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FILED PURSUANT TO RULE 424(b)(3)
FILE NO. 333-50282
$1,660,000,000
[SANMINA LOGO]
Zero Coupon Convertible Subordinated Debentures due 2020
and the common stock issuable upon conversion of the debentures
We issued the debentures in a private placement in September 2000. This
prospectus will be used by selling securityholders to resell their debentures
and the common stock issuable upon conversion of their debentures.
The debentures are convertible prior to maturity into common stock at an
initial conversion rate of 3.2413 shares for each $1,000 principal amount at
maturity. The conversion rate will not be adjusted for accrued original issue
discount, but will be subject to adjustment in certain events.
On or after September 12, 2005, we may redeem any of the debentures at the
redemption prices set forth in this prospectus. Holders may require us to
repurchase the debentures at the repurchase prices set forth in this prospectus
on September 12, 2005, September 12, 2010 and September 12, 2015.
Our common stock is quoted on the Nasdaq National Market under the symbol
"SANM." On December 14, 2000, the last reported sale price of our common stock
on the Nasdaq National Market was $76.625 per share.
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THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This prospectus is dated December 19, 2000
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY
STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON
THE FRONT OF THIS PROSPECTUS.
TABLE OF CONTENTS
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PAGE
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Where You Can Find More Information......................... 2
Prospectus Summary.......................................... 3
Risk Factors................................................ 6
Use of Proceeds............................................. 15
Ratio of Earnings to Fixed Charges.......................... 15
Description of Debentures................................... 16
Description of Capital Stock................................ 31
Material United States Federal Income Tax Considerations.... 32
Selling Securityholders..................................... 36
Plan of Distribution........................................ 38
Legal Matters............................................... 39
Experts..................................................... 39
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WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the Securities
and Exchange Commission, in accordance with the Securities Exchange Act of 1934.
You may read and copy our reports, proxy statements and other information filed
by us at the public reference facilities of the Commission at 450 Fifth Street,
Judiciary Plaza, N.W., Washington, D.C. 20549-1004. Copies of such materials can
be obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549-1004. Please call
the Commission at 1-800-SEC-0330 for further information about the public
reference rooms. Our reports, proxy statements and other information filed with
the Commission are available to the public over the Internet at the Commission's
World Wide Web site at http://www.sec.gov.
The Commission allows us to "incorporate by reference" into this prospectus
the information we filed with the Commission. This means that we can disclose
important information by referring you to those documents. The information
incorporated by reference is considered to be a part of this prospectus.
Information that we file later with the Commission will automatically update and
supersede this information. We incorporate by reference the documents listed
below and any future filings made by us with the Commission under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act until our offering is complete:
- Our Annual Report on Form 10-K, as amended, for the fiscal year ended
October 2, 1999;
- Our Quarterly Reports on Form 10-Q, for the fiscal quarters ended January
1, 2000, as amended, April 1, 2000 and July 1, 2000; and
- Our Current Reports on Form 8-K filed on July 7, 2000, September 5, 2000,
and September 15, 2000.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Rick Ackel
Chief Financial Officer
Sanmina Corporation
2700 North First Street
San Jose, California 95134
(408) 964-3500
You should rely only on the information incorporated by reference or
provided in this prospectus or a prospectus supplement or amendment. We have not
authorized anyone else to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume the information in this prospectus or a
prospectus supplement or amendment is accurate as of any date other than the
date on the front of the documents.
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PROSPECTUS SUMMARY
Because this is a summary, it may not contain all information that may be
important to you. You should read the entire prospectus, including the
information incorporated by reference and the financial data and related notes,
before making an investment decision. When used in this prospectus, the terms
"we," "our," "us" and "Sanmina" refer to Sanmina Corporation and not to the
selling securityholders.
SANMINA CORPORATION
Sanmina is a leading independent provider of customized integrated
electronic manufacturing services, known as EMS, including turnkey electronic
assembly and manufacturing management services, to original equipment
manufacturers, or OEMs, in the electronics industry. Our electronics
manufacturing services consist primarily of the manufacture of complex printed
circuit board assemblies using surface mount and pin-through-hole
interconnection technologies, the manufacture of custom designed backplane
assemblies, fabrication of complex multi-layered printed circuit boards, and
testing and assembly of completed systems. In addition to assembly, turnkey
manufacturing management also involves procurement and materials management,
complex engineering services, and consultation on printed circuit board design
and manufacturing. Through Sanmina Cable Systems, we also manufacture custom
cable and wire harness assemblies for electronic industry OEMs. In addition, we
have recently developed enclosure systems capabilities which manufactures and
assembles metal enclosures that house large electronic systems and subsystems.
As a result of these services, Sanmina can offer an end to end total EMS
solution for its customers.
We locate our manufacturing facilities near our customers and,
increasingly, our customers' end users. Our assembly plants are located in
Northern California, Richardson, Texas, the greater Boston, Massachusetts area,
Manchester, New Hampshire, Durham, North Carolina, Guntersville, Alabama,
Calgary, Alberta, Canada and Dublin, Ireland. Our printed circuit board
fabrication facilities are located in Northern California, Southern California,
the greater Boston, Massachusetts area and Nashua, New Hampshire. Sanmina Cable
Systems' principal manufacturing facility is located in Carrollton, Texas. Our
principal enclosure manufacturing facilities are located in the Toronto, Canada
area. In June 2000, we acquired Essex AB, an EMS company with operations in
Sweden and Finland. In June 2000, we completed our acquisition of Hadco
Corporation and, as a result, we added printed circuit board fabrication
facilities in metropolitan Boston, southern New Hampshire, New York state,
Watsonville, California, San Jose, California, Santa Clara, California, Austin,
Texas, Phoenix, Arizona and Kuching, Malaysia. This acquisition also added EMS
operations in Salem, New Hampshire and San Jose, California. In June 2000, we
completed the acquisition of Interworks, a leading designer and manufacturer of
standard and custom modular subsystems focused on the networking equipment and
communications sectors of the marketplace. In July 2000, we acquired EMS
operations in the Shenzen region of the Peoples' Republic of China.
Our principal offices are located at 2700 North First Street, San Jose,
California 95134. Our telephone number at this location is (408) 964-3500. Our
world wide web site is located at www.Sanmina.com. Information contained on our
web site does not constitute part of this prospectus.
RECENT DEVELOPMENTS
In August 2000, Sanmina acquired a design and engineering group from Nortel
Networks. In October 2000, Sanmina completed its acquisition of the San Jose,
California system integration and fulfillment operation of Lucent Technologies.
Also in October 2000, Sanmina announced an OEM partnership with Siemens. This
agreement is to acquire a 49.9% ownership interest in INBOARD, a wholly owned
subsidiary of Siemens AG. INBOARD is a manufacturer of complex printed circuit
boards, including the SIMOV technology.
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THE DEBENTURES
SECURITIES OFFERED......... $1,660,000,000 aggregate principal amount at
maturity of Zero Coupon Convertible Subordinated
Debentures due 2020. We will not pay periodic
interest on the debentures, except as described
under "Description of Debentures -- Optional
Conversion to Semiannual Coupon Debentures Upon a
Tax Event."
YIELD TO MATURITY OF
DEBENTURES............... 4% per year compounded semi-annually, calculated
from September 12, 2000.
CONVERSION................. You have the option to convert the debentures into
our common stock at any time prior to maturity or
their earlier redemption. You can convert the
debentures into common stock at a fixed conversion
rate of 3.2413 shares per $1,000 principal amount
at maturity. The conversion rate will be subject to
adjustment if certain events occur. See
"Description of Debentures -- Conversion of
Debentures by Holders."
You may exercise the option to convert only before
the debentures reach maturity and before we redeem
or repurchase them.
RANKING.................... The debentures are subordinated to all existing and
future senior indebtedness. As of July 29, 2000, we
had no indebtedness outstanding that would have
constituted senior indebtedness. As of the same
date, our subsidiaries had approximately $649.8
million of indebtedness and other liabilities
outstanding to which the debentures would have been
effectively subordinated (including trade and other
payables); of this amount, $187.9 million is no
longer outstanding as a result of the redemption of
Hadco Corporation's senior notes. The indenture
does not limit the amount of indebtedness,
including senior indebtedness, that we and our
subsidiaries may incur. See "Description of
Debentures -- Subordination."
ORIGINAL ISSUE DISCOUNT.... The debentures are being offered at original issue
discount for United States federal income tax
purposes equal to the excess of their principal
amount at maturity over the amount of their issue
price. We will not make periodic cash payments of
interest on the debentures, except as described
under "Description of Debentures -- Optional
Conversion to Semiannual Coupon Debentures Upon a
Tax Event." Nonetheless, you should be aware that
accrued original issue discount will be included
periodically in your gross income for United States
federal income tax purposes. See "Material United
States Federal Income Tax Considerations."
You should be aware that you will be responsible
for the payment of taxes that may be due even
though you may not receive any cash payment at the
time original issue discount is included in your
gross income.
REDEMPTION AT OUR OPTION... We cannot redeem the debentures before September
12, 2005. At any time on or after September 12,
2005, we can redeem all or part of the debentures
for cash. You can convert the debentures after they
are called for redemption at any time prior to the
redemption date.
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Redemption prices are equal to the issue price plus
accrued original issue discount through the date of
redemption. See "Description of
Debentures -- Redemption of Debentures at Our
Option."
FUNDAMENTAL CHANGE......... You may require us to repurchase the debentures if
we experience a fundamental change. The fundamental
change purchase price is equal to the issue price
plus accrued original issue discount through the
date of repurchase. See "Description of
Debentures -- Repurchase at the Option of the
Holder Upon a Fundamental Change."
REPURCHASE AT THE OPTION OF
THE HOLDER............... You may require us to repurchase the debentures on
September 12, 2005, September 12, 2010 and
September 12, 2015 for a purchase price equal to
the issue price plus accrued original issue
discount through the date of repurchase. We may
elect to pay all or a portion of the purchase price
in common stock instead of cash, subject to certain
conditions. See "Description of
Debentures -- Repurchase of Debentures at the
Option of the Holder."
CONVERSION TO SEMIANNUAL
COUPON DEBENTURE......... If a tax event prevents us from deducting original
issue discount payable on the debentures, we can
elect to pay you interest in cash and terminate the
further accrual of original issue discount. See
"Description of Debentures -- Optional Conversion
to Semiannual Coupon Debentures Upon a Tax Event."
USE OF PROCEEDS............ We will not receive any of the proceeds from the
sale by any selling securityholder of the
debentures or the underlying common stock.
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RISK FACTORS
Before you invest in the debentures or shares of common stock underlying
the debentures, you should be aware of various risks, including those described
below. You should carefully consider these risk factors, together with all of
the other information included or incorporated by reference in this prospectus,
before you decide whether to purchase the debentures. The risks set out below
are not the only risks we face.
If any of the following risks occur, our business, financial condition and
results of operations could be materially adversely affected. In such case, the
trading price of the debentures and common stock could decline, and you may lose
all or part of your investment.
Keep these risk factors in mind when you read "forward-looking" statements
elsewhere in this prospectus and in the documents incorporated herein by
reference. These are statements that relate to our expectations for future
events and time periods. Generally, the words "anticipate," "expect," "intend"
and similar expressions identify forward-looking statements. Forward-looking
statements involve risks and uncertainties, and future events and circumstances
could differ significantly from those anticipated in the forward-looking
statements.
SANMINA IS HEAVILY DEPENDENT ON THE ELECTRONICS INDUSTRY, AND CHANGES IN THE
INDUSTRY COULD HARM SANMINA'S BUSINESS AND OPERATING RESULTS.
Sanmina's business is heavily dependent on the health of the electronics
industry. Sanmina's customers are manufacturers in the communications,
industrial and medical instrumentation and high-speed computer systems sectors
of the electronics industry. These industry sectors, and the electronics
industry as a whole, are subject to rapid technological change and product
obsolescence. Sanmina's customers can discontinue or modify products containing
components manufactured by Sanmina. Any discontinuance or modification of orders
or commitments could harm Sanmina's operating results. The electronics industry
is also subject to economic cycles and has in the past experienced, and is
likely in the future to experience, recessionary periods. A general recession in
the electronics industry could harm Sanmina's business and operating results.
SANMINA TYPICALLY DOES NOT OBTAIN LONG-TERM VOLUME PURCHASE COMMITMENTS FROM
CUSTOMERS, AND CANCELLATIONS AND RESCHEDULING OF PURCHASE ORDERS COULD HARM
SANMINA'S OPERATING RESULTS AND CAUSE ITS STOCK PRICE TO DECLINE.
Sanmina typically does not obtain long-term volume purchase contracts from
its customers. Customer orders may be canceled and volume levels may be changed
or delayed. For example, Sanmina experienced certain cancellation and
rescheduling of shipment dates of customer orders during the fourth fiscal
quarter of 1998. As a result, Sanmina's results of operations for that quarter
failed to meet the expectations of stock market analysts, and the price of
Sanmina common stock declined. Sanmina cannot assure you that it will be able to
replace canceled, delayed or reduced contracts with new business. As a result,
future cancellations or rescheduling of orders or commitments could cause
Sanmina's operating results to be below expectations, which would likely cause
Sanmina's stock price to decline.
SANMINA'S RESULTS OF OPERATIONS CAN BE AFFECTED BY A VARIETY OF FACTORS, WHICH
COULD CAUSE SANMINA'S OPERATING RESULTS TO FAIL TO MEET EXPECTATIONS AND
SANMINA'S STOCK PRICE TO DECLINE.
Sanmina's results of operations have varied and may continue to fluctuate
significantly from period to period, including on a quarterly basis. Sanmina's
operating results are affected by a number of factors. These factors include:
- timing of orders from major customers;
- mix of products ordered by and shipped to major customers, including the
mix between backplane assemblies and printed circuit board assemblies;
- the volume of orders as related to Sanmina's capacity;
- pricing and other competitive pressures;
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- component shortages, which could cause Sanmina to be unable to meet
customer delivery schedules;
- Sanmina's ability to effectively manage inventory and fixed assets; and
- Sanmina's ability to time expenditures in anticipation of future sales.
