DEF 14A 1 d39603ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

 

 

Filed by the Registrant  ☒                            Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material under § 240.14a-12

SMART GLOBAL HOLDINGS, INC.

(Name of Registrant as Specified in Its Charter)

 

(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

 

No fee required.

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  (1)

Title of each class of securities to which transaction applies:

 

      

 

 

  (2)

Aggregate number of securities to which transaction applies:

 

      

 

 

  (3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

      

 

 

  (4)

Proposed maximum aggregate value of transaction:

 

      

 

 

  (5)

Total fee paid:

 

      

 

 

Fee previously paid with preliminary materials.

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

  (1)

Amount Previously Paid:

 

      

 

 

  (2)

Form, Schedule or Registration Statement No.:

 

      

 

 

  (3)

Filing Party:

 

      

 

 

  (4)

Date Filed:

 

      

 

 

 


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SMART GLOBAL HOLDINGS, INC.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON FEBRUARY 12, 2021

December 21, 2020

Dear Shareholder:

You are cordially invited to attend the 2021 Annual Meeting of the Shareholders (the Annual Meeting) of SMART Global Holdings, Inc., a Cayman Islands exempted company (we, us, SMART, SMART Global Holdings or the Company). The Annual Meeting will be held on Friday, February 12, 2021 at 10:00 a.m. Pacific Time, at the Company’s U.S. corporate headquarters, 39870 Eureka Drive, Newark, CA 94560 for the following purposes:

1. To elect the three nominees for Class I director to serve until the 2024 annual meeting or until their successors are duly elected and qualified.

2. To ratify the selection of Deloitte & Touche LLP as the independent registered public accounting firm for SMART for the current fiscal year.

3. To provide an advisory, non-binding vote regarding our executive compensation.

4. To approve an amendment to the SMART Global Holdings, Inc. Amended and Restated 2017 Share Incentive Plan (as previously amended, the 2017 Share Incentive Plan) to increase the ordinary shares available for issuance under that plan by 1,000,000.

These items of business are more fully described in the proxy statement accompanying this Notice of Annual Meeting of Shareholders (the Proxy Statement).

The record date for the Annual Meeting is December 9, 2020 (the Record Date). Only shareholders of record at the close of business on the Record Date may vote at the Annual Meeting or any adjournment thereof. A complete list of such shareholders will be available for examination by any shareholder for any purpose germane to the Annual Meeting during ordinary business hours at the Company’s U.S. executive offices at 39870 Eureka Drive, Newark, CA 94560-4809 for a period of 10 days prior to the Annual Meeting.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held on

February 12, 2021 at 10:00 a.m. Pacific Time at

39870 Eureka Drive, Newark, CA 94560

The Proxy Statement and annual report to shareholders are available at: www.proxyvote.com.

By Order of the Board of Directors

 

 

LOGO

Bruce Goldberg

Vice President, Chief Legal Officer, Chief Compliance Officer and Secretary

Newark, California

ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE PROXY CARD, OR VOTE OVER THE TELEPHONE OR INTERNET AS INSTRUCTED IN THESE MATERIALS, AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING. EVEN IF YOU HAVE VOTED BY PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE ANNUAL MEETING.

PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE ANNUAL MEETING, YOU MUST OBTAIN A PROXY ISSUED IN YOUR NAME FROM THAT RECORD HOLDER IN ORDER TO BE ENTITLED TO VOTE IN PERSON AT THE ANNUAL MEETING.


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TABLE OF CONTENTS

 

 

 

     Page  

Questions and Answers About These Proxy Materials and Voting

     1  

Proposal No. 1: Election of Directors

     8  

Corporate Governance and Board Matters

     12  

Proposal No.  2: Ratification of the Selection of the Independent Registered Public Accounting Firm

     21  

Proposal No.  3: Advisory Vote on the Compensation of the Company’s Named Executive Officers

     23  

Proposal No.  4: Approval of an Amendment to the SMART Global Holdings, Inc. Amended and Restated 2017 Share Incentive Plan

     24  

Other Information Related to SMART, the Directors and Executive Officers

     30  

Compensation Discussion and Analysis

     34  

Certain Relationships and Related Party Transactions

     60  

Householding of Proxy Materials

     64  

Other Matters

     64  

Exhibit A

     65  


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SMART Global Holdings, Inc.

c/o Maples Corporate Services Limited, P.O. Box 309, Ugland House

Grand Cayman, KY1-1104, Cayman Islands

PROXY STATEMENT

FOR THE 2021 ANNUAL MEETING OF SHAREHOLDERS

QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING

Why did I receive a one-page notice in the mail regarding the internet availability of proxy materials instead of a full set of proxy materials?

