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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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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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Sanmina | ||||||
Notice of 2020 Annual Meeting of Stockholders and Proxy Statement | ||||||
About Sanmina Corporation
SANMINA CORPORATIONNOTICE OF ANNUAL MEETING OF STOCKHOLDERSTo Be Held on March 11, 2019
The Annual Meeting of Stockholders of Sanmina Corporation will be held on March 11, 2019, 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 describedis 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 theindustrial, medical, defense and aerospace, automotive, communications networks and cloud solutionsindustries. 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
● | end-to-end solutions; |
● | product design and engineering resources; |
● | vertically integrated manufacturing solutions; |
● | advanced component technologies; |
● | global manufacturing capabilities, supported by robust IT systems and a global supplier base; |
● | customer-focused organization; |
● | expertise in serving diverse end markets; and |
● | expertise in industry standards and regulatory requirements. |
LETTER FROM THE EXECUTIVE CHAIRMAN OF THE BOARD |
To Our Stockholders, The Sanmina Board of Directors thanks you for your investment in Sanmina Corporation and for your continued support throughout our ongoing transformation. We have strengthened our management team, 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. IMPROVED PERFORMANCE AND STOCKHOLDER VALUE CREATION Sanmina is a well-balanced company, delivering innovative, high technology, cost-efficient manufacturing solutions to the market from a strong financial position. At the same time, we have a results-driven culture that 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 investors. In FY19, we increased our operating efficiencies, leveraged our advanced technology and manufacturing capabilities, and further diversified within our end markets. As a result, we generated improved financial results and built a foundation ready to capitalize on the momentum. |
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Looking ahead to FY20 we remain focused on disciplined and sustainable execution. We are committed to healthy cash generation, industry-leading operating margins and quality growth. We continue to diversify within our markets, creating a portfolio of business with longer product life cycles, increased customer loyalty, higher technology and higher complexity products. As our markets evolve and grow, our ability to optimize our product and portfolio mix towards higher value opportunities will continue to be an important lever for managing the business.
NEW EXECUTIVE MANAGEMENT TEAM
We recognize that in order to consistently achieve our goals, we must continue to evolve our business. We have appointed two new key members of management to help drive this evolution. In September 2019, we appointed Hartmut Liebel as our new CEO. Hartmut is a proven business leader with a distinguished track record of successfully driving profitable growth with a strong focus on customer service and satisfaction, innovation, operational execution and people development. In January 2019, our Chief Financial Officer announced his plan to retire and, in October 2019, Kurt Adzema was appointed to the role. Mr. Adzema brings over 20 years of experience in financial leadership roles with an extensive background in corporate development, strategic planning, financial analysis, investment banking and investor relations. On behalf of the Board, we are pleased to welcome these two new executives to the company.
INCREASED STOCKHOLDER ENGAGEMENT
Our Board and Management are committed to regular engagement with our stockholders. Our Board- driven stockholder outreach program and feedback is shared with the Board and respective Committees to determine actionable items. In 2019, we reached out to approximately 67% of our stockholders and spoke with a sizable and diverse group that holds 47% of our outstanding shares. Our discussions spanned a variety of topics, including alignment of our compensation, governance and sustainability practices, as well as our current strategy for growth and long-term value creation.
In FY20, we have refreshed our compensation program to focus even more on performance and the future potential to drive long term growth, with a strong emphasis on accountability to deliver the right results in the right way. To better align our 2020 compensation program with our strategy, we conducted a comprehensive review of our program to ensure that we are incentivizing quality growth and continue to pay for performance, while also focusing on key operation and financial metrics and long-term stockholder value. Our Compensation Discussion and Analysis describes these changes.
On behalf of the entire Board, we value feedback from our stockholders and remain committed to an 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.
2020 Proxy Statement accompanying this Notice):1
Table of Sanmina Corporation.Contents
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS |
WHEN | WHERE | RECORD DATE | |||
Monday, March 9, 2020; 11:00 A.M., Pacific Standard Time | 30 E. Plumeria Drive, San Jose, California 95134 | January 15, 2020 |
ITEMS OF BUSINESS
Board Recommendation | ||
Proposal 1: | FOR | |
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, 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 17, 201915, 2020 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, 2019.22, 2020.
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
2 SANMINA CORPORATION
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.
Who We Are
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.
In fiscal 2019, we increased our operating efficiencies, leveraged our advanced technology and manufacturing capabilities, and further diversified within our end markets. As a result, we delivered improved financial results and built a strong foundation ready to capitalize on our momentum. Revenue increased 16% to $8.2 billion; non-GAAP operating margin of 4.1%, was up 110 basis points from 2018; and non-GAAP earnings per share expanded 60% to $3.40. Our cash flow from operations of $383 million reflects the management team’s operational excellence and focus on efficiencies in areas we can control, while dealing with an evolving demand environment, delays in technology ramps and global economic uncertainty.
Fiscal 2019
Performance Highlights
REVENUE & NON-GAAP OPERATING MARGIN* (In Millions) | ||
(In Millions) | ||
NON-GAAP EARNINGS PER SHARE (EPS)* | ||
* | See Appendix B for reconciliation of non-GAAP financial information provided in this proxy statement to their most directly comparable GAAP measures. |
2020 Proxy Statement 3
Proxy Summary
Board and Governance Highlights
PROPOSAL ONE:ELECTION OF DIRECTORS The Board recommends a voteFOReach director nominee. | ›See page 13 for further information. |
Director Nominees
Name and principal position | Age | Independent | Director since | Tenure | Board committees | |||||||||||
AC | CC | NGC | ||||||||||||||
| Jure Sola | 69 | No | 1989 | 31 | |||||||||||
Hartmut Liebel | 56 | No | 2019 | 1 | ||||||||||||
Eugene A. Delaney | 63 | Yes | 2013 | 7 | ||||||||||||
John P. Goldsberry | 65 | Yes | 2008 | 12 | ||||||||||||
Rita S. Lane | 57 | Yes | 2016 | 4 | ||||||||||||
Joseph G. Licata, Jr | 59 | Yes | 2007 | 13 | ||||||||||||
Krish Prabhu | 65 | Yes | 2019 | 1 | ||||||||||||
Mario M. Rosati | 73 | Yes | 1997 | 23 | ||||||||||||
Jackie M. Ward(Lead Independent Director) | 81 | Yes | 2001 | 19 |
AC | Audit Committee | CC | Compensation Committee | NGC | Nominating and Governance Committee | Chair | Member |
4 SANMINA CORPORATION
Proxy SummaryTABLE OF CONTENTS
BOARD INDEPENDENCE | DIVERSITY | ||||||||||
| AGE |
SKILLS AND EXPERIENCE
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Electronics manufacturing services and similar manufacturing companies | ||||
Other technology/information technology | ||||
Public company board membership | ||||
Senior management for public and large companies and private and entrepreneurial companies | ||||
International business | ||||
Strategic planning | ||||
Business development and marketing | ||||
Executive compensation issues | ||||
Accounting, audit and corporate finance | ||||
Board governance, including board nominations | ||||
Risk management and crisis communication | ||||
Senior leadership in business, professional services and education/government |
2020 Proxy Statement 5
Proxy Summary
Responsiveness to Our Stockholders
The Compensation Committee strives to ensure that our executive compensation program aligns with the interests of our stockholders and adheres to our pay-for performance philosophy. We were disappointed with our 51% stockholder support for our 2019 Say on Pay vote. Following the 2019 annual meeting of the stockholders, the Compensation Committee was restructured and Eugene Delaney was appointed to chair the Compensation Committee. Mr. Delaney took immediate action to better understand the views of our stockholders and address their concerns.
2019 STOCKHOLDER OUTREACH In 2019, we invited stockholders representing approximately67%of our outstanding shares to meet with our management and members of the Board to discuss executive compensation and governance. Sanmina management and members of the Board met with stockholders representing47%of outstanding shares. Stockholders representing20%of outstanding shares did not require a meeting, had no concerns 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 better understand the methodology they use to evaluate our compensation plans and corporate governance practices. |
WHAT WE HEARD ●Stockholders wanted greater response to the Say-on-Pay result and the feedback provided. ●Stockholders expressed concern about the alignment of the compensation plans to performance and stockholder interests. ●Stockholders were concerned about single-year performance goals with multiple years to achieve contained in our long-term plan, rather than cumulative, multi-year goals measured at the end of the multi-year period. ●Stockholders wanted more transparency around performance goals and fewer modifiers in the short-term incentive plan. ●Stockholders preferred an increase in executive stock ownership requirements. ●Stockholders wanted a more robust clawback policy. ●Stockholders expressed interest in knowing more about Board composition, skills, succession planning, the nominating process and refreshment, and the Board’s involvement in Company strategy. ●Additionally, key proxy advisors expressed concerns regarding CEO pay, the relationship between pay and Company performance, redundancy of performance metrics between the annual bonus program and the long-term incentive program, and the percentage of long-term incentive awards described as “performance-based”. |
WHAT WE HAVE DONE IN RESPONSE ●The Board of Directorsreconstituted the Compensation Committee and appointed a new Chair. ●Weincreased engagement with stockholders to better understand and best align Sanmina’s compensation plan to stockholder interests while meeting the needs of a very dynamic and competitive market for talent retention and recruiting. ●Sanmina engaged with a major advisory firm to better understand its methodology in making recommendations concerning proposals being voted upon by stockholders at annual meetings. ●We provide in this Proxy Statementgreater transparency about our compensation plans, their purpose, what they measure and how they operate. ●The Compensation Committee madesignificant changes to Sanmina’s executive compensation program (effective fiscal 2020): ●Increased the CEO’s percentage of total target compensation comprised of performance-based long-term incentives to 62% from 53%. ●Eliminated duplication of performance metrics between the short-term bonus plan and long-term incentive awards. ●Established long-term incentive performance goals that cover a full three-year period, with no interim measurement. ●Simplified and reduced the array of performance metrics in the short-term bonus plan. ●Strengthened our Clawback Policy to apply to equity awards. |
6 SANMINA CORPORATION
Proxy Summary
Good Governance Practices
2020 Proxy Statement 7
Proxy Summary
PROPOSAL TWO:RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board recommends a voteFORthis proposal. | ›See page 28 for further information. |
PROPOSAL THREE:APPROVAL OF THE RESERVATION OF AN ADDITIONAL 1,600,000 SHARES OF COMMON STOCK FOR ISSUANCE UNDER THE 2019 EQUITY INCENTIVE PLAN The Board recommends a voteFORthis proposal. | ›See page 30 for further information. |
PROPOSAL FOUR:APPROVAL, ON AN ADVISORY (NON-BINDING) BASIS, OF COMPENSATION OF NAMED EXECUTIVE OFFICERS The Board recommends a voteFORthis proposal. | ›See page 41 for further information. |
8 SANMINA CORPORATION
Proxy Summary
Executive Compensation Highlights
Components of CEO Compensation - 2019
Component | % 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 50thpercentile of our peers | ||||||
Annual Incentive Compensation | ●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, non-GAAP operating margin) ●Five modifiers (Q4 non-GAAP operating margin, cash flow from operations, inventory turns, pre-tax return on invested capital and non-GAAP EBITDA) ●Individual Metrics: Individual performance objectives ●Compensation Committee has discretion to adjust upward or downward ●Allows for total cash compensation to become more competitive compared to peers when high levels of corporate and individual performance are achieved | ||||||
Equity Incentives | ●Align incentives of management with interests of stockholders ●Align realized pay with stockholder value creation ●Support long-term retention of critical talent | ●Favorable mix of performance-based PSUs and time-based RSUs (69%/31%) ●PSU Metrics: Non-GAAP earnings per share ●Stock Option Vesting Metric: Stock price increases ●Awards vest over multi-year periods ●Allows for total compensation to become more competitive to peers when high levels of corporate and individual performance, including increases in stock price, are achieved |
2020 Proxy Statement 9