Sanmina's results can also be significantly influenced by development and
introduction of new products by Sanmina's customers. From time to time, Sanmina
experiences changes in the volume of sales to each of Sanmina's principal
customers, and operating results may be affected on a period-to-period basis by
these changes. Sanmina's customers generally require short delivery cycles, and
a substantial portion of Sanmina's backlog is typically scheduled for delivery
within six months. Quarterly sales and operating results therefore depend in
large part on the volume and timing of bookings received during the quarter,
which are difficult to forecast. Sanmina's backlog also affects its ability to
plan production and inventory levels, which could lead to fluctuations in
operating results. In addition, a significant portion of Sanmina's operating
expenses are relatively fixed in nature and planned expenditures are based in
part on anticipated orders. Any inability to adjust spending quickly enough to
compensate for any revenue shortfall may magnify the adverse impact of such
revenue shortfall on Sanmina's results of operations. Results of operations in
any period should not be considered indicative of the results to be expected for
any future period. In addition, fluctuations in operating results may also
result in fluctuations in the price of Sanmina common stock.
SANMINA IS DEPENDENT ON A SMALL NUMBER OF CUSTOMERS FOR A LARGE PORTION OF
SANMINA'S REVENUES, AND DECLINES IN SALES TO MAJOR CUSTOMERS COULD HARM
SANMINA'S OPERATING RESULTS.
A small number of customers are responsible for a significant portion of
Sanmina's net sales. During the first nine months of fiscal year 2000, fiscal
year 1999 and fiscal year 1998, sales to Sanmina's ten largest customers
accounted for 56%, 49% and 44%, respectively, of Sanmina's net sales. For the
first nine months of fiscal 2000, sales to only one customer represented more
than 10% of Sanmina's net sales. For fiscal 1999, only sales to Cisco Systems
represented more than 10% of Sanmina's net sales. For fiscal 1998, no single
customer exceeded 10% of net sales. This customer information gives effect to
the restatement of Sanmina's results of operations to reflect the acquisitions
of Hadco and Essex.
Although Sanmina cannot assure you that its principal customers will
continue to purchase products and services from Sanmina at current levels, if at
all, Sanmina expects to continue to depend upon its principal customers for a
significant portion of Sanmina's net sales. Sanmina's customer concentration
could increase or decrease, depending on future customer requirements, which
will be dependent in large part on market conditions in the electronics industry
segments in which Sanmina's customers participate. The loss of one or more major
customers or declines in sales to major customers could significantly harm
Sanmina's business and operating results and lead to declines in the price of
Sanmina common stock.
SANMINA IS SUBJECT TO RISKS ASSOCIATED WITH ITS STRATEGY OF ACQUISITIONS, AND
THESE RISKS COULD HARM SANMINA'S OPERATING RESULTS AND CAUSE ITS STOCK PRICE TO
DECLINE.
Sanmina has, for the past several fiscal years, pursued a strategy of
growth through acquisitions. These acquisitions have involved acquisitions of
entire companies, such as the November 1997 acquisition of Elexsys
International, Inc., the November 1998 acquisition of Altron, Incorporated, the
December 1998 acquisition of Telo Electronics, Inc., the March 1999 acquisition
of Manu-Tronics, Inc., the June 2000 acquisition of Essex AB, the June 2000
acquisition of Hadco Corporation and the July 2000 acquisition of Well Grown,
Ltd.
In addition, Sanmina has in other instances acquired selected assets,
principally equipment, inventory and customer contracts and, in certain cases,
facilities or facility leases. Acquisitions of this nature completed by Sanmina
include the November 1996 acquisitions of the Guntersville, Alabama operations
of Comptronix Corporation and certain assets of the custom manufacturing
services division of Lucent Technologies. In October and November 1999, Sanmina
acquired the electronics assembly operations of Nortel Networks located in
Calgary, Canada and Chateaudun, France. In October 1999, Sanmina also
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acquired the electronics enclosure systems business of Devtek, located in
Toronto, Canada. In March 2000, Sanmina acquired a printed circuit board
assembly operation located principally in San Antonio, Texas from Harris
Corporation. In March 2000, Sanmina also acquired an electromechanical assembly
operation located in Clinton, North Carolina from Alcatel USA. Acquisitions of
companies and businesses and expansion of operations involve certain risks,
including the following:
- the potential inability to successfully integrate acquired operations and
businesses or to realize anticipated synergies, economies of scale or
other value;
- diversion of management's attention;
- difficulties in scaling up production at new sites and coordinating
management of operations at new sites;
- the possible need to restructure, modify or terminate customer
relationships of the acquired company; and
- loss of key employees of acquired operations.
Accordingly, Sanmina may experience problems in integrating the recently
acquired operations or operations associated with any future acquisition.
Sanmina therefore cannot assure you that any recent or future acquisition will
result in a positive contribution to Sanmina's results of operations.
Furthermore, Sanmina cannot assure you that Sanmina will realize value from any
acquisition which equals or exceeds the consideration paid. In particular, the
successful combination of Sanmina and any businesses Sanmina acquires in the
future will require substantial effort from each company, including the
integration and coordination of sales and marketing efforts. The diversion of
the attention of management and any difficulties encountered in the transition
process, including, the interruption of, or a loss of momentum in, the
activities of any future acquisition, problems associated with integration of
management information and reporting systems, and delays in implementation of
consolidation plans, could harm Sanmina's ability to realize the anticipated
benefits of any future acquisition. Any failure of Sanmina to realize the
anticipated benefits of its acquisitions could harm Sanmina's business and
operating results, and could cause the price of its common stock to decline. In
addition, future acquisitions may result in dilutive issuances of equity
securities, the incurrence of additional debt, large one-time write-offs and the
creation of goodwill or other intangible assets that could result in
amortization expense. These factors could harm Sanmina's business and operating
results and cause the price of Sanmina's common stock to decline.
In addition, Sanmina has pursued and expects to continue to pursue
opportunities to acquire assembly operations being divested by electronics
industry OEMs. Sanmina expects that competition for these opportunities among
electronics manufacturing services firms will be intense as these transactions
typically enable the acquirer to enter into long-term supply arrangements with
the divesting OEM. Accordingly, Sanmina's future results of operations could be
harmed if it is not successful in attracting a significant portion of the OEM
divestiture transactions Sanmina pursues. In addition, due to the large scale
and long-term nature of supply arrangements typically entered into in OEM
divestiture transactions and because cost reductions are generally a major
reason why the OEM is divesting operations, pricing of manufacturing services
may be less favorable to the manufacturer than in standard contractual
relationships. For example, Sanmina experienced declines in gross margins in the
first quarter of fiscal 2000 due to Sanmina's increase in sales to Nortel under
Sanmina's supply agreement relating to the operations it acquired. As Sanmina
enters into new OEM divestiture transactions, Sanmina may experience further
erosion in gross margins.
SANMINA MAY EXPERIENCE COMPONENT SHORTAGES, WHICH WOULD CAUSE SANMINA TO DELAY
SHIPMENTS TO CUSTOMERS, RESULTING IN POTENTIAL DECLINES IN REVENUES AND
OPERATING RESULTS.
Recently, a number of components purchased by Sanmina and incorporated into
assemblies and subassemblies it produces have been the subject of shortages.
These components include application-specific integrated circuits, capacitors
and connectors. Unanticipated component shortages caused Sanmina to be unable to
make certain scheduled shipments to customers in the first nine months of fiscal
2000 and
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may do so in the future. The inability to make scheduled shipments in the future
could cause Sanmina to experience a shortfall in revenues. Sanmina could also
experience negative customer goodwill due to the delay in shipment. Component
shortages may also increase Sanmina's cost of goods due to premium charges it
must pay to purchase components in short supply and due to changes in the mix of
assemblies shipped to customers. For example, shortages in certain components
negatively affected Sanmina's operating results and contributed to an increase
in inventory levels during the first nine months of fiscal 2000. Accordingly,
component shortages could harm Sanmina's operating results for a particular
fiscal period due to the resulting revenue shortfall or cost increases and could
also damage customer relationships over a longer-term period.
Sanmina is subject to competition and technological change, and its
business may be harmed by competitive pressures and failure to adapt to
technological changes. The electronic interconnect industry is highly fragmented
and characterized by intense competition. Sanmina competes in the
technologically advanced segment of the interconnect market, which is also
highly competitive but is much less fragmented than the industry as a whole.
Sanmina's competitors consist primarily of larger manufacturers of interconnect
products, and some of these competitors have greater manufacturing and financial
resources than Sanmina as well as greater surface mount assembly capacity. As a
participant in the interconnect industry, Sanmina must continually develop
improved manufacturing processes to accommodate its customers' needs for
increasingly complex products. During periods of recession in the electronics
industry, Sanmina's competitive advantages in the areas of quick turnaround
manufacturing and responsive customer service may be of reduced importance to
electronics OEMs, who may become more price sensitive. In addition, captive
interconnect manufacturers seek orders in the open market to fill excess
capacity, thereby increasing price competition.
In addition, Sanmina may be at a competitive disadvantage with respect to
price when compared to manufacturers with lower cost structures, particularly
those with offshore facilities where labor and other costs are lower. Sanmina
currently has offshore facilities in China and Malaysia. Although Sanmina plans
to establish other offshore facilities, Sanmina may not do so in time to be
competitive.
ENVIRONMENTAL MATTERS ARE A KEY CONSIDERATION IN SANMINA'S BUSINESS, AND FAILURE
TO COMPLY WITH THE REQUIREMENTS OF ENVIRONMENTAL LAWS COULD HARM SANMINA'S
BUSINESS.
Sanmina is subject to a variety of local, state and federal environmental
laws and regulations relating to the storage, use, discharge and disposal of
chemicals, solid waste and other hazardous materials used during their
manufacturing processes, as well as air quality regulations and restrictions on
water use. Proper waste disposal is a major consideration for printed circuit
board manufacturers because metals and chemicals are used in the manufacturing
process. Maintenance of environmental controls is also important in the
electronics assembly process. When violations of environmental laws occur,
Sanmina can be held liable for damages and the costs of remedial actions and can
also be subject to revocation of permits necessary to conduct its businesses.
There can be no assurance that violations of environmental laws will not occur
in the future as a result of the inability to obtain permits, human error,
equipment failure or other causes. Any permit revocations could require Sanmina
to cease or limit production at one or more facilities, which could seriously
harm Sanmina's business, financial condition and results of operations.
Moreover, the failure to comply with present and future regulations could
restrict the combined company's ability to expand facilities or could require it
to acquire costly equipment or to incur other significant expenses to comply
with environmental regulations.
Environmental laws could become more stringent over time, imposing greater
compliance costs and increasing risks and penalties associated with violations.
Sanmina operates in several environmentally sensitive locations and is subject
to potentially conflicting and changing regulatory agendas of political,
business and environmental groups. Changes or restrictions on discharge limits,
emissions levels, permitting requirements or processes, or material storage or
handling might require a high level of unplanned capital investment and/or
relocation. Compliance with new or existing regulations could seriously harm
Sanmina's business, financial condition and results of operations.
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SANMINA IS SUBJECT TO ENVIRONMENTAL CONTINGENCIES AT SITES OPERATED BY ACQUIRED
COMPANIES AND COULD INCUR SUBSTANTIAL COSTS FOR ENVIRONMENTAL REMEDIATION AND
RELATED ACTIVITIES AT THESE SITES.
In November 1997, Sanmina acquired Elexsys International, Inc. which became
Sanmina's wholly-owned subsidiary. Several facilities owned or occupied by
Elexsys at the time of the merger, or formerly owned or occupied by Elexsys or
companies acquired by Elexsys, had either soil contamination or contamination of
groundwater underneath or near the facility including the following:
contamination was discovered at Elexsys' Irvine, California facility in 1989 and
Elexsys voluntarily installed a groundwater remediation system at the facility
in 1994. Additional investigation is being undertaken by other parties in the
area at the request of the California Regional Water Quality Control Board. It
is unknown whether any additional remediation activities will be required as a
result of such investigations or whether any third-party claims will be brought
against Sanmina alleging that they have been damaged in any way by the existence
of the contamination at the Irvine facility. Sanmina has been required by the
California Department of Toxic Substances Control to undertake investigation of
soil and/or groundwater at certain facilities formerly owned or occupied by a
predecessor company to Elexsys in Mountain View, California. Depending upon the
results of this soil sampling and groundwater testing, Sanmina could be ordered
to undertake soil and/or groundwater cleanup. To date, Sanmina has not been
ordered to undertake any soil or groundwater cleanup activities at the Mountain
View facilities, and Sanmina does not believe any such activities should be
required. Test results received to date are not sufficient to enable Sanmina to
determine whether or not such cleanup activities are likely to be mandated.
Contamination has also been discovered at other current and former Elexsys
facilities and has been reported to the relevant regulatory agencies. No
remediation or further investigation of such contamination has been required by
regulatory agencies. To date, the cost of the various investigations and the
cost of operating the remediation system at the Irvine facility have not been
material to Sanmina's financial condition. However, in the event Sanmina is
required to undertake additional groundwater or soil cleanup, the costs of such
cleanup are likely to be substantial. Sanmina is currently unable to estimate
the amount of such soil and groundwater cleanup costs because no soil or
groundwater cleanup has been ordered and Sanmina cannot determine from available
test results what remediation activities, if any, are likely to be required.
Sanmina believes, based on the limited information currently available, that the
cost of any groundwater or soil clean-up that may be required would not harm
Sanmina's business, financial condition and results of operations. Nevertheless,
the process of remediating contaminated soil and groundwater is costly, and if
Sanmina is required to undertake substantial remediation activities at one or
more of the former Elexsys facilities, there can be no assurance that the costs
of such activities would not harm Sanmina's business, financial condition and
results of operations.
In November 1998, Sanmina acquired Altron Incorporated, which became a
wholly-owned subsidiary of Sanmina. Altron was advised in 1993 by Olin
Corporation that contamination resulting from activities of prior owners of
property owned by Olin Corporation and located close to the Altron manufacturing
plant in Wilmington, Massachusetts, had migrated under the Altron plant. Olin
has assumed full responsibility for any remediation activities that may be
required and has agreed to indemnify and hold Altron harmless from any and all
costs, liabilities, fines, penalties, charges and expenses arising from and
relating to any action or requirement, whether imposed by statute, ordinance,
rule, regulation, order, decree or by general principles of law to remediate,
clean up or abate contamination emanating from the Olin site. Although Sanmina
believes that Olin's assumption of responsibility will result in no remediation
cost to Altron from the contamination, there can be no assurance that Altron
will not be subject to some costs regarding this matter, but Sanmina does not
anticipate that such costs, if any, will be material to its financial condition
or results of operations.
