchase a specified number of shares for
2021 Proxy Statement 63
The term of an option will be specified in the award agreement but may not be more than ten years (or five years for an incentive stock option granted to a ten percent stockholder). The 2019 Plan provides that the administrator will determine the acceptable form(s) of consideration for exercising an option. An option will be deemed exercised when we receive the notice of exercise and full payment for the shares to be exercised, together with applicable tax withholdings. Stock Appreciation Rights A stock appreciation right gives a participant the right to receive the appreciation in the fair market value of The exercise price per share of each stock appreciation right may not be less than the fair market value of a share of our common stock on the date of grant. Stock appreciation rights will be exercisable at such times or under such conditions as determined by the administrator and set forth in the award agreement. The term of a stock appreciation right may not be more than ten years. The terms and conditions relating to the period of exercise of stock appreciation rights following the termination of a participant’s service are similar to those for options described above. In the event of termination of service due to participant’s death, the award becomes vested in full. Restricted Stock Awards Awards
64 SANMINA CORPORATION
After an award of restricted stock units has been granted, the administrator has the discretion to reduce or waive any restrictions or vesting criteria that must be met to receive a payout or to accelerate the time at which any restrictions will lapse or be removed. A participant will forfeit any unearned restricted stock units upon termination of his or her service. However, In the event of termination of service due to participant’s death, the award becomes vested in full. The administrator in its sole discretion may pay earned restricted stock units in cash, shares, or a combination of both. Performance Units and Performance units and performance shares are
After an award of performance units or performance shares has been granted, the The administrator has the discretion to pay earned A participant will forfeit any performance units
Transferability Awards generally are not transferable other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the
Outside Director Limitations No non-employee director may 2021 Proxy Statement 65 Proposal Four: Approval of the Reservation of an Additional 1,400,000 Shares of One-Year Vesting Requirement; Chief Executive Officer Holding Requirement Awards granted under the 2019 Plan shall vest no earlier than the one year anniversary of the award’s date of grant, provided that the administrator, in its sole discretion, may provide that an award may accelerate vesting, including, without limitation, by reason of the participant’s death, disability or retirement, or termination of the participant’s service, including a termination that occurs in connection with a change in control, and provided further that awards that result in the issuance of an aggregate of up to 5% of the shares reserved for issuance under the 2019 Plan may be granted to service providers, or outstanding awards modified, without regard to such minimum vesting, exercisability and distribution provisions. In addition, shares received by the Chief Executive Officer upon exercise, settlement or issuance of an award granted to him or her while serving as Chief Executive Officer, after satisfaction of any applicable tax obligations, may not be sold or otherwise transferred (other than for estate planning purposes) for at least one year following delivery of such shares or, if earlier, upon the termination of the Chief Executive Officer’s service to us. Dissolution or Liquidation In the event of a proposed dissolution or liquidation of our company, the administrator will notify each participant as soon as practicable prior to the effective date of such proposed transaction. An award will terminate immediately prior to consummation of such proposed action to the extent the award has not been previously exercised. Change in Control The 2019 Plan provides that, in the event of a merger or change in control of the Company, each award will be treated as the administrator determines, including that that each award be assumed or an equivalent option or right substituted by the successor corporation. If the successor corporation does not assume or substitute for the award, the participant will fully vest in and have the right to exercise all of his or her outstanding options and stock appreciation rights, all restrictions on restricted stock and restricted stock units will lapse. With respect to awards with performance-based vesting that are not assumed or substituted for, all performance goals or other vesting criteria will be deemed achieved based on actual performance measured through the last date that the award remains outstanding (or such earlier date, as determined by the administrator, in its sole discretion), with any performance period shortened proportionately and applicable performance goals or other vesting criteria adjusted proportionately to reflect the shortened performance period (or to the extent applicable, the value of the consideration to be received by the Company’s stockholders in connection with the merger or change in control), as determined by the administrator, in its sole discretion. In addition, if an option or stock appreciation right is not assumed or substituted for, the administrator will notify the participant in writing or electronically that the option