Table of Contents Proxy Summary NEW Components of CEO Compensation - 2020 Base Salary Annual Incentive Compensation Equity Incentives Based on target direct annual compensation for the CEO in 2020. 10 SANMINA CORPORATION Proxy Summary Compensation Practices WHAT WE ARE DOING: WHAT WE DON’T DO 2020 Proxy Statement 11 12 SANMINA CORPORATION 2020 Proxy Statement 13 Jure Sola Hartmut Liebel Proposal CORPORATE GOVERNANCEComponent % of Total Target(1) Purpose Key Characteristics 28(1) EXECUTIVE COMPENSATION AND RELATED INFORMATION●Pay for Performance—Our executive compensation program continues to evolve in response to stockholder and proxy advisor feedback. The program continues to emphasize variable (at risk) compensation, with the majority of the total target pay opportunities of our CEO tied to financial and/or stock price performance. 100% of our long-term incentive awards to our named executive officers in fiscal 2019 were equity incentives, reinforcing the linkage between executive pay and stockholder value creation.34COMPENSATION DISCUSSION AND ANALYSIS34SUMMARY COMPENSATION TABLE56CEO PAY RATIO65COMPENSATION OF DIRECTORS66SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT68CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS70SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE70REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS71OTHER MATTERS72AVAILABILITY OF ADDITIONAL INFORMATION72APPENDIX A—2019 EQUITY INCENTIVE PLANAPPENDIX B—RECONCILIATION OF NON-GAAP MEASURES TABLE OF CONTENTS SANMINA CORPORATION30 E. Plumeria DriveSan Jose, California 95134PROXY STATEMENTFOR THE 2019 ANNUAL MEETING OF STOCKHOLDERSQUESTIONS AND ANSWERS ABOUT PROCEDURAL MATTERSQ1:Why am I receiving these proxy materials?A:The Board of Directors of Sanmina Corporation ("Sanmina," "we," "us" or "our") is providing these proxy materials to you in connection with the solicitation of proxies for use at the 2019 Annual Meeting of Stockholders (the "Annual Meeting") to be held on Monday, March 11, 2019 at 11:00 a.m., Pacific Standard Time, and at any adjournment or postponement thereof, for the purpose of considering and acting upon the matters described in this document.Q2:What is the Notice of Internet Availability of Proxy Materials?A:In accordance with rules and regulations adopted by the Securities and Exchange Commission (the "SEC"), instead of mailing a printed copy of our proxy materials to all stockholders entitled to vote at the Annual Meeting, we are furnishing the proxy materials to our stockholders over the Internet. If you received a Notice of Internet Availability of Proxy Materials (the "Notice of Internet Availability") by mail, you will not receive a printed copy of the proxy materials. Instead, the Notice of Internet Availability will instruct you as to how you may access and review the proxy materials and submit your vote via the Internet. If you received a Notice of Internet Availability by mail and would like to receive a printed copy of the proxy materials, please follow the instructions for requesting such materials included in the Notice of Internet Availability.We expect to mail the Notice of Internet Availability on or about January 24, 2019, 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.Q3:Where is the Annual Meeting?A:The Annual Meeting will be held at our corporate offices, located at 30 E. Plumeria Drive, San Jose, California 95134. The telephone number at the meeting location is (408) 964-3500.Q4:Can I attend the Annual Meeting?A:You are invited to attend the Annual Meeting if you were a stockholder of record or a beneficial owner as of January 17, 2019. You should bring a brokerage statement or other evidence of your Sanmina shareholdings for entrance to the Annual Meeting. The meeting will begin promptly at 11:00 a.m., Pacific Standard Time.Stock OwnershipQ5:What is the difference between holding shares as a stockholder of record and as a beneficial owner?A:Stockholders of Record. If your shares are registered directly in your name with Sanmina's transfer agent, Wells Fargo Shareowner Services, you are considered, with respect to thoseshares, the stockholder of record, and the Notice of Internet Availability has been sent directly to you.Beneficial Owners.Proposal One: Election of Directors 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 MeetingDirector Nominees
Executive Chairman of Sanmina Corporation
Chief Executive Officer of Sanmina Corporation.14 SANMINA CORPORATIONQ10:Can I vote my shares without attending the Annual Meeting?A:Yes. Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct how your shares are voted without attending the Annual Meeting, as summarized below.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 10, 2019 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.Q11:How will my shares be voted if I submit a proxy via the Internet, by telephone or by mail and do not make specific choices?A:If you submit a proxy via the Internet, by telephone or by mail and do not make voting selections, the shares represented by that proxy will be voted "FOR" Proposals One, Two, Three and Four.Q12:What happens if additional matters are presented at the Annual Meeting?A:If any other matters are properly presented for consideration at the Annual Meeting, including, among other things, consideration of a motion to adjourn the Annual Meeting to another time or place or adjournment for the purpose of soliciting additional proxies, the proxy holders will have discretion to vote on those matters in accordance with their best judgment. We do not currently anticipate that any other matters will be raised at the Annual Meeting.Q13:Can I change or revoke my vote?A:Yes, by following the instructions below:Stockholders of Record. If you are a stockholder of record, you may change your vote by:•Delivering to Sanmina's Corporate Secretary, prior to your shares being voted at the Annual Meeting, a written notice of revocation or a duly executed proxy card, in either case dated later than the prior proxy relating to the same shares, or•Attending the Annual Meeting and voting in person (although attendance at the Annual Meeting will not, by itself, revoke a proxy).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 10, 2019.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.Q14:What proposals will be voted on at the Annual Meeting?A:At the Annual Meeting, stockholders will be asked to vote on:One. The election of nine directors to hold office until the 2020 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 28, 2019;Proposal Three. The approval of the 2019 Equity Incentive Plan; andProposal Four. The approval on an advisory (non-binding) basis of the compensation of our named executive officers.Q15:What is the voting requirement to approve each of the proposals and how does the BoardOne: Election of Directors recommend that I vote?
Age:63 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. |
Age:65 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. |
2020 Proxy Statement 15A:Proposal One. 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 Committee deems relevant.You may vote "FOR," "AGAINST" or "ABSTAIN" on each of the nine nominees for election as director.The Board of Directors recommends that you vote your shares "FOR" each of the nine nominees listed in Proposal One.
Proposal One: Election of Directors
Age:57 Principal occupation: Consultant Director since:2016 Board committees: Audit Nominating and Governance (Chair) Other public boards: 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, and as a Board member of L3Harris Technologies, Inc., a provider of aerospace, communication, electronic and sensor systems. ●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. |
Age:59 Principal occupation: Managing Partner, BlueArc Capital Management Director since:2007 Board committees: Audit | 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 18 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
You may vote "FOR," "AGAINST" or "ABSTAIN" on this proposal.The BoardProposal One: Election of Directors recommends that you vote your shares "FOR" Proposal Two
Age:65 Principal occupation: Consultant Director since:2019 Board committees: Compensation | 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. ●Currently serves on the boards of several private companies and 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. |
Age:73 Principal occupation: Retired Member, Wilson Sonsini Goodrich & Rosati Director since:1997 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 several privately held companies. 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. |
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Proposal Three. The affirmative vote of a majority of the votes cast is required to approve the 2019 Equity 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 the2020 Proxy Statement for the 2019 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.17
You may vote "FOR," "AGAINST" or "ABSTAIN" on this proposal.The Board of Directors recommends that you vote your shares "FOR" Proposal Four.
Stockholder Proposals and Director Nominations
Requirements forstockholder 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 2020 Annual MeetingProposal One: Election of Stockholders, stockholder proposals must be received by Sanmina's Corporate Secretary no later than September 26, 2019 and must otherwise comply with the requirements of Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the "Exchange Act").Directors
Age:81 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 | Jackie M. Ward(Lead Independent Director) Biographical Information ●Has served as a director of Sanmina since December 2001. ●Served as a director of SCI from 1992 until December 2001 when Sanmina and SCI Systems, Inc. merged. ●Served as a 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. |
Requirements18 SANMINA CORPORATION 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 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. To be timely for the 2020 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 10, 2019 and December 10, 2019. 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.
TableProposal One: Election of ContentsDirectors
PROPOSAL ONE:ELECTION OF DIRECTORS
IdentificationQualification of Nominees
Our Board of Directors (the "Board") currently consists of ten members. The Nominating and Governance Committee of the Board has nominated the nine members of the Board listed below for reelection at this meeting. Current director Wayne Shortridge is not standing for reelection.
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, John P. Goldsberry, Rita S. Lane, Joseph G. Licata, Jr., 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.
Name of Nominee | Age | Principal Occupation | Director Since | ||||||
---|---|---|---|---|---|---|---|---|---|
Jure Sola | 68 | Executive Chairman of Sanmina Corporation | 1989 | ||||||
Michael J. Clarke | 64 | Chief Executive Officer of Sanmina Corporation | 2013 | ||||||
Eugene A. Delaney | 62 | Consultant | 2013 | ||||||
William J. DeLaney | 63 | Former Chief Executive Officer, Sysco Corporation | 2018 | ||||||
John P. Goldsberry | 64 | Former Chief Financial Officer, GLOBALFOUNDRIES Inc. | 2008 | ||||||
Rita S. Lane | 56 | Consultant | 2016 | ||||||
Joseph G. Licata, Jr. | 58 | Managing Partner, BlueArc Capital Management | 2007 | ||||||
Mario M. Rosati | 72 | Member, Wilson Sonsini Goodrich & Rosati, P.C. | 1997 | ||||||
Jackie M. Ward | 80 | Former Chair of the Board of Sysco Corporation and Chair of the Board of 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 the Chief Executive Officer of Sanmina since October 2018 and as a director of Sanmina since December 2013. Mr. Clarke is also a member of the board of directors of U.S. LBM Holdings, Inc., a privately-held specialty building materials distributor. 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 Cigna Corporation, a global health service company, and Union Pacific Corporation, a rail transportation company.
John P. Goldsberry has served as a director of Sanmina since January 2008. Mr. Goldsberry 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. 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 Signify Holdings (formerly Philips Lighting), a global lighting systems manufacturer, and as a board member of L3 Technologies, Inc., a provider of aerospace, communication, electronic and sensor systems. 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 Managing Partner—Private Equity, of BlueArc Capital Management. Mr. Licata is currently Chairman of the Board of Choice Adhesives, Brunswick Bowling Products HealPros Corp., all privately-held companies. 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.
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. During the past five years, Ms. Ward also served as a director of Sysco Corporation (Chair of the Board), 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 | ||||
Senior management for public and large companies and private and entrepreneurial companies | ||||
International business | ||||
Strategic planning | ||||
Business development and marketing | ||||
Executive compensation issues | ||||
Accounting, audit and corporate finance | ||||
Board governance, including board nominations | ||||
Risk management and crisis communication | ||||
Senior leadership in business, professional services and education/government |
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.
Independent Directors
The Board of Directors has determined that all of the non-employee members of the Board satisfy the definition of independence 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 normal agenda of our regularly scheduled board meetings.
2020 Proxy Statement 19
CORPORATE GOVERNANCE AND BOARD MATTERS |
Sanmina has long been guided by a set of basic 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.
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 ●Nominees recommended by stockholders ●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 a nominee’s other existing and anticipated future commitments based on the Company’s Board membership limits | Nomination by Nominating and Governance Committee Full Board appoints or nominee is voted upon by stockholders at Annual Meeting | ||||
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 and Board Matters
Board Structure and Responsibilities
Board Leadership
ROLE OF LEAD INDEPENDENT DIRECTOR
During 2019, Jackie M. Ward served as lead independent director. The duties of lead independent director are to:
● | Serve as the principal contact between the independent directors and the Executive Chairman; |
● | Assist the Executive Chairman in establishing the agenda for Board meetings; |
● | Coordinate with the Executive Chairman in regard to meetings with stockholders and, if requested by stockholders, ensure that she is available for consultation and direct communication; |
● | Recommend the retention of outside advisors and consultants; |
● | Monitor the quality, quantity and timeliness of information sent to the Board; and |
● | Perform such other functions as the Board or other Directors may request. |
Assuming the reelection of Jackie M. Ward at the Annual Meeting, Ms. Ward will continue to serve as lead independent director in 2020. The charter for the lead independent director can be found on our website at http://ir.sanmina.com/investor-relations/corporate-governance/default.aspx.