Sanmina has been named as a potentially responsible party at several
contaminated disposal sites as a result of the past disposal of hazardous waste
by companies acquired by Sanmina or their corporate predecessors. While
liabilities for such historic disposal activities have not been material to
Sanmina's financial condition to date, there can be no guarantee that past
disposal activities will not result in material liability to Sanmina in the
future.
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HADCO, WHICH WAS RECENTLY ACQUIRED BY SANMINA, IS SUBJECT TO ENVIRONMENTAL
CONTINGENCIES AT SITES CURRENTLY OR FORMERLY OPERATED BY IT AND COULD INCUR
SUBSTANTIAL COSTS FOR ENVIRONMENTAL REMEDIATION AND RELATED ACTIVITIES AT THESE
SITES.
In June 2000, Sanmina completed its acquisition of Hadco, which is now a
wholly-owned subsidiary of Sanmina. Hadco is aware of certain chemicals that
exist in the ground at certain of its facilities. Hadco has notified various
governmental agencies and continues to work with them to monitor and resolve
these matters. During March 1995, Hadco received a Record Of Decision from the
New York State Department of Environmental Conservation, regarding soil and
groundwater contamination at its Owego, New York facility. Based on a Remedial
Investigation and Feasibility Study for apparent on-site contamination at that
facility and a Focused Feasibility Study, each prepared by environmental
consultants of Hadco, the New York State Department of Environmental
Conservation has approved a remediation program of groundwater withdrawal and
treatment and iterative soil flushing. Hadco has executed a Modification of the
Order on Consent to implement the approved Record of Decision. Capital equipment
for this remediation has already been acquired by Hadco, and future operation
and maintenance costs, which will be incurred and expended over the estimated
life of the program of the next 28 years, are estimated at between $40,000 and
$100,000 per year. In the summer of 1998, the New York State Department of
Environmental Conservation took additional samples from a wetland area near
Hadco's Owego facility. Analytical reports of earlier sediment samples indicated
the presence of certain inorganics. The new samples showed elevated levels of
certain metals, but the New York State Department of Environmental Conservation
has not made a determination as to the potential source of such metals, the
remedial action to be taken, or the persons to undertake and/or pay for any
remediation. Hadco and/or other third parties may be required to conduct
additional investigations and remediation at that location, the costs of which
are currently indeterminable.
Hadco commenced the operation of a groundwater extraction system at its
Derry, New Hampshire facility to address certain groundwater contamination and
groundwater migration control issues. Further investigation is underway to
determine the areal extent of the groundwater contaminant plume. Because of the
uncertainty regarding both the quantity of contaminants beneath the building at
the site and the long-term effectiveness of the groundwater migration control
system Hadco has installed, it is not possible to make a reliable estimate of
the length of time remedial activity will have to be performed. However, it is
anticipated that the groundwater extraction system will be operated for at least
30 years. Hadco may be required to conduct additional investigations and
remediation relating to the Derry facility. The total costs of such groundwater
extraction system and of conducting any additional investigations and
remediation relating to the Derry facility are not fully determinable.
Hadco is one of 33 entities which have been named as potentially
responsible parties in a lawsuit pending in the federal district court of New
Hampshire concerning environmental conditions at the Auburn Road, Londonderry,
New Hampshire landfill site. Local, state and federal entities and certain other
parties to the litigation seek contribution for past costs, totaling
approximately $20 million, allegedly incurred to assess and remediate the Auburn
Road site. In December 1996, following publication and comment period, the EPA
amended the Record of Decision to change the remedy at the Auburn Road site from
active groundwater remediation to future monitoring. In June 1999, Hadco entered
into a Consent Decree with 30 of the defendants and third party defendants. The
Consent Decree was approved by the Court in March 2000. Under the terms of the
Consent Decree, Hadco is a cash-out party and does not have responsibility for
performance of ongoing remedial or monitoring work at the site.
From 1974 to 1980, Hadco operated a printed circuit manufacturing facility
in Florida as a lessee. This property is the subject of a pending lawsuit in the
circuit court for Broward County, Florida and an investigation by the Florida
Department of Environmental Protection. In connection with the investigation,
Hadco and others have participated in alternative dispute resolution regarding
the site with an independent mediator. Mediation sessions began in 1992 and
continued over the next several years through May 1998. In June 1995, Hadco and
Gould, Inc., another prior lessee of the site, were joined as third-party
defendants in the pending Florida lawsuit by a party who had previously been
named as a defendant when the Florida lawsuit was commenced in 1993 by the
Florida Department of Environmental Protection. As a result of the mediation, a
Settlement Agreement was entered into among Hadco, Gould and the Florida
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Department of Environmental Protection in March 1999. The third-party complaints
against Hadco and Gould in the pending Florida lawsuit were dismissed. The
Settlement Agreement provides that Hadco and Gould will undertake remedial
action based on a Supplemental Contamination Assessment Report and a later
Feasibility Study, which has been prepared by a consultant to Hadco and Gould
and approved by the Florida Department of Environmental Protection. The
estimated cost of the recommended source removal described in the Feasibility
Study is approximately $165,000, and for ongoing monitoring and remediation is
approximately $2.1 million. Actual remedial activities have not yet commenced
but are expected to begin in the near future.
In March 1993, the EPA notified Hadco Santa Clara of its potential
liability for maintenance and remediation costs in connection with a hazardous
waste disposal facility operated by Casmalia Resources, a California Limited
Partnership, in Santa Barbara County, California. The EPA identified Hadco Santa
Clara as one of the 65 generators which had disposed of the greatest amounts of
materials at the site. Based on the total tonnage contributed by all generators,
Hadco Santa Clara's share is estimated at approximately 0.2% of the total
weight.
The Casmalia site was regulated by the EPA during the period when the
material was accepted. There is no allegation that Hadco Santa Clara violated
any law in the disposal of material at the sites. Rather the EPA's actions
stemmed from the fact that Casmalia Resources may not have the financial means
to implement a closure plan for the site and because of Hadco Santa Clara's
status as a generator of hazardous waste.
In June 1997, the United States District Court in Los Angeles, California
approved and entered a Consent Decree among the EPA and 49 entities (including
Hadco Santa Clara) acting through the Casmalia Steering Committee. The Consent
Decree sets forth the terms and conditions under which the Casmalia Steering
Committee will carry out work aimed at final closure of the site. Certain
closure activities will be performed by the Casmalia Steering Committee. Later
work will be performed by the Casmalia Steering Committee, if funded by other
parties. Under the Consent Decree, the settling parties will work with the EPA
to pursue the non-settling parties to ensure they participate in contributing to
the closure and long-term operation and maintenance of the facility.
The EPA will continue as the lead regulatory agency during the final
closure work. Because long-term maintenance plans for the site will not be
determined for a number of years, it has not yet been decided which regulatory
agency will oversee this phase of the work plan or how the long-term costs will
be funded. However, the Consent Decree provides a mechanism for ensuring that an
appropriate federal, state or local agency will assume regulatory responsibility
for long-term maintenance.
FAILURE TO MANAGE SANMINA'S GROWTH MAY SERIOUSLY HARM ITS BUSINESS.
Sanmina's business has grown in recent years through both internal
expansion and acquisitions, and continued growth may cause a significant strain
on Sanmina's infrastructure and internal systems. To manage its growth
effectively, Sanmina must continue to improve and expand its management
information systems. Sanmina will face additional growth management challenges,
particularly as a result of its recent acquisitions in Europe and Asia. Future
acquisitions, both in the United States and internationally, could place
additional strains on Sanmina's management infrastructure. If Sanmina is unable
to manage growth effectively, its results of operations could be harmed.
SANMINA'S EXISTING INTERNATIONAL OPERATIONS AND PLANS TO EXPAND INTERNATIONAL
OPERATIONS INVOLVE ADDITIONAL RISKS, AND FAILURE TO EFFECTIVELY EXPAND
INTERNATIONALLY COULD HARM SANMINA'S OPERATING RESULTS.
Sanmina opened its first overseas facility, located in Dublin, Ireland, in
June 1997. During June 2000 and July 2000, Sanmina acquired operations in China,
Sweden and Finland. By virtue of the Hadco acquisition, Sanmina acquired
operations in Ireland and Malaysia. A number of risks are inherent in
international operations and transactions. International sales and operations
may be limited or disrupted by the imposition of government controls, export
license requirements, political and economic instability, trade restrictions,
changes in tariffs, labor unrest and difficulties in staffing, coordinating
communications among
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and managing international operations. Additionally, Sanmina's business and
operating results may be harmed by fluctuations in international currency
exchange rates as well as increases in duty rates, difficulties in obtaining
export licenses, misappropriation of intellectual property, constraints on
Sanmina's ability to maintain or increase prices, and competition. Sanmina
cannot assure you that it will realize the anticipated strategic benefits of its
international expansion or that international operations will contribute
positively to Sanmina's business and operating results.
In addition, to respond to competitive pressures and customer requirements,
Sanmina plans to further expand internationally in lower cost locations,
particularly additional locations in Asia and Latin America. As a result of this
proposed expansion, Sanmina could encounter difficulties in scaling up
production at overseas facilities or in coordinating Sanmina's United States and
international operations. In addition, Sanmina may not realize anticipated
revenue growth at new international operations. Sanmina may elect to establish
start-up operations rather than acquiring existing businesses, which would
require Sanmina to recruit management and other personnel and build a customer
base at a completely new operation. Accordingly, unanticipated problems Sanmina
encounters in establishing new international operations could harm its business
and operating results and cause its stock price to decline.
SANMINA IS SUBJECT TO RISKS RELATED TO INTELLECTUAL PROPERTY RIGHTS HELD BY
THIRD PARTIES.
Sanmina is subject to risks related to intellectual property rights held by
third parties. In certain cases, Sanmina may find it necessary or desirable to
license or otherwise acquire rights to intellectual property rights held by
others. In July 2000, Sanmina settled one such dispute through a licensing
arrangement with the Lemelson Foundation. Other such disputes, which could
involve Sanmina in litigation or in administrative proceedings before the United
States Patent and Trademark Office or patent authorities in foreign countries,
could arise in the future. These proceedings could be costly to conduct and
could also result in the diversion of management time and attention. In
addition, adverse determinations in any proceedings of this nature could require
Sanmina to pay monetary damages and could also result in the loss of
intellectual property rights. In the event Sanmina were able to settle disputes
through licensing or similar arrangements, the costs of these licenses could be
substantial. Accordingly, future disputes regarding intellectual property rights
could harm Sanmina's business, financial condition and results of operations.
SANMINA DEPENDS ON CERTAIN KEY PERSONNEL, AND THE LOSS OF KEY PERSONNEL MAY HARM
SANMINA'S BUSINESS.
Sanmina's future success depends in large part on the continued service of
its key technical and management personnel and on its ability to continue to
attract and retain qualified employees, particularly those highly skilled
design, process and test engineers involved in the manufacture of existing
products and the development of new products and processes. The competition for
such personnel is intense, and the loss of key employees, none of whom is
subject to an employment agreement for a specified term or a post-employment
non-competition agreement, could harm Sanmina's business.
THE DEBENTURES ARE SUBORDINATED.
The debentures will be unsecured and subordinated in right of payment to
all or our existing and future senior indebtedness. In the event of our
bankruptcy, liquidation or reorganization or upon acceleration of the debentures
due to an event of default under the indenture and in certain other events, our
assets will be available to pay obligations on the debentures only after all
senior indebtedness has been paid in full. As a result, there may not be
sufficient assets remaining to pay amounts due on any or all of the outstanding
debentures. The debentures also will be effectively subordinated to the
liabilities, including trade payables, of any of our subsidiaries. Neither we
nor our subsidiaries are limited from incurring debt, including senior
indebtedness, under the indenture. If we or our subsidiaries were to incur
additional debt or liabilities, our ability to pay our obligations on the
debentures could be adversely affected. As of July 29, 2000, we had no senior
indebtedness outstanding, and our subsidiaries had $649.8 million of debt and
other liabilities outstanding (including trade and other payables). Of this
amount, $187.9 million is no longer outstanding as result of to the redemption
of Hadco's senior debentures. We may from time to time
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incur additional debt, including senior indebtedness. Our subsidiaries may also
from time to time incur other additional debt and liabilities. See "Description
of Debentures -- Subordination."
SANMINA MAY NOT BE ABLE TO REPURCHASE OR REDEEM DEBENTURES.
On September 12, 2005, September 12, 2010 and September 12, 2015, we will
be obligated to repurchase, at your election, any outstanding debentures. In
addition, you may require us to redeem all or a portion of your debentures in
the event of a fundamental change. We may not have enough funds to pay the
repurchase price on a purchase date (in which case, we could be required to
issue common stock to pay the repurchase price) or pay the redemption price in
the event of a fundamental change. Any future credit agreements or other debt
agreements may provide that a fundamental change or our obligation to purchase
or redeem the debentures upon a fundamental change would be an event of default
under this debt agreement. As a result, we may be restricted or prohibited from
repurchasing or redeeming the debentures. If we are prohibited from repurchasing
or redeeming the debentures, we would seek the consent of then-existing lenders
to repurchase or redeem the debentures or we would attempt to refinance the
debt. If we are unable to obtain a consent or refinance the debt, we would be
prohibited from repurchasing or redeeming the debentures, which would result in
an event of default under the indenture. In these circumstances, or if a
fundamental change resulted in an event of default under any lending agreement,
the subordination provisions of the indenture would probably restrict or
prohibit payments to you. The term "fundamental change" is limited to specified
transactions and may not include other events that might adversely affect our
financial condition. Our obligation to offer to redeem the debentures upon a
fundamental change would not necessarily afford you protection in the event of a
highly leveraged transaction, reorganization, merger or similar transaction
involving Sanmina. See "Description of Debentures -- Repurchase of Debentures at
the Option of the Holder" and "-- Repurchase at the Option of the Holder Upon a
Fundamental Change."
