<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Solectron Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
LOGO
SOLECTRON CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 12, 1999
To the Stockholders of Solectron Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Solectron
Corporation (the "Company"), a Delaware corporation, will be held on Tuesday,
January 12, 1999, at 9:00 a.m., local time, at The Sheraton San Jose, 1801
Barber Lane, Milpitas, California 95035, for the following purposes:
1. To elect ten (10) directors to serve for the ensuing year and until
their successors are duly elected and qualified.
2. To amend the Company's 1992 Stock Option Plan to increase the
number of shares reserved for issuance thereunder by 5,700,000 shares.
3. To ratify the appointment of KPMG Peat Marwick LLP as independent
accountants of the Company for the fiscal year ending August 27, 1999.
4. To approve an amendment to the Company's Certificate of
Incorporation increasing the number of authorized shares of Common Stock of
the Company from 200,000,000 to 400,000,000 shares.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on November 17, 1998
are entitled to notice of and to vote at the meeting and any adjournment
thereof.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign and return the enclosed proxy card as promptly as possible in the
postage-paid envelope enclosed for that purpose. Any stockholder attending the
meeting may vote in person even if he or she has already returned a proxy.
By Order of the Board of Directors,
/s/ SUSAN WANG
Susan Wang
Secretary
Milpitas, California
December 11, 1998
YOUR VOTE IS IMPORTANT
TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT
IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
<PAGE> 3
SOLECTRON CORPORATION
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
------------------------
GENERAL
The enclosed Proxy is solicited on behalf of Solectron Corporation (the
"Company"), for use at the Annual Meeting of Stockholders to be held on Tuesday,
January 12, 1999, at 9:00 a.m., local time, or at any adjournment or
postponement thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Stockholders. The Annual Meeting will be held at The
Sheraton San Jose, 1801 Barber Lane, Milpitas, California, 95035. The Company's
telephone number is (408) 957-8500.
These proxy solicitation materials were mailed on or about December 11,
1998 to all stockholders of record at the close of business on November 17, 1998
(the "Record Date"). A copy of the Company's Annual Report to Stockholders for
the year ended August 28, 1998 ("Fiscal 1998"), including financial statements,
was sent to the stockholders prior to or concurrently with this Proxy Statement.
RECORD DATE; OUTSTANDING SHARES
Stockholders of record at the close of business on the Record Date are
entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. At the Record Date, 118,655,418 shares of the Company's Common Stock
were issued and outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to the solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing a
written notice of revocation bearing a later date than the proxy with the
Secretary of the Company (currently Susan Wang) at or before the taking of the
vote at the Annual Meeting, (ii) duly executing a later dated proxy relating to
the same shares and delivering it to the Secretary of the Company at or before
the taking of the vote at the Annual Meeting or (iii) attending the Annual
Meeting and voting in person (although attendance at the Annual Meeting will not
in and of itself constitute a revocation of a proxy). Any written notice of
revocation or subsequent proxy should be delivered to the Secretary of the
Company, or hand-delivered to the Secretary of the Company at or before the
taking of the vote at the Annual Meeting.
VOTING AND SOLICITATION
On all matters other than the election of directors, each share has one
vote. See "Proposal One -- ELECTION OF DIRECTORS -- Required Vote."
The cost of soliciting proxies will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for expenses incurred in forwarding solicitation
materials to such beneficial owners. Proxies may be solicited by certain of the
Company's directors, officers and regular employees, without additional
compensation, personally or by telephone, telegraph or letter.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting
is a majority of the votes eligible to be cast by holders of shares of Common
Stock issued and outstanding on the Record Date. Shares that are voted "FOR,"
"AGAINST" or "ABSTAIN" are treated as being present at the meeting for purposes
<PAGE> 4
of establishing a quorum and are also treated as shares entitled to vote at the
Annual Meeting (the "Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to a proposal (other than the election of directors). In the
absence of a controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, abstentions will have the same effect
as a vote against the proposal.
In a 1988 Delaware case, Berlin v. Emerald Partners, the Delaware Supreme
Court held that, while broker non-votes should be counted for purposes of
determining the presence or absence of a quorum for the transaction of business,
broker non-votes should not be counted for purposes of determining the number of
Votes Cast with respect to the particular proposal on which the broker has
expressly not voted. Accordingly, the Company intends to treat broker non-votes
in this manner. Thus, a broker non-vote will not have any effect on the outcome
of the voting on a proposal.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR ANNUAL MEETING FOR FISCAL YEAR
1999
Proposals of stockholders of the Company which are to be presented by such
stockholders at the Company's Annual Meeting for the year ending August 27, 1999
("Fiscal 1999") must be received by the Company no later than August 6, 1999 in
order that they may be included in the Proxy Statement and form of proxy
relating to that meeting. Such stockholder proposals should be submitted to
Solectron Corporation at 847 Gibraltar Drive, Milpitas, CA 95035 Attention:
Secretary.
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
The Company's Board of Directors (the "Board") currently consists of ten
persons. All ten positions on the Board are to be elected at this meeting.
Unless otherwise instructed, the proxyholders will vote the proxies received by
them for the Company's nominees named below, all of whom are presently directors
of the Company. In the event that any nominee of the Company 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 present Board to
fill the vacancy. In the event additional persons are nominated for election as
directors, the proxyholders intend to vote all proxies received by them in such
a manner in accordance with cumulative voting as will ensure the election of as
many of the nominees listed below as possible, and in such event, the specific
nominees to be voted for will be determined by the proxyholders. The Company is
not aware of any nominee who will be unable or will decline to serve as a
director. The term of office of each person elected as a director will continue
until the next Annual Meeting of Stockholders or until his successor has been
elected and qualified.