ROLE OF EXECUTIVE CHAIRMAN
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. Prior to that, the positions of Chairman of the Board and Chief Executive Officer were held by Mr. Sola for more than 27 years. In addition to performing the customary duties of Chairman of the Board, Mr. Sola, in his role as Executive Chairman,
● | Supports the Chief Executive Officer by interacting with current and prospective customers; |
● | Advises on the strategic direction of Sanmina: and |
● | Performs such other duties as may be assigned by the Board. |
The Board believes that this leadership structure, coupled with the appointment of Jackie M. Ward as Lead Independent Director, provides balance, continuity and currently is in the best interest of Sanmina and its stockholders.
Areas of Board Oversight
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, 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.
2020 Proxy Statement 21
Corporate Governance and Board Matters
Board Committees
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* 8meetings in fiscal 2019 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) 7meetings in fiscal 2019 Attendance | Duties and Responsibilities ●Reviews and approves the salaries and equity, incentive and other compensation of our executive officers. ●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) 4meetings in fiscal 2019 Attendance | Duties and Responsibilities ●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. ●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. |
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee are employees of Sanmina. During fiscal 2019, 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.
Code of Business Conduct and Ethics
Sanmina has adopted a Code of Business Conduct and Ethics (the “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 at http://ir.sanmina.com/investor-relations/corporate-governance/default.aspx.
Board 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 |
2020 Proxy Statement 23
Corporate Governance and Board Matters
Our long-standing commitment to stockholder engagement includes:
● | An engagement program that is management led and overseen by the Board; |
● | Dedicated resources to actively engage with stockholders on a variety of topics through 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 enhancement to our policies and practices, particularly in the area of executive compensation. The results of our stockholder engagement efforts during 2019 are summarized on page 51.
CORPORATE GOVERNANCE GUIDELINES
Sanmina has adopted a set of Corporate Governance Guidelines that are intended to serve as, among other things, a 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 guidelines can be found on our website at http://ir.sanmina. com/investor-relations/corporate-governance/default.aspx.
BOARD MEETINGS
The Board held six meetings during fiscal 2019. No director attended fewer than 75 percent of the meetings of the Board or of committees on which such person served.
ATTENDANCE AT ANNUAL MEETING OF STOCKHOLDERS BY THE BOARD OF DIRECTORS
Sanmina encourages, but does not explicitly consider diversityrequire, its Board members to attend the Annual Meeting of Stockholders. Our annual meetings of stockholders typically coincides with a regular Board meeting date, which facilitates the attendance of Board members at the stockholder meetings. All Board members attended the 2019 Annual Meeting of Stockholders.
BOARD 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 or stock options issued to directors and shares purchased on the open market, if any. All of our directors currently meet this standard or are within the period for initial compliance.
24 SANMINA CORPORATION
Corporate Governance and Board Matters
HEDGING AND PLEDGING OF COMPANY SECURITIES
Sanmina believes that “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’s stock price were to fall) is inappropriate when undertaken by employees, officers or directors as such techniques reduce alignment with the interests of our stockholders. Similarly, Sanmina believes that “pledging” of Sanmina stock by employees, officers or directors (i.e., using Sanmina stock as collateral for a loan, such as in identifying nomineesa 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 or engaging in any transaction intended to hedge or offset any decrease in the market value of Sanmina’s common stock or (ii) engaging in short sales related to Sanmina’s common stock. Sanmina prohibits officers and directors from (i) depositing any Sanmina common stock in a margin account or (ii) pledging Sanmina securities as collateral for director. Below are listeda loan.
STOCKHOLDER PROPOSALS
Stockholders may submit proposals for inclusion in our proxy statement and may recommend candidates for election to the primary factorsBoard, 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.
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”); |
● | 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 respectcertain deadlines in order for proposals submitted by them be considered for inclusion in our proxy statement or brought to each nominee in determininga 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 him or her for electionindividuals to the Board and for serviceserve as a member of one of our Board committees, if applicable.directors?” page 83.
2020 Proxy Statement 25
Vote Required; Recommendation of the Board of DirectorsDirector Compensation Arrangements
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, theThe Nominating and Governance Committee of the Board hasreviews and recommends non-employee director pay levels, which are approved by the optionBoard. The Nominating and Governance Committee believes Sanmina’s director compensation pay levels are reasonable in light of accepting or declining such resignation, considering any factors thatbenchmarking data prepared by the Nominating and Governance Committee’s independent compensation consultant and reviewed by the Committee.
Cash Compensation
During fiscal 2019, 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, deems relevant.$25,000 in the case of the Compensation Committee and $15,000 in the case of the Nominating and Governance Committee. Finally, our lead independent director earned an additional cash retainer of $40,000 for her duties as such during 2019. 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.
OUR BOARD UNANIMOUSLY RECOMMENDS VOTING "FOR" THE NOMINEES LISTED ABOVE FOR ELECTION TO THE BOARD.Equity Compensation
During fiscal 2019, non-employee directors received an aggregate of $180,000 in value of restricted stock units granted under our 2019 Equity Incentive Plan vesting as to 25% of the shares subject thereto on each of the first four quarterly anniversaries of the grant date.
Director Compensation Limits
The 2019 Plan Equity Incentive provides that, in a given fiscal year, a non employee director may not receive equity awards having a grant date fair market value greater than $900,000. Sanmina believes that having a stockholder-approved limit on equity grants to directors is consistent with best corporate governance practices.
26 SANMINA CORPORATION
Compensation of Directors
The following table presents the compensation earned by or paid to our non-employee directors during fiscal 2019.
Name | Fees Earned and Paid in Cash ($) | 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 | ||||||||
William DeLaney | — | — | — | — | — | (4) | |||||||
John P. Goldsberry | 120,000 | 180,000 | — | — | 300,000 | ||||||||
Rita S. Lane | 115,000 | 180,000 | — | — | 295,000 | ||||||||
Joseph G. Licata, Jr. | 90,000 | 180,000 | — | — | 270,000 | ||||||||
Krish Prabhu | 45,000 | (5) | 90,000 | (5) | — | — | 135,000 | ||||||
Mario M. Rosati | 80,000 | 180,000 | — | — | 260,000 | ||||||||
Jackie M. Ward | — | 320,011 | 60,208 | — | 380,219 |
(1) | Represents the grant date fair value of equity awards granted in March 2019, 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 2019, the following directors held unvested restricted stock awards and outstanding stock options as follows: Mr. Delaney—14,946 and 17,145, respectively; Mr. Goldsberry—2,946 and 7,181, respectively; Ms. Lane—2,946 and 0, respectively; Mr. Licata—2,946 and 0, respectively; Mr. Prabhu—0 and 0, respectively; Mr. Rosati—2,946 and 35,082, respectively; and Ms. Ward—19,529 and 35,082, respectively. |
(4) | Mr. DeLaney resigned on May 31, 2019 and did not earn any compensation during fiscal 2019. |
(5) | Amounts prorated for the portion of fiscal 2019 that Mr. Prabhu served as a director. |
2020 Proxy Statement 27
Table of ContentsPROPOSAL TWO:RATIFICATION OF APPOINTMENT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has approved the engagement of PricewaterhouseCoopers LLP ("PwC"(“PwC”) as our independent registered public accounting firm for the fiscal year ending September 28, 2019.October 3, 2020. In the event stockholders do not ratify the Audit Committee'sCommittee’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 30, 2017 ("29, 2018 (“fiscal 2017"2018”) and September 29, 2018 ("28, 2019 (“fiscal 2018"2019”). The Audit Committee considers the non-audit and tax fees in its assessment of the independence of the Company'sCompany’s independent registered public accounting firm.
Fiscal 2018 | Fiscal 2019 | |||||
Audit Fees | $ | 2,635,000 | $ | 4,306,000 | ||
Audit-Related Fees | $ | 172,000 | $ | 97,000 | ||
Tax Fees | $ | 373,000 | $ | 264,000 | ||
All Other Fees | $ | 4,000 | $ | 4,000 | ||
TOTAL | $ | 3,184,000 | $ | 4,671,000 |
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 2017 and fiscal 2018 were as follows:
Fiscal 2017 | Fiscal 2018 | ||||
---|---|---|---|---|---|
$ | 3,027,000 | $ | 2,635,000 |
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 2017 and fiscal 2018 were as follows:
Fiscal 2017 | Fiscal 2018 | ||||
---|---|---|---|---|---|
$ | 51,000 | $ | 172,000 |
Tax Fees
The aggregate fees billed for tax services rendered by PwC during fiscal 2017 and fiscal 2018 are set forth below. These services consisted primarily of tax compliance and tax consultation services.
Fiscal 2017 | Fiscal 2018 | ||||
---|---|---|---|---|---|
$ | 667,000 | $ | 373,000 |
All Other Fees
Fiscal 2017 | Fiscal 2018 | ||||
---|---|---|---|---|---|
$ | 4,000 | $ | 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-ApprovalPre-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'sSEC’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 2018,2019, all services provided by our independent registered public accounting firm were pre-approved in accordance with this policy.
Vote Required; Recommendation28 SANMINA CORPORATION
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS |
Sanmina’s Audit Committee is comprised solely of members who meet the Board of DirectorsNasdaq Listing Standard’s independence requirements for audit committee members. The Audit Committee has reviewed the audited financial statements for fiscal 2019 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.
The affirmative vote of a majority of the votes duly cast is required to ratify the appointment of PwC asPricewaterhouseCoopers LLP (“PwC”), our independent registered public accounting firm. Abstentions havefirm for fiscal 2019, was responsible for performing an independent audit of our financial statements in accordance with the same effectstandards 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 a vote against this proposal. However, broker non-votes areof September 28, 2019, 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 deemedjust the acceptability, of our accounting principles and has discussed with PwC the matters required to be votes castdiscussed by professional standards. Finally, the Audit Committee has also received the written disclosures and therefore, have no effectthe 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 outcome of this proposal.reviews and discussions referred to above, the Audit Committee recommended to the Board (and the Board approved) that the audited financial statements for fiscal 2019 be included in the Annual Report on Form 10-K for fiscal 2019 for filing with the SEC.
THE AUDIT COMMITTEE
OF THE BOARD BELIEVES THE APPOINTMENT OF PRICEWATERHOUSE COOPERS LLP IS IN THE BEST INTERESTSDIRECTORS 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 28, 2019.SANMINA CORPORATION
JOHN P. GOLDSBERRY, Chairman
EUGENE A. DELANEY
RITA S. LANE
JOSEPH G. LICATA
2020 Proxy Statement 29
1. | Our burn rate is in line with to our peers.Sanmina’s three-year average net burn rate (grants less cancellations divided by outstanding shares) of 1.4% is lower than the 2.3% median net burn rate of the peer companies listed in the “Compensation Discussion and Analysis” on page 42 of the Proxy Statement for their three most recent fiscal years for which data is publicly available. | |
2. | Our share repurchases in the last two fiscal years have more than offset the dilutive effect of grants made under the 2019 Plan during the same time period.During the last two fiscal years, we have repurchased approximately 10 million shares of our common stock in the open market, more than offsetting the potential dilution from the 7 million shares granted under our stock plan during that same time period. | |
3. | Our overhang is reasonable compared to our peers. As of December 31, 2019, 4.3 million shares were subject to outstanding equity awards under our 2019 Plan and 2009 Incentive Plan (the “2009 Plan”) and 7.7 million shares were reserved for issuance under our 2019 Plan, inclusive of outstanding equity awards, representing 6% and 11% of our shares outstanding, respectively. This “overhang” is reasonable compared to average net and gross overhang of our peers. | |
4. | Adherence to Proxy Advisory Firm Guidelines.We have implemented several plan features recommended by proxy advisory firms in the 2019 Plan, including: | |
a. | All awards granted under the 2019 Plan must have a minimum vesting period of at least one year, subject to certain de minimus exceptions; | |
b. | All shares received by the Chief Executive Officer upon exercise, settlement or issuance of an award must be held for a minimum of one year before being sold or, if earlier, until the termination of the Chief Executive Officer’s service; | |
c. | Reasonable and appropriate change in control provisions; | |
d. | No dividends payable on unvested awards; and | |
e. | No liberal recycling of full value awards (e.g, shares withheld from vesting awards to pay taxes are not returned to the plan for future grant). |
30 SANMINA CORPORATION
PROPOSAL THREE:APPROVAL OF THE 2019 Equity Incentive Plan
Request for Stockholder Approval of 2019 Equity Incentive Plan
The stockholders are being asked to approve our 2019 Equity Incentive Plan (the "2019 Plan"). The 2019 Plan is intended to replace our 2009 Incentive Plan, as amended (the "2009 Plan"), which will expire as to future grants on January 26, 2019.Proposal Three: Approval of the 2019 Plan will allow the Company to continue to provide equity awards as part of the Company's compensation program, an important tool for motivating, attracting and retaining talented employees and for creating stockholder value. Non-approvalReservation
For these reasons, Sanmina requests stockholders approve the reservation of an additional 1,600,000 shares of common stock for issuance under the 2019 Plan. We expect that the share reserve under the 2019 Plan, as proposed to be increased, will allow us to continue to grant equity-based compensation at levels we deem necessary and appropriate for at least the next two years. We base this belief upon our historical annual equity award grant rate (otherwise known as burn rate), our historical forfeiture rate and our estimate of the number of Shares we will need to attract new senior and executive hires and in connection with potential merger and acquisition transactions. This belief could change, however, based upon a number of factors, including the need to increase our burn rate over historical averages in order to attract and retain key talent and the price of our common stock (because we determine the size of equity awards to be granted in part based on the price of our common stock at the time of grant, if our stock price on the date the award is granted is significantly lower than the stock price assumed in our forecast, we would need to grant a larger number of shares than anticipated to deliver the same value to participants). | ||
The Board unanimously recommends voting “FOR” the approval of the reservation of an additional 1,600,000 shares for issuance under the 2019 plan. |
Description of the 2019 Plan will compel the Company to significantly increase the cash component of employee compensation to attract and retain key employees because the Company would need to replace components of compensation previously delivered in equity awards and which would therefore reduce our operating cash flow.