A PUBLIC MARKET MAY NOT DEVELOP FOR THE DEBENTURES.
The initial purchasers in the initial private placement have advised us
that they currently intend to make a market in the debentures. However, the
initial purchasers are not obligated to make a market and may discontinue this
market making activity at any time without notice. In addition, market making
activity by the initial purchasers will be subject to the limits imposed by the
Securities Act and the Exchange Act. As a result, we cannot assure you that any
market for the debentures will develop or, if one does develop, that it will be
maintained. If an active market for the debentures fails to develop or be
sustained, the trading price of the debentures could be materially adversely
affected.
THE DEBENTURES MAY NOT BE RATED OR MAY RECEIVE A LOWER RATING THAN ANTICIPATED.
Sanmina believes it is likely that one or more rating agencies may rate the
debentures. If one or more rating agencies assign the debentures a rating lower
than expected by investors, the market price of the debentures and our common
stock would be materially and adversely affected.
SANMINA'S STOCK PRICE MAY BE VOLATILE.
The trading price of our common stock has been and could in the future be
subject to significant fluctuations in response to:
- variations in quarterly operating results;
- developments in the electronics industry;
- general economic conditions, and
- changes in securities analysts' recommendations regarding Sanmina's
securities and other factors.
In addition, the stock market in recent years has experienced significant price
and volume fluctuations which have affected the market prices of technology
companies and which have often been unrelated to or disproportionately impacted
by the operating performance of such companies. These broad market fluctuations
may adversely affect the market price of our debentures and the common stock
into which the debentures are convertible.
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USE OF PROCEEDS
We will not receive any proceeds from the sale by any selling
securityholder of the debentures or the underlying common stock.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods indicated is
as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED
------------------------------------- -------------
1995 1996 1997 1998 1999 2000 1999
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges...... 37.4x 18.5x 5.0x 3.5x 5.0x 6.2x 4.0x
</TABLE>
These computations include us and our consolidated subsidiaries. For these
ratios, "earnings" represents income before taxes plus fixed charges. "Fixed
charges" consists of interest expense, charges and amortization of debt,
expenses and discount on premium related to indebtedness, whether expensed or
capitalized, and that portion of rental expense Sanmina believes to be
representative of interest.
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DESCRIPTION OF DEBENTURES
The debentures have been issued under an indenture dated as of September
12, 2000 between us and Wells Fargo Bank Minnesota, National Association, as
trustee. We have summarized the material terms and provisions of the indenture
in this section. You should read the indenture for additional information before
you buy any of these debentures. References in this section to "us," "we," "our"
and "Sanmina" are solely to Sanmina Corporation and not to our subsidiaries.
GENERAL
The debentures are unsecured obligations of our company and are subordinate
in right of payment to our obligations described under "-- Subordination." The
debentures are limited to $1,660,000,000 aggregate principal amount at maturity.
The debentures are scheduled to mature on September 12, 2020. The debentures are
being offered at a substantial discount from their principal amount at maturity
and will therefore have original issue discount for U.S. federal income tax
purposes. See "Material United States Federal Income Tax Considerations."
There will be no periodic cash payments of interest on the debentures,
except as described under "-- Optional Conversion to Semiannual Coupon
Debentures Upon a Tax Event." In periods during which a debenture remains
outstanding, the accrual of original issue discount will be compounded
semi-annually using a year composed of twelve 30-day months. Original issue
discount is the difference between the issue price of a debenture and its
principal amount at maturity. The accrual of original issue discount will
commence on the date the debentures are issued. Original issue discount or, if
the debentures are converted to semiannual coupon debentures following the
occurrence of a tax event, interest on the debentures, will cease to accrue upon
conversion, repurchase or redemption of the debentures under the terms of the
indenture.
The principal amount at maturity of each debenture is payable at the office
or agency of the paying agent, in the Borough of Manhattan, The City of New
York, which shall initially be an office or agency of the trustee, or any other
office of the paying agent maintained for this purpose. You may present
debentures for conversion into common stock at the office of the conversion
agent. Debentures in definitive form may be presented for exchange for other
debentures or registration of transfer at the office of the registrar. The
trustee will initially serve as paying agent, conversion agent and registrar. We
will not impose a service charge for any registration, transfer or exchange of
debentures. However, we may require the holder to pay for any tax, assessment or
other governmental charge to be paid in connection with any registration,
transfer or exchange of debentures.
SUBORDINATION
The debentures are subordinated to the prior payment of all of our senior
indebtedness.
If we dissolve, wind up, liquidate our reorganize our business, we will
repay our senior indebtedness before we make any payment on the debentures. If
the debentures are accelerated because of an event of default, we will pay the
holders of any senior indebtedness in full before we pay the debenture holders.
We must promptly notify the holders of any senior indebtedness if there is an
event of default under the indenture.
We may not make any payment on the debentures if there is:
- a default in the payment of senior indebtedness; or
- any other default of designated senior indebtedness that permits the
holders of designated senior indebtedness to accelerate its maturity and
the trustee receives a payment blockage notice.
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We may resume payments on the debentures:
- in case of any payment default, on the date the default is cured, waived
or ceases to exist; and
- in the case of any non-payment default, on the earlier of (A) the date
the non-payment default is cured, waived, or ceases to exist, and (B) 179
days after the date on which the trustee receives the payment blockage
notice.
No new period of payment blockage may be commenced unless:
- 365 days have elapsed since the initial effectiveness of the immediately
preceding payment blockage notice; and
- all scheduled payments of principal amount at maturity, issue price,
original issue discount, redemption price, repurchase price, fundamental
change purchase price and interest, if any, on the debentures that have
become due and payable have been fully paid in cash.
No non-payment default that existed on the date of delivery of any payment
blockage notice to the trustee shall be the basis for any later payment blockage
notice.
If the trustee or any debenture holder receives any payment or
distribution, then they must hold the payment in trust for the benefit of
holders of senior indebtedness. In the event of our bankruptcy, dissolution or
reorganization, holders of our senior indebtedness may receive more, ratably,
and holders of the debentures may receive less, ratably, than our other
creditors.
We will pay the trustee reasonable compensation and will indemnify the
trustee against certain liabilities it may incur in connection with its duties.
The trustee's claims for compensation and indemnification generally will be
senior to the claims of debenture holders.
DEFINITIONS
"INDEBTEDNESS" means:
(1) all of our indebtedness, obligations and other liabilities
(A) for borrowed money, including overdrafts, foreign exchange
contracts, currency exchange agreements, interest rate protection
agreements, and any loans or advances from banks or
(B) evidenced by bonds, debentures, notes or similar instruments,
whether or not the recourse of the lender is to the whole of the assets
or only to a portion of the assets, other than any account payable or
other accrued current liability or obligation incurred in the ordinary
course of business in connection with obtaining materials or services;
(2) all of our obligations with respect to letters of credit, bank
guarantees or bankers' acceptances;
(3) all of our obligations under leases that are required to be
accounted for as capitalized leases under generally accepted accounting
principles;
(4) all of our obligations under synthetic leases or any other leases
or related documents, including purchase agreements, in connection with
leases of real property that provide that we are contractually obligated to
purchase or cause a third party to purchase the leased property and thereby
guarantee a minimum residual value of the leased property to the lessor and
our obligations under such leases or related documents to purchase or to
cause a third person to purchase the leased property;
(5) all of our obligations with respect to an interest rate or other
swap, cap or collar agreement or other similar instrument or agreement or
foreign currency hedge, exchange, purchase or similar instrument or
agreement;
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(6) all direct or indirect guarantees or similar agreements by us in
respect of, and all of our obligations to purchase or otherwise acquire or
otherwise assure a creditor against loss in respect of, indebtedness,
obligations or liabilities of another person of the kind described in items
(1) through (5) above;
(7) any indebtedness or other obligations described in items (1)
through (6) above that are secured by any mortgage, pledge, lien or other
encumbrance existing on property which is owned or held by us, regardless
of whether the indebtedness or other obligation secured thereby shall have
been assembled by us; and
(8) any and all deferrals, renewals, extensions and refundings of, or
amendments, modification or supplements to, any indebtedness, obligation or
liability of the kind described in items (1) through (7) above.
"SENIOR INDEBTEDNESS" means the principal, premium, if any, interest,
including any interest accruing after bankruptcy, rent and all fees, costs,
expenses and other amounts due on indebtedness, whether created, incurred,
assumed, guaranteed or in effect guaranteed by us, including all deferrals,
renewals, extensions, refundings, amendments, modifications or supplements to
the above.
Senior indebtedness does not include:
(1) indebtedness that expressly provides that it shall not be senior
in right of payment to the debentures or expressly provides that it is on
the same basis or junior to the debentures;
(2) indebtedness to any of our majority-owned subsidiaries; and
(3) the 4 1/4% Convertible Subordinated Notes due 2004.
The debentures are our obligations exclusively. Our subsidiaries have no
payment obligations under the debentures. Although we currently conduct
substantially all of our operations at the parent level, we may increase the
level of operations conducted through our subsidiaries in the future. Were this
to occur, our cash flow and our ability to service our debt, including the
debentures, would be increasingly dependent on the earnings of our subsidiaries
and the distribution of our subsidiaries' earnings to us. Any dividends, loans
or advances to us by our subsidiaries may be subject to statutory or contractual
restrictions. In addition, our right to receive assets upon a liquidation or
reorganization of any subsidiary will be effectively subordinated to the claims
of that subsidiary's other creditors. As of July 29, 2000, we had no
indebtedness outstanding that would have constituted senior indebtedness. As of
the same date, our subsidiaries had approximately $649.8 million of outstanding
indebtedness and other liabilities to which the debentures would be effectively
subordinated (including trade and other payables). Of this $649.8 million,
$187.9 million is no longer outstanding as a result of the redemption of Hadco
Corporation's senior notes.
Neither we nor our subsidiaries are restricted from incurring additional
debt under the indenture.
CONVERSION OF DEBENTURES BY HOLDERS
You may convert your debenture into shares of our common stock at any time
prior to maturity. However, if we elect to redeem a debenture, you may convert
it only until the close of business on the last trading day prior to a
redemption date, unless we fail to pay the redemption price. If you have
delivered a repurchase notice exercising your option to require us to repurchase
your debenture, you may not convert the debenture unless you withdraw the notice
in accordance with the terms of the indenture. Similarly, if you exercise your
option to require us to repurchase your debenture upon a fundamental change,
that debenture may be converted only if you withdraw your election to exercise
your option in accordance with the terms of the indenture. You may convert your
debentures in whole or in part provided that you convert them in multiples of
$1,000 principal amount at maturity. We will deliver the shares issuable upon
any conversion to the trustee no later than the close of business on the seventh
business day following the conversion date.
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The initial conversion rate is 3.2413 shares of common stock per $1,000
principal amount at maturity of debentures, subject to adjustment upon the
occurrence of the events described below. If, on conversion, you would be
entitled to a fractional share of common stock, you will instead receive cash in
an amount equal to the closing price of shares of our common stock on the
trading day immediately prior to the conversion date multiplied by such
fraction.
You will not receive any cash payment on conversion of a debenture
representing accrued original issue discount. Instead, accrued original issue
discount will be deemed paid in full rather than canceled, extinguished or
forfeited. Consequently, our delivery to you of the fixed number of shares of
our common stock into which the debenture is convertible, together with the cash
payment, if any, in lieu of a fractional share of our common stock, will be
deemed to satisfy our obligation to pay the principal amount at maturity of the
debenture, including accrued original issue discount attributable to the period
from the issue date to the conversion date. We will not adjust the conversion
rate to account for accrued original issue discount.
The conversion date is the date on which all of the requirements for
delivery of the debenture for conversion have been satisfied.
The conversion rate is subject to adjustment to prevent dilution upon the
occurrence of any one of the following events:
(1) the issuance of our common stock as a dividend or distribution on
our common stock;
(2) the issuance to our stockholders of rights or warrants to purchase
our common stock at below market price;
(3) certain subdivisions, combinations and reclassifications of our
outstanding common stock;
(4) distributions to all our common stockholders of our capital stock,
debt securities, or other assets, excluding distributions of:
- common stock in the manner described in item (1) above;
- rights or warrants in the manner described in item (2) above; or
- cash in the manner described in item (5) below;
(5) cash distributions, excluding any quarterly cash dividend on our
common stock if the quarterly distribution does not exceed the greater of:
- the cash dividend per share from the previous quarter not requiring an
adjustment under this provision, as adjusted to reflect subdivisions
or combinations of our common stock; or
- 3.75% of the average of the last reported sales price of the common
stock during the 10 trading days immediately prior to the dividend
declaration date;
(6) payment in respect of a tender offer or exchange offer by us or
any of our subsidiaries for our common stock if the price per share exceeds
the current market price of our common stock on the next trading day after
the last date on which tenders or exchanges may be made; and
(7) payment in respect of certain tender offers or exchange offers by
a third party in which, as of the closing or expiration date of such offer,
our board of directors does not recommend rejection of the offer, in which
case an adjustment will be made only if:
- the tender offer or exchange offer increases the ownership of the
person making the offer to more than 25% of our common stock; and
- the cash and other consideration paid exceeds the market price of our
common stock on the next trading day after the last date on which
tenders or exchanges may be made.
If an adjustment were required to be made under item (5) above as a result
of a quarterly distribution, the adjustment would be based upon the amount by
which the cash distributed exceeded the
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<PAGE> 20
maximum quarterly dividend permitted under that item. If an adjustment were
required to be made under item (5) as a result of a distribution other than a
quarterly dividend, the adjustment would be based upon the full amount of cash
distributed. The adjustment referred to in item (7) above will not be made if,
as of the closing of the tender offer or exchange offer, the offering documents
disclose a plan or an intention to cause us to engage in a consolidation, merger
or sale of all or substantially all our assets.
If our common stockholders become entitled to receive stock, other
securities, property, cash or other assets upon any reclassification of our
common stock, any consolidation or merger involving us, or any sale to another
entity of substantially all of our assets, then you will generally be able to
convert your debentures into the same type of consideration received by our
common stockholders as if you had done so immediately prior to the
reclassification, consolidation, merger or sale.
We may increase the conversion rate for a period of at least 20 days so
long as:
- the increase remains irrevocable during that period; and
- our board of directors determines that the increase is in our best
interest, which determination shall be conclusive.