Pursuant to “Notice and Access” rules adopted by the Securities and Exchange Commission (the SEC), we have elected to provide access to our proxy materials over the internet. Accordingly, we are sending an Important Notice Regarding the Availability of Proxy Materials (the Proxy Availability Notice) to our shareholders of record. All shareholders will have the ability to access the proxy materials on the website referred to in the Proxy Availability Notice free of charge or request to receive a printed set of the proxy materials for the Annual Meeting. Instructions on how to access the proxy materials over the internet or to request a printed copy may be found in the Proxy Availability Notice.

We provided some of our shareholders, including shareholders who have previously requested to receive paper copies of the proxy materials and some of our shareholders who are participants in our benefit plans, with paper copies of the proxy materials instead of the Proxy Availability Notice. If you received paper copies of the proxy materials, we encourage you to help us save money and reduce the environmental impact of delivering paper proxy materials to shareholders by signing up to receive all of your future proxy materials electronically.

We expect that this Proxy Statement and the other proxy materials will be available to shareholders on or about December 21, 2020.

What does it mean if I receive more than one Proxy Availability Notice?

If you receive more than one Proxy Availability Notice, your shares may be registered in more than one name or in different accounts. Please follow the voting instructions on each Proxy Availability Notice to ensure that all of your shares are voted.

Will I receive any other proxy materials by mail?

We may send you a proxy card, along with a second Proxy Availability Notice, by mail on or after December 31, 2020.

How do I attend the Annual Meeting?

The Annual Meeting will be held on Friday, February 12, 2021 at 10:00 a.m. Pacific Time, at the U.S. headquarters of the Company, 39870 Eureka Drive, Newark, CA 94560. Information on how to vote in person at the Annual Meeting is discussed below. If you plan to attend the Annual Meeting, please note that attendance will be limited to shareholders as of the Record Date. Each shareholder may be asked to present valid photo identification, such as a driver’s license or passport. Shareholders holding shares in brokerage accounts or by a bank or other nominee may be required to show a brokerage statement or account statement reflecting share ownership as of the Record Date.

Who can vote at the Annual Meeting?

Only shareholders of record at the close of business on the Record Date will be entitled to vote at the Annual Meeting. On the Record Date, there were 24,772,568 ordinary shares outstanding and entitled to vote.

 

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Shareholder of Record: Shares Registered in Your Name

If, on the Record Date, your shares were registered directly in your name with SMART’s transfer agent, Computershare Trust Company, N.A., then you are a shareholder of record. As a shareholder of record, you may vote in person at the Annual Meeting or vote by proxy. Whether or not you plan to attend the Annual Meeting, we urge you to vote by proxy over the telephone or on the internet as instructed below (See “How do I vote?”) or complete, date, sign and return the proxy card mailed to you to ensure your vote is counted.

Beneficial Owner: Shares Registered in the Name of a Broker, Bank or Other Nominee

If, on the Record Date, your shares were held, not in your name, but rather in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and the Proxy Availability Notice is being forwarded to you by the organization that holds your account. The organization holding your account is considered to be the shareholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your broker, bank or other nominee regarding how to vote the shares in your account. You are also invited to attend the Annual Meeting; however, since you are not the shareholder of record, you may not vote your shares in person at the Annual Meeting unless you request, obtain and bring to the Annual Meeting a valid proxy from your broker, bank or other nominee.

What am I voting on?