The Board believes that long-term incentive compensation programs align the interests of management, employees and the stockholders to create long-term stockholder value. Equity plans such as the 2019 Plan increase Sanmina's ability to achieve this objective, and, by allowing for several different forms of long-term incentive awards, helps Sanmina to recruit, reward, motive, and retain talented personnel. The Board believes that the approval of the 2019 Plan is essential to Sanmina's continued success, in particular, Sanmina's ability to attract and retain outstanding and highly skilled individuals in the extremely competitive labor markets in which Sanmina competes. Such awards are also crucial to Sanmina's ability to motivate employees to achieve its goals.
Stockholders are being asked to approve an aggregate of 3,993,000 shares for future issuance under the 2019 Plan (the "Shares"). This amount includes 2,393,006 shares that remained available for grant under the 2009 Plan as of January 4, 2019, which plan, as stated above, will expire on January 26, 2019 and therefore will no longer be available for grant under that plan. We expect that the share reserve under the 2019 Plan will allow us to continue to grant equity-based compensation at levels we deem necessary and appropriate for approximately the next two years. We base this belief upon our historical annual equity award grant rate (otherwise known as burn rate), our historical forfeiture rate and our estimates of the number of Shares that we estimate will be needed to attract new senior and executive hires and in connection with potential merger and acquisition transactions. This belief could change, however, based upon a number of factors, including the need to increase our burn rate over historical averages in order to attract and retain key talent and the price of our common stock (because we determine the size of equity awards to be granted in part based on the price of our common stock at the time of grant, if our stock price on the date the award is granted is significantly lower than the stock price assumed in our forecast, we would need to grant a larger number of Shares than anticipated to deliver the same value to participants).
Key Plan Provisions
Key Reasons stockholder considerations
Stockholders should consider the following in determining whether to approve our 2019 Plan:
Summary of the 2019 Plan
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
● | The 2019 Plan has a ten year term; |
● | The 2019 Plan provides for the grant of stock options, both incentive stock options and nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, performance shares, and such other cash or stock awards to eligible individuals as the plan’s administrator (as defined below) may determine; |
● | 3,993,000 shares are authorized for issuance pursuant to awards under the 2019 Plan (the “Base Amount”), plus any shares subject to stock options or similar awards granted under the 2009 Plan that, after March 11, 2019, expire or otherwise terminate without having been exercised in full and shares issued pursuant to awards granted under the 2009 Plan that, after March 11, 2019, are forfeited to or repurchased by the Company, with the maximum number of shares to be added to the 2019 Plan pursuant to the 2009 Plan equal to 6,436,840 shares. If stockholders approve this proposal, the Base Amount will be increased by 1,600,000 to 5,593,000. All of such shares may be authorized, but unissued, or reacquired common stock; |
● | Shares subject to outstanding awards under the 2009 Plan that are forfeited, cancelled, or otherwise expire will be rolled into the 2019 Plan; |
● | Any shares subject to awards other than options or stock appreciation rights (e.g., “full value” awards) will be counted against numerical share limits as 1.36 shares for every one share subject thereto; and |
● | The 2019 Plan is administered by the Compensation Committee. |
Administration
Our Board of Directors has delegated administration of the 2019 Plan to the Compensation Committee. Our Board of Directors and the Compensation Committee may further delegate administration of the 2019 Plan to any committee ofIn addition, our Board of Directors, or a committee of individuals satisfying applicable laws appointed by our Board of Directors in accordance with the terms of the 2019 Plan. 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 Sharesshares to be subject to such awards; provided, however, that the Board resolutions regarding such delegation shall specify the totalmaximum number of Sharesshares that may be subject to the awards granted by such officer.
2020 Proxy Statement 31
Proposal Three: Approval of the Reservation
For purposes of this summary of the 2019 Plan, the term "administrator"“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"“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,share, (ii) select the service providers to whom awards may be granted, (iii) determine the number of Sharesshares to be covered by each award granted under the 2019 Plan, (iv) to 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 behalf of the Company any instrument required to effect the grant of an award
previously granted by the administrator, (xi) allow a participant to defer receipt of the payment of cash or the delivery of shares that would otherwise be due to such participant under an award pursuant to such procedures as the administrator may determine, and (xii) make all other determinations deemed necessary or advisable for administering the 2019 Plan. The administrator'sadministrator’s decisions, determinations and interpretations will be final and binding on all participants and any other holders of awards.
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 December 29, 2018,September 28, 2019, we had approximately 48,00034,000 eligible participants, including employee directors, outside directors and consultants.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 being asked to approve aan additional 1,600,000 shares for issuance under the 2019 Plan. The number of Sharesshares currently reserved for issuance under the 2019 Plan equal toequals 3,993,000 Shares,shares (the “Base Amount”), plus any Sharesshares subject to stock options or similar awards granted under the 2009 Plan that, after the date of stockholder approval of this Plan,March 11, 2019, expire or otherwise terminate without having been exercised in full and Sharesshares issued pursuant to awards granted under the 2009 Plan that, after the date of stockholder approval of this Plan,March 11, 2019, are forfeited to or repurchased by the Company, with the maximum number of Sharesshares to be added to the 2019 Plan pursuant to the 2009 Plan equal to 6,436,840 Shares.shares. The 3,993,000 Shares our stockholders are being asked to approve includes 2,393,006 shares that remain available for grant under the 2009 Plan as of January 4, 2019, which plan, as stated above, will be expiring on January 26, 2019 and therefore no longer available for grant under that plan. The Shares may be authorized, but unissued, or reacquired Common Stock. If stockholders approve this proposal, the Base Amount will be increased by 1,600,000 to 5,593,000, plus any shares that may be added to the 2019 Plan from outstanding awards under the 2009 Plan as discussed above.
Any Sharesshares subject to awards other than options or stock appreciation rights will be counted against the numerical limits of the 2019 Plan as 1.36 Sharesshares for every one Shareshare subject thereto. Further, if Sharesshares 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 Sharesshares so forfeited or repurchased will return to the 2019 Plan and will again become available for issuance.
32 SANMINA CORPORATION
Proposal Three: Approval of the Reservation
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 to be settled in Shares,shares, is forfeited to or repurchased by the Company, the unpurchased Sharesshares (or for awards other than options and stock appreciation rights, the forfeited or repurchased Shares)shares) which were subject thereto will become available for future grant or sale under the 2019 Plan (unless the plan2019 Plan has terminated). Upon exercise of a stock appreciation right settled in Shares,shares, the gross number of Sharesshares covered by the portion of the award so exercised will cease to be available under the 2019 Plan. If unvested Sharesshares of restricted stock, or unvested Sharesshares issued pursuant to awards of restricted stock units, performance shares or performance units are repurchased by or forfeited to the Company, such Sharesshares will become available for future grant under the 2019 Plan. Shares used to pay the tax and exercise price of an award will not become available for future grant or sale under the 2019 Plan. To the extent an award under the 2019 Plan is paid out in cash rather than Shares,shares, such cash payment will not result in reducing the number of Sharesshares available for issuance under the 2019 Plan.
Adjustments
In the event of any dividend or other distribution (whether in the form of cash, Shares,shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of Sharesshares or other securities or other change in the corporate structure affecting our common stock, the 2019 Plan administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the 2019 Plan, will adjust the number and class of Sharesshares that may be delivered under the 2019 Plan and/or the number, class, and price of Sharesshares covered by each outstanding award, and the numerical Shareshare or value limits, as applicable, set forth in the 2019 Plan.
Stock Options
An option gives a participant the right to purchase a specified number of Sharesshares for a fixed exercise price during a specified period of time. Each option granted under the 2019 Plan will be evidenced by an award agreement specifying the number of Sharesshares subject to the option and the other terms and conditions of the option, consistent with the requirements of the 2019 Plan.
The exercise price per share of each option may not be less than the fair market value of a share of our common stock on the date of grant. However, any incentive stock option granted to a person who at the time of grant owns stock possessing more than 10% of the total combined voting power of all classes of our stock or any parent or subsidiary corporation of ours (a "ten“ten percent stockholder"stockholder”) must have an exercise price per share equal to at least 110% of the fair market value of a share on the date of grant. The aggregate fair market value of the shares (determined on the grant date) covered by incentive stock options which first become exercisable by any participant during any calendar year also may not exceed $100,000. The fair market value of the common stock is generally the closing sales price of our stock as reported on the Nasdaq Global Select Stock Market.
Options will be exercisable at such times or under such conditions as determined by the administrator and set forth in the award agreement.
Upon the termination of a participant'sparticipant’s service, the unvested portion of the participant'sparticipant’s option generally expires. The vested portion of the option will remain exercisable for the period following the participant'sparticipant’s termination of service that was determined by the administrator and specified in the participant'sparticipant’s award agreement, and if no such period was determined by the administrator, the vested portion of the option will remain exercisable for: (i) 90 days following a termination of the participant'sparticipant’s service for reasons other than death or disability or (ii) 5five years following a termination of the participant'sparticipant’s service due to death or disability. In no event will the option be exercisable after the end of the option'soption’s term. In the event of termination of service due to participant'sparticipant’s death, the award becomes vested in full.
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).
2020 Proxy Statement 33
Proposal Three: Approval of the Reservation
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 Sharesshares 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 our common stock between the date an award is granted and the date it is exercised. Upon exercise of a stock appreciation right, the holder of the award will be entitled to receive an amount determined by multiplying: (i) the difference between the fair market value of a share on the date of exercise and the exercise price by (ii) the number of exercised stock appreciation rights. We may pay the appreciation in cash, in Shares,shares, or a combination of both. Each stock appreciation right granted under the 2019 Plan will be evidenced by an award agreement specifying the exercise price and the other terms and conditions of the award.
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'sparticipant’s service are similar to those for options described above. In the event of termination of service due to participant'sparticipant’s death, the award becomes vested in full.
Restricted Stock Awards
Awards of restricted stock are rights to acquire or purchase Sharesshares that vest in accordance with the terms and conditions established by the administrator in its sole discretion. Unless otherwise provided by the administrator, a participant will forfeit any Sharesshares of restricted stock that have not vested by the termination of the participant'sparticipant’s service. However, in the event of termination of service due to participant'sparticipant’s death, the award becomes vested in full. Each restricted stock award granted will be evidenced by an award agreement specifying the number of Sharesshares subject to the award and the other terms and conditions of the award. The administrator will determine the vesting conditions that apply to an award of restricted stock.