or stock appreciation right will be exercisable for a period of time determined by the administrator, in its sole discretion, and the option or stock appreciation right will terminate upon the expiration of such period. For awards granted to our non-employee directors, in the event of a change in control in which such awards are assumed or substituted for, if on the date of or following such assumption or substitution the participant’s status as a director or a director of the successor corporation, as applicable, is terminated other than upon a voluntary resignation by the participant (unless such resignation is at the request of the acquirer), then the participant will fully vest in and have the right to exercise options and/or stock appreciation rights as to all of the shares underlying such award, including those shares which would not otherwise be vested or exercisable, all restrictions on restricted stock and restricted stock units will lapse, and, with respect to awards with performance-based vesting, unless specifically provided otherwise under the applicable award agreement, a Company policy applicable to the participant, or other written agreement between the participant and the Company, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels and all other terms and conditions met. 66 SANMINA CORPORATION Proposal Four: Approval of the Reservation of an Additional 1,400,000 Shares of Amendment and Termination The 2019 Plan will automatically terminate ten years from the date of its adoption by our Board of Directors, unless terminated at an earlier time by our Board of Directors. The administrator may amend, alter, suspend, or terminate the 2019 Plan at any time, provided that no amendment may be made without stockholder approval to the extent approval is necessary or desirable to comply with any applicable laws. No amendment, alteration, suspension, or termination may materially impair the rights of any participant unless mutually agreed otherwise between the participant and the administrator. Summary of U.S. Federal Income Tax Consequences The following summary is intended only as a general guide to the U.S. federal income tax consequences of participation in the 2019 Plan. The summary is based on existing U.S. laws and regulations as of December 31, 2020, and there can be no assurance that those laws and regulations will not change in the future. The summary does not purport to be complete and does not discuss the tax consequences upon a participant’s death, or the provisions of the income tax laws of any municipality, state or foreign country in which the participant may reside. As a result, tax consequences for any particular participant may vary based on individual circumstances. Incentive Stock Options A participant recognizes no taxable income for regular income tax purposes as a result of the grant or exercise of an option that qualifies as incentive stock option under Section 422 of the Code. If a participant exercises the option and then later sells or otherwise disposes of the shares acquired through the exercise of the option after both the two-year anniversary of the date the option was granted and the one-year anniversary of the exercise, the participant will recognize a capital gain or loss equal to the difference between the sale price of the shares and the exercise price, and we will not be entitled to any deduction for federal income tax purposes. However, if the participant disposes of such shares either on or before the two-year anniversary of the date of grant or on or before the one-year anniversary of the date of exercise (a “disqualifying disposition”), any gain up to the excess of the fair market value of the shares on the date of exercise over the exercise price generally will be taxed as ordinary income, unless the shares are disposed of in a transaction in which the participant would not recognize a loss (such as a gift). Any gain in excess of that amount will be a capital gain. If a loss is recognized, there will be no ordinary income, and such loss will be a capital loss. Any ordinary income recognized by the participant upon the disqualifying disposition of the shares generally should be deductible by us for federal income tax purposes, except to the extent such deduction is limited by applicable provisions of the Code. For purposes of the alternative minimum tax, the difference between the option exercise price and the fair market value of the shares on the exercise date is treated as an adjustment item in computing the participant’s alternative minimum taxable income in the year of exercise. In addition, special alternative minimum tax rules may apply to certain subsequent disqualifying dispositions of the shares or provide certain basis adjustments or tax credits for purposes. Nonstatutory Stock Options A participant generally recognizes no taxable income as the result of the grant of such an option. However, upon exercising the option, the participant normally recognizes ordinary income equal to the amount that the fair market value of the shares on such date exceeds the exercise price. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of the shares acquired by the exercise of a nonstatutory stock option, any gain or loss (based on the difference between the sale price and the fair market value on the exercise date) will be taxed as capital gain or loss. No tax deduction is available to us with respect to the grant of a nonstatutory stock option or the sale of the shares acquired through the exercise of the nonstatutory stock option. 