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The names of the nominees, and certain information about them, are set
forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- --------------------------------------------- --------
<S> <C> <C> <C>
Richard A. D'Amore (1)................ 45 General Partner, North Bridge Venture 1985
Partners
Dr. Winston H. Chen (4)............... 57 Chairman, Paramitas Foundation 1978
Charles A. Dickinson(1),(3),(4)....... 74 Independent Management Consultant 1984
Heinz Fridrich (2),(4)................ 65 Faculty, University of Florida 1996
Dr. Philip Gerdine (2)................ 59 Executive Director, Siemens AG 1998
William Hasler (3),(4)................ 56 Co-Chief Executive Officer, Aphton 1998
Corporation
Dr. Kenneth E. Haughton (3)........... 70 Independent Consultant 1985
Dr. Paul R. Low (2)................... 65 President, PRL Associates 1993
Dr. Koichi Nishimura.................. 60 President, Chief Executive Officer and 1991
Chairman of the Board of the Company
Osamu Yamada (1)...................... 69 Independent International Management 1994
Consultant
</TABLE>
- ---------------
(1) Member of the Nominating Committee.
(2) Member of the Audit and Finance Committee.
(3) Member of the Compensation Committee.
(4) Member of Information Technology Committee.
Except as set forth below, each of the nominees has been engaged in his
principal occupation set forth above during the past five (5) years. There is no
family relationship between any director or executive officer of the Company.
Dr. Koichi Nishimura has served as a director of the Company since 1991,
and Chairman of the Board since September 1996. He has served as Chief Executive
Officer since 1992 and President since 1990. He was Co-Chief Executive Officer
from 1991 to 1992 and Chief Operating Officer from 1988 to 1991. From 1964 to
1988, Dr. Nishimura was employed by International Business Machines Corporation
("IBM") in various technology and management positions. He also serves as a
director of Merix Corporation.
Dr. Winston H. Chen is a founder of the Company and has served as a
director of the Company since 1978, Chairman of the Board of Directors from 1990
to March 1994, President from 1979 to 1990, Chief Executive Officer from 1984 to
1991, and as Co-Chief Executive Officer from 1991 to 1992. Dr. Chen is currently
Chairman of Paramitas Foundation, a position he has held since 1990. From 1970
to 1978, Dr. Chen served as Process Technology and Development Manager of IBM.
He also serves as a director of Intel Corporation and Edison International.
Mr. Richard A. D'Amore has served as a director of the Company since 1985.
Mr. D'Amore is a general partner of North Bridge Venture Partners. He also
serves as a director of Veeco Instruments Inc., and Xionics Document
Technologies, Inc.
Mr. Charles A. Dickinson has served as a director of the Company since
1984, and served as Chairman of the Board of Directors from 1986 to 1990 and
from 1994 to September 1996. He served as an independent management consultant
to the Company from 1991 to 1993. He served as President, Solectron Europe, from
1993 to February 1996. From 1986 to 1990, Mr. Dickinson was Chairman of the
Board of Directors, President and Chief Executive Officer of Vermont Micro
Systems, Inc. He also serves as a director of Trident Microsystems, Inc., and
LeCroy Corporation.
Mr. Heinz Fridrich has served as a director of the Company since April
1996. He has been a member of the faculty of the University of Florida since
1993. From 1950 to 1993, Mr. Fridrich held a number of manufacturing and
operations management positions in Europe and the United States with IBM. He
also serves as a director of Central Hudson Gas & Electric Company and Veeco
Instruments, Inc.
Dr. Philip V. Gerdine has served as a director of the Company since May
1998. Dr. Gerdine served as Executive Director, Siemens AG and as managing
director of The Plessey Company from September 1989 to
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September 1998 and previously was Vice President-Corporate Development of
Siemens Corporation. Dr. Gerdine has held senior management positions with
General Electric Co., Price Waterhouse and The Boston Consulting Group. He
currently serves as a director of Applied Materials, Inc.
Mr. William A. Hasler has served as a director of the Company since May
1998. Mr. Hasler is currently co-chief executive officer of Aphton Corporation,
an international biotechnology firm. Prior to joining Aphton, he was Dean and
Department Chair of the Haas School of Business at the University of California,
Berkeley. He currently serves as a director of Quickturn Design Systems, Inc.,
Walker Interactive Systems Inc., TCSI Corporation and Tenera, Inc.
Dr. Kenneth E. Haughton has served as a director of the Company since 1985.
Since 1991, Dr. Haughton has been an independent consultant. From 1990 to 1991,
he was Vice President of Engineering at Da Vinci Graphics. From 1989 to 1990,
Dr. Haughton was an independent consultant, and from 1982 to 1989, he served as
Dean of Engineering at Santa Clara University. He also serves as a director of
Seagate Technology.
Dr. Paul R. Low has served as a director of the Company since 1993. He is
currently President of PRL Associates, a position he has held since 1992. Dr.
Low worked for IBM from 1957 to 1992. During his tenure at IBM, Dr. Low held
senior management and executive positions with successively increasing
responsibility, including President, General Technology Division and IBM
Corporate Vice President; President of General Products Division; and General
Manager, Technology Products business line, also serving on IBM's corporate
management board. He also serves as a director of Applied Materials, Inc., Veeco
Instruments, Inc., NCD and Xion.
Mr. Osamu Yamada has served as a director of the Company since 1994. Mr.
Yamada has been an independent international business consultant since November
1996. From October 1991 to November 1996, Mr. Yamada served as an advisor to The
Mitsubishi Bank, Limited and the Bank of Tokyo/Mitsubishi. From 1990 to 1991, he
was Chairman and Chief Executive Officer of BankCal Tri-State Corporation, a
wholly owned subsidiary of The Mitsubishi Bank, Limited. From 1987 to 1990, he
was Senior Managing Director of The Mitsubishi Bank, Limited, and in an
overlapping period from 1985 to 1990, he was also Chairman, President and Chief
Executive Officer of Bank of California. Prior to 1985, he held a number of key
management positions with The Mitsubishi Bank, Limited organization. Mr. Yamada
currently serves on a number of boards of major universities and cultural
centers.
There is no family relationship among any of the foregoing individuals.
BOARD MEETINGS AND COMMITTEES
The Board held a total of 6 regular meetings and 9 telephonic meetings
during Fiscal 1998.
During Fiscal 1998, each director attended more than 75% of the meetings of
the Board and meetings of committees upon which such director served.
The Audit and Finance Committee of the Board currently consists of Dr. Paul
R. Low, Heinz Fridrich and Dr. Philip Gerdine. This committee oversees the
Company's internal financial control systems and procedures, reviews and
approves the Company's financial statements and coordinates and approves the
activities of the Company's auditors. The Audit Committee held 6 meetings during
Fiscal 1998.
