| Item 1.01 | Entry into a Material Definitive Agreement. |
Share Purchase Agreement
On June 28, 2022, SMART Global Holdings, Inc., a Cayman Islands exempted company (“SGH”), entered into a Share Purchase Agreement (the “Purchase Agreement”) with Storm Private Holdings I Ltd., a Cayman Islands exempted company (“Stratus Holding Company” and together with its subsidiaries, “Stratus Technologies”), and Storm Private Investments LP, a Cayman Islands exempted limited partnership (“Seller”). The transaction, which was approved by SGH’s Board of Directors, is expected to close in the second half of calendar year 2022.
Pursuant to the Purchase Agreement, among other matters, and subject to the satisfaction or waiver of the conditions set forth therein, Seller will sell to SGH, and SGH will purchase from Seller, all of Seller’s right, title and interest in and to the outstanding equity securities of Stratus Holding Company (the “Share Purchase”).
Pursuant to the terms of, and subject to the conditions specified in, the Purchase Agreement, upon consummation of the Share Purchase (the “Closing”), (i) SGH will pay to Seller a cash purchase price of $225 million, subject to certain adjustments as set forth in the Purchase Agreement (the “Closing Purchase Price”), and (ii) Seller will have the right to receive, and SGH will be obligated to pay, contingent consideration (if any) of up to $50 million (the “Earn-Out”) based on the gross profit performance of the Stratus Technologies business during the first full 12 fiscal months of Stratus Technologies following the Closing. The Earn-Out, if any, will be payable in cash, ordinary shares of SGH, $0.03 par value per share (“SGH Shares”), or a mix of cash and SGH Shares, at SGH’s election.
If SGH elects to pay any portion of the Earn-Out in SGH Shares, the number of SGH Shares issued will be determined based on the average of the daily volume-weighted average sales price per SGH Share for each of the 30 consecutive trading days ending on and including the trading day immediately preceding the date of payment of the Earn-Out (subject to equitable adjustment in the event of certain changes to SGH Shares occurring during such 30 consecutive trading days). Such SGH Shares would be issued in reliance upon the exemptions from registration afforded by Section 4(a)(2) and Rule 506 of Regulation D promulgated under the Securities Act of 1933, as amended. SGH, Stratus Holding Company and Seller have also agreed that, as a condition to the issuance of SGH Shares (if any) in respect of the Earn-Out, SGH and Seller will enter into an agreement pursuant to which (i) SGH will agree to cause such SGH Shares to be registered for resale, and (ii) Seller will agree to abide by certain volume-based trading limitations with respect to such SGH Shares to facilitate an orderly process with respect to certain sales of such SGH Sales by Seller.
The consummation of the Share Purchase is subject to certain customary conditions to Closing, including, among others, (i) the absence of any law or order that is in effect and restrains, enjoins or otherwise prohibits or prevents the consummation of the transactions contemplated by the Purchase Agreement (a “Closing Legal Impediment”), (ii) the absence of any pending legal proceeding by a governmental authority that seeks to restrain, enjoin, prohibit, prevent or otherwise make illegal the transactions contemplated by the Purchase Agreement, (iii) the expiration or termination of the applicable waiting period, or the receipt of regulatory approvals, under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), (iv) subject to certain materiality exceptions, the accuracy of certain representations and warranties of each of Stratus Holding Company, Seller and SGH contained in the Purchase Agreement and the compliance in all material respects by each party with the covenants contained in the Purchase Agreement, and (v) the absence of any change, effect, fact, condition, circumstance, occurrence, or event that has had, or would reasonably be expected to have, a material adverse effect with respect to Seller or Stratus Technologies. The consummation of the Share Purchase is not subject to a financing condition.