We must give at least seven days' advance notice of any increase in the
conversion rate. In addition to increases in the conversion rate of the type
described above, we may increase the conversion rate as we deem advisable to
avoid or diminish any income tax to holders of our common stock resulting from
any dividend or distribution of our stock, or rights to acquire stock, or from
any event treated as a dividend, distribution or right to acquire our stock for
income tax purposes. See "Material United States Federal Income Tax
Considerations."
No adjustment in the conversion rate will be required unless the adjustment
would require a change of at least 1% in the conversion rate then in effect.
However, any adjustment that would otherwise be required to be made to the
conversion rate will be carried forward and taken into account in any subsequent
adjustment.
Except as stated above, the conversion rate will not be adjusted for the
issuance of our common stock, any securities convertible into or exchangeable
for our common stock or any rights to purchase any of the foregoing.
If, following a tax event, we exercise our option to have interest accrue
on a debenture in lieu of original issue discount, you will be entitled to
receive on conversion the same number of shares of common stock that you would
have received had we not exercised our option. If we exercise our option,
debentures surrendered for conversion during the period from the close of
business on the record date next preceding the next interest payment date to the
opening of business on the next interest payment date must also be accompanied
by an amount equal to the accrued and unpaid interest on the debenture that you
are to receive except debentures to be redeemed on the next interest payment
date. Except where debentures surrendered for conversion must be accompanied by
the payment described in this paragraph, no interest on converted debentures
will be payable by us on any interest payment date subsequent to the date of
conversion. See "-- Optional Conversion to Semiannual Coupon Debentures Upon a
Tax Event."
In the event of a taxable distribution to our common stockholders or in
certain other circumstances requiring an adjustment to the conversion rate, the
debenture holders may, in certain circumstances, be deemed to have received a
distribution subject to United States income tax as a dividend. In certain other
circumstances, the absence of an adjustment may result in a taxable dividend to
the holders of common stock. See "Material United States Federal Income Tax
Considerations."
REDEMPTION OF DEBENTURES AT OUR OPTION
We may not redeem the debentures before September 12, 2005. Beginning on
September 12, 2005, we may redeem the debentures for cash in whole or in part at
any time, by mailing a redemption notice to
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<PAGE> 21
the debenture holders not less than 30 days nor more than 60 days prior to the
redemption date. The redemption price will be an amount in cash equal to 100% of
the sum of:
- $452.89, the original issue price per $1,000 principal amount, and
- accrued original issue discount up to and including the date of
redemption.
The debentures will be redeemable in multiples of $1,000 principal amount at
maturity. There is no sinking fund for the debentures.
The table below shows redemption prices of debentures per $1,000 principal
amount at maturity at September 12, 2005, and at each September 12 thereafter
until maturity on September 12, 2020. These redemption prices reflect accrued
original issue discount up to and including each redemption date. The redemption
price of a debenture redeemed between any two of the dates listed below would
include an additional amount reflecting original issue discount accrued from the
next preceding redemption date through the actual date of redemption.
<TABLE>
<CAPTION>
(2)
(1) ACCRUED ORIGINAL (3)
DEBENTURE ISSUE DISCOUNT REDEMPTION
ISSUE PRICE AT 4% PRICE (1)+(2)
----------- ---------------- -------------
<S> <C> <C> <C>
September 12, 2005.................................. $452.89 $ 99.19 $ 552.08
September 12, 2006.................................. $452.89 $121.49 $ 574.38
September 12, 2007.................................. $452.89 $144.69 $ 597.58
September 12, 2008.................................. $452.89 $168.84 $ 621.73
September 12, 2009.................................. $452.89 $193.95 $ 646.84
September 12, 2010.................................. $452.89 $220.09 $ 672.98
September 12, 2011.................................. $452.89 $247.27 $ 700.16
September 12, 2012.................................. $452.89 $275.56 $ 728.45
September 12, 2013.................................. $452.89 $304.99 $ 757.88
September 12, 2014.................................. $452.89 $335.61 $ 788.50
September 12, 2015.................................. $452.89 $367.46 $ 820.35
September 12, 2016.................................. $452.89 $400.60 $ 853.49
September 12, 2017.................................. $452.89 $435.09 $ 887.98
September 12, 2018.................................. $452.89 $470.96 $ 923.85
September 12, 2019.................................. $452.89 $508.28 $ 967.17
At stated maturity (September 12, 2020)............. $452.89 $547.11 $1,000.00
</TABLE>
If we elect to convert the debentures to semiannual coupon debentures
following a tax event, the debentures will be redeemable at the restated
principal amount plus accrued and unpaid interest, if any, to the applicable
redemption date.
If less than all of the outstanding debentures held in certificated form
are to be redeemed, the trustee will select the debentures held in certificated
form to be redeemed in principal amounts at maturity of $1,000 or integral
multiples thereof by lot, pro rata or by another method the trustee considers
fair and appropriate. If a portion of your certificated debentures is selected
for partial redemption and you convert a portion of your debentures, the
converted portion will be deemed to be the portion selected for redemption.
Debentures registered in the name of DTC or its nominee will be redeemed as
described under the caption entitled "Book-Entry System."
REPURCHASE OF DEBENTURES AT THE OPTION OF THE HOLDER
You have the right to require us to repurchase the debentures on September
12, 2005, September 12, 2010 and September 12, 2015. We will be required to
repurchase any outstanding debenture for which you deliver a written repurchase
notice to the paying agent. This notice must be delivered during the period
beginning at any time from the opening of business on the date that is 20
business days prior to the repurchase date until the close of business on the
repurchase date. If a repurchase notice is given and
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<PAGE> 22
withdrawn during that period, we will not be obligated to repurchase the
debentures listed in the notice. Our repurchase obligation will be subject to
additional conditions.
The purchase price payable for a debenture will be equal to the issue price
plus accrued original issue discount through the repurchase date. If, prior to
the repurchase date, we have elected to convert the debentures to semiannual
coupon debentures following a tax event, the purchase price will be equal to the
restated principal amount plus accrued and unpaid interest to the repurchase
date. See "-- Optional Conversion to Semiannual Coupon Debentures Upon a Tax
Event." The table below shows the repurchase prices of a debenture as of the
specified repurchase dates.
<TABLE>
<CAPTION>
REPURCHASE DATE PURCHASE PRICE
--------------- --------------
<S> <C>
September 12, 2005..................................... $552.08
September 12, 2010..................................... $672.98
September 12, 2015..................................... $820.35
</TABLE>
We may, at our option, elect to pay the repurchase price in cash, in shares
of our common stock or in any combination of the two. For a discussion of the
tax treatment of debenture holders receiving cash, shares of our common stock or
both, see "Material United States Federal Income Tax Considerations."
If we elect to pay the repurchase price, in whole or in part, in shares of
our common stock, the number of shares to be delivered in exchange for the
portion of the repurchase price to be paid in our common stock will be equal to
that portion of the repurchase price divided by the market price (as defined
below) of our common stock. We will not, however, deliver fractional shares in
repurchases using shares of our common stock as consideration. Debenture holders
who would otherwise be entitled to receive fractional shares will instead
receive cash in an amount equal to the market price of a share of our common
stock multiplied by such fraction.
Your right to require us to repurchase debentures is exercisable by
delivering a written repurchase notice to the paying agent within 20 business
days of the repurchase date. The paying agent initially will be the trustee.
The repurchase notice must state:
(1) if certificated debentures have been issued, the debenture
certificate numbers, or, if your debentures are not certificated, your
repurchase notice must comply with appropriate DTC procedures;
(2) the portion of the principal amount at maturity of debentures to
be repurchased, which must be in $1,000 multiples;
(3) that the debentures are to be repurchased by us pursuant to the
applicable provisions of the debentures and the indenture; and
(4) your election, in the event that we decide to pay all or a portion
of the repurchase price in shares of our common stock but prove unable to
satisfy the conditions for common stock payment and ultimately have to pay
cash, to:
- withdraw your repurchase notice with respect to all or a portion of
the debentures listed therein; or
- receive cash for the entire purchase price for all the debentures
listed in your repurchase notice.
If you fail to indicate your election under item (4) above, you will be deemed
to have elected to receive cash for the entire purchase price for all the
debentures listed in your repurchase notice.
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<PAGE> 23
You may withdraw any written repurchase notice by delivering a written
notice of withdrawal to the paying agent prior to the close of business of the
repurchase date. The withdrawal notice must state:
- the principal amount at maturity of the withdrawn debentures;
- if certificated debentures have been issued, the certificate numbers of
the withdrawn debentures, or, if your debentures are not certificated,
your withdrawal notice must comply with appropriate DTC procedures; and
- the principal amount at maturity, if any, which remains subject to the
repurchase notice.
We must give notice of an upcoming repurchase date to all debenture holders
not less than 20 business days prior to the repurchase date at their addresses
shown in the register of the registrar. We will also give notice to beneficial
owners as required by applicable law. This notice will state, among other
things:
- whether we will pay the purchase price of the debentures in cash, shares
of our common stock, or both, in which case the relative percentages will
be specified;
- if we elect to pay all or a portion of the repurchase price in shares of
our common stock, the method by which we are required to calculate
"market price" of the common stock; and
- the procedures that holders must follow to require us to repurchase their
debentures.
The "market price" means the average sale price of our common stock for the
five trading days ending on the third business day prior to the applicable
repurchase date, assuming the third business day prior to the applicable
repurchase date is a trading day, or if not, the five trading days ending on the
last trading day prior to the third business day, appropriately adjusted to take
into account the occurrence of certain events that would result in an adjustment
of the conversion rate with respect to our common stock.
The "sale price" of our common stock on any date means the closing sale
price per share of our common stock on that date, or if no closing sale price is
reported, the average of the bid and ask prices or, if more than one in either
case, the average of the average bid and the average ask prices, as reported on
the Nasdaq's National Market or, if our common stock is listed on a United
States national or regional securities exchange, as reported in composite
transactions for the principal United States securities exchange on which our
common stock is traded.
Because the market price of our common stock will be determined prior to
the applicable repurchase date you bear the market risk that our common stock
will decline in value between the date the market price is calculated and the
repurchase date. We may pay the repurchase price or any portion of the
repurchase price in shares of our common stock only if our common stock is
listed on a United States national securities exchange or quoted in an
inter-dealer quotation system of any registered United States national
securities association.
Upon determination of the actual number of shares of our common stock to be
issued in accordance with the foregoing provisions, if required, we will notify
the securities exchanges or quotation systems on which our common stock is then
listed or quoted and disseminate the number of shares to be issued on our
website or through another public medium.
Our right to repurchase your debentures, in whole or in part, with shares
of our common stock is subject to various conditions, including:
- registration of the shares of our common stock to be issued upon
repurchase under the Securities Act and the Exchange Act, if required;
and
- qualification or registration of the shares of our common stock to be
issued upon repurchase under applicable state securities laws, if
necessary, or the availability of an exemption therefrom.
If these conditions are not satisfied by a repurchase date, we will pay the
purchase price of the debentures to be repurchased entirely in cash. We may not
change the form or components or percentages
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<PAGE> 24
of components of consideration to be paid for the debentures once we have given
the debenture holders the required notice, except as described in the preceding
sentence.
Payment of the repurchase price for a debenture for which a repurchase
notice has been delivered and not withdrawn is conditioned upon book-entry
transfer or delivery of the debenture, together with necessary endorsements, to
the paying agent at its office in the Borough of Manhattan, The City of New
York, or any other office of the paying agent, at any time after delivery of the
repurchase notice. Payment of the repurchase price for the debenture will be
made promptly following the later of the repurchase date and the time of
book-entry transfer or delivery of the debenture. If the paying agent holds
money or securities sufficient to pay the repurchase price of the debenture on
the business day following the repurchase date, then, on and after the date:
- the debenture will cease to be outstanding;
- original issue discount, or, if the debentures have been converted to
interest-bearing debentures following a tax event, interest will cease to
accrue; and
- all other rights of the holder will terminate.
This will be the case whether or not book-entry transfer of the debenture has
been made or the debenture has been delivered to the paying agent, and all other
rights of the debenture holder will terminate, other than the right to receive
the repurchase price upon delivery of the debenture.
Our ability to repurchase debentures with cash may be limited by the terms
of our then-existing borrowing agreements. The indenture will prohibit us from
repurchasing debentures for cash from debenture holders if any event of default
under the indenture has occurred and is continuing, except a default in the
payment of the repurchase price with respect to the debentures.
Even though we become obligated to repurchase any outstanding debenture on
a repurchase date, we may not have sufficient funds to pay the repurchase price
on that repurchase date. If this were to occur, we could be required to issue
shares of our common stock to pay the repurchase price at valuations based on
then prevailing market prices for all debentures tendered by their holders.
We will comply with the provisions of Rule 13e-4 and any other tender offer
rules under the Exchange Act that may be applicable at the time of the tender
offer. If required, we will file a Schedule TO or any other schedule required in
connection with any offer by us to repurchase the debentures.
REPURCHASE AT THE OPTION OF THE HOLDER UPON A FUNDAMENTAL CHANGE
If we undergo a fundamental change, you will have the option to require us
to purchase for cash any or all of your debentures on a purchase date that is 30
days after the date we provide you with notice of the fundamental change. We
will pay a purchase price equal to the issue price plus accrued original issue
discount through the purchase date or, if applicable, the restated principal
amount plus accrued and unpaid interest to the date of purchase. You may require
us to purchase all or any part of your debentures provided that the principal
amount at maturity of the debentures being purchased is an integral multiple of
$1,000.
A "fundamental change" is the occurrence of any transaction or event in
connection with which all or substantially all of our common stock will be
exchanged for, converted into, acquired for or constitute solely the right to
receive (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or any
other method) any form of consideration which is not all or substantially all of
our common stock listed (or, upon consummation of or immediately following such
transaction or event, which will be listed) on a United States national
securities exchange or approved for quotation on the Nasdaq's National Market or
any similar United States system of automated dissemination of quotations of
securities prices.
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<PAGE> 25
In order to exercise your right to require us to repurchase your debentures
upon a fundamental change, you must deliver a written notice to the paying agent
prior to the close of business on the business day prior to the date on which
the debentures are to be repurchased. You may withdraw the notice by delivering
a written withdrawal notice to the paying agent before the repurchase date.