2021 Proxy Statement 67 Proposal Four: Approval of the Reservation of an Additional 1,400,000 Shares of Stock Appreciation Rights In general, no taxable income is reportable when a stock appreciation right is granted to a participant. Upon exercise, the participant generally will recognize ordinary income in an amount equal to the fair market value of any shares received. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss. Restricted Stock Awards A participant acquiring shares of restricted stock generally will recognize ordinary income equal to the fair market value of the shares on the vesting date. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. The participant may elect, pursuant to Section 83(b) of the Code to accelerate the ordinary income tax event to the date of acquisition by filing an election with the Internal Revenue Service no later than thirty days after the date the shares are acquired. Upon the sale of shares acquired pursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value on the date the ordinary income tax event occurs, will be taxed as capital gain or loss. Restricted Stock Unit Awards There are no immediate tax consequences of receiving an award of restricted stock units. A participant who is awarded restricted stock units generally will be required to recognize ordinary income in an amount equal to the fair market value of shares issued to such participant at the end of the applicable vesting period or, if later, the settlement date elected by the administrator or a participant. Any additional gain or loss recognized upon any later disposition of any shares received would be capital gain or loss. Performance Shares and Performance Unit Awards A participant generally will recognize no income upon the grant of a performance share or a performance unit award. Upon the settlement of such awards, participants normally will recognize ordinary income in the year of receipt in an amount equal to the cash received and the fair market value of any cash or unrestricted shares received. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of any shares received, any gain or loss, based on the difference between the sale price and the fair market value on the date the ordinary income tax event occurs, will be taxed as capital gain or loss. Section 409A Section 409A provides certain requirements for non-qualified deferred compensation arrangements with respect to an individual’s deferral and distribution elections and permissible distribution events. Awards granted under the 2019 Plan with a deferral feature will be subject to the requirements of Section 409A. If an award is subject to and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize ordinary income on the amounts deferred under the award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to Section 409A fails to comply with Section 409A’s provisions, Section 409A imposes an additional 20% federal income tax on compensation recognized as ordinary income, as well as interest on such deferred compensation. 68 SANMINA CORPORATION Proposal Four: Approval of the Reservation of an Additional 1,400,000 Shares of Tax Effect for Sanmina We generally will be entitled to a tax deduction in connection with an award under the 2019 Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for example, the exercise of a nonstatutory stock option) except to the extent such deduction is limited by applicable provisions of the Code. Special rules limit the deductibility of compensation paid to our chief executive officer and other “covered employees” as determined under Section 162(m) and applicable guidance. Under Section 162(m), the annual compensation paid to any of these specified executives will be deductible only to the extent that it does not exceed $1,000,000. THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF U.S. FEDERAL INCOME TAXATION UPON PARTICIPANTS AND SANMINA WITH RESPECT TO AWARDS UNDER THE 2019 PLAN. IT DOES NOT PURPORT TO BE COMPLETE AND DOES NOT DISCUSS THE IMPACT OF EMPLOYMENT OR OTHER TAX REQUIREMENTS, THE TAX CONSEQUENCES OF A PARTICIPANT’S DEATH, OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE, OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE. Number of Awards Granted to Employees, Consultants and Directors The number of awards that an employee, director, or consultant may receive under the 2019 Plan is in the discretion of the administrator and therefore cannot be determined in advance. The following table sets forth: (i) the aggregate number of shares subject to restricted stock units and performance stock units granted under the 2019 Plan during fiscal 2020 to each of our named executive officers; executive officers, as a group; directors who are not executive officers, as a group; and all employees who are not executive officers, as a group; and (ii) the grant-date value of shares subject to such restricted stock units and performance stock units.
2021 Proxy Statement 69 Table of Contents Proposal Four: Approval of the Reservation of an Additional 1,400,000 Shares of Other Equity Compensation Plan Information The following table summarizes the number of shares issuable upon exercise of outstanding options and deliverable upon vesting of performance stock units and restricted stock units granted to our employees, directors and consultants, as well as the number of shares of common stock remaining available for future issuance under Sanmina’s equity compensation plans as of October 3, 2020. Sanmina has no stock appreciation rights or other awards outstanding that are convertible into or exchangeable for common stock. Additionally, there are no awards outstanding under equity compensation plans not approved by stockholders.