Unless the administrator provides otherwise, participants holding Sharesshares of restricted stock will have voting rights without regard to vesting, but will not have rights to dividends and other distributions with respect to such Sharesshares until the Sharesshares vest. The administrator has the discretion to reduce or waive any restrictions and to accelerate the time at which any restrictions will lapse or be removed.
Restricted Stock Units
A restricted stock unit represents a right to receive cash or a shareshares of our common stock if the performance goals or other vesting criteria set by the administrator are achieved or the restricted stock unit otherwise vests. Each award of restricted stock units granted under the 2019 Plan will be evidenced by an award agreement specifying the number of Sharesshares subject to the award and other terms and conditions of the award. The administrator will determine the vesting conditions that apply to an award of restricted stock units.
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'sparticipant’s death, the award becomes vested in full. The administrator in its sole discretion may pay earned restricted stock units in cash, Shares,shares, or a combination of both.
34 SANMINA CORPORATION
Proposal Three: Approval of the Reservation
Performance Units and Performance Shares
Performance units and performance shares are awards that will result in a payment to a participant only if performance goals established by the administrator are achieved or the awards otherwise vest. Performance units will have an initial value established by the administrator on or before the date of grant. Each performance share will have an initial value equal to the fair market value of a share on the grant date. Performance units and performance shares will result in a payment to a participant only if the performance goals or other vesting criteria set by the administrator are achieved or the awards otherwise vest.
Each award of performance units or performance shares granted under the 2019 Plan will be evidenced by an award agreement specifying the performance period and other terms and conditions of the award. The administrator may set vesting criteria based upon the achievement of company-wide, divisional, or individual goals (including, but not limited to, continued employment or service), or any other basis determined by the administrator, in its discretion.
After an award of performance units or performance shares has been granted, the administrator has the discretion to accelerate, reduce or waive any performance objectives or other vesting provisions for such performance units or performance shares, but may not increase the amount payable at a given level of performance.
The administrator has the discretion to pay earned performance units or performance shares in the form of cash, Sharesshares (which will have an aggregate fair market value equal to the earned performance units or performance shares at the close of the applicable performance period), or a combination of both.
A participant will forfeit any performance units or performance shares that have not been earned or have not vested as of the termination of his or her service with us. However, in the event of termination of service due to participant'sparticipant’s death, the award will accelerate, with such acceleration assuming that all performance goals and other vesting criteria are deemed achieved at target performance levels and any additional service conditions satisfied.
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 participant, only by the participant. With the approval of the administrator, a participant may transfer an award, in a manner specified by the administrator, to a spouse or former spouse pursuant to certain court-approved domestic relations orders, and transfer an option by gift to an immediate family member or certain trusts, partnerships or other entities or foundations in accordance with the terms of the 2019 Plan.
Outside Director Limitations
No non-employee director may be granted, in any fiscal year of the Company, 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 a non-employee director), will not count for purposes of this limitation.
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'saward’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'sparticipant’s death, disability or retirement, or termination of the participant'sparticipant’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 Sharesshares 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, Sharesshares received by the Chief Executive Officer upon exercise, settlement or
2020 Proxy Statement 35
Proposal Three: Approval of the Reservation
issuance of an Awardaward 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 Sharesshares or, if earlier, upon the termination of the Chief Executive Officer'sOfficer’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 Awardaward 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'sCompany’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'sparticipant’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 Sharesshares underlying such award, including those Sharesshares 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 one hundred percent (100%)100% of target levels and all other terms and conditions met.
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.
36 SANMINA CORPORATION
Proposal Three: Approval of the Reservation
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 January 24,December 31, 2019, 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'sparticipant’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 Sharesshares 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 Sharesshares 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 Sharesshares 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"“disqualifying disposition”), any gain up to the excess of the fair market value of the Sharesshares on the date of exercise over the exercise price generally will be taxed as ordinary income, unless the Sharesshares 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 Sharesshares 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 Sharesshares on the exercise date is treated as an adjustment item in computing the participant'sparticipant’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 Sharesshares 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 Sharesshares 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 Sharesshares 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 Sharesshares acquired through the exercise of the nonstatutory stock option.
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 Sharesshares received. Any additional gain or loss recognized upon any later disposition of the Sharesshares would be capital gain or loss.
2020 Proxy Statement 37
Proposal Three: Approval of the Reservation
Restricted Stock Awards
A participant acquiring Sharesshares of restricted stock generally will recognize ordinary income equal to the fair market value of the Sharesshares 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 Section83(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 Sharesshares are acquired. Upon the sale of Sharesshares 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 Sharesshares 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 Sharesshares 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 Sharesshares 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 Sharesshares 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'sindividual’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's409A’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.
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"“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.
38 SANMINA CORPORATION
Proposal Three: Approval of the Reservation
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'SPARTICIPANT’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 of Common Stockcommon stock subject to options granted under the 20092019 Plan during fiscal year 20182019 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; (ii) the average per share exercise price of such options; (iii) the aggregate number of shares subject to restricted stock units ("RSUs"(“RSUs”) granted under the 20092019 Plan during fiscal year 20182019 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 (iv) the grant-date value of shares subject to such RSUs.
Number of | Average | Number of | Dollar Value | |||||||||
Shares | Per Share | Shares | of Shares | |||||||||
Subject to | Exercise Price | Subject to | Subject to | |||||||||
Options | of Option | RSUs | RSUs | |||||||||
Name of Individual or Group | Granted | Grants(1) | Granted | Granted(1) | ||||||||
Jure Sola | — | — | 175,000 | $ | 4,481,750 | |||||||
Executive Chairman | ||||||||||||
Michael J. Clarke | 150,000 | (3) | $ | 23.96 | 250,000 | (4) | $ | 5,990,000 | ||||
Chief Executive Officer(2) | ||||||||||||
Hartmut Liebel | — | — | 60,000 | $ | 1,791,000 | |||||||
President and Chief Operating Officer(5) | ||||||||||||
David Anderson | — | — | 63,000 | $ | 1,498,770 | |||||||
Executive Vice President and Chief Financial Officer(6) | ||||||||||||
Dennis Young | — | — | 23,000 | $ | 547,170 | |||||||
Executive Vice President, Worldwide Sales | ||||||||||||
Alan Reid | — | — | 25,000 | $ | 594,750 | |||||||
Executive Vice President, Global Human Resources | ||||||||||||
All executive officers, as a group | 150,000 | $ | 23.96 | 596,000 | $ | 14,903,440 | ||||||
All directors who are not executive officers, as a group | — | — | 39,935 | $ | 1,220,014 | |||||||
All employees who are not executive officers, as a group | — | — | 1,183,742 | $ | 29,444,345 |
(1) | Reflects the aggregate grant date fair value of awards computed in accordance with ASC 718. These amounts do not purport to reflect the value that will be realized upon the sale of the underlying shares or that the underlying shares will in fact vest and be issued. |
(2) | Mr. Clarke ceased to serve as Chief Executive Officer as of September 30, 2019. |
(3) | Award canceled subsequent to fiscal year end in connection with Mr. Clarke’s cessation of service as Chief Executive Officer. |
(4) | Awards for an aggregate of 140,000 shares were canceled subsequent to fiscal year end in connection with Mr. Clarke’s cessation of service as Chief Executive Officer. |
(5) | Mr. Liebel joined the Company in this position in July 2019. Effective as of September 30, 2019, Mr. Liebel was appointed as Chief Executive Officer. |
(6) | Mr. Anderson ceased to serve as Chief Financial Officer as of October 13, 2019. |
2020 Proxy Statement 39
Name of Individual or Group | Number of Shares Subject to Options Granted | Average Per Share Exercise Price of Option Grants(1) | Number of Shares Subject to RSUs Granted | Dollar Value of Shares Subject to RSUs Granted(1) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jure Sola | — | — | 200,000 | $ | 7,690,000 | ||||||||
Executive Chairman | |||||||||||||
Robert K. Eulau | 200,000 | $ | 38.45 | 200,000 | (2) | $ | 7,690,000 | ||||||
Former Chief Executive Officer | |||||||||||||
Gerry Fay | — | — | — | — | |||||||||
Former Chief Business Officer | |||||||||||||
David Anderson | — | — | 40,000 | (3) | $ | 1,538,000 | |||||||
Executive Vice President and Chief Financial Officer | |||||||||||||
Alan McW. Reid | — | — | 10,000 | $ | 305,500 | ||||||||
Executive Vice President, Global Human Resources | |||||||||||||
All executive officers, as a group | 200,000 | $ | 38.45 | 450,000 | $ | 17,223,500 | |||||||
All directors who are not executive officers, as a group | — | — | 90,207 | $ | 2,516,775 | ||||||||
All employees who are not executive officers, as a group | — | — | 561,750 | $ | 17,185,625 |
Proposal Three: Approval of the aggregate grant date fair value of awards computed in accordance with ASC 718.
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 providersemployees, directors and
directors, consultants, as well as the number of shares of common stock remaining available for future issuance under Sanmina'sSanmina’s equity compensation plans as of September 29, 2018.28, 2019. 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 | 5,041,950 | (1) | $ | 14.40 | (2) | 4,429,739 |
(1) | Includes 3,152,862 shares deliverable upon vesting of Restricted Stock Units. |
(2) | Weighted average remaining term of options is 3.07 years. |
40 SANMINA CORPORATION
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 | 6,628,772 | (1) | $ | 13.52 | (2) | 3,547,304 |
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 approve the 2019 Equity Incentive Plan. 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" THE ADOPTION OF THE 2019 EQUITY 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 34, 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 2018 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
2020 Proxy Statement 41
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 for 2019 |
IV | Other Compensation Program Features |
V | 2020 Executive Compensation Program Changes |
Throughout this CD&A, the individuals who served as our Executive Chairman, Chief Executive Officer and Chief Financial Officer during fiscal 2019 and the other individuals included in the “Summary Compensation Table” in the Proxy Statement, forare referred to as the “named executive officers” or “NEOs.” Our fiscal 2019 Annual MeetingNEOs were:
Jure Sola | Executive Chairman | |
Michael J. Clarke(1) | Chief Executive Officer | |
Hartmut Liebel(2) | President and Chief Operating Officer | |
David R. Anderson(3) | Executive Vice President and Chief Financial Officer | |
Dennis R. Young | Executive Vice President, Worldwide Sales | |
Alan Reid | Executive Vice President, Global Human Resources |
(1) | Mr. Clarke ceased to serve as Chief Executive Officer as of September 30, 2019. |
(2) | Mr. Liebel joined the Company in this position in July 2019. Effective as of September 30, 2019, Mr. Liebel was appointed as Chief Executive Officer. |
(3) | Mr. Anderson ceased to serve as Chief Financial Officer as of October 13, 2019. |
42 SANMINA CORPORATION
Compensation Discussion and Analysis the 2018 Summary Compensation Table
Fiscal 2019 Business Highlights
In fiscal 2019, we increased our operating efficiencies, leveraged our advanced technology and other related tablesmanufacturing capabilities, and disclosure."
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE COMPENSATION FOR OUR NAMED EXECUTIVE OFFICERS.
Sanmina has long upheldfurther diversified within our end markets. As a set of basic beliefsresult, we delivered improved financial results and built a strong foundation ready to guide its actions. 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.
Corporate Governance Guidelines
Sanmina has adopted a set of Corporate Governance Guidelines that are intended to serve, among other things, as a 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 guidelines can be foundcapitalize on our website athttp://ir.sanmina.com/investor-relations/corporate-governance/default.aspx.
Code of Business Conduct and Ethics
Sanmina has adopted a Code of Business Conduct and Ethics (the "Code") that includes a conflict of interest policy and appliesmomentum. Revenue increased 16% 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://ir.sanmina.com/investor-relations/corporate-governance/default.aspx.
Independent Directors
The Board of Directors has determined that all of the non-employee members of the Board satisfy the definition of independence 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 normal agenda of our regularly scheduled board meetings.
Role of Lead Independent Director
During 2018, Wayne Shortridge served as lead independent director. The duties of lead independent director include: serving as the principal contact between the independent directors and the Executive Chairman; assisting the Executive Chairman in establishing the agenda for Board meetings; coordinating with the Executive 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. Assuming the reelection of Jackie Ward at the Annual Meeting, Ms. Ward will serve as lead independent director in 2019. The charter for the lead independent director can be found on our website athttp://ir.sanmina.com/investor-relations/corporate-governance/default.aspx.