The Compensation Committee of the Board is currently composed of Dr.
Kenneth E. Haughton, Charles A. Dickinson and William Hasler. This committee is
responsible for establishing compensation guidelines for executives of the
Company, reviewing and approving executive bonus plans and providing guidance
with respect to other compensation issues, such as incentive stock option
grants. The Compensation Committee held a total of 2 meetings during Fiscal
1998.
The Nominating Committee of the Board currently consists of Charles A.
Dickinson, Dr. Winston H. Chen, Richard A. D'Amore and Osamu Yamada. This
committee is responsible for the development of general criteria regarding the
qualifications and selection of board members and recommends candidates for
election to the Board. The Nominating Committee held 1 meeting during Fiscal
1998.
The Information Technology Committee of the Board was recently established
and currently consists of Heinz Fridrich, Charles A. Dickinson and William
Hasler. This committee is responsible for addressing the
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Company's Information Technology needs from the Board's perspective. The
Information Technology Committee held no meetings during Fiscal 1998.
DIRECTOR COMPENSATION
Directors who are not employees of the Company ("Outside Directors")
receive annual retainers of $16,800. In addition, each Outside Director is paid
$2,200 for each meeting of the Board attended, as well as $500 for each
telephonic meeting of the Board attended, in Fiscal 1998. Outside Directors may
also receive consulting fees for projects completed at the request of
management. Employee directors are not compensated for their service on the
Board or on committees of the Board.
Options to purchase shares of the Company's Common Stock are granted to
Outside Directors under the 1992 Stock Option Plan (the "Option Plan") only in
accordance with an automatic, non-discretionary grant mechanism. The Option Plan
provides, with respect to Outside Directors, for an automatic grant on December
1 of each year of a nonstatutory option to purchase six thousand (6,000) shares
(pro rata for the portion of the first fiscal year of service as an Outside
Director) of the Company's Common Stock at a per share exercise price of one
hundred percent (100%) of the fair market value on the date of grant. Please see
"Proposal Two -- Amendment of 1992 Stock Option Plan -- Automatic Grants to
Outside Directors."
REQUIRED VOTE
Each stockholder voting in the election of directors is entitled to
cumulate such stockholder's votes. Each stockholder who elects to cumulate votes
shall be entitled to as many votes as equals the number of directors to be
elected multiplied by the number of shares held by such stockholder, and the
stockholder may cast all such votes for a single director or distribute such
votes among as many candidates as the stockholder may see fit. However, no
stockholder shall be entitled to cumulate votes unless the candidate's name has
been placed in nomination prior to the voting and the stockholder, or any other
stockholder, has given notice at the meeting prior to the voting of the
intention to cumulate the votes. The ten nominees receiving the highest number
of affirmative votes of the shares entitled to be voted for them shall be
elected as directors. Votes withheld from any director are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business, but have no other legal effect under Delaware law. Abstentions and
shares held by brokers that are present but not voted, because the brokers were
prohibited from exercising discretionary authority ("Broker Non-Votes"), will be
counted as present for purposes of determining the presence or absence of a
quorum.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" THE NOMINEES LISTED ABOVE.
PROPOSAL TWO
AMENDMENT OF 1992 STOCK OPTION PLAN
GENERAL
The Company's 1992 Stock Option Plan (the "Option Plan") was adopted by the
Board in October 1992 and approved by the stockholders in January 1993, and a
total of one million, six hundred thousand (1,600,000) shares of Common Stock
were initially reserved for issuance thereunder. In September 1993, the Board
amended the Option Plan to increase the number of shares reserved for issuance
thereunder to an aggregate of four million (4,000,000) shares, and such
amendment was approved by the stockholders in January 1994. In November 1994,
the Board approved an amendment to the Option Plan increasing the number of
shares reserved for issuance thereunder by two million (2,000,000) shares to an
aggregate of six million (6,000,000) shares, and such amendment was approved by
the stockholders in January 1995. On September 25, 1996, the Board approved an
amendment to the Option Plan increasing the number of shares reserved for
issuance thereunder by two million, five hundred thousand (2,500,000) shares to
an aggregate of eight million, five hundred thousand (8,500,000) shares, and
such amendment was approved by the stockholders in January 1997. On November 18,
1998 the Board approved an amendment to the Option Plan
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increasing the number of shares reserved for issuance thereunder by five
million, seven hundred thousand (5,700,000) shares to an aggregate of fourteen
million, two hundred thousand (14,200,000) shares.
The Board of Directors believes that it is in the Company's best interest
to amend the Option Plan and increase the number of shares reserved for issuance
thereunder so that the Company may attract and retain high quality employees
necessary to build the Company's infrastructure and continue to provide ongoing
incentives to the Company's employees in the form of options to purchase the
Company's Common Stock.
The Option Plan provides for the granting to employees of "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), and for the granting of nonstatutory options to
employees, directors and consultants.
PURPOSE
The principal purpose of the Option Plan is to provide equity incentives to
the Company's employees, consultants and Outside Directors by enabling them to
participate in the Company's success and to encourage the participants'
continued service to the Company.
ADMINISTRATION
The Option Plan may be administered by the Board of Directors or by a
committee, and is currently being administered by the Compensation Committee of
the Board of Directors (the "Administrator"). Grants of options under the Plan
shall be made by the Board or a committee. No member of the Board or committee
may vote on any option to be granted him or take part in any consideration of
the Plan as it may apply to him. Grants of options to directors who are
employees may be made by the Board if a majority of the directors are
"disinterested persons" or by a committee consisting of two or more
"disinterested persons," and grants of options to nonemployee directors may be
made only as described in the "Eligibility" section below. The interpretation
and construction of any provision of the Option Plan is within the sole
discretion of the Board or committee, whose determination is final and
conclusive. Members of the Board or committee receive no additional compensation
for their services in connection with the administration of the Option Plan.
Copies of the Option Plan are available upon request at the Company's principal
executive offices.
ELIGIBILITY
The Option Plan provides that options may be granted to employees
(including officers and directors who are also employees), consultants of the
Company or any parent or majority-owned subsidiary and Outside Directors.