70 SANMINA CORPORATION
Security Ownership of Certain Beneficial Owners and Management The following table sets forth certain information regarding the beneficial ownership of our common stock as of December 31, The information provided in this table is based on
2021 Proxy Statement 71
Ownership Of Our Stock
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Pursuant to its written charter, the Audit Committee reviews all related-party transactions required to be disclosed pursuant to the rules and regulations of the SEC and the Nasdaq Global Select Market, namely transactions involving Sanmina in which its executive officers, directors or beneficial owners of five percent or greater of our securities have a material direct or indirect interest and which are valued at more than $120,000. The Audit Committee receives regular updates from management concerning actual or potential related party transactions. We also solicit written confirmation of any related party transactions from our executive officers and directors on an annual basis. The following is a list of related party transactions meeting the definition above that existed during fiscal Retention of Wilson Sonsini Goodrich & Rosati.During a portion of fiscal Employment of Relatives of Chairman and Chief Executive
We know of no other matters to be submitted to the meeting. If any other matters properly come before the meeting, it is the intention of the persons named in the accompanying form of proxy to vote the shares they represent in accordance with their best judgment. WE WILL MAIL WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN REQUEST A COPY OF OUR ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES AND A LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO INVESTOR RELATIONS, SANMINA CORPORATION, 30 E. PLUMERIA DRIVE, SAN JOSE, CALIFORNIA
Table of Contents
We are a reporting company and file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy these reports, proxy statements and other information at the FOR THE BOARD OF DIRECTORS CHRISTOPHER K. SADEGHIAN January 28, 2021 2021 Proxy Statement 75
76 SANMINA CORPORATION Questions and Answers About Procedural Matters
2021 Proxy Statement 77 Questions and Answers About Procedural Matters
78 SANMINA CORPORATION Questions and Answers About Procedural Matters
2021 Proxy Statement 79 Questions and Answers About Procedural Matters
Stockholder Proposals and Director Nominations
80 SANMINA CORPORATION Questions and Answers About Procedural Matters
Stockholders must comply with certain deadlines in order for proposals submitted by them be considered for inclusion in our proxy statement or brought to a vote at the Annual Meeting. Please see “Q18—What is the deadline to propose actions for consideration at next year’s Annual Meeting of Stockholders or to nominate individuals to serve as directors?” above.
2021 Proxy Statement 81 Questions and Answers About Procedural Matters Additional Information
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The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units, Performance Shares and other stock or cash awards as the Administrator may determine.
Appendix A Sanmina Corporation 2019 Equity Incentive Plan A change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12)
Notwithstanding the foregoing, a transaction will not be deemed a Change in Control unless the transaction qualifies as a change in control event within the meaning of Section 409A. Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (i) its sole purpose is to change the state of the Company’s incorporation, or (ii) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.
Appendix A Sanmina Corporation 2019 Equity Incentive Plan (n)
(r) “Fair Market
Appendix A Sanmina Corporation 2019 Equity Incentive Plan (cc) “Period of
(jj) “Securities Act” means the Securities Act of 1933, as amended.
3. Stock Subject to the Plan. (a)Stock Subject to the (b)Full Value (c)Lapsed A-4 SANMINA CORPORATION Appendix A Sanmina Corporation 2019 Equity Incentive Plan will cease to be available under the Plan. If unvested Shares of Restricted Stock, or unvested Shares issued pursuant to Awards of Restricted Stock Units, Performance Shares or Performance Units are repurchased by or forfeited to the Company, such Shares will become available for future grant under the Plan. Shares used to pay the tax and exercise price of an Award will not become available for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Notwithstanding the foregoing and, subject to adjustment provided in Section (d)Share 4. Administration of the Plan. (a) (i)Multiple Administrative (ii)
Restricted Stock and Restricted Stock Units and the terms thereof, and (ii) determine the number of shares of Common Stock to be subject to such Awards granted to such Employees and Consultants; provided, however, that the Board resolutions regarding such delegation shall specify the total number of shares of Common Stock that may be subject to the Awards granted by such Officer. Notwithstanding anything to the contrary in this Section 4(a), the Board may not delegate to an Officer authority to determine the Fair Market Value of the Common Stock pursuant to Section 4(b) below.