There are four matters scheduled for a vote:

 

   

Election of three Class I directors;

 

   

Ratification of the selection by the Board of Directors of the Company (the Board or the Board of Directors) of Deloitte & Touche LLP (Deloitte) as the Company’s independent registered public accounting firm for the Company’s fiscal year ending August 27, 2021;

 

   

A non-binding advisory vote on our executive compensation; and

 

   

Approval of an amendment to the SMART Global Holdings, Inc. Amended and Restated 2017 Share Incentive Plan (as previously amended, the 2017 Share Incentive Plan) to increase the ordinary shares available for issuance under that plan by 1,000,000.

What if another matter is properly brought before the Annual Meeting?

The Board knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the Annual Meeting, the persons named in the accompanying proxy will vote the shares for which you grant your proxy on those matters in accordance with their best judgment.

What is the Board’s voting recommendation?

The Board recommends that you vote your shares:

 

   

“For” the election of each of the three nominees for director named in this Proxy Statement;

 

   

“For” the ratification of the selection by the Board of Deloitte as the Company’s independent registered public accounting firm for the Company’s fiscal year ending August 27, 2021; and

 

   

“For” the non-binding advisory vote on our executive compensation.

 

   

“For” approval of an amendment to the 2017 Share Incentive Plan to increase the ordinary shares available for issuance under that plan by 1,000,000.

How do I vote?

With regard to the election of directors, you may vote “For” or “Against” any or all of the three nominees to the Board or you may “Abstain” your vote for any nominee you specify. With regard to the ratification of the

 

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Board’s selection of Deloitte as the Company’s independent public accounting firm for the Company’s fiscal year ending August 27, 2021, you may vote “For” or “Against” or you may “Abstain” from voting. For the non-binding advisory vote on our executive compensation, you may vote “For” or “Against” or you may “Abstain” from voting. For approval of an amendment to the 2017 Share Incentive Plan, you may vote “For,” “Against” or “Abstain” from voting.

The procedures for voting depend on whether your shares are registered in your name or are held by a bank, broker or other nominee:

Shareholder of Record: Shares Registered in Your Name

If you are a shareholder of record on the Record Date, you may vote in person at the Annual Meeting, vote by proxy over the telephone, vote by proxy through the internet, or vote by proxy using a proxy card that you may request or that we may elect to deliver at a later time. Whether or not you plan to attend the Annual Meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the Annual Meeting and vote in person even if you have already voted by proxy. Voting in person will have the effect of revoking your previously submitted proxy (see “Can I change my vote after submitting my proxy?” below).

 

   

To vote over the telephone, dial toll-free (800) 690-6903 using a touch-tone phone and follow the recorded instructions. You will be asked to provide the Company number and control number from the Proxy Availability Notice. Your vote must be received by 11:59 p.m., Eastern Time on February 11, 2021 to be counted.

 

   

To vote through the internet, go to http://www.proxyvote.com to complete an electronic proxy card. You will be asked to provide the Company number and control number from the Proxy Availability Notice. Your vote must be received by 11:59 p.m., Eastern Time on February 11, 2021 to be counted.

 

   

To vote using the proxy card, simply complete, sign and date the proxy card that may be delivered to you and return it promptly in the envelope provided. If you return your signed proxy card to us and we receive it before the Annual Meeting, we will vote your shares as you direct.

 

   

To vote in person, come to the Annual Meeting and we will give you a ballot upon request.

Beneficial Owner: Shares Registered in the Name of a Broker, Bank or Other Nominee

If you are a beneficial owner of shares registered in the name of your broker, bank or other nominee, you should have received a Proxy Availability Notice containing voting instructions from that organization rather than from SMART. Simply follow the voting instructions in the Proxy Availability Notice to ensure that your vote is counted. To vote in person at the Annual Meeting, you must obtain a valid proxy from your broker, bank or other nominee. Follow the instructions from your broker, bank or other nominee included with these proxy materials, or contact your broker, bank or other nominee to request a proxy form.

How many votes do I have?

On each matter to be voted upon, you have one vote for each ordinary share you own as of the Record Date.

What if I return a proxy card or otherwise vote but do not make specific choices?