Incentive stock options may be granted only to employees. The Administrator
selects the optionees and determines the number of shares to be subject to each
option and the time or times at which shares become exercisable under the
option. In making such determination, the duties and responsibilities of the
employee or consultant, the value of his or her services, his or her present and
potential contribution to the success of the Company, the anticipated number of
years of future service and other relevant factors are taken into account.
Generally, such options become exercisable or "vest" at the rate of one
forty-eighth ( 1/48) of the shares subject to the option per month. Each option
may be exercised only to the extent it is vested. As of November 17, 1998, there
were options to purchase 9,775,841 shares outstanding under the Option Plan, and
there were approximately 2,000 employees eligible to participate in the Option
Plan.
AUTOMATIC GRANTS TO OUTSIDE DIRECTORS
The Option Plan provides that nonstatutory options are automatically
granted to Outside Directors on a yearly basis on December 1, in order to
provide an incentive to Outside Directors of the Company (the "Automatic Grant
Program"). The initial grant of six thousand (6,000) shares is pro rated for the
portion of the first fiscal year of service as an Outside Director. The exercise
price of options granted under the Automatic Grant Program is the fair market
value of the Company's Common Stock on the date of the automatic grant. Outside
Directors may not be granted options under the Option Plan except under the
Automatic Grant Program. Options granted to Outside Directors become exercisable
cumulatively with
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respect to one-twelfth ( 1/12) of the underlying shares on the first day of each
month following the date of grant of such option. Options granted to Outside
Directors have a term of five (5) years from the date of grant.
TERMS OF OPTIONS
The terms of options granted under the Option Plan (other than options
granted to Outside Directors pursuant to the Automatic Grant Program (the
"Outside Director Options") are determined by the Administrator. Each option
granted under the Option Plan is evidenced by a written stock option agreement
between the Company and the optionee and is subject to the following additional
terms and conditions:
(a) Exercise of Option. Options under the Option Plan generally become
exercisable as to one forty-eighth ( 1/48) of the underlying shares after each
month from the date of grant.
An option granted under the Option Plan is exercised by giving written
notice of exercise to the Company, specifying the number of full shares of
Common Stock to be purchased and tendering payment of the purchase price to the
Company. Payment for shares issued upon exercise of an option may consist of
cash, check, promissory note, other shares of the Company's Common Stock or any
combination of such methods of payment, or such other consideration and method
of payment as is permitted under the Delaware General Corporation Law.
(b) Exercise Price. The per share exercise price of options granted under
the Option Plan (other than Outside Director options) is determined by the
Administrator and, in the case of incentive stock options, may not be less than
one hundred percent (100%) of the fair market value on the date of grant.
However, in the case of incentive stock options granted to an optionee who owns
more than ten percent (10%) of the voting power or value of all classes of stock
of the Company, the per share exercise price must not be less than one hundred
ten percent (110%) of the fair market value on the date of grant. The exercise
price of nonstatutory options may be less than one hundred percent (100%), but
shall be no less than eighty-five percent (85%), of the fair market value of the
Company's Common Stock on the date of grant, if the Administrator determines
that a discount from the fair market value is appropriate in lieu of the payment
of a reasonable amount of salary or cash bonus to the optionee. For so long as
the Company's Common Stock is listed on any established stock exchange or a
national market system, including without limitation the New York Stock Exchange
(the "NYSE"), the fair market value of a share of Common Stock shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in Common Stock) on the date of grant of the Option,
as reported in The Wall Street Journal or such other source as the Administrator
deems reliable.
(c) Termination of Status as an Employee, Consultant or Outside
Director. If the optionee's employment or consulting relationship with the
Company or status as an Outside Director is terminated for any reason (other
than death or disability), options may be exercised within thirty (30) days (or
such other period of time not exceeding three (3) months as is determined by the
Administrator) after such termination as to all or part of the shares as to
which the optionee was entitled to exercise at the date of such termination.
(d) Death or Disability of Optionee. Options may be exercised within no
more than six (6) months following termination because of a permanent and total
disability or by the employee's estate after his or her death.
(e) Term and Termination of Options. Options granted under the Option Plan
may have a term of ten (10) years and generally have a term of seven (7) years
from the date of grant. No option may be exercised by any person after the
expiration of its term. In the case of an incentive stock option granted to an
optionee who, immediately before the grant of such option, owns more than ten
percent (10%) of the voting power or value of all classes of stock of the
Company, the term of such incentive stock option may not exceed five (5) years.
(f) Non-Transferability of Options. An option is not transferable by the
optionee, other than by will or the laws of descent or distribution, and is
exercisable during the optionee's lifetime only by the optionee. In the event of
the optionee's death, options may be exercised by a person who acquires the
right to exercise the option by bequest or inheritance.
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(g) Other Provisions. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Option Plan as may be
determined by the Administrator.
CHANGES IN CAPITALIZATION
In the event a change, such as a stock split or stock dividend payable in
Common Stock, is made in the Company's capitalization, which results in an
exchange of Common Stock for a greater or lesser number of shares without
receipt of consideration by the Company, appropriate adjustment shall be made in
the option price and number of shares subject to outstanding options.
Appropriate adjustment will also be made in the number of shares of Common Stock
which have been authorized for issuance under the Option Plan but as to which no
options have yet been granted or which have been returned to the Option Plan
upon cancellation of an option. Such adjustments shall be made by the Board of
Directors, whose determination shall be final and conclusive, subject to any
required action by the stockholders of the Company.
In the event of the proposed dissolution or liquidation of the Company,
options outstanding under the Option Plan will terminate immediately prior to
the consummation of such proposed action, unless otherwise provided by the
Board. The Board may in the exercise of its discretion, declare that any
outstanding option shall terminate as of a date fixed by the Board and give each
optionee the right to exercise his or her option as to all or any part of the
optioned stock, including shares as to which the option would not otherwise be
exercisable. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, outstanding options shall be assumed or an equivalent option shall
be substituted by such successor corporation (or a parent or subsidiary of such
successor corporation), unless such successor corporation does not agree to
assume the options or to substitute an equivalent option, in which case the
optionee shall have the right to exercise all outstanding options as to all of
the optioned stock, including shares as to which the option would not otherwise
be exercisable. If the Board makes an outstanding option fully exercisable in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Board shall notify the optionee that his or her outstanding options shall be
fully exercisable for a period of thirty (30) days from the date of such notice,
and the option will terminate upon the expiration of such period.