Role of Executive Chairman
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. Prior to that, the positions of Chairman of the Board and Chief Executive Officer were held by Mr. Sola for more than 15 years. In addition to performing the customary duties of Chairman of the Board, Mr. Sola, in his role as Executive Chairman, supports the Chief Executive Officer by interacting with current and prospective customers and advising on the strategic direction of Sanmina. Mr. Sola also provided management and operational support during two CEO transitions that occurred during
2018. The Board believes that this leadership structure, coupled with the appointment of Jackie Ward as Lead Independent Director, effective upon her reelection at the Annual Meeting, provides balance, continuity and currently is in the best interest of Sanmina and its stockholders.
Board Meetings
The Board held seven meetings during fiscal 2018. No director attended fewer than 75 percent of the meetings of the Board or of committees on which such person served.
Board Committees
The Board currently maintains three standing committees: an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee.
Audit Committee
The Audit Committee currently consists of directors Eugene A. Delaney, William 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 currently serves as the Chairman of the Audit Committee. Messrs. Delaney, 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 legal and regulatory compliance, among others. 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 nine formal meetings during fiscal 2018. 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://ir.sanmina.com/investor-relations/corporate-governance/default.aspx.
Compensation Committee
The Compensation Committee currently consists of directors Eugene Delaney, John Goldsberry, Joseph G. Licata, Wayne Shortridge and Jackie M. Ward. Mr. Shortridge currently serves 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 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 held seven meetings during fiscal 2018.
The Compensation Committee has adopted a written charter approved by the Board, a copy of which is available at our website athttp://ir.sanmina.com/investor-relations/corporate-governance/default.aspx.
The Compensation Committee has established the Performance Award Subcommittee to administer previously granted 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 subcommittee currently includes all members of the Compensation Committee. The written charter for such subcommittee is available at our website athttp://ir.sanmina.com/investor-relations/corporate-governance/default.aspx.
Nominating and Governance Committee
The Nominating and Governance Committee currently consists of directors William DeLaney, 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 currently serves as the Chairman of the Nominating and Governance Committee during fiscal 2018.
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 and considers stockholder proposals for action at stockholder meetings, including stockholder nominees for director. 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 2018.
The Nominating and Governance Committee has adopted a written charter approved by the Board, a copy of which is available at our website athttp://ir.sanmina.com/investor-relations/corporate-governance/default.aspx.
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 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.
Role of the Board of Directors in Risk Management Practices and Policies
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. 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 non-management director deferred compensation plan, shares issued upon vesting or exercise of restricted stock units or stock options issued to directors and shares purchased on the open market, if any. 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: Executive Chairman: four times; 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 or are within the period for initial compliance.
Hedging and Pledging of Company Securities
Sanmina believes that "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's stock price were to fall) is inappropriate when undertaken by employees, officers or directors as such techniques reduce alignment with the interests of our stockholders. Similarly, Sanmina believes that "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 intended to hedge or offset any decrease in the market value of Sanmina's common stock or (ii) engaging in short sales related to Sanmina'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 Directors
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 2018 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:
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.
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee are employees of Sanmina. During fiscal 2018, 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.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
COMPENSATION DISCUSSION AND ANALYSIS
Business and Compensation Highlights
Management continued to emphasize sustainable and profitable growth during fiscal 2018, achieving an eighth consecutive year of profitability for our company. In addition, during fiscal 2018, the Company further increased the diversification of its end market customer base and increased its liquidity by $125 million through an amendment to its credit facility to support future growth. Although results were positive in some respects, they failed to meet the goals established in our Board-approved budget for fiscal 2018, particularly for revenue,$8.2 billion; non-GAAP operating margin operating cash flow, inventory turns,at 4.1%, was up 110 basis points from 2018; and non-GAAP EBITDA and pre-tax ROIC, due in partearnings per share expanded 60% to parts shortages and delays in new program ramps caused by customer design changes, yield issues and other factors. This resulted in only a 14% payout percentage under our annual cash bonus plan. Even so, as explained more fully in this CD&A, payouts under this plan for our named executive officers were eliminated for fiscal 2018.
The following table illustrates our fiscal 2018 results in terms of revenue, non-GAAP operating margin, pre-tax return on invested capital, non-GAAP EBITDA,$3.40. Our greatly-improved cash flow from operations of $383 million reflects the management team’s operational excellence and inventory turns:
| FY18 | FY17 | Change | |||||
---|---|---|---|---|---|---|---|---|
Revenue | $ | 7,110 | $ | 6,869 | 3.5% | |||
Non-GAAP(1) Operating Margin | 3.0 | % | 4.0 | % | (25%) | |||
Pre-tax Return on Invested Capital (ROIC)—exiting Q4 | 17.6 | % | 19.9 | % | (2.3) percentage points | |||
Non-GAAP EBITDA | $ | 325 | $ | 387 | (16%) | |||
Cash Flow from Operations | $ | 156 | $ | 251 | (38%) | |||
Inventory Turns | 5.4x | 6.2x | (0.8x) |
(focus on efficiencies in millions, except for percentagesareas we can control, while dealing with an evolving demand environment, delays in technology ramps and turns)global economic uncertainty.
REVENUE & NON-GAAP OPERATING MARGIN* (In Millions) | CASH FLOW FROM OPERATIONS (In Millions) | NON-GAAP EARNINGS PER SHARE (EPS)* | ||
Non-GAAP Operating Margin | |
* | See Appendix B for reconciliation of non-GAAP financial information to their most directly comparable GAAP measures. |
All non-GAAP measures contained in this CD&A exclude the impact of stock-basedFiscal 2019 Executive Compensation Highlights
Sanmina’s NEO’s are compensated to drive long-term success and long-term stockholder value. The target direct compensation expenses, restructuring costs, asset impairment charges, intangible asset amortization expensethat our CEO and other infrequentNEO’s were awarded requires them to meet or unusual items (including, when applicable, charges or recoveries associated with distressed customers, litigation settlements, gainsexceed financial and losses on salesoperational goals not just in 2019 but in future years as well. Our NEO’s are incentivized to build long-term success and return long-term value to stockholders.
2020 Proxy Statement 43
Appendix B to this proxy statement is a reconciliation of the non-GAAP measures contained in this Compensation Discussion and Analysis to their most directly comparable GAAP measures.
Responses to 2018 Say-on-Pay Vote
Stockholders did not approve our say-on-pay proposal at our 2018 annual meeting and, asTARGET COMPENSATION MIX
A significant portion of target CEO compensation is comprised of components that are based on achieving a result, we have resumed our process of comprehensively engaging with stockholders to better understand their concerns and to incorporate their feedback into Sanmina's executive pay program. To address stockholder and stockholder advisory group concerns, we have enhanced our stockholder engagement process, made significant changes to our pay programs to continue to tightly tie our executive pay to financial results and stockholder value creation and have also significantly increased thepre-determined level of detail infinancial 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 disclosures in this CD&A. A comprehensive list of this engagement activity, together with the significant pay program changes we have made, appears in "Last Year's Say-on-Pay Vote and Stockholder Outreach."stockholders.
Table of ContentsTARGET COMPENSATION MIX FOR FISCAL 2019
CEO
All other NEOs
OUR COMPENSATION PROGRAM EMPHASIZES PERFORMANCE-BASED AND AT-RISK PAY
Changes in Chief Executive Officer in Fiscal 2018 and 2019
Fiscal 2018 was an unusual year for us in terms of a planned change in our CEO at the beginningApproximately 67% of the year and the need to offer a competitive compensation package necessary to retain him. In August 2018, our CEO resigned and we appointed Michael Clarke as our new CEO beginning in fiscal 2019. As a result, we were again required to provide a competitive compensation package designed to attract and retain the new CEO. The references to CEO compensation in this CD&A are to our CEO who served during fiscal 2018 and not to Mr. Clarke, unless noted otherwise.
Alignment of Incentive Pay Results with Company Performance
The total compensation opportunities of our executives in fiscal 2018 were heavily weighted towards performance-based compensation and equity awards that will deliver value to executives only if Sanmina's financial and stock price performance continues to improve, with approximately 61% of our Chief Executive Officer'sCEO’s total target compensation (base, bonus and value of equity awardsincentives at the time of grant) beingwas comprised of performance-based pay opportunities tied directly to performance. Key features of our performance-based executive pay arrangements include:
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 response to stockholder and stockholder advisory group feedback, the Compensation Committee has revised the Corporate Bonus Plan to reduce the number of metrics under the plan and eliminate metrics that were also used under the long-term incentive plan. These changes will be effective beginning fiscal 2020.
2019 Corporate Bonus Plan Metrics | 2020 Corporate Bonus Plan Metrics | |
●Revenue ●Non-GAAP operating margin ●Five modifiers (Q4 non-GAAP operating margin, cash flow from operations, inventory turns, pre-tax return on invested capital and non-GAAP EBITDA) | ●Revenue ●Non-GAAP operating margin ● NEW One modifier (cash flow from operations) |
44 SANMINA CORPORATION
Compensation Discussion and Analysis
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.In response to stockholder and stockholder advisory group feedback, for 2020, the Compensation Committee revised the long-term incentive plan to reduce the number of metrics used and to increase the measurement period requirementsfor achievement to three years.
2019 Long Term Incentive Mix and Metrics | 2020 Long Term Incentive Mix and Metrics | |
Mix: | Mix: | |
CEO — Michael Clarke | CEO — Hartmut Liebel | |
NEOs | NEOs | |
PSU metrics (CEO and NEOs) ●Non-GAAP earnings per share ●Single year metric, three years to achieve ●Fixed payout | PSU metrics (CEO and NEOs) ●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 | |
Performance Stock Options (CEO only) ●2 tranches: first tranche vests if stock price target achieved in first year after grant; second tranche vests if stock price target achieved in second year after grant | Performance Stock Options ●None | |
RSUs ●Vests over three years, one-third annually (CEO) and 13 month to three-year cliff (NEOs) | RSUs ●Vests over three years, one-third annually (CEO) and 13 month to three-year cliff (NEOs) |
2020 Proxy Statement 45
Compensation Discussion and Analysis
2019 Say-on-Pay Vote and Stockholder Engagement
Our Board of Directors was disappointed with the 51% approval on the 2019 Say-on-Pay vote. During the remainder of 2019, we undertook an extensive stockholder engagement effort and the Compensation Committee conducted a thorough review of our compensation programs in order to four years.
2019 STOCKHOLDER ENGAGEMENT
During 2019, Sanmina’s management and members of our Board, including the Executive Chairman, Lead Independent Director, and Compensation Committee Chairman, reached out to stockholders representing approximately 67% of our outstanding shares to discuss executive compensation and governance and throughout the year actively engaged with stockholders representing 47% of our outstanding shares. Our 2019 engagement was more expansive than prior years, and we continue to make enhancements to our robust stockholder engagement process so that we can engage even more productively with our stockholders going forward.
We appreciate the feedback that our stockholders shared with us. In evaluating and making decisions regarding the 2020 compensation program design, the Compensation Committee took this valuable feedback into consideration. As a result, the Compensation Committee made significant changes to Sanmina’s executive compensation program beginning in fiscal 2020:
● | Increased the CEO’s percentage of total target compensation comprised of performance-based long-term incentives to 62% from 53%. |
● | Reduced the number of performance metrics in the annual bonus and eliminated duplication of annual bonus plan metrics with the long-term incentive awards. |
● | Established long-term incentive performance goals that cover a full three-year period. |
● | Ceased to award “all or nothing” long term incentives. |
● | Approved 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 minimum performance threshold for any payout. |
● | Strengthened our Clawback Policy to apply to equity awards. |
In response to stockholder requests that we provide greater transparency in our disclosure of the operation of the incentive plans, we have enhanced in this Proxy Statement our description of the plans, their purpose, what they measure and how they operate.
Alignment of Incentive Pay Results with Company Performance
A key objective of our heavy emphasis on performance-based executive compensation programs,program is to align executive pay remainswith performance – both financial performance of our Company and long-term stockholder value creation. We believe our executives should be rewarded for their measurable impact on the company’s financial performance and increases in stockholder value. As shown below, our NEO pay is well aligned with corporate performance, stockholder returns and our pay-for-performance philosophy. For example, underperformance of corporate measures in fiscal 2018 will result in the cancelation of 260,000 performance stock units that had been granted in years prior to fiscal 2018 to named executive officers.