If you return a signed and dated proxy card or otherwise vote without marking voting selections, your shares will be voted, as applicable, “For” the election of the three nominees for director named in this Proxy Statement, “For” the ratification of Deloitte as the Company’s independent registered public accounting firm, “For” the compensation of the Company’s Named Executive Officers, and “For” an amendment to the 2017 Share Incentive Plan to increase the ordinary shares available for issuance under that plan by 1,000,000. If any other matter is properly presented at the Annual Meeting, your proxy holder (one of the individuals named on your proxy card) will vote your shares using his or her best judgment.

 

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Will my vote be kept confidential?

Proxies, ballots and voting tabulations by the Company are handled on a confidential basis to protect your voting privacy. This information will not be disclosed, except as required by law.

Who is paying for this proxy solicitation?

We will pay for the entire cost of soliciting proxies. In addition to these proxy materials, members of our Board and our employees may also solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.

Can I change my vote after submitting my proxy?

Yes. You can revoke your proxy at any time before the final vote at the Annual Meeting. If you are the record holder of your shares, you may revoke your proxy in any one of the following ways:

 

   

You may submit another properly completed proxy card with a later date.

 

   

You may grant a subsequent proxy by telephone or through the internet.

 

   

You may send a timely written notice that you are revoking your proxy to our Secretary at c/o 39870 Eureka Drive, Newark, CA 94560-4809.

 

   

You may attend the Annual Meeting and vote in person. Simply attending the Annual Meeting will not, by itself, revoke your proxy.

Your most current proxy card or telephone or internet proxy is the one that is counted, so long as it is provided within the applicable deadline. If your shares are held by your broker, bank or other nominee, you should follow the instructions provided by your broker, bank or other nominee to change your vote or revoke your proxy.

When are shareholder proposals for inclusion in our proxy statement for next year’s annual meeting due?

Shareholders wishing to present proposals for inclusion in our proxy statement for the 2022 annual meeting of shareholders (the 2022 Annual Meeting) pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the Exchange Act), must submit their proposals so that they are received by us at our U.S. principal executive offices no later than August 27, 2021. Proposals should be sent to our Secretary at c/o 39870 Eureka Drive, Newark, CA 94560-4809 (our Principal Executive Offices).

When are other proposals and shareholder nominations for next year’s annual meeting due?

With respect to proposals and nominations not to be included in our proxy statement pursuant to Rule 14a-8 of the Exchange Act, our Second Amended and Restated Memorandum and Articles of Association (our Articles of Association) provide that shareholders who wish to nominate a director to be brought before the shareholders at an annual meeting of shareholders must notify our Secretary by a written notice, which notice must be received at our Principal Executive Offices not less than 120 days nor more than 130 days prior to the anniversary date of the immediately preceding year’s annual meeting of shareholders. For other business to be brought before the shareholders at an annual meeting of shareholders, shareholders must notify our Secretary by a written notice, which notice must be received at our Principal Executive Offices not less than 45 days prior to the anniversary date of the immediately preceding year’s annual meeting of shareholders.

Shareholders wishing to present nominations for director for consideration at the 2022 Annual Meeting under these provisions of our Articles of Association must submit their nominations or proposals so that they are

 

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received at our Principal Executive Offices not later than October 15, 2021 in order to be considered; provided, however, that in the event less than 130 days’ notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice to be timely must be so received not later than the close of business on the 10th day following the earlier of the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Shareholders wishing to present other proposals for consideration at the 2021 Annual Meeting under these provisions of our Articles of Association must submit their nominations or proposals so that they are received at our Principal Executive Offices not later than November 10, 2021 in order to be considered.

Nominations or proposals should be sent in writing to our Secretary, c/o Maples Corporate Services Limited, P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. A shareholder’s notice to nominate a director or bring any other business before the 2022 Annual Meeting must set forth certain information, which is specified in our Articles of Association. A complete copy of our Articles of Association may be found by accessing SMART’s filings on the SEC’s website at www.sec.gov.

How are votes counted?

Votes will be counted by the inspector of elections appointed for the Annual Meeting.

What is the effect of abstentions and broker non-votes?