AMENDMENT AND TERMINATION OF THE OPTION PLAN
Except with respect to the Automatic Grant Program, the Board may amend or
terminate the Option Plan from time to time in such respects as the Board may
deem advisable; provided that, to the extent necessary and desirable to comply
with Rule 16b-3 promulgated under the Exchange Act, or with Section 422 of the
Code or any other successor or applicable law or regulation, the Company shall
obtain stockholder approval of any Option Plan amendment in such a manner and to
such a degree as is required by the applicable law, rule or regulation. The
Automatic Grant Program may only be amended once every six (6) months. Any
amendment or termination of the Option Plan shall not affect options already
granted and such options shall remain in full force and effect as if the Option
Plan had not been amended or terminated, unless mutually agreed otherwise
between the optionee and the Administrator, which agreement must be in writing
and signed by the optionee and the Company.
The Option Plan will continue to require stockholder approval of amendments
in accordance with federal tax laws and regulations applicable to incentive
stock option plans, to the extent the Company desires that the Option Plan
continue to qualify for the grant of incentive stock options thereunder. The
Code and the rules and regulations thereunder governing incentive stock option
plans currently require stockholder approval for any increase in the number of
shares issuable under a plan and for changes in the eligibility standards under
a plan.
In any event, the Option Plan shall terminate in 2002. Any options
outstanding under the Option Plan at the time of termination shall remain
outstanding until they expire by their terms.
8
<PAGE> 11
TAX INFORMATION
Options granted under the Option Plan may be either "incentive stock
options," as defined in Section 422 of the Code or nonstatutory options.
Incentive Stock Options. If an option granted under the Option Plan is an
incentive stock option, the optionee will recognize no income upon grant of the
incentive stock option and incur no tax liability due to the exercise unless the
optionee is subject to the alternative minimum tax. The Company will not be
allowed a deduction for federal income tax purposes as a result of the exercise
of an incentive stock option regardless of the applicability of the alternative
minimum tax. Upon the sale or exchange of the shares at least two (2) years
after grant of the option and one (1) year after receipt of the shares by the
optionee, any gain will be treated as long-term capital gain. If these holding
periods are not satisfied, the optionee will recognize ordinary income equal to
the difference between the exercise price and the lower of the fair market value
of the stock at the date of the option exercise or the sale price of the stock.
A different rule for measuring ordinary income upon such a premature disposition
may apply if the optionee is also an officer, director or ten percent (10%)
stockholder of the Company. The Company will be entitled to a deduction in the
same amount as the ordinary income recognized by the optionee. Any gain
recognized by the optionee on such a premature disposition of the shares in
excess of the amount treated as ordinary income will be characterized as capital
gain or loss.
Nonstatutory Options. All other options which do not qualify as incentive
stock options are referred to as nonstatutory options. An optionee will not
recognize any taxable income at the time he or she is granted a nonstatutory
option. However upon its exercise, the optionee will recognize ordinary income
for tax purposes measured by the excess of the then fair market value of the
shares over the option price. In certain circumstances, where the shares are
subject to a substantial risk of forfeiture when acquired or where the optionee
is an officer, director or ten percent (10%) stockholder of the Company, the
date of taxation may be deferred unless the optionee files an election with the
Internal Revenue Service under Section 83(b) of the Code. The income recognized
by an optionee who is also an employee of the Company will be subject to tax
withholding by the Company. Upon resale of such shares by the optionee, any
difference between the sales price and the exercise price, to the extent not
recognized as ordinary income as provided above, will be treated as capital gain
or loss. The Company will be entitled to a tax deduction in the amount and at
the time that the Optionee recognizes ordinary income with respect to shares
acquired upon exercise of a nonstatutory option.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company, with respect to the grant and exercise of
options under the Option Plan, does not purport to be complete and does not
discuss the income tax laws of any municipality, state or foreign country in
which an optionee may reside.
STOCK PRICE
The closing price of a share of the Company's Common Stock on the NYSE on
November 17, 1998 was $68.
PLAN BENEFITS
The Company cannot now determine the exact number of options to be granted
in the future to the executive officers named under "EXECUTIVE OFFICER
COMPENSATION -- Summary Compensation Table," all current executive officers as a
group or all other employees (including current officers who are not executive
officers) as a group. See "EXECUTIVE OFFICER COMPENSATION -- Stock Option Grants
and Exercises" for the number of stock options granted to the executive officers
named in the Summary Compensation Table in fiscal 1998. In fiscal 1998, options
to purchase 105,000 shares of Common Stock of the Company were granted to all
current executive officers as a group and options to purchase 2,172,605 shares
of Common Stock of the Company were granted to all other employees (including
current officers who are not executive officers) as a group.
9
<PAGE> 12
REQUIRED VOTE
The affirmative vote of a majority of the votes cast is required to approve
the amendment to the Company's Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
AMENDMENT TO THE 1992 STOCK OPTION PLAN.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected KPMG Peat Marwick LLP ("KPMG"),
independent public accountants, to audit the financial statements of the Company
for Fiscal 1999. KPMG has audited the Company's financial statements since the
Company's 1985 fiscal year. Representatives of KPMG are expected to be present
at the 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
affirmative vote of the holders of a majority of the shares present in person or
represented by proxy and entitled to vote at the meeting is required to ratify
the appointment of KPMG.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS.
PROPOSAL FOUR
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
The Board of Directors has determined that it is in the best interests of
the Company and its stockholders to amend the first paragraph of Article Four of
the Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock of the Company from 200,000,000 to 400,000,000 shares.
Accordingly, the Board of Directors has unanimously approved the proposed
amendment to the first paragraph of Article Four of the Certificate of
Incorporation in the form set forth on Exhibit A attached hereto (the
"Amendment") and hereby solicits the approval of the Company's stockholders of
the Amendment. If the stockholders approve the Amendment, the Board of Directors
currently intends to file an amendment to the Company's Certificate of
Incorporation reflecting the Amendment with the Secretary of State of the State
of Delaware as soon as practicable following such stockholder approval. If the
Amendment is not approved by the stockholders, Article Four of the existing
Certificate of Incorporation will continue in effect.