46 SANMINA CORPORATION
The following tables illustrate the linkage between our performanceIICompensation Philosophy and our CEO's compensation opportunities:Design-Related Features
total compensation in these tables both with and without the value of these equity awards in order to show pay-for-performance alignment had his resignation not occurred.
Adoption of Best Practices
Our executive compensation programs include features that are widely recognized as best practices. Examples include:
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●Pay for Performance—Our executive compensation program continues to evolve in response to stockholder and proxy advisor feedback. The program continues to emphasize variable (at risk) compensation, with the majority of the total target pay opportunities of our CEO tied to financial and/
2020 Proxy Statement 47 Compensation Discussion and Analysis Sanmina’s Pay for Performance Compensation Philosophy
Sanmina’s Executive Compensation Process ROLE AND AUTHORITY OF SANMINA’S COMPENSATION COMMITTEE The Committee:
ROLE OF EXECUTIVE OFFICERS IN COMPENSATION DECISIONS
48 SANMINA CORPORATION
The Committee retained Exequity, LLP, an executive compensation consulting firm, to provide advice on matters related to executive pay. During fiscal
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 2020.
Each year the Committee determines the amount of
2020 Proxy Statement 49 Compensation Discussion and Analysis REVIEW OF PEER GROUP DATA In making compensation decisions for fiscal Based on a thorough review of these factors in fiscal
The Committee also considered data from third-party surveys, which are reported on an aggregate, not individual company, basis. The peer group companies considered by the Committee in determining named executive officer compensation for fiscal
HOW WE CHOSE OUR PERFORMANCE COMPENSATION METRICS FOR 2019 For both the short-term and long-term incentive awards, the Committee chose metrics that are used by management to assess the financial performance and condition of the business and that measure success against the Company’s strategy. The use of these metrics rewards executives for achieving the Company’s strategic objectives, each NEO is rewarded only to the degree that the Company’s strategic objectives have been furthered.
50 SANMINA CORPORATION Compensation Discussion and Analysis 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. LAST YEAR’S SAY-ON-PAY VOTE AND 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 2019, we intensified our stockholder outreach efforts after our compensation program was approved by only 51% of the votes cast on the 2019 Say-on-Pay proposal. We wanted to better understand the concerns of our stockholders about our compensation program, so we reached out to stockholders representingtwo-thirdsof our outstanding shares and met with stockholders owningalmost halfof our outstanding shares. Our annual corporate governance investor outreach cycle is outlined below. STOCKHOLDER ENGAGEMENT
2020 Proxy Statement 51 Compensation Discussion and Analysis
52 SANMINA CORPORATION Compensation Discussion and Analysis Components of 2019 CEO Compensation
WHY WE SELECTED THESE COMPONENTS
The Committee selected these components because it believes each is necessary to help us align
Our practice has been to subject a substantial portion of executive equity awards to performance-based vesting conditions tied to the achievement of certain financial or stock price metrics. In this way, our equity compensation program aligns the interests of our named executive officers with those of our stockholders by creating an incentive for our named executive officers to help maximize stockholder value. The 2020 Proxy Statement 53 Compensation Discussion and Analysis 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 financial, operational and executive managers who are also recruited by other manufacturing and high technology companies, particularly in Silicon Valley where our headquarters is located. In addition, our equity compensation program encourages our named executive officers to remain employed with us for a substantial period of time because unvested awards are forfeited upon termination of employment, except as provided in the Change-in-Control plan as outlined below. IIIExecutive Officer Compensation Decisions for 2019 BASE SALARY Base salary compensates named executive officers for their services rendered on a day-to-day basis. The Committee primarily considers individual performance, experience level, changes in individual roles and responsibilities during the year and peer group compensation data in determining whether to adjust base salary levels for individual named executive officers. As mentioned above, we generally target base salaries lower than our peers, with total compensation becoming competitive if we achieve our financial goals. During early fiscal 2019, the Committee reviewed the base salary of each of the named executive officers. No adjustments were made as a result of this review to NEO base salaries for fiscal 2019. 2019 SHORT-TERM INCENTIVE COMPENSATION Approval of Fiscal 2019 Corporate Bonus Plan Short-term incentives are awarded under an annual Corporate Bonus Plan. In December 2018, the Committee approved the Sanmina Fiscal 2019 Corporate Bonus Plan (the “2019 Bonus Plan”). The 2019 Bonus Plan contained the fiscal 2019 annual incentive compensation targets, expressed as a percentage of salary, for the named executive officers. The 2019 Bonus Plan also contained the performance metrics on which award payout was based, together with target measures for each metric. For 2019, the performance metrics were: our revenue, non-GAAP operating margin, cash flow from operations, inventory turns, pre-tax return on invested capital (ROIC) and non-GAAP earnings before interest, taxes, depreciation and amortization (EBITDA) for fiscal 2019. Each 2019 Bonus Plan participant’s actual incentive compensation for fiscal 2019 was determined by reference to his or her target incentive compensation opportunity, the Company’s achievement against the corporate performance targets and achievement of the participant’s individual/divisional performance goals for fiscal 2019. Individual goals differed by NEO and included demonstrated leadership and organizational capabilities, strategic thinking and improvement of customer relationships and engagement. The Committee retained discretion under the 2019 Bonus Plan to adjust the individual bonuses payable under the 2019 Bonus Plan upwards or downwards at any time based on individual performance. The Committee approved the targets contained in the 2019 Bonus Plan based primarily upon forecasts for fiscal 2019 financial performance, the Committee’s view of the likelihood of underachievement or overachievement of the targets and the competitiveness of total cash compensation that would be paid to executives compared to peer companies if the plan funded at target levels. When it approved the 2019 Bonus Plan, the Committee believed that achievement of the target corporate performance factor of 100% under the 2019 Bonus Plan would be challenging based upon industry-wide conditions and our internal forecasts at the time. Overview of Fiscal 2019 Corporate Bonus Plan Design Step 1:The determination of the earned bonus amounts under the 2019 Bonus Plan started with the “base corporate performance factor.” The base corporate performance factor was determined in reference to two financial metrics; fiscal 2019 revenue and non-GAAP operating margin. The base corporate performance factor ranged from 30% to 130% depending on the level of fiscal 2019 revenue and non-GAAP operating margin, but the corporate performance factor is zero (and no bonus can therefore be payable) unless a certain minimum level of both revenue and non-GAAP operating margin are achieved. 54 SANMINA CORPORATION Compensation Discussion and Analysis Step 2: Once the base corporate performance factor was determined, it was then adjusted by performance results in relation to five additional financial performance objectives: inventory turns, non-GAAP EBITDA, pre-tax ROIC, cash flow from operations and fourth quarter non-GAAP operating margin. Actual results above a certain goal for each of these additional objectives could result in an increase in the base corporate performance factor of up to 70%, and actual results below a specified threshold could result in decrease to the base corporate performance factor of up to 32%. Step 3: Final payout for each NEO was determined by this formula:
Determination of Fiscal 2019 Corporate Performance Factor As shown below, Sanmina’s financial performance in fiscal 2019 resulted in a corporate performance factor of 134% (compared to a maximum of 200% had all performance measures contained in the 2019 Bonus Plan been achieved in full). The calculations of both the base corporate performance factor and the adjustments are shown for 2019 in the table below: BASE CORPORATE BONUS FACTOR:
ADDITIONS (0% - 70%):
SUBTRACTIONS (0% - 32%):
2020 Proxy Statement 55 Compensation Discussion and Analysis CALCULATION OF ADJUSTED CORPORATE PERFORMANCE FACTOR:
Determination of Individual NEO Bonuses for Fiscal 2019
56 SANMINA CORPORATION Compensation Discussion and Analysis
2019 LONG-TERM EQUITY-BASED INCENTIVE AWARDS For 2019, our long-term equity incentive awards were comprised of:
Performance Stock Units In fiscal
This long-term incentive mix reflects the 2020 Proxy Statement 57 Compensation Discussion and Analysis The table below illustrates the performance conditions applicable to
58 SANMINA CORPORATION
Compensation Discussion and Analysis Restricted Stock Units The Committee also believes that the continued retention of our executive team is
Consistent with our pay-for-performance philosophy, Mr. 2020 Proxy Statement 59 Compensation Discussion and Analysis that are dependent on the achievement of financial goals. The Compensation Committee believes
Mr.
In addition, Mr.
Since Mr. Liebel’s appointment as CEO on September 30, 2019, Mr. Clarke has served as an advisor to
Compensation Discussion and Analysis In addition to the base salary, bonus and equity compensation discussed above, we provide our named executive officers with some additional benefits that the Committee has determined support attraction and retention of key talent, which include:
We do not provide the following types of perquisites to named executive officers:
IVOther 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.
Compensation Discussion and Analysis 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 our stock during such period. In addition, our Board has adopted a policy for reimbursement of all cash incentive awards received by all named executive officers under certain circumstances. This policy supplements, but does not replace, the reimbursement requirements of Section 304 discussed above. Under this policy, we shall seek reimbursement of all cash incentive compensation paid to any named executive officer during the 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 Executive Chairman and Chief Executive Officer, three times base salary, in the case of our Chief Financial Officer, and one and one-half times base salary in the case of the other named executive officers. Covered officers have five years to attain the guidelines. The equity counted towards achievement of the executive ownership guidelines includes shares owned outright, shares deemed to be beneficially owned under rules of the Securities and Exchange Commission and shares underlying unvested time-based restricted stock units. All NEOs have either satisfied the guidelines or are in the transition period to do so. Stock Hedging and Pledging Policy Our insider trading policy restricts hedging Tax and Accounting Considerations Section 162(m) of the Internal Revenue Code of 1986 limits the deductibility of compensation paid to named executive officers to $1 million. In previous years, there was an exemption from this $1 million deduction limit for compensation payments that qualified as Accounting rules require us to expense the GAAP-based grant-date fair values of our equity awards, which lowers the amount of our reported profits under U.S. GAAP. In recognition of this equity award expensing and the impact of dilution to our stockholders, we closely monitor the share amounts and the grant-date fair values of the equity awards that are granted each year and provide non-GAAP results that exclude this and certain other expenses that the Company has determined are infrequent, non-cash or not relating to our operational results. SeeAppendix B for reconciliation information. 62 SANMINA CORPORATION Compensation Discussion and Analysis V2020 Executive Compensation Program Changes
As mentioned above, Sanmina has implemented several important changes to its short-term and long-term incentive plans following discussions with stockholders and a proxy advisory firm. First, Sanmina has reduced the number of metrics used in the short-term cash bonus plan from six to three to increase transparency and assist stockholders in understanding how achievement of our short-term financial goals affects executive compensation. Second, in fiscal 2020, we are no longer granting performance-based equity awards to executive officers that vest upon achievement of single year financial targets. Instead, Sanmina is adopting multi-year measurement periods for performance-based equity for this group going forward using just a single financial metric, such that high performance must be sustained over several years in order for equity to vest. In this way, the Committee believes executives will be better incentivized to make decisions that drive long-term sustainable growth. 2020 Proxy Statement 63 Table of Contents
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 64 SANMINA CORPORATION
The following table presents the compensation earned by our Executive Chairman, Chief Executive Officer, our Chief Financial Officer and our three next most highly compensated executive officers for the fiscal years indicated.