On or before the 10th day following a fundamental change, we are required
to mail to the trustee and all debenture holders of record a written notice:
- stating that a fundamental change has occurred; and
- explaining the repurchase rights that have arisen as a consequence of the
fundamental change.
To exercise your repurchase right, you must deliver to us or our designated
agent within 30 days after the date of our fundamental change notice:
- written notice of your election to exercise your repurchase right; and
- the debentures to be repurchased duly endorsed for transfer.
Payment for debentures surrendered for repurchase and not withdrawn prior to the
expiration of the 30-day period will be made promptly following the repurchase
date.
If, following a tax event, we have previously exercised our option to pay
interest on the debentures instead of accruing original issue discount, we will
purchase the debentures at a cash price equal to the Restated Principal Amount
plus accrued and unpaid interest from the date we exercised our option. See
"-- Optional Conversion to Semiannual Coupon Debentures Upon a Tax Event."
In the event of a fundamental change, we will comply with the provisions of
Rule 13e-4, if any, and any other tender offer rules under the Exchange Act that
may be applicable at the time we repurchase the debentures. If required, we will
also file a Schedule TO or any other schedule required in connection with any
offer by us to repurchase the debentures.
The repurchase rights of the debenture holders could discourage a potential
acquirer from acquiring us, but the fundamental change repurchase feature does
not result from management's knowledge of any potential acquirer's attempt to
obtain control of us, nor is it part of an anti-takeover strategy on the part of
management.
The term "fundamental change" is limited to specific types of transactions
and does not include other events that might adversely affect our financial
condition. Moreover, the fundamental change repurchase feature may not protect
you in the event of a highly leveraged transaction, reorganization, merger or
similar transaction involving or affecting us.
No debentures may be repurchased at the option of holders upon a
fundamental change if there has occurred and is continuing an event of default
described under "-- Events of Default; Notice and Waiver" below. However,
debentures may be repurchased if the event of default is in the payment of the
fundamental change purchase price with respect to the debentures.
MERGERS AND SALES OF ASSETS
We may not consolidate with or merge into any other person or convey,
transfer or lease substantially all of our assets to another entity, unless:
- the successor entity, if other than Sanmina, assumes all of our
obligations under the debentures and the indenture;
- the successor entity is organized and existing under the laws of the
United States or any State thereof or the District of Columbia; and
- we or the successor entity will not immediately thereafter be in default
under the indenture.
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Upon the assumption of our obligations by a successor entity as described above,
we will be discharged from all obligations under the debentures and the
indenture, subject to certain exceptions. Some transactions that would
constitute a fundamental change would permit each debenture holder to require us
to repurchase their debentures as described under "-- Repurchase at Option of
the Holder Upon a Fundamental Change."
OPTIONAL CONVERSION TO SEMIANNUAL COUPON DEBENTURES UPON A TAX EVENT
We have the option to convert the debentures to interest-bearing debentures
following a tax event. From and after the date a tax event occurs, we may elect
to pay interest at 4% per year on the debentures instead of accruing original
issue discount. The principal amount will be restated as the sum of:
- the issue price and
- the amount of original issue discount accrued up to the date we exercise
our conversion option. This "restated principal amount" will then be the
amount due at maturity. If we elect this option, interest will be based
on a 360-day year comprised of twelve 30-day months. Interest will accrue
from the date we exercise our conversion option and will be payable
semiannually on September 12 to holders of record on the immediately
preceding August 28 and on March 12 to holders of record on the
immediately preceding February 28.
A tax event occurs when we receive an opinion from tax counsel stating
that, for United States federal income tax purposes, there is more than an
insubstantial risk that all or a portion of the interest, including original
issue discount, payable on the debentures would not be deductible by us either
on a current accrual basis or under any other method, as a result of either:
- any amendment, change or announced prospective change in the laws or
regulations of the United States or any of its political subdivisions or
taxing authorities; or
- any amendment, change, interpretation or application of the laws or
regulations by any legislative body, court, government agency or
regulatory authority.
EVENTS OF DEFAULT; NOTICE AND WAIVER
If an event of default has occurred and is continuing, the indenture
provides that either the trustee or the holders of at least 25% in aggregate
principal amount at maturity of the debentures then outstanding may declare due
and payable:
- the issue price of the debentures, or, if the debentures are converted to
interest-bearing debentures following a tax event, the restated principal
amount; plus
- original issue discount accrued and unpaid on the debentures to the date
of the declaration, or, if the debentures are converted to
interest-bearing debentures following a tax event, interest accrued and
unpaid on the debentures to the date of the declaration; plus
- any additional interest owing under the registration rights agreement.
In the case of certain events of bankruptcy or insolvency, the issue price plus
original issue discount accrued and unpaid on the debentures to the date of the
event, will automatically become immediately due and payable or, if the
debentures are converted to interest-bearing debentures following a tax event
the restated principal amount plus interest accrued and unpaid on the debentures
to the date of the event.
Under circumstances specified in the indenture, the holders of a majority
in aggregate principal amount at maturity of the outstanding debentures may
rescind any acceleration of the debentures so that they will not become
immediately due and payable.
Cash interest will accrue at the rate of 4% per annum and be payable on
demand upon a default in the payment of any redemption price or purchase price
and, after acceleration, of the issue price plus accrued original issue discount
(or, if the debentures are converted to interest-bearing debentures following
26
<PAGE> 27
a tax event, issue price plus accrued interest) to the extent such payment of
the interest is legally enforceable. Original issue discount or, if the
debentures are converted to semiannual coupon debentures following the
occurrence of a tax event, interest on the debentures, except as provided in the
first sentence of this paragraph, will cease to accrue after declaration of
acceleration.
The following are events of default under the indenture:
(1) our failure to pay any of the following when each becomes due and
payable:
- the principal amount of the debentures, or, if the debentures have
been converted to interest-bearing debentures following a tax event,
the restated principal amount at stated maturity;
- the issue price;
- accrued and unpaid original issue discount, or, if the debentures have
been converted to interest-bearing debentures following a tax event,
accrued and unpaid interest;
- redemption price;
- repurchase price; or
- fundamental change purchase price;
(2) our failure for 30 days to pay any additional interest due to all
holders of registrable securities or interest assuming conversion of the
debentures to interest-bearing debentures following a tax event due on the
debentures;
(3) our failure to comply with any of our covenants or agreements set
forth in the indenture or the debentures for 60 days after written notice
by the trustee or by the holders of at least 25% in principal amount at
maturity of the outstanding debentures;
(4) certain events involving our bankruptcy, insolvency or
reorganization or the bankruptcy, insolvency or reorganization of any of
our significant subsidiaries.
The trustee will give notice to the debenture holders of any continuing
default known to the trustee within 90 days after the trustee becomes aware of
it. However, the trustee may withhold notice to the debenture holders of any
default or event of default, except for defaults in any payment on the
debentures, if the trustee considers it in the best interest of the debenture
holders to do so.
The holders of a majority in aggregate principal amount at maturity of the
outstanding debentures may direct the time, place and method of conducting any
proceeding for any remedy available to the trustee or exercising any trust or
power conferred on the trustee. However, such direction may not conflict with
any law or the indenture and will be subject to certain other limitations.
Before exercising any right or power under the indenture at the direction of the
debenture holders, the trustee will be entitled to receive security or indemnity
satisfactory to the trustee against the costs, expenses and liabilities incurred
by the trustee in complying with the direction of the debenture holders. No
debenture holder will have any right to pursue any remedy with respect to the
indenture or the debentures unless:
(1) the debenture holder has previously given us and the trustee
written notice of a continuing event of default;
(2) the holders of at least 25% in aggregate principal amount at
maturity of the outstanding debentures have made a written request to the
trustee to pursue the remedy;
(3) the debenture holder or holders have offered the trustee indemnity
satisfactory to the trustee;
(4) the holders of a majority in aggregate principal amount at
maturity of the outstanding debentures have not given the trustee a
direction inconsistent with the request within 60 days of the trustee's
receipt of the request; and
(5) the trustee has failed to comply with the request within a 60-day
period.
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However, none of the following rights of any debenture holder may be
impaired or adversely affected without the debenture holder's consent:
(1) the right to receive payments of principal, including the issue
price and accrued original issue discount, or additional interest or
interest in respect of any default in payment under a debenture on or after
the due date;
(2) the right to institute suit for the enforcement of any payments or
conversion; or
(3) the right to convert debentures.
The holders of at least a majority in aggregate principal amount at
maturity of the outstanding debentures may waive an existing default and its
consequences, other than:
- any default in any payment on the debentures;
- any default with respect to the conversion rights of the debentures; or
- any default in respect of certain covenants or provisions in the
indenture which may not be modified without the consent of the holder of
each debenture as described under the caption entitled "-- Modification
and Waiver" below.
We will be required to furnish to the trustee annually a statement as to
any default by us in the performance and observance of our obligations under the
indenture.
MODIFICATION AND WAIVER
We may amend, modify or supplement the indenture with the consent of the
holders of not less than a majority in aggregate principal amount at maturity of
all outstanding debentures. Notwithstanding the foregoing, no amendment may,
without the consent of each holder affected:
(1) reduce the principal amount at maturity, issue price, redemption
price, repurchase price or fundamental change purchase price;
(2) extend the stated maturity of any debenture;
(3) alter the manner or rate of accrual of original issue discount,
additional interest (under the Registration Rights Agreement) or interest,
if any;
(4) make any debenture payable in money or securities of a type other
than that stated in the debentures;
(5) impair the right to institute suit for payment under, or
conversion of, the debentures;
(6) reduce the percentage in principal amount of the outstanding
debentures the consent of whose holders (A) is required for any such
amendment, modification or supplement, or (B) is required for any waiver
provided for in the indenture;
(7) reduce the quorum or voting requirements under the indenture;
(8) change any obligation of Sanmina to maintain an office or agency
in the places and for the purposes specified in the indenture;
(9) make any change that adversely affects the right to convert any
debenture or the right to require us to repurchase a debenture or the right
to require us to repurchase a debenture upon a fundamental change;
(10) modify the provisions of the indenture affecting the
subordination of the indentures in a manner adverse to the debenture
holders; or
(11) subject to specified exceptions, modify certain of the provisions
of the indenture relating to modification or waiver of provisions of the
indenture.
We may also make certain modifications of the indenture without the consent
of the holders.
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<PAGE> 29
FORM, EXCHANGE, REGISTRATION AND TRANSFER
We will issue the debentures in registered form, without interest coupons.
We will not charge a service charge for any registration of transfer or exchange
of the debentures. We may, however, require the payment of any tax or other
governmental charge payable for that registration.
Debentures will be exchangeable for other debentures, for the same total
principal amount and for the same terms but in different authorized
denominations in accordance with the indenture. Holders may present debentures
for registration of transfer at the office of the security registrar or any
transfer agent we designate. The security registrar or transfer agent will
effect the transfer or exchange when it is satisfied with the documents of title
and identity of the person making the request.
We have appointed the trustee as security registrar for the debentures. We
may at any time rescind that designation or approve a change in the location
through which any registrar acts. We are required to maintain an office or
agency for transfers and exchanges in each place of payment. We may at any time
designate additional registrars for the debentures.
In the case of any redemption, the security registrar will not be required
to register the transfer or exchange of any debenture either:
- during a period beginning 15 business days prior to the expected mailing
of the relevant notice of redemption and ending on the close of business
on the day of mailing of such notice; or
- if the debentures have been called for redemption, in whole or in part,
except the unredeemed portion of any debenture being redeemed in part.
PAYMENT AND PAYING AGENTS
Payments on the debentures not made in shares of our common stock will be
made in U.S. dollars at the office of the trustee. At our option, however, we
may make payments by check mailed to the holder's registered address or, with
respect to global debentures, by wire transfer. We will make interest payments
to the person in whose name the debenture is registered at the close of business
on the record date for the interest payment.
The trustee initially will be designated as our paying agent for payments
on debentures. We may at any time designate additional paying agents or rescind
the designation of any paying agent or approve a change in the office through
which any paying agent acts.
Subject to the requirements of any applicable abandoned property laws, the
trustee and paying agent shall pay to us upon written request any money held by
them for payments on the debentures that remain unclaimed for two years after
the date upon which that payment has become due. After payment to us, holders
entitled to the money must look to us for payment. In that case, all liability
of the trustee or paying agent with respect to that money will cease.
BOOK-ENTRY SYSTEM
The debentures will be represented by one or more global securities. Each
global security will be deposited with, or on behalf of, The Depository Trust
Company and be registered in the name of a nominee of DTC. Except under
circumstances described below, the debentures will not be issued in definitive
form.
Upon the issuance of a global security, DTC will credit on its book-entry
registration and transfer system the accounts of persons designated by the
initial purchaser with the respective principal amounts of the debentures
represented by the global security. Ownership of beneficial interests in a
global security will be limited to persons that have accounts with DTC or its
nominee (called "participants") or persons that may hold interests through
participants. Ownership of beneficial interests in a global security will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by DTC or its nominee with respect to interests of persons
other than participants. The laws of some states require that
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<PAGE> 30
certain purchasers of securities take physical delivery of the securities in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a global security.
So long as DTC or its nominee is the registered owner of a global security,
DTC or its nominee, as the case may be, will be considered the sole owner or
holder of the debentures represented by that global security for all purposes
under the indenture. Except as provided below, owners of beneficial interests in
a global security will not be entitled to have debentures represented by that
global security registered in their names, will not receive or be entitled to
receive physical delivery of debentures in definitive form and will not be
considered the owners or holders thereof under the indenture. Principal and
interest payments, if any, or payments of the redemption price or the purchase
price on debentures registered in the name of DTC or its nominee will be made to
DTC or its nominee, as the case may be, as the registered owner of the relevant
global security. Neither we, the trustee, any paying agent nor the registrar for
the debentures will have any responsibility or liability for any aspect of the
records relating to, nor payments made on account of, beneficial interests in a
global security or for maintaining, supervising or reviewing any records
relating to such beneficial interests.
We expect that DTC or its nominee, upon receipt of any payment of principal
or interest, if any, or payments of the redemption price or the purchase price
will credit immediately participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the relevant global security as shown on the records of DTC or its nominee.