The objective of the increase in the authorized number of shares of Common
Stock is to ensure that the Company has sufficient shares available for future
issuances. The Board of Directors believes that it is prudent to increase the
authorized number of shares of Common Stock to the proposed levels in order to
provide a reserve of shares available for issuance to meet business needs as
they arise. Such future activities may include, without limitation, establishing
strategic relationships with corporate partners, providing equity incentives to
employees, officers or directors, funding future financings or acquisitions or
effecting stock splits or dividends. Although the Company in the ordinary course
of its business evaluates potential acquisitions of companies, products and
technologies, the Company has no present commitments, agreements or ongoing
negotiations with respect to any such acquisitions or financings involving the
issuance of its Common Stock.
POSSIBLE EFFECTS OF THE PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION
If the stockholders approve the proposed Amendment, the Board of Directors
may cause the issuance of additional shares of Common Stock without a further
vote of the stockholders of the Company, except as provided under Delaware
corporate law or under the rules of the NYSE or any securities exchange on which
shares of Common Stock of the Company are then listed. The issuance of
additional shares of Common Stock
10
<PAGE> 13
would decrease the proportionate equity interest of the Company's current
stockholders and, depending upon the price paid for such additional shares,
could result in dilution to the Company's current stockholders.
REQUIRED VOTE
The affirmative vote of at least a majority of the outstanding shares of
Common Stock of the Company is required to approve the Amendment to the
Certificate of Incorporation increasing the number of authorized shares of
Common Stock. Abstentions will each be counted as votes against the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act and regulations of the Securities and
Exchange Commission (the "SEC") thereunder require the Company's executive
officers and directors, and persons who own more than ten percent (10%) of a
registered class of the Company's equity securities, to file reports of initial
ownership and changes in ownership with the SEC. Based solely on its review of
copies of such forms received by the Company, or on written representations from
certain reporting persons that no other reports were required for such persons,
the Company believes that, during Fiscal 1998 all of the Section 16(a) filing
requirements applicable to its executive officers, directors and ten percent
(10%) stockholders were complied with.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into indemnification agreements with its executive
officers, directors and certain significant employees containing provisions
which are in some respects broader than the specific indemnification provisions
contained in the Delaware General Corporation Law. These agreements provide,
among other things, for indemnification of the executive officers, directors and
certain significant employees in proceedings brought by third parties and in
stockholder derivative suits. Each agreement also provides for advancement of
expenses to the indemnified party. The agreements have been approved by the
majority vote of the disinterested stockholders of the Company.
11
<PAGE> 14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of November 17, 1998 information relating
to the beneficial ownership of the Company's Common Stock by (i) each person
known by the Company to be the beneficial owner of more than five percent (5%)
of the outstanding shares of Common Stock, (ii) each director, (iii) each of the
executive officers named in the Summary Compensation Table, (iv) and all
directors and executive officers as a group.
<TABLE>
<CAPTION>
APPROXIMATE
NAME AMOUNT OWNED(1) PERCENTAGE OWNED
---- --------------- ----------------
<S> <C> <C>
The Equitable Companies Incorporated
787 Seventh Avenue
New York, NY 10019................................ 18,162,890(2) 15.30%
FMR Corporation
82 Devonshire Street
Boston, MA 02109-3614............................. 17,232,096(2) 14.52%
Montag & Caldwell
3343 Peachtree Road N.E
Atlanta, GA 30326................................. 9,934,009(3) 8.37%
Dr. Winston H. Chen................................. 672,000(4) *
Susan Wang.......................................... 342,945(5) *
Dr. Koichi Nishimura................................ 337,722(6) *
Walter W. Wilson.................................... 265,849(7) *
Ken Tsai............................................ 229,404(8) *
Charles A. Dickinson................................ 140,756(9) *
Dr. Kenneth E. Haughton............................. 62,200(10) *
Dr. Paul R. Low..................................... 48,000(11) *
Richard A. D'Amore.................................. 42,000(12) *
Dr. Saeed Zohouri................................... 34,825(13) *
Stephen T. Ng....................................... 28,250(14)
Osamu Yamada........................................ 24,250(15) *
Heinz Fridrich...................................... 12,000(16) *
David Kynaston...................................... 11,718(17)
Dr. Philip Gerdine.................................. 700 *
William Hasler...................................... 0 *
All directors and executive officers as a group
(16 persons)...................................... 1.9%
</TABLE>
- ---------------
* Less than one percent (1%).
(1) Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to the
securities. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of the Company's
Common Stock subject to options held by that person that will be
exercisable on or before January 17, 1999, are deemed outstanding. Such
shares, however, are not deemed outstanding for the purpose of computing
the percentage ownership of any other person.
(2) Calculated as of most recent 13G filing.
(3) Calculated as of November 17, 1998.
(4) Includes 36,000 shares issuable upon the exercise of stock options that are
exercisable on or before January 17, 1999.
(5) Includes 143,936 shares issuable upon the exercise of stock options that
are exercisable on or before January 17, 1999.
12
<PAGE> 15
(6) Includes 161,561 shares issuable upon the exercise of stock options that
are exercisable on or before January 17, 1999.
(7) Includes 141,688 shares issuable upon the exercise of stock options that
are exercisable on or before January 17, 1999.
(8) Includes 196,030 shares issuable upon the exercise of stock options that
are exercisable on or before January 17, 1999.
(9) Includes 50,490 shares issuable upon the exercise of stock options that are
exercisable on or before January 17, 1999.
(10) Includes 42,000 shares issuable upon the exercise of stock options that are
exercisable on or before January 17, 1999.
(11) Includes 48,000 shares issuable upon the exercise of stock options that are
exercisable on or before January 17, 1999.
(12) Includes 42,000 shares issuable upon the exercise of stock options that are
exercisable on or before January 17, 1999.
(13) Includes 29,649 shares issuable upon the exercise of stock options that are
exercisable on or before January 17, 1999.
(14) Includes 9,716 shares issuable upon the exercise of stock options that are
exercisable on or before January 17, 1999.
(15) Includes 24,250 shares issuable upon the exercise of stock options that are
exercisable on or before January 17, 1999.
(16) Includes 11,000 shares issuable upon the exercise of stock options that are
exercisable on or before January 17, 1999.
(17) Includes 11,718 shares issuable upon the exercise of stock options that are
exercisable on or before January 17, 1999.
13
<PAGE> 16
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows, as to the Chief Executive Officer and each of
the four other most highly compensated executive officers, information
concerning compensation for services to the Company in all capacities.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION(2) ALL OTHER
---------------------- OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (#)(2) ($)(3)
--------------------------- ---- ---------- --------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Dr. Koichi Nishimura................. 1998 $491,552 $546,991 45,000 $7,650
President, Chief Executive Officer
and 1997 475,020 446,999 70,000 5,695
Chairman of the Board of Directors 1996 464,483 360,000 40,000 5,410
Dr. Saeed Zohouri.................... 1998 358,926 378,162 15,000 4,485
Senior Vice President, Chief 1997 249,890 348,364 60,000 3,145
Technology Officer and President, 1996 177,694 269,917 30,000 2,477
Solectron North America Corporation
Walter W. Wilson..................... 1998 358,022 339,521 15,000 4,575
Senior Vice President and
President, 1997 268,268 314,609 20,000 3,110
Solectron the Americas 1996 256,913 265,391 15,000 3,053
Ken Tsai............................. 1998 250,490 285,226 15,000 295
Senior Vice President and
President, 1997 224,978 339,119 30,000 863
Solectron Asia 1996 155,767 303,224 15,000 755
Susan Wang........................... 1998 380,962 322,877 15,000 4,485
Senior Vice President, Chief 1997 249,990 276,841 24,000 2,832
Financial Officer and Secretary 1996 207,691 227,071 15,000 2,795
</TABLE>
- ---------------
(1) Perquisites are not included since the aggregate amount is less than the
lesser of $50,000 or 10% of salary and bonus, in accordance with regulations
promulgated by the SEC; therefore, the Other Annual Compensation has not
been included in this table.
(2) The Company has not granted any stock appreciation rights or restricted
stock awards and does not have any Long-Term Incentive Plans as that term is
defined in regulations promulgated by the SEC.
(3) Amounts represent the Company's contributions to a 401(k) plan and the
taxable benefit of premium payments under split dollar life insurance
policies.
14
<PAGE> 17
STOCK OPTION GRANTS AND EXERCISES
The following tables set forth, for the executive officers named in the
Summary Compensation Table, the stock options granted under the Company's stock
option plans and the options exercised by such executive officers during Fiscal
1998.
STOCK OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------- POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL RATES
TOTAL OPTIONS OF STOCK PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE OR FOR OPTION TERM(2)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------
NAME (#)(1) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
---- -------- ------------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Koichi Nishimura............ 45,000 1.72% $43.8125 9/24/04 $802,623 $1,870,455
Saeed Zohouri............... 15,000 .57% $43.8125 9/24/04 $267,541 $ 623,485
Walter W. Wilson............ 15,000 .57% $43.8125 9/24/04 $267,541 $ 623,485
Ken Tsai.................... 15,000 .57% $43.8125 9/24/04 $267,541 $ 623,485
Susan Wang.................. 15,000 .57% $43.8125 9/24/04 $267,541 $ 623,485
</TABLE>
- ---------------
(1) These options become exercisable as to one forty-eighth ( 1/48th) of the
shares after each month from the date of grant.
(2) Potential realizable value is based on an assumption that the stock price of
the Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the seven (7) year option term.
Potential realizable value is shown net of exercise price. These amounts are
calculated based on the regulations promulgated by the SEC and do not
reflect the Company's estimate of future stock price growth.
AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND YEAR-END VALUES
<TABLE>
<CAPTION>
TOTAL NUMBER OF
UNEXERCISED OPTIONS VALUE OF UNEXERCISED,
HELD AT IN-THE-MONEY OPTIONS HELD
SHARES FISCAL YEAR END(#) AT FISCAL YEAR END($)(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Koichi Nishimura...... 105,896 $2,837,692 233,785 95,319 $6,241,557 $1,398,201
Saeed Zohouri......... 188,116 $ 873,021 93,426 66,366 $2,186,950 $1,225,950
Walter W. Wilson...... 0 $ 0 173,646 31,354 $4,894,912 $ 466,335
Ken Tsai.............. 10,000 $ 184,687 196,116 38,884 $5,449,891 $ 641,670
Susan Wang............ 40,000 $1,012,500 175,561 33,439 $4,934,159 $ 509,088
</TABLE>
- ---------------
(1) Fair market value of underlying securities at exercise minus the exercise
price.
(2) Calculated based upon the August 28, 1998 fair market value share price of
$44.4375 less the share price to be paid upon exercise. There is no
guarantee that if and when these options are exercised they will have this
value.
COMPENSATION COMMITTEE REPORT
INTRODUCTION
The Compensation Committee (the "Committee") of the Board is charged with
the responsibility of reviewing all aspects of the Company's executive
compensation programs and administering the Company's stock option plans. In
Fiscal 1998, the members of the Committee were Messrs. Haughton, Dickinson and
Hasler, all of whom are non-employee directors of the Company. The Committee
meets at the beginning of each fiscal year to establish target base compensation
levels for the Company's executive officers for the following fiscal year and to
finalize bonuses for the previous fiscal year.
15
<PAGE> 18
COMPENSATION PHILOSOPHY
The Company's executive compensation policies are designed to attract and
retain qualified executives who will contribute to the Company's long-term
success, to reward executives for achieving the Company's financial goals, and
to link executive compensation and stockholder interests through bonuses and
equity-based plans. The Committee believes that strong financial performance, on
a sustained basis, is the most certain avenue through which the Company can
positively affect long-term stockholder return. Furthermore, the Company
believes that, in order to attract and retain the most qualified executives in
the industry, its compensation policies must be competitive with other companies
of comparable size and in similar industries and must reinforce strategic
performance objectives through the use of incentive compensation programs. In
order to provide incentive to executive officers, a large percentage of their
annual compensation is paid as a bonus. The amount of the bonus for each person
is determined on the basis of several indicators of corporate performance as
outlined below.
COMPENSATION PLANS
The following are the key components of the Company's executive officer
compensation:
Base Compensation. The Committee establishes base salaries for executive
officers based on its review of base salaries of executive officers in companies
of comparable size and in similar industries. A majority of the companies used
by the Committee in its review of salaries of other companies are a part of the
H&Q Technology Index used in the "Performance Graph" below.
Bonuses. The Company's executive bonus plan provides for incentive
compensation to the Company's executive officers and other key employees and is
determined cumulatively on a quarterly basis based principally on certain
performance measures. The performance measures include worldwide corporate
performance, site performance and individual performance. Worldwide and site
performance are measured based on targets with respect to the Company's profit
before taxes, inventory turns, days sales outstanding and return on assets. The
Committee believes that these factors are indicative of overall corporate
performance and stockholder value. Individual performance is measured based on
goals related to each person's function within the organization. Employees
accrue bonuses each quarter based on performance against year-to-date profit and
asset utilization targets. However, only approximately 26% of such accrued
bonuses vest and are payable quarterly. The remaining accrued bonus balances
vest at the fiscal year end and are payable upon final determination of earned
bonuses.
Long-Term Incentive Compensation. The Company's Option Plan provides for
long-term incentive compensation for employees of the Company, including
executive officers. A significant portion of the total compensation package for
the Company's executive officers is in the form of stock option awards. These
awards give employees an equity interest in the Company, thereby aligning the
interests of executive officers and stockholders and providing incentive to
maximize stockholder value.
COMPANY PERFORMANCE AND CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation for the Company's Chief Executive Officer ("CEO") for
Fiscal 1998 was comprised of a base salary component and a bonus component. The
Committee met at the beginning of Fiscal 1998 and reviewed CEO compensation for
companies of comparable size and similar industries in order to establish a base
salary for the Company's CEO. The Committee established a close tie between
Company performance and CEO compensation by designating a large portion of total
annual compensation as bonus. The Committee established corporate performance
goals including profit before taxes, inventory turns, days sales outstanding and
return on assets. At the beginning of Fiscal 1999, the Committee evaluated the
Company's Fiscal 1998 performance in light of the goals established in the
previous year. The Committee found that these corporate performance target
levels had been met or exceeded and that in addition, the Company's CEO had
exceeded his personal performance goals for strategic leadership, growth,
increase in stockholder value and organizational and human resource development
thereby entitling him to his full bonus payment.
16
<PAGE> 19
MEMBERS OF THE COMPENSATION COMMITTEE
Dr. Kenneth E. Haughton
Charles A. Dickinson
William Hasler
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of Kenneth E. Haughton, Charles A. Dickinson or William Hasler, the
members of the Compensation Committee, is an executive officer of any entity for
which any executive officer of the Company serves as a director or a member of
the Compensation Committee.
17
<PAGE> 20
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock with the cumulative total return on the S&P 500 Index and
the H&Q Technology Index for the five fiscal years commencing August 31, 1993
and ended August 31, 1998, assuming an investment of $100 and the reinvestment
of any dividends.
The comparisons in the graph below are based upon historical data and are
not indicative of, nor intended to forecast, future performance of the Company's
Common Stock.
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
H&Q TECHNOLOGY
SOLECTRON S&P 500 INDEX INDEX
<S> <C> <C> <C>
AUG-93 100 100 100
AUG-94 154 103 119
AUG-95 179 122 203
AUG-96 187 142 203
AUG-97 419 195 325
AUG-98 444 223 305
</TABLE>
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of proxy to vote the shares they represent as
the Company may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ SUSAN WANG
Susan Wang
Secretary
Dated: December 11, 1998
18
<PAGE> 21
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF SOLECTRON CORPORATION
FISCAL 1998 ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Koichi Nishimura and Susan Wang, and each
of them, with full power of substitution, to represent the undersigned and to
vote all of the shares of stock in Solectron Corporation (the "Company") which
the undersigned is entitled to vote at the Annual Meeting of the Stockholders of
the Company to be held at The Sheraton San Jose, 1801 Barber Lane, Milpitas,
California 95035 on Tuesday, January 12, 1999 at 9:00 a.m. Pacific Time, and at
any adjournment thereof (1) as hereinafter specified upon the proposals set
forth below and as more particularly described in the Proxy Statement of the
Company dated December 11, 1998 (the "Proxy Statement"), receipt of which is
hereby acknowledged, and (2) in their discretion, upon such other matters as may
properly come before the meeting. The undersigned hereby acknowledges receipt of
the Company's Annual Report for the year ended August 28, 1998.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO SPECIFICATION
IS MADE, SUCH SHARES SHALL BE VOTED FOR PROPOSALS 1 THROUGH 4. CONTINUED AND TO
BE SIGNED ON REVERSE SIDE.
[X] Please mark
votes as in
this example
1. ELECTION OF DIRECTORS
FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD [ ]
(EXCEPT AS MARKED TO THE CONTRARY BELOW AUTHORITY TO VOTE FOR ALL NOMINEES
LISTED BELOW)
Koichi Nishimura, Ph.D., Winston H. Chen, Ph.D., Richard A. D'Amore,
Charles A. Dickinson, Heinz Fridrich, Kenneth E. Haughton, Ph.D., Paul R.
Low, Ph.D., Osamu Yamada, Philip Gerdine, Ph.D., and William Hasler.
(INSTRUCTION: To withhold authority to vote for any individual nominee
write that nominee's name on the space provided below)
See Reverse Side
<PAGE> 22
2. PROPOSAL TO AMEND THE COMPANY'S 1992 STOCK PLAN TO INCREASE THE NUMBER OF
SHARES RESERVED FOR ISSUANCE THEREUNDER BY 5,700,000 SHARES.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING AUGUST 27,
1999.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK OF
THE COMPANY FROM 200,000,000 TO 400,000,000 SHARES.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN
AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK MAY BE
REPRESENTED AT THE MEETING.
Signature: Date:
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