Abstentions: Under the laws of the Cayman Islands (under which SMART is incorporated), abstentions are counted as shares present and entitled to vote at the Annual Meeting, but they are not counted as votes cast. Our Articles of Association provide that unless put to the meeting as a special resolution, matters shall be decided by a simple majority of votes cast by such members (or shareholders) who, being entitled to do so, vote in person or by proxy at such meeting. Voting at any shareholders’ meeting is by way of a poll.

Broker Non-Votes: A “broker non-vote” occurs when a broker, bank or other nominee holding your shares in street name does not vote on a particular matter because you did not provide the broker, bank or other nominee voting instructions and the broker, bank or other nominee lacks discretionary voting authority to vote the shares because the matter is considered “non-routine” under the New York Stock Exchange rules for brokers. The “non-routine” matters on the agenda for the Annual Meeting include Proposal No. 1: Election of Directors, Proposal No. 3: Advisory Vote on the Compensation of the Company’s Named Executive Officers, and Proposal No. 4—Approval of an Amendment to the 2017 Share Incentive Plan to increase the ordinary shares available for issuance under that plan by 1,000,000.

Broker non-votes will be counted for the purpose of determining whether a quorum is present at the Annual Meeting; however, because broker non-votes will constitute an abstention, they will have no effect on the outcome of the votes on Proposal No. 1: Election of Directors, Proposal No. 3: Advisory Vote on the Compensation of the Company’s Named Executive Officers or Proposal No. 4—Approval of an Amendment to the 2017 Share Incentive Plan to increase the ordinary shares available for issuance under that plan by 1,000,000. As a result, if you hold your shares in street name and you do not instruct your broker, bank or other nominee how to vote your shares in the election of directors, the advisory vote on the compensation of the Company’s Named Executive Officers or the approval of an amendment to the 2017 Share Incentive Plan, then no votes will be cast on your behalf on these proposals. Therefore, it is critical that you indicate your vote on these proposals if you want your vote to be counted. The proposal to ratify the selection by the Board of Deloitte as our independent registered public accounting firm for the current fiscal year should be considered a “routine” matter. Therefore, your broker, bank or other nominee will be able to vote on Proposal No. 2: Ratification of the Selection of the Company’s Independent Registered Public Accounting Firm even if it does not receive instructions from you, so long as it holds your shares in its name.

 

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How many votes are needed to approve each proposal?

 

Proposal

   Vote Required

No. 1. Election of Directors

   Majority Cast

No. 2. Ratification of the Selection of the Company’s Independent Registered Public Accounting Firm

   Majority Cast

No. 3. Advisory Vote on the Compensation of the Company’s Named Executive Officers

   Majority Cast

No. 4. Approval of an Amendment to the 2017 Share Incentive Plan to increase the ordinary shares available for issuance under the plan by 1,000,000

   Majority Cast

A “Majority Cast” means that a majority of the votes cast on the proposal are voted “For” the proposal.

Accordingly:

 

   

Proposal No. 1: For the election of directors, each nominee receiving at least a simple majority of “For” votes from votes cast will be elected as a Class I director to hold office until the 2024 annual meeting of shareholders. Abstentions and broker non-votes will have no effect.

 

   

Proposal No. 2: To be approved, a majority of the total votes cast on Proposal No. 2 must be voted “For” the ratification of the selection by the Board of Deloitte as the Company’s independent registered public accounting firm for the current fiscal year. Abstentions and broker non-votes will not be considered votes cast on Proposal No. 2; however, the ratification of the selection by the Board of Deloitte is a matter on which a broker, bank or other nominee has discretionary voting authority, and thus, we do not expect any broker non-votes with respect to Proposal No. 2.

 

   

Proposal No. 3: To be approved, a majority of the total votes cast on Proposal No. 3 must be voted “For” the compensation of the Company’s Named Executive Officers. Abstentions and broker non-votes will not be considered votes cast on Proposal No. 3.

 

   

Proposal No. 4: To be approved, a majority of the total votes cast on Proposal No. 4 must be voted “For” approval of an amendment to the 2017 Share Incentive Plan to increase the ordinary shares available for issuance under that plan by 1,000,000. Abstentions and broker non-votes will not be considered votes cast on Proposal No. 4.