2020 Proxy Statement 65
Executive Compensation Tables The following table presents information regarding grants of plan based awards made to each of our named executive officers during fiscal
66 SANMINA CORPORATION
Executive Compensation Tables
Stock Options The following table presents certain information concerning outstanding option awards held as of September
Executive Compensation Tables Stock Awards The following table presents certain information concerning the outstanding stock awards held as of September
68 SANMINA CORPORATION
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
2020 Proxy Statement 69
Executive Compensation Tables
Pursuant to deferred compensation plan by the named executive officers
70 SANMINA CORPORATION
Executive Compensation Tables Employment, Termination and Change in Control Arrangements Sanmina does not have employment agreements with any of its named executive officers. However, 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 Compensation Committee approved in December 2009 a change in control plan to provide benefits to such employees in the event that their employment terminates under certain circumstances following a change in control of Sanmina. These benefits consist of (1) payment, in a lump sum, of one to two times base salary and one times target bonus for the year, (2) acceleration in full of all unvested stock options and restricted stock held by the employee and (3) payment, in a lump sum, of premiums for continued health insurance coverage for a period of 18 months. The plan does not provide benefits unless the employee is terminated without cause or resigns for good reason within a specified period of time following a change in control. In addition, covered employees must execute a general release as a condition to receiving benefits. Sanmina believes that the benefits provided by the plan are comparable to those offered by peer group companies. Below is a table showing the potential benefits payable under such plan to the named executive officers of Sanmina who were serving as such as of the last day of fiscal
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 2020 Proxy Statement 71 Executive Compensation Tables or the 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.
Under SEC rules, we are required to provide the following information regarding the relationship between the annual total compensation of
This pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. We determined the median of the annual total compensation of our employees as of September For fiscal 2019, we determined our median employee as of September 28, 2019, which was the last day of fiscal 2019, at which time we (including our consolidated subsidiaries) had approximately Once we identified our median employee, we estimated such With respect to the annual total compensation of Mr. 2020 Proxy Statement 73
The following table sets forth certain information regarding the beneficial ownership of our common stock as of The information provided in this table is based on
74 SANMINA CORPORATION
Ownership of
2020 Proxy Statement 75
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 fiscal Employment of Relatives of Executive Chairman.Zeljko Sola, the brother of Jure Sola, our Executive Chairman, is a business development vice president at Sanmina, and earned or realized compensation of approximately
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
CHRISTOPHER K. SADEGHIAN January 22, 2020 78 SANMINA CORPORATION
Stock Ownership
2020 Proxy Statement 79 Questions and Answers About Procedural Matters
Quorum and Voting
Questions and Answers About Procedural Matters
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 8, 2020. 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. 2020 Proxy Statement 81
82 SANMINA CORPORATION
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.
(a) (b) (c) (d) (e) (f) (g) A change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group percent (50%) or more of the total voting power of the stock of the Company or of the ultimate parent entity of the Company, such event will not be considered a Change in Control under this subsection (i). For this purpose, indirect beneficial ownership will include, without 2020 Proxy Statement A-1 Appendix A Sanmina Corporation 2019 Equity Incentive Plan limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company, as the case may be, either directly or through one or more subsidiary corporations or other business entities; or 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)-month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this subsection (ii), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change in Control; or A change in the ownership of a substantial portion of the For purposes of this definition, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company. 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 (h) (i) (j)
(l) A-2 SANMINA CORPORATION Appendix A Sanmina Corporation 2019 Equity Incentive Plan (m) (n) (o) (p) (q) (r) The determination of fair market value for purposes of tax withholding may be made in the
Appendix A Sanmina Corporation 2019 Equity Incentive Plan (bb)“Performance
3. Stock Subject to the Plan. (a)Stock Subject to the (b)Full Value A-4 SANMINA CORPORATION Appendix A Sanmina Corporation 2019 Equity Incentive Plan (c)Lapsed (d)Share 4. Administration of the Plan. (a) (i)Multiple Administrative (ii)Rule (iii)Delegation to an 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. (iv)Other (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 hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Administrator will determine; 2020 Proxy Statement A-5 Appendix A Sanmina Corporation 2019 Equity Incentive Plan (vi) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan; (vii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable non-U.S. laws or for qualifying for favorable tax treatment under applicable non-U.S. laws; (viii) to modify or amend each Award (subject to 6(b) and Section 20(c) of the Plan) including but not limited to the discretionary authority to extend the post-termination exercisability period of Awards. Notwithstanding the previous sentence, the Administrator may not modify or amend an Option or Stock Appreciation Right to reduce the exercise price of such Option or Stock Appreciation Right after it has been granted (except for adjustments made pursuant to Section 15), and neither may the Administrator cancel any outstanding Option or Stock Appreciation Right in exchange for cash, other awards or an Option or Stock Appreciation Right with an exercise price that is less than the exercise price of the original Option or Stock Appreciation Right, or implement any other type of Exchange Program, unless such action is approved by stockholders prior to such action being taken; (ix) to allow Participants to satisfy tax withholding obligations in such manner as prescribed in Section 16 of the Plan; (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; (xi) to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under an Award pursuant to such procedures as the Administrator may determine; and (xii) to make all other determinations deemed necessary or advisable for administering the Plan. (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 (b)One-Year Vesting (c)Dividends and Other (d)Outside Director A-6 SANMINA CORPORATION Appendix A Sanmina Corporation 2019 Equity Incentive Plan (e)Chief Executive Officer Holding 7. Stock Options. (a) (b)Number of (c)Term of (d) (i)Exercise (ii)Waiting Period and Exercise (iii)Form of (e) (i)Procedure for Exercise; Rights as a 2020 Proxy Statement A-7 Appendix A Sanmina Corporation 2019 Equity Incentive Plan (ii)Termination of Relationship as a Service 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)Tolling (1) if the exercise of the Option following the termination of (2) if the exercise of the Option following the termination of the 8. Stock Appreciation Rights. (a)Grant of Stock Appreciation (b)Number of A-8 SANMINA CORPORATION Appendix A Sanmina Corporation 2019 Equity Incentive Plan (c)Exercise Price and Other (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; by (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 may be in cash, in Shares of equivalent value, or in some combination thereof. 9. Restricted Stock. (a)Grant of Restricted (b)Restricted Stock (c) (d)Other (e)Removal of (f)Voting (g)Dividends and Other (h)Return of Restricted Stock to 2020 Proxy Statement A-9 Appendix A Sanmina Corporation 2019 Equity Incentive Plan 10. Restricted Stock Units. (a) (b)Vesting Criteria and Other (c)Earning Restricted Stock (d)Form and Timing of (e) 11. Performance Units and Performance Shares. (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 performance objectives or other vesting provisions for such Performance Unit/Share. Notwithstanding the foregoing, any outstanding Performance Units/Shares held by a Participant who dies while a Service Provider will accelerate upon the (e)Form and Timing of Payment of Performance Units/ (f)Cancellation of Performance Units/ 12. Compliance With Code Section 409A.Awards will be designed and operated in such a manner that they are either exempt from the application of, or comply with, the requirements of Section 409A such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Section 409A, except as otherwise determined in the sole discretion of the Administrator. The Plan and each Award Agreement under the Plan is intended to meet the requirements of Section 409A and will be construed and interpreted in accordance with such intent, except as otherwise determined in the sole discretion of the Administrator. To the extent that an Award or payment, or the settlement or deferral thereof, is subject to Section 409A the Award will be granted, paid, settled or deferred in a manner that will meet the requirements of Section 409A, such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Section 409A. In no event will the Company (or any Parent or Subsidiary of the Company, as applicable) reimburse a Participant for any taxes imposed or other costs incurred as a result of Section 409A. 13. Leaves of Absence/Transfer Between Locations.Unless the Administrator provides otherwise or as provided by written Company policies, vesting of Awards granted hereunder will be suspended during any unpaid leave of absence or as provided by written Company policies. A Service Provider will not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company and its Affiliates. For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then six (6) months and one day following the commencement of such leave any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option. 14. Transferability of Awards.Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. With the approval of the Administrator, a Participant may, in a manner specified by the Administrator, (a) transfer an Award to a 2020 Proxy Statement A-11 Appendix A Sanmina Corporation 2019 Equity Incentive Plan 15. Adjustments; Dissolution or Liquidation; Merger or Change in Control. (a) (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 such Award with performance-based vesting, 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 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) received in the Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change in Control is not solely common stock of the Successor Corporation or its Parent, the Administrator may, with the consent of the Successor Corporation, provide for the consideration to be received upon the exercise of an Option or Stock Appreciation Right or upon the payout of a Restricted Stock Unit, Performance Unit or Performance Share, for each Share subject to such Award, to be solely common stock of the Successor Corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the Change in Control. Notwithstanding anything in this Section 15(c) to the contrary, an Award that vests, is earned or paid-out upon the satisfaction of one or more performance goals will not be considered assumed if the Company or its successor modifies any of such performance goals without the A-12 SANMINA CORPORATION Appendix A Sanmina Corporation 2019 Equity Incentive Plan (d)Outside Director 16. Tax. (a)Withholding (b)Withholding 17. No Effect on Employment or Service.Neither the Plan nor any Award will confer upon a Participant any right with respect to continuing the 18. Date of Grant.The date of grant of an Award will be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination will be provided to each Participant within a reasonable time after the date of such grant. 19. Term of Plan.Subject to Section 24 of the Plan, the Plan will become effective upon its adoption by the Board. It will continue in effect for a term of ten (10) years from the date adopted by the Board, unless terminated earlier under Section 20 of the Plan. 20. Amendment and Termination of the Plan. (a)Amendment and (b)Stockholder 2020 Proxy Statement A-13 Appendix A Sanmina Corporation 2019 Equity Incentive Plan (c)Effect of Amendment or 21. Conditions Upon Issuance of Shares. (a)Legal (b)Investment 22. Inability to Obtain Authority.The inability of the Company to obtain authority from any regulatory body having jurisdiction or to complete or comply with the requirements of any registration or other qualification of the Shares under any U.S. federal or state law, any non-U.S. law, or the rules and regulations of the Securities and Exchange Commission, the stock exchange on which Shares of the same class are then listed, or any other governmental or regulatory body, which authority, registration, qualification or rule compliance is deemed by the 23. Clawback.The Administrator may specify in an Award Agreement that the 24. Stockholder Approval.The Plan will be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws. A-14 SANMINA CORPORATION
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.
2020 Proxy Statement B-1
Appendix B Reconciliation of Non-GAAP Measures
Management has excluded from these non-GAAP measures above stock-based compensation, restructuring, acquisition and integration expenses, impairment charges, amortization charges and other infrequent items, as adjusted for taxes, to the extent material or which we consider to be of a non-operational nature in the applicable period, and as more fully described below. Management excludes these items principally because such charges are not directly related to the Additional information regarding the economic substance of each exclusion, Stock-based Compensation Expense, which consists of non-cash charges for the estimated fair value of stock options and unvested restricted stock units granted to employees, is excluded in order to permit more meaningful period-to-period comparisons of the B-2 SANMINA CORPORATION Appendix B Reconciliation of Non-GAAP Measures Restructuring, Acquisition and Integration Expenses, which consist of severance, lease termination, 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 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 Impairment Charges, which consist of non-cash charges, are excluded because such charges are non-recurring and do not reduce the 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 Other Infrequent Items, which consist of other infrequent or unusual items (including charges associated with distressed customers, litigation settlements, and gains and losses on sales of assets and redemptions of debt), to the extent material or non-operational in nature, are excluded because such items are typically non-recurring, difficult to predict or not directly related to the Adjustments for Taxes, which consist of the tax effects of the various adjustments that we include in our non-GAAP measures, and adjustments related to deferred tax and discrete tax items. Including these adjustments permits more accurate comparisons of the 2020 Proxy Statement B-3 SANMINA CORPORATION THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS NOTICE OF ANNUAL MEETING OF STOCKHOLDERS 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 authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of Sanmina Corporation that the stockholder is/are entitled to vote at the Annual Meeting of Stockholders to be held at 11:00 AM Pacific Standard Time on March 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 INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS OF SANMINA CORPORATION FOR ITS FISCAL YEAR ENDING SANMINA CORPORATION
SAN JOSE, CALIFORNIA 95134 VOTE BY INTERNET—www.proxvvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Standard Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access stockholder communications electronically in future years. VOTE BY PHONE—1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Standard Time on the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. SANMINA CORPORATION The Board of Directors recommends a vote FOR the following proposal(s).
The Board of Directors recommends a vote FOR the following proposals.
and, in their discretion, upon such other matter or matters which may properly come before the meeting or any adjournment or postponement thereof. THIS PROXY WHEN EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL. (This Proxy should be marked, dated and signed by the stockholder(s) exactly as his, her or its name appears hereon, and returned promptly in the enclosed envelope. Persons signing in a fiduciary capacity should so indicate. If shares are held by joint tenants or as community property, both should sign.)
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