(b)Powers of the (i) to determine the Fair Market Value; (ii) to select the Service Providers to whom Awards may be granted hereunder; (iii) to determine the number of Shares to be covered by each Award granted hereunder; (iv) to approve forms of Award Agreements for use under the Plan; (v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted
Appendix A Sanmina Corporation 2019 Equity Incentive Plan (viii) to modify or amend each Award (subject to 6(b) and Section
(x) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;
(c)Effect of 5. Eligibility.Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares and such other cash or stock awards as the Administrator determines may be granted to Service Providers. Incentive Stock Options may be granted only to employees of the Company or any Parent or Subsidiary of the Company. 6. Limits. (a) No Exchange Program or Repricing. The Administrator may not implement an Exchange Program. (b) One-Year Vesting Requirement. Awards granted under the Plan shall vest no earlier than the one (1) year anniversary of the Award’s date of grant, provided that the Administrator, in its sole discretion, may provide an Award may accelerate vesting, including, without limitation, by reason of the Participant’s death, Disability or retirement, or a termination of the Participant’s service, and provided further, that, notwithstanding the foregoing one-year vesting requirement, Awards that result in the issuance of an aggregate of up to five percent (5%) of the Shares reserved for issuance under Section 3(a) may be granted to Service Providers without regard to such minimum vesting provisions. (c) Dividends and Other Distributions. The Administrator will not be permitted to provide that dividends or other distributions with respect to Shares to be paid or issued to a Participant with respect to an Award, unless and until the underlying Award has vested. Further, in no event may dividend equivalents be paid with respect to Awards of Stock Options or Stock Appreciation Rights. (d) Outside Director Limitations. No Outside Director may be granted, in any Fiscal Year, Awards with a grant date fair value (determined in accordance with U.S. generally accepted accounting principles) of greater than $900,000. Any Awards granted to an individual for his or her services as an Employee, or for his or her services as a Consultant (other than as an Outside Director), will not count for purposes of the limitation under this Section 6(d). (e) Chief Executive Officer Holding Requirement. Any Shares received by the Chief Executive Officer of the Company pursuant to the exercise, issuance or settlement of an Award granted to him or her while serving in the capacity of Chief Executive Officer, after satisfaction of any applicable tax obligations, may not be sold or otherwise transferred (other than for estate planning purposes) by the Chief Executive Officer prior to the one (1) year anniversary of the date the Chief Executive Officer received such Shares, or, if earlier, the termination of the Chief Executive Officer’s status as a Service Provider. A-6 SANMINA CORPORATION
7. Stock Options. (a) (b)Number of (c)Term of (d) Option Exercise Price and (i)Exercise (ii)Waiting Period and Exercise (iii)Form of (e) Exercise of (i)Procedure for Exercise; Rights as a An Option will be deemed exercised when the Company receives: (i) notice of exercise (in such form as the Administrator specifies from time to time) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised (together with any applicable withholding taxes). No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section (ii)Termination of Relationship as a Service 2021 Proxy Statement A-7 Appendix A Sanmina Corporation 2019 Equity Incentive Plan provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified by the Administrator, the Option will terminate, and the Shares covered by such Option will revert to the Plan. (iii)Disability of (iv)Death of (v) (1) if the exercise of the Option following the termination of (2) if the exercise of the Option following the termination of the Securities Act, then the Option will terminate on the earlier of (A) the expiration of the term of the Option, or (B) the expiration of a period of ninety (90) days after the termination of the
(a)Grant of Stock Appreciation (b)Number of (c)Exercise Price and Other A-8 SANMINA CORPORATION Appendix A Sanmina Corporation 2019 Equity Incentive Plan (d)Stock Appreciation Right (e)Expiration of Stock Appreciation (f)Payment of Stock Appreciation Right (i) The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; (ii) The number of Shares with respect to which the Stock Appreciation Right is exercised. At the discretion of the Administrator, the payment upon the exercise of a Stock Appreciation Right
(a)Grant of Restricted
(c) (d)Other (e)Removal of (f)Voting (g)Dividends and Other (h)Return of Restricted Stock to
(a) Restricted Stock Units and the form of payout, which, subject to Section 2021 Proxy Statement A-9 Appendix A Sanmina Corporation 2019 Equity Incentive Plan (b)Vesting Criteria and Other (c)Earning Restricted Stock (d)Form and Timing of (e)
(a)Grant of Performance Units/
(b)Value of Performance Units/ (c)Performance Objectives and Other (d)Earning of Performance Units/ A-10 SANMINA CORPORATION Appendix A Sanmina Corporation 2019 Equity Incentive Plan (e)Form and Timing of Payment of Performance Units/ (f)Cancellation of Performance Units/
12.
Section 409A, such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under
(a) 2021 Proxy Statement A-11 Appendix A Sanmina Corporation 2019 Equity Incentive Plan (b)Dissolution or (c)Change in In the event that the Successor Corporation does not assume or substitute for the Award (and for the avoidance of doubt, notwithstanding the vesting limitations under Section 6(b)), the Participant will fully vest in and have the right to exercise all of his or her outstanding Options and Stock Appreciation Rights, including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock and Restricted Stock Units will lapse, and, with respect to For the purposes of this subsection (c), an Award will be considered assumed if, following the Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) Notwithstanding anything in this Section
A-12 SANMINA CORPORATION Appendix A Sanmina Corporation 2019 Equity Incentive Plan 16. Tax. (a)Withholding (b)Withholding determined by using the maximum federal, state or local marginal income tax rates applicable to the Participant with respect to the Award on the date that the amount of tax to be withheld is to be determined. The
(a)Amendment and (b)Stockholder (c)Effect of Amendment or
(a)Legal 2021 Proxy Statement A-13 Appendix A Sanmina Corporation 2019 Equity Incentive Plan (b)Investment
Below is a reconciliation of the non-GAAP financial measures contained in this proxy statement to their most directly comparable GAAP equivalent and a description of the items excluded from the calculation of our non-GAAP measures.
2021 Proxy Statement B-1
Appendix B Reconciliation of Non-GAAP Measures
B-2 SANMINA CORPORATION Appendix B Reconciliation of Non-GAAP Measures
Management Management excludes these items principally because such charges or benefits are not directly related to the Company's ongoing core business operations. We use such non-GAAP measures in order to (1) make more meaningful period-to-period comparisons of the Company's operations, both internally and externally, (2) guide management in assessing the performance of the business, internally allocating resources and making decisions in furtherance of Company's strategic plan, (3) provide investors with a better understanding of how management plans and measures the business and (4) provide investors with a better understanding of Additional information regarding the economic substance of each exclusion, management's use of the resultant non-GAAP measures, the material limitations of management's approach and management's methods for compensating for such limitations is provided below. Stock-based Compensation Expense, which consists of non-cash charges for the estimated fair value of Restructuring, Acquisition and Integration Expenses, which consist of severance, lease termination costs, exit costs and other charges primarily related to closing and consolidating manufacturing facilities and those associated with the acquisition and integration of acquired businesses, are excluded because such charges (1) can be driven by the timing of acquisitions and exit activities which are difficult to predict, (2) are not directly related to ongoing business results and (3) do not reflect expected future operating expenses. In addition, given the fact that the Company's competitors complete acquisitions and adopt restructuring plans at different times and in different amounts than the Company, excluding these charges or benefits permits more accurate comparisons of the Company's core results with those of its competitors. Items excluded by the Company may be different from those excluded by the Company's competitors and restructuring and integration expenses include both cash and non-cash expenses. Cash expenses reduce the Company's liquidity. Therefore, management also reviews GAAP results including these amounts. 2021 Proxy Statement B-3 Appendix B Reconciliation of Non-GAAP Measures Impairment Charges, which consist of non-cash charges, are excluded because such charges are non-recurring and do not reduce the Company's liquidity. In addition, given the fact that the Company's competitors may record impairment charges at different times, excluding these charges permits more accurate comparisons of the Company's core results with those of its competitors. Amortization Charges, which consist of non-cash charges impacted by the timing and magnitude of acquisitions of businesses or assets, are also excluded because such charges do not reduce the Company's liquidity. In addition, such charges can be driven by the timing of acquisitions, which is difficult to predict. Excluding these charges permits more accurate comparisons of the Company's core results with those of its competitors because the Company's competitors complete acquisitions at different times and for different amounts than the Company. Other Unusual or Infrequent Items, Adjustments for Taxes, B-4 SANMINA CORPORATION SANMINA CORPORATION VOTE BY INTERNET Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M., Eastern Daylight Time, the day before the cut-off date or meeting date. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/SANM2021 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 VOTE BY MAIL
SANMINA CORPORATION
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
SANMINA CORPORATION
TO BE HELD ON MARCH The stockholder(s) hereby appoint(s) Jure Sola and Christopher K. Sadeghian, or either of them, as proxies, each with the power to appoint his substitute, and hereby THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
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