None of the proposals, if approved, entitles shareholders to appraisal rights under Cayman Islands law or our Articles of Association.

What is the quorum requirement?

A quorum of shareholders is necessary to hold a valid shareholder meeting. A quorum will be present if one or more holders of shares are present in person or by proxy (or, if a corporation or other non-natural person, by its duly authorized representative) together holding (or representing by proxy) not less than a majority of the total voting power of all shares outstanding and entitled to vote at the Annual Meeting. On the Record Date, there were 24,772,568 shares outstanding and entitled to vote. Thus, the holders of at least 12,386,285 shares must be present in person or represented by proxy at the Annual Meeting to have a quorum.

Your shares will be counted towards the quorum only if you submit a valid proxy by mail, over the phone or through the internet (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote in person at the Annual Meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, then either the chair of the Annual Meeting or the holders of a majority of shares present at the Annual Meeting in person or represented by proxy may adjourn the meeting to another date. At any adjourned Annual Meeting at which a quorum is present, any business may be transacted that might have been transacted at the Annual Meeting as originally notified. If the adjournment is for more than 30 days, or if after that adjournment a new record date is fixed for the adjourned Annual Meeting, a notice of the adjourned Annual Meeting shall be given to each shareholder of record entitled to vote at the adjourned Annual Meeting.

 

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How can I find out the results of the voting at the Annual Meeting?

Preliminary voting results will be announced at the Annual Meeting. In addition, final voting results will be published in a Current Report on Form 8-K that we expect to file with the SEC within four business days after the Annual Meeting. If final voting results are not available to us in time to file a Form 8-K with the SEC within four business days after the Annual Meeting, we intend to file a Form 8-K to publish the preliminary results within four business days after the Annual Meeting and file an additional Form 8-K to publish the final results within four business days after the final results are known to us.

Advisory Shareholder Vote on “Say on Pay”

We ceased to be an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, beginning in our fiscal year 2019. Pursuant to the JOBS Act, as a company that ceased to be an emerging growth company within two years of our initial public offering, we were required to hold our first non-binding advisory shareholder vote on “say on pay” prior to the third anniversary of our initial public offering. Accordingly, we held our first such vote at our 2020 Annual Meeting of Shareholders.

Interest of Certain Persons in Matters to Be Acted Upon

The Board of Directors knows of no matters to come before the Annual Meeting other than the matters referred to in this Proxy Statement; however, if any other matters should properly come before the meeting, the persons named in the enclosed proxy intend to vote in accordance with their best judgment. No director, nominee for election as director, or executive officer of SMART has any special interest in any matter to be voted upon other than election to the Board of Directors.

Forward-Looking Statements

This Proxy Statement contains forward-looking statements. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “anticipate,” “target,” “expect,” “estimate,” “intend,” “plan,” “goal,” “believe” or other words of similar meaning. Forward-looking statements provide the Company’s current expectations or forecasts of future events, circumstances, results or aspirations, and are subject to significant risks and uncertainties. These risks and uncertainties could cause the Company’s actual results to differ materially from those set forth in such forward-looking statements. Certain of such risks and uncertainties are described in the Company’s Annual Report on Form 10-K for the year ended August 28, 2020. The Company does not undertake to update the forward-looking statements included in this Proxy Statement to reflect the impact of circumstances or events that may arise after the date the forward-looking statements were made.

 

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PROPOSAL NO. 1: ELECTION OF DIRECTORS

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.

The Company’s Board of Directors is presently composed of nine members, who are divided into three classes, designated as Class I, Class II and Class III. One class of directors is elected by the shareholders at each annual meeting to serve from the time of their election until the third annual meeting of shareholders following their election. The current terms of our Class I directors expire at the 2021 annual meeting. Class I directors consist of Sandeep Nayyar, Mukesh Patel and Maximiliane Straub. Class II directors consist of Randy Furr, Ajay Shah and Jason White. Class III directors consist of Bryan Ingram, Kenneth Hao and Mark Adams.

The following table sets forth information regarding the Board Nominees and other members of the Board.

 

Name

   Age   

Position with SMART

   Director
Since
     Class    Term Expires  

Sandeep Nayyar

   61    Director, Lead Independent Director and Nominee      2014      I      2021  

Mukesh Patel

   62    Director and Nominee      2013      I      2021  

Maximiliane Straub

   56    Director and Nominee      2019      I      2021  

Randy Furr

   66    Director      2017      II      2022  

Ajay Shah(1)

   61    Director, Executive Chairman      2011      II      2022  

Jason White(1)

   39    Director      2011      II      2022  

Kenneth Hao(1)

   52    Director      2011      III      2023  

Bryan Ingram

   57    Director      2018      III      2023  

Mark Adams

   56    Director, President & CEO      2020      III      2023  

 

(1)

Messrs. Shah, White and Hao were nominated to our Board of Directors by Silver Lake (defined to include investment funds affiliated with Silver Lake Partners and Silver Lake Sumeru).

The Nominating and Corporate Governance Committee of the Board (the NCG Committee) has nominated each of our Class I directors, Messrs. Nayyar and Patel and Ms. Straub, as nominees for a three-year term expiring at the 2024 annual meeting of shareholders and until their respective successors are duly elected and qualified, or, if sooner, until the director’s death, resignation or removal.

A brief biography of each nominee and each continuing director is set forth below, including the individual’s age as of December 9, 2020 and information regarding the experience, qualifications, attributes or skills of each nominee that led the NCG Committee to believe that the director should continue to serve on the Board.

Nominees for Election as Directors for a Term Expiring in 2024

Sandeep Nayyar, age 61, has served as a director since September 2014 and as our Lead Independent Director since December 2020. Mr. Nayyar has been the Vice President and Chief Financial Officer of Power Integrations, Inc., a supplier of high performance electronic components, from 2010 to the present. Prior to that, from 2001 to 2009, Mr. Nayyar served as the Vice President of Finance for Applied Biosystems, Inc., a developer and manufacturer of life sciences products. From 1990 to 2001, Mr. Nayyar served in various senior finance roles including Vice President Finance at Quantum Corporation, a computer storage company. Mr. Nayyar was with Ernst & Young LLP, a public accounting firm, from 1986 to 1990 including service as an Audit Manager. Mr. Nayyar is a Certified Public Accountant in the State of California and a Chartered Accountant in India and has a Bachelor of Commerce from the University of Delhi, India.

We believe that Mr. Nayyar’s experience in complex technology companies in the semiconductor, life sciences and storage industries, and the perspective he brings as a Certified Public Accountant, make him well qualified for service as a director.

 

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Mukesh Patel, age 62, has served as a director of SMART Global Holdings since March 2013 and served as a director of SMART Worldwide Holdings, Inc., a predecessor to SMART Global Holdings, Inc., from 2004 until 2012. Mr. Patel is an entrepreneur and an active startup investor. He has over 35 years of experience in the semiconductor and hardware industry and has held the position as Chairman, CEO and other executive roles, He is also an investor, board member and a mentor to multiple startups in Silicon Valley. Mr. Patel was a co-founder of Metta Technology, a codec chip design company, and served as CEO of Sparkolor Corporation, an optical device company. Mr. Patel co-founded our Company in 1988 and served as a director and in various management and executive roles until its acquisition by Solectron in 1999. Prior to co-founding our Company, Mr. Patel served in various roles at semiconductor technology companies, including Seeq Technology Corporation, Advanced Micro Devices, Inc. and Samsung Semiconductor, Inc. Mr. Patel currently serves on the boards of directors of a number of other private technology companies. He holds a B.S. degree in Electrical Engineering from Bombay University, India.

As our co-founder and former executive, Mr. Patel brings to our Board of Directors significant strategic and operational experience, as well as a wealth of historical knowledge about our Company and industry. These factors, combined with Mr. Patel’s experience as a venture capital investor and semiconductor executive, his service on the boards and board committees of technology companies, and his expertise in mergers and acquisitions, make him particularly well qualified for service as a director.

Maximiliane Straub, age 56, has served as a director of SMART Global Holdings since April 2019. Ms. Straub has served with the Robert Bosch companies for over 26 years and currently serves as President Global Business Services Bosch, a position she has held since January 1, 2020. Ms. Straub also serves as the Chief Financial Officer and Executive Vice President of Finance, Controlling and Administration of Bosch North LLC, a position she has held since June 2010. Prior to joining the Robert Bosch companies, Ms. Straub held several financial positions within the semiconductor division of Siemens and Siemens/Matsushita. Ms. Straub serves on the Board of Directors of Inforum, a professional organization focused on creating strategic connections to help advance professional women. In 2010, 2015 and 2020, Ms. Straub was recognized by Automotive News as one of the “Top 100 Women in the Auto Industry.” She is a guest lecturer for the University of Michigan Ross School of Business program, “Ascending to the C-Suite: From Theory to Practice.” Ms. Straub served on the Boards of Directors of MTS Systems Corporation and Horizon Global Corporation and AQuantia. Ms. Straub’s educational degrees include Industriekauffrau IHK and an advanced business administration degree with thesis, Diplom-Betriebswirt from the University of Munich.

We believe that Ms. Straub’s substantial experience as an executive at public companies in the technology sector, as well as her extensive financial and operational expertise and her background in industrial technology, make her well qualified for service as a director.

Continuing Directors

Kenneth Hao, age 52, has served as a director since 2011. He is Chairman and a Managing Partner of Silver Lake. Prior to joining Silver Lake in 2000, Mr. Hao was an investment banker with Hambrecht & Quist, a technology-focused investment bank and venture capital firm, for 10 years, most recently serving as a Managing Director in the Technology Investment Banking group. Mr. Hao currently serves on the boards of directors of SolarWinds, ServiceMax and NortonLifeLock. In addition, Mr. Hao previously served as a director of Broadcom, NetScout Systems, Inc., UGS Corp., Network General Corporation and Certance Holdings, which was acquired by Quantum Corporation and formerly a division of Seagate Technology. Mr. Hao holds an A.B. degree in Economics from Harvard College.

We believe that Mr. Hao’s substantial experience as an investor in, and advisor to, technology companies and his service on the boards and board committees of technology companies make him well qualified for service as a director.

 

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Bryan Ingram, age 57, has served as a director since October 2018. Mr. Ingram retired from Broadcom effective March 20, 2020. Mr. Ingram served as Senior Vice President and General Manager of Broadcom’s Wireless Semiconductor Division (WSD) from November 2015 until November 3, 2019 and from 2007 to March 2013. As Senior Vice President and General Manager, Mr. Ingram oversaw at WSD the development, production, and marketing of RF components used in handsets and other communications devices. Mr. Ingram served as Chief Operating Officer of Avago Technologies from April 2013 until October 2015. In this role, he led the legacy Avago business units and operations. From 2005 to 2007, Mr. Ingram was Vice President of WSD. Prior to the founding of Avago from the Agilent Semiconductor Products Group (SPG) in 2005, Mr. Ingram was Vice President and General Manager of the SPG Wireless Semiconductor Division. From 1986 to 1999, Mr. Ingram held various management positions at Hewlett Packard and Westinghouse. Mr. Ingram holds a Bachelor of Science in Electrical Engineering from the University of Illinois and a Master of Science in Electrical Engineering from Johns Hopkins University.

We believe that Mr. Ingram’s substantial experience as an executive at public companies in the technology sector, as well as his background in operations, business development and marketing, make him well qualified for service as a director.

Randy Furr, age 66, has served as a director since September 2017. Mr. Furr joined Bloom Energy in April 2015 and served as Executive Vice President and Chief Financial Officer until his retirement on March 31, 2020. Prior to Bloom Energy, he served as Corporate Executive Vice President and Chief Financial Officer of Spansion Inc. from June 2009 to March 2015 when Spansion was acquired by Cypress Semiconductor Corporation. Mr. Furr has over 35 years of experience in the technology sector and is an experienced financial and operations executive. Mr. Furr also held senior executive positions as Executive Vice President and Chief Financial Officer at Magellan Navigation, Inc. from August 2008 to June 2009, and as Chief Operating Officer and Chief Financial Officer at Aliph, a consumer Bