Late Friday afternoon, March 6, Sanmina-SCI filed details of a preliminary settlement reached last month between a group of shareholders who had sued the company and several of its current and former executives and members of its board over the electronic manufacturer’s past stock option practices.
The deal, subject to final approval at a hearing in San Jose May 1, calls for changes in the way the company grants options along with steps to being taken by several individual defendants, including the repricing and/or forfeiture of previous options grants and outright cash payments to the company.
The company also agreed to pay the plaintiffs’ lawyers $4 million to cover their fees and expenses.
Sanmina-SCI Chief Executive Jure Sola agreed to reprice mispriced stock options he currently holds covering 1.38 million shares, which, based on the increased exercise price, amounts to the forfeit of $10.6 million in value. Sola will also repay the company $148,360 to make up for the difference between the strike price he already paid to exercise some options and the price they should have carried had they been properly priced when granted.
The company’s former chief operating officer, Randy Furr, who joined the company in 1992 as chief financial officer and was made chief operating officer in 1996, has agreed to repay $126,480 to cover the increased strike price of mispriced options he previously exercised, and also to forfeit his right to a severance payment of $61,667.
Furr left the company unexpectedly in October 2005 “for personal and family reasons.” He resurfaced seven months later as chief financial officer of Adobe Systems, but resigned less than six months later, less than a month after a special committee of Sanmina-SCI’s board announced that, as a result of “improper stock option grants,” it would have to restate past financial statements going back to 1997.
Sola and Furr, between them, also paid $504,000 more than they should have for some options that were mispriced higher, but both waived their rights to recover the amount from the company as part of the proposed deal.
The bulk of the settlement is devoted numerous corporate governance reforms related to, among other things, the company’s “board of directors and management composition and stock option granting practices and procedures.”