We also expect that payments by participants to owners of beneficial interests
in a global security held through such participants will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants.
If DTC is at any time unwilling or unable to continue as a depositary and a
successor depositary is not appointed by us within 90 days, we will issue
debentures in definitive form in exchange for the entire global security for the
debentures. In addition, we may at any time and in our sole discretion determine
not to have debentures represented by a global security and, in such event, will
issue debentures in definitive form in exchange for the entire global security
relating to such debentures. In any such instance, an owner of a beneficial
interest in a global security will be entitled to physical delivery in
definitive form of debentures represented by such global security equal in
principal amount to such beneficial interest and to have such debentures
registered in its name. Debentures so issued in definitive form will be issued
as registered debentures in denominations of $1,000 and integral multiples of
$1,000, unless otherwise specified by us.
DTC has advised us that DTC is:
- a limited purpose trust company organized under the laws of the State of
New York;
- a member of the Federal Reserve System;
- a clearing corporation within the meaning of the Uniform Commercial Code;
and
- a clearing agency registered pursuant to the provisions of Section 17A of
the Exchange Act.
DTC was created to hold securities for its participants and to facilitate
the clearance and settlement of securities transactions between participants
through electronic book-entry changes to the accounts of its participants. This
practice eliminates the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations. Some of the
participants, or their representatives, together with other entities, own DTC.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through, or maintain a custodial
relationship with, a participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the global security among participants, it is under no
obligation to perform or continue to perform these procedures, and these
procedures may be discontinued at any time.
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<PAGE> 31
Conveyance of notices and other communications by DTC to participants, by
participants to indirect participants and indirect participants to beneficial
owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements that may be in effect from time to time. Redemption
notices will be sent to Cede & Co., as nominee of DTC. If less than all of the
debentures are being redeemed, DTC will reduce the amount of interest of each
participant in the debentures in accordance with its procedures.
Holders of debentures may not request certificated debentures and
certificated debentures will not be issued, except at our option or in exchange
for debentures represented by the global debenture if no successor depositary is
appointed by us as set forth above in the fifth paragraph under this caption.
See the description under "Material United States Federal Income Tax
Considerations" for a discussion of certain tax considerations relevant to a
holder of debentures.
INFORMATION CONCERNING THE TRUSTEE
We have appointed Wells Fargo Bank Minnesota, National Association, as
trustee under the indenture, and as paying agent, conversion agent, registrar
and custodian with regard to the debentures. Wells Fargo Bank Minnesota,
National Association is also the trustee for our 4 1/4% Convertible Subordinated
Notes due 2004 and the transfer agent for our common stock.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 500,000,000 shares of common
stock, par value $0.01 per share, and 5,000,000 shares of preferred stock, par
value $0.01 per share.
COMMON STOCK
As of December 14, 2000, there were 152,544,825 shares of common stock
outstanding held by approximately 852 holders of record. Each holder of common
stock is entitled to one vote per share on all matters to be voted upon by the
stockholders. Holders of common stock are entitled to receive dividends declared
by the board of directors, out of funds legally available for the payment of
dividends subject to preferences that may be applicable to the holders of
preferred stock. Upon liquidation, dissolution or winding up of our business,
the holders of common stock are entitled to share equally in all assets
available for distribution after payment of liabilities, subject to prior
distribution rights of preferred stock. The holders of common stock have no
preemptive or conversion rights or other subscription rights. No redemption or
sinking fund provisions apply to the common stock.
All outstanding shares of common stock are fully paid and nonassessable.
DELAWARE GENERAL CORPORATION LAW SECTION 203
We are a Delaware corporation subject to Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, Section 203 prohibits
a publicly held Delaware corporation from engaging in a "business combination"
transaction with an "interested stockholder" for a period of three years after
the person became an interested stockholder, unless the business combination or
the transaction in which the person became an interested stockholder is approved
in the manner described below.
The Section 203 restrictions do not apply if:
(1) the business combination or transaction is approved by our board
of directors before the date the interested stockholder obtained the
status;
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<PAGE> 32
(2) upon consummation of the transaction which resulted in the
stockholder obtaining the status, the stockholder owned at least 85% of the
shares of stock entitled to vote in the election of directors, the "voting
stock". The 85% calculation does not include those shares:
- owned by directors who are also officers of the target corporation;
and
- held by employee stock plans which do not permit employees to decide
confidentially whether to accept a tender or exchange offer; or
- on or after the date the interested stockholder obtained its status,
the business combination is approved by our board of directors and at
a stockholder meeting by the affirmative vote of at least 66 2/3% of
the outstanding voting stock which is not owned by the interested
stockholder.
Generally, a "business combination" includes a merger, asset sale, or other
transaction resulting in a financial benefit to the interested stockholder.
Generally, an "interested stockholder" is a person who, together with affiliates
and associates, owns, or within three years prior to the determination of
interested stockholder status, did own, 15% or more of a corporation's voting
stock. Section 203 may prohibit or delay mergers or other takeover or change in
control attempts with respect to Sanmina Corporation. As a result, Section 203
may discourage attempts to acquire us even though such transaction may offer our
stockholders the opportunity to sell their stock at a price above the prevailing
market price.
CHARTER AND BYLAW PROVISIONS
Our charter and bylaws include provisions that may have the effect of
discouraging, delaying or preventing a change in control or an unsolicited
acquisition proposal that a stockholder might consider favorable, including a
proposal that might result in the payment of a premium over the market price for
the shares held by stockholders as follows:
- our board has the power to establish the rights, preferences and
privileges of authorized and unissued shares;
- our charter limits the liability of our directors, in their capacity as
directors but not in their capacity as officers, to Sanmina or its
stockholders to the fullest extent permitted by Delaware law.
INDEMNIFICATION ARRANGEMENTS
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officer. Such indemnification covers our directors and officers under
certain circumstances for liabilities arising under the Securities Act of 1933,
as amended, including reimbursement for expenses. Article X of Sanmina's Bylaws
provide for indemnification of our directors and officers, employees and other
agents to the maximum extent permitted by law. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to our directors,
officers and controlling persons, we have been advised that in the opinion of
the Commission, such indemnification is against public policy, as stated by the
Commission, and is, therefore, unenforceable.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is Wells Fargo
Financial.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
This section summarizes some of the U.S. federal income tax considerations
relating to the purchase, ownership, and disposition of the debentures and of
common stock into which the debentures may be converted. This summary does not
provide a complete analysis of all potential tax considerations. The information
provided below is based on existing authorities. These authorities may change,
or the Internal Revenue Service might interpret the existing authorities
differently. In either case, the tax consequences of purchasing, owning or
disposing of debentures or common stock could differ from those described below.
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<PAGE> 33
The summary generally applies only to holders that purchase debentures in the
initial offering at their issue price and hold the debentures or common stock as
"capital assets" (generally, for investment). The summary generally does not
address tax considerations that may be relevant to particular investors because
of their specific circumstances, or because they are subject to special rules.
Finally, the summary does not describe the effect of the federal estate and gift
tax laws or the effects of any applicable foreign, state, or local laws.
INVESTORS CONSIDERING THE PURCHASE OF DEBENTURES SHOULD CONSULT THEIR OWN
TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO
THEIR PARTICULAR SITUATIONS AND THE CONSEQUENCES OF FEDERAL ESTATE OR GIFT TAX
LAWS, FOREIGN, STATE, OR LOCAL LAWS, AND TAX TREATIES.
ORIGINAL ISSUE DISCOUNT
Because the debentures do not provide for payments of fixed periodic
interest, they will be sold at a discount from their principal amount. Investors
will in effect receive interest at maturity, unless the debentures are converted
or redeemed before then, by receiving a principal amount greater than the issue
price of the debentures. Because this excess of principal over issue price is
economically equivalent to interest, the U.S. tax rules require that this amount
(referred to as "original issue discount") be recognized as interest income over
the term of the debentures. The amount of accrued interest for each period is
determined under a constant yield method, so that the accrued interest for any
period equals a constant percentage of the holder's investment, including the
original purchase price of the debenture plus any previously accrued interest.
Because the holder's investment increases each period, the amount of interest
income for each period will increase as the debentures get closer to maturity.
We will be required to furnish annually to the Internal Revenue Service and
to certain noncorporate holders information regarding the amount of original
issue discount allocable to the year. For this purpose, we will use six-month
accrual periods that begin or end on the maturity date of the debentures.
SALE, EXCHANGE OR REDEMPTION OF THE DEBENTURES
Except as described below, a holder will recognize capital gain or loss if
the holder disposes of a debenture in a sale, redemption or exchange other than
a conversion of the debenture into common stock. The holder's gain or loss will
equal the difference between the proceeds received by the holder and the
holder's adjusted tax basis in the debenture. The proceeds received by the
holder will include the amount of any cash and the fair market value of any
other property received for the debenture. The holder's tax basis in the
debenture will generally equal the amount the holder paid for the debenture,
increased by previously accrued original issue discount. The gain or loss
recognized by a holder on a disposition of the debenture will be long-term
capital gain or loss if the holder held the debenture for more than one year.
Long-term capital gains of individual taxpayers are generally taxed at a maximum
rate of 20 percent. The deductibility of capital losses is subject to
limitation.
If a holder elects to exercise his option to tender debentures to us on a
September 12, 2005, September 12, 2010 or September 12, 2015 purchase date and
we issue common stock in satisfaction of all or part of the purchase price, the
exchange of the debentures for common stock should qualify as a reorganization
for federal income tax purposes. If we pay the purchase price solely in common
stock, the holder generally should not recognize any gain or loss. If we pay the
purchase price with a combination of common stock and cash, the holder would be
required to recognize any gain realized, but only to the extent of the cash
received. The holder would not be allowed to recognize any loss. Because the
price we will pay will equal the issue price plus accrued original issue
discount, however, the amount received by the holder should equal the holder's
tax basis and the holder should not realize any gain or loss. If we pay all or
part of the purchase price with common stock and the holder receives cash in
lieu of a fractional share of stock, the holder would be treated as if he
received the fractional share and then had the fractional share redeemed for the
cash. The holder would recognize capital gain or loss equal to the
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<PAGE> 34
difference between the cash received and that portion of his basis in the stock
attributable to the fractional share. A holder's initial tax basis in his common
stock, including any fractional share, should equal the holder's adjusted basis
in the debentures tendered, increased by the amount of gain recognized and
decreased by the amount of cash received. The holder's holding period for his
common stock should include the period during which the holder held his
debentures. The holding period for common stock attributable to original issue
discount, however, might begin on the day following the exchange date.
CONVERSION OF THE DEBENTURES
A holder generally will not recognize any income, gain or loss on
converting a debenture into common stock. If the holder receives cash in lieu of
a fractional share of stock, however, the holder would be treated as described
in the preceding paragraph. The holder's holding period for the stock will
include the period during which he or she held the debenture. The holding period
for common stock attributable to original issue discount, however, might begin
on the day following conversion.
DIVIDENDS
If, after a holder converts a debenture into common stock, we make a
distribution in respect of that stock, the distribution will be treated as a
dividend, taxable to the holder as ordinary income, to the extent it is paid
from our current or accumulated earnings and profits. If the distribution
exceeds our current and accumulated profits, the excess will be treated first as
a tax-free return of the holder's investment, up to the holder's basis in its
common stock. Any remaining excess will be treated as capital gain. If the
holder is a U.S. corporation, it would generally be able to claim a deduction
equal to a portion of any dividends received.
The terms of the debentures allow for changes in the conversion rate of the
debentures in certain circumstances. A change in conversion rate that allows
debentureholders to receive more shares of common stock on conversion may
increase the debentureholders' proportionate interests in our earnings and
profits or assets. In that case, the debentureholders would be treated as though
they received a dividend in the form of our stock. Such a constructive stock
dividend could be taxable to the debentureholders, although they would not
actually receive any cash or other property. A taxable constructive stock
dividend would result, for example, if the conversion rate is adjusted to
compensate debentureholders for distributions of cash or property to our
shareholders. Not all changes in conversion rate that allow debentureholders to
receive more stock on conversion, however, increase the debentureholders'
proportionate interests in the company. For instance, a change in conversion
rate could simply prevent the dilution of the debentureholders' interests upon a
stock split or other change in capital structure. Changes of this type, if made
by a bona fide, reasonable adjustment formula, are not treated as constructive
stock dividends. Conversely, if an event occurs that dilutes the
debentureholders' interests and the conversion rate is not adjusted, the
resulting increase in the proportionate interests of our shareholders could be
treated as a taxable stock dividend to them. Any taxable constructive stock
dividends resulting from a change to, or failure to change, the conversion rate
would be treated like dividends paid in cash or other property. They would
result in ordinary income to the recipient, to the extent of our current or
accumulated earnings and profits, with any excess treated as a tax-free return
of capital or as capital gain.
SALE OF COMMON STOCK
A holder will generally recognize capital gain or loss on a sale or
exchange of common stock. The holder's gain or loss will equal the difference
between the proceeds received by the holder and the holder's adjusted tax basis
in the stock. The proceeds received by the holder will include the amount of any
cash and the fair market value of any other property received for the stock. The
gain or loss recognized by a holder on a sale or exchange of stock will be
long-term capital gain or loss if the holder held the stock for more than one
year. In the case of individuals, long-term capital gains are generally taxed at
a maximum rate of 20 percent, while the deductibility of capital losses is
subject to limitation.
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BACKUP WITHHOLDING AND INFORMATION REPORTING
The Internal Revenue Code and the Treasury regulations require those who
make specified payments to report the payments to the Internal Revenue Service.
Among the specified payments are interest, dividends, and proceeds paid by
brokers to their customers. The required information returns enable the Internal
Revenue Service to determine whether the recipient properly included the
payments in income. This reporting regime is reinforced by "backup withholding"
rules. These rules require the payors to withhold tax at a 31 percent rate from
payments subject to information reporting if the recipient fails to cooperate
with the reporting regime by failing to provide his taxpayer identification
number to the payor, furnishing an incorrect identification number, or
repeatedly failing to report interest or dividends on his returns. The
information reporting and backup withholding rules do not apply to payments to
corporations, whether domestic or foreign.
Payments of dividends to individual holders of common stock will generally
be subject to information reporting, and will be subject to backup withholding
unless the holder provides us or our paying agent with a correct taxpayer
identification number.
Payments made to holders by a broker upon a sale of debentures or common
stock will generally be subject to information reporting and backup withholding.
If, however, the sale is made through a foreign office of a U.S. broker, the
sale will be subject to information reporting but not backup withholding. If the
sale is made through a foreign office of a foreign broker, the sale will
generally not be subject to either information reporting or backup withholding.
This exception may not apply, however, if the foreign broker is owned or
controlled by U.S. persons, or is engaged in a U.S. trade or business.
Any amounts withheld from a payment to a holder of debentures or common
stock under the backup withholding rules can be credited against any U.S.
federal income tax liability of the holder.
TAX EVENT
The modification of the terms of the debentures by us upon a tax event as
described in "Description of Debentures -- Optional Conversion to Semiannual
Coupon Debentures Upon a Tax Event," could alter the timing of income
recognition by the holders regarding the semiannual payments of interest due
after the option exercise date.
THE PRECEDING DISCUSSION OF MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
IS FOR GENERAL INFORMATION ONLY. IT IS NOT TAX ADVICE. EACH PROSPECTIVE INVESTOR
SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR U.S. FEDERAL, STATE,
LOCAL, AND FOREIGN TAX CONSEQUENCES OF PURCHASING, HOLDING, AND DISPOSING OF OUR
DEBENTURES OR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN
APPLICABLE LAWS.
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SELLING SECURITYHOLDERS
We originally issued the debentures in a private placement in September
2000. The debentures were resold by the initial purchasers to qualified
institutional buyers under Rule 144A under the Securities Act in transactions
exempt from registration under the Securities Act. Selling securityholders may
offer and sell the debentures and the underlying common stock pursuant to this
prospectus.
The following table contains information as of December 14, 2000, with
respect to the selling securityholders and the principal amount of debentures
and the underlying common stock beneficially owned by each selling security
holders that may be offered using this prospectus.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
AT MATURITY OF NUMBER OF SHARES
DEBENTURES PERCENTAGE OF OF COMMON STOCK PERCENTAGE OF
BENEFICIALLY OWNED DEBENTURES THAT MAY BE COMMON STOCK
NAME THAT MAY BE SOLD OUTSTANDING SOLD(1) OUTSTANDING(2)
---- ------------------ ------------- ------------------- --------------
<S> <C> <C> <C> <C>
Worldwide Transactions, Ltd......... 1,023,000 * 3,316 *
JMG Capital Partners, LP............ 25,500,000 1.5% 82,653 *
JMG Triton Offshore Fund, Ltd....... 36,500,000 2.2% 118,307 *
McMahan Securities Co. L.P.......... 1,000,000 * 3,241 *
Argent Classic Convertible Arbitrage
Fund L.P.......................... 60,000,000 3.6% 194,478 *
BBT Fund, L.P....................... 55,000,000 3.3% 178,272 *
Gaia Offshore Master Fund Ltd....... 5,000,000 * 16,207 *
Argent Classic Convertible Arbitrage
Fund (Bermuda) L.P. .............. 105,000,000 6.3% 340,337 *
Argent Convertible Arbitrage
Fund L.P. ........................ 10,000,000 * 32,413 *
AIG SoundShore Strategic Holding
Fund Ltd. ........................ 2,500,000 * 8,103 *
AIG SoundShore Opportunity Holding
Fund Ltd. ........................ 2,500,000 * 8,103 *
AIG SoundShore Holdings Ltd......... 5,000,000 * 16,207 *
Hamilton Partners Limited........... 37,000,000 2.2% 119,928 *
Black Diamond Offshore, Ltd......... 4,688,000 * 15,195 *
Double Black Diamond Offshore,
LDC............................... 19,289,000 1.2% 62,521 *
CFFX, LLC........................... 10,000,000 * 32,413 *
SG Cowen Securities................. 34,000,000 2.0% 110,204 *
First Union International Capital
Markets........................... 51,250,000 3.1% 166,117 *
First Union Risk Management Inc..... 92,500,000 5.6% 299,820 *
Morgan Stanley & Co. Incorporated... 65,000,000 3.9% 210,685 *
Liberty View Funds L.P.............. 5,500,000 * 17,827 *
Jersey (IMA) Ltd.................... 2,000,000 * 6,483 *
Granville Capital Corporation....... 61,500,000 3.7% 199,340 *
Robertson Stephens.................. 20,000,000 1.2% 64,826 *
Susquehanna Capital Group........... 10,208,000 * 33,087 *
Onyx Fund Holdings, LDC............. 37,500,000 2.3% 121,549 *
Goldman Sachs and Company........... 1,808,000 * 5,860 *
Deephaven Domestic Convertible
Trading Ltd....................... 17,500,000 1.1% 56,723 *
Highbridge International LLC........ 46,500,000 2.8% 150,720 *
Sage Capital........................ 200,000 * 648 *
Allstate Life Insurance Company..... 2,750,000 * 8,914 *
Allstate Insurance Company.......... 9,900,000 * 32,089 *
</TABLE>
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<PAGE> 37
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
AT MATURITY OF NUMBER OF SHARES
DEBENTURES PERCENTAGE OF OF COMMON STOCK PERCENTAGE OF
BENEFICIALLY OWNED DEBENTURES THAT MAY BE COMMON STOCK
NAME THAT MAY BE SOLD OUTSTANDING SOLD(1) OUTSTANDING(2)
---- ------------------ ------------- ------------------- --------------
<S> <C> <C> <C> <C>
Oppenheimer Convertible Securities
Fund.............................. 18,000,000 1.1% 58,343 *
CIBC World Markets.................. 35,000,000 2.1% 113,446 *
Conseco Fund Group -- Convertible
Securities Fund................... 1,500,000 * 4,862 *
Pacific Specialty (Convertibles).... 500,000 * 1,621 *
Safeway............................. 2,200,000 * 7,131 *
Attorney's Title Insurance Fund
Inc. ............................. 500,000 * 1,621 *
Daughters of Charity National Health
System............................ 3,800,000 * 12,317 *
Morgan Stanley Dean Witter
Convertible Securities Trust...... 4,600,000 * 14,910 *
Banc of America Securities LLC...... 23,916,000 1.4% 77,519 *
Merrill Lynch Pierce Fenner & Smith
Inc............................... 2,500,000 * 8,103 *
Credit Suisse First Boston
Corporation....................... 34,826,000 2.1% 112,882 *
Massachusetts Mutual Life Insurance
Company........................... 7,360,000 * 23,856 *
MassMutual High Yield Partners II
LLC............................... 7,360,000 * 23,856 *
MassMutual Corporate Investors...... 2,300,000 * 7,455 *
MassMutual Participation
Investors......................... 1,200,000 * 3,890 *
MassMutual Asia Limited............. 170,000 * 551 *
Saar Holdings CDO Limited........... 1,000,000 * 3,241 *
DLB High Yield Fund................. 610,000 * 1,977 *
St. Claire International Ltd........ 2,000,000 * 6,483 *
Alpha US Sub Fund VIII LLC.......... 1,500,000 * 4,862 *
R2 Investments, LDC................. 55,000,000 3.3% 178,272 *
Clinton Riverside Convertible
Portfolio Limited................. 10,000,000 * 32,413 *
Tribeca Investment LLC.............. 75,000,000 4.5% 243,098 *
OCM Convertible Trust............... 6,390,000 * 20,712 *
Delta Air Lines Master Trust (c/o
Oaktree Capital Management)....... 5,210,000 * 16,887 *
State Employee's Retirement Fund of
the State of Delaware............. 7,230,000 * 23,435 *
State of Connecticut Combined
Investment Funds.................. 16,025,000 1.0% 51,942 *
Partner Reinsurance Company Ltd..... 2,820,000 * 9,140 *
Chrysler Corporation Master
Retirement Trust.................. 14,295,000 * 46,334 *
Motion Picture Industry Health
Plan -- Active Member Fund........ 1,670,000 * 5,413 *
Motion Picture Industry Health
Plan -- Retiree Member Fund....... 835,000 * 2,706 *
Vanguard Convertible Securities
Fund, Inc......................... 17,525,000 1.1% 56,804 *
Any other holder of Debentures or
future transferee, pledgee, donee
or successor of any
holder(3)(4)...................... 459,042,000 27.7% 1,487,893 *
</TABLE>
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* Less than 1%.
(1) Assumes conversion of all of the holder's debentures at a conversion rate of
3.2413 shares for each $1,000 principal amount at maturity. However, this
conversion price will be subject to adjustment as described under
"Description of Debentures -- Right of Conversion." As a result, the amount
of common stock issuable upon conversion of the debentures may increase or
decrease in the future.
(2) Calculated based on Rule 13d-3(d)(i) of the Exchange Act using 152,544,825
shares of common stock outstanding as of December 14, 2000. In calculating
this amount, we treated as outstanding the number of shares of common stock
issuable upon conversion of all of that particular holder's debentures.
However, we did not assume the conversion of any other holder's debentures.
(3) Information about other selling security holders will be set forth in
prospectus supplements, if required.
(4) Assumes that any other holders of debentures, or any future transferees,
pledgees, donees or successors of or from any such other holders of
debentures, do not beneficially own any common stock other than the common
stock issuable upon conversion of the debentures at the initial conversion
rate.
We prepared this table based on the information supplied to us by the
selling securityholders named in the table.
The selling securityholders listed in the above table may have sold or
transferred, in transactions exempt from the registration requirements of the
Securities Act, some or all of their debentures since the date on which the
information in the above table is presented. Information about the selling
securityholders may change from over time. Any changed information will be set
forth in prospectus supplements.
Because the selling securityholders may offer all or some of their
debentures or the underlying common stock from time to time, we cannot estimate
the amount of the debentures or underlying common stock that will be held by the
selling securityholders upon the termination of any particular offering. See
"Plan of Distribution."
PLAN OF DISTRIBUTION
We will not receive any of the proceeds of the sale of the debentures and
the underlying common stock offered by this prospectus. The debentures and the
underlying common stock may be sold from time to time to purchasers:
- directly by the selling securityholders;
- through underwriters, broker-dealers or agents who may receive
compensation in the form of discounts, concessions or commissions from
the selling securityholders or the purchasers of the debentures and the
underlying common stock.
The selling securityholders and any such broker-dealers or agents who
participate in the distribution of the debentures and the underlying common
stock may be deemed to be "underwriters." As a result, any profits on the sale
of the debentures and underlying common stock by selling securityholders and any
discounts, commissions or concessions received by any such broker-dealers or
agents might be deemed to be underwriting discounts and commissions under the
Securities Act. If the selling securityholders were to be deemed underwriters,
the selling securityholders may be subject to statutory liabilities of,
including, but not limited to, Sections 11, 12 and 17 of the Securities Act and
Rule 10b-5 under the Exchange Act.
If the debentures and underlying common stock are sold through underwriters
or broker-dealers, the selling securityholders will be responsible for
underwriting discounts or commissions or agent's commissions.
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The debentures and underlying common stock may be sold in one or more
transactions at:
- fixed prices;
- prevailing market prices at the time of sale;
- varying prices determined at the time of sale; or
- negotiated prices.
These sales may be effected in transactions:
- on any national securities exchange or quotation service on which the
debentures and underlying common stock may be listed or quoted at the
time of the sale, including the Nasdaq National Market System in the case
of the common stock;
- in the over-the-counter market;
- in transactions otherwise than on such exchanges or services or in the
over-the-counter market; or
- through the writing of options.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with sales of the debentures and underlying common stock or
otherwise, the selling securityholders may enter into hedging transactions with
broker-dealers. These broker-dealers may in turn engage in short sales of the
debentures and underlying common stock in the course of hedging their positions.
The selling securityholders may also sell the debentures and underlying common
stock short and deliver debentures and underlying common stock to close out
short positions, or loan or pledge debentures and underlying common stock to
broker-dealers that in turn may sell the debentures and underlying common stock.
To our knowledge, there are currently no plans, arrangement or
understandings between any selling securityholders and any underwriter,
broker-dealer or agent regarding the sale of the debentures and the underlying
common stock by the selling securityholders. Selling securityholders may not
sell any or all of the debentures and the underlying common stock offered by
them pursuant to this prospectus. In addition, we cannot assure you that any
such selling securityholder will not transfer, devise or gift the debentures and
the underlying common stock by other means not described in this prospectus.
Our common stock trades on the Nasdaq National Market under the symbol
"SANM." We cannot assure you as to the development of liquidity or any trading
market for the debentures. See "Risk Factors -- A public market may not develop
for the debentures."
We cannot assure you that any selling securityholder will sell any or all
of the debentures or underlying common stock pursuant to this prospectus. In
addition, any debentures or underlying common stock covered by this prospectus
that qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act
may be sold under Rule 144 or Rule 144A rather than pursuant to this prospectus.
The selling securityholders and any other person participating in such
distribution will be subject to the Exchange Act. The Exchange Act rules
include, without limitation, Regulation M, which may limit the timing of
purchases and sales of any of the debentures and the underlying common stock by
the selling securityholders and any other such person. In addition, Regulation M
of the Exchange Act may restrict the ability of any person engaged in the
distribution of the debentures and the underlying common stock to engage in
market-making activities with respect to the particular debentures and the
underlying common stock being distributed for a period of up to five business
days prior to the commencement of such distribution. This may affect the
marketability of the debentures and the underlying common stock and the ability
of any person or entity to engage in market-making activities with respect to
the debentures and the underlying common stock.
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Pursuant to the registration rights agreement filed as an exhibit to this
registration statement, we and the selling securityholders will be indemnified
by each other against certain liabilities, including liabilities under the
Securities Act or will be entitled to contribution in connection with these
liabilities.
We have agreed to pay substantially all of the expenses incidental to the
registration, offering and sale of the debentures and underlying common stock to
the public other than commissions, fees and discounts of underwriters, brokers,
dealers and agents.
LEGAL MATTERS
The validity of the issuance of Sanmina's securities offered by this
prospectus will be passed upon for Sanmina by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California.
EXPERTS
The consolidated financial statements as of October 2, 1999 and September
30, 1998 and for each of the three years in the period ended October 2, 1999
incorporated by reference in this registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect hereto, and are incorporated herein in reliance upon the
authority of said firm as experts in giving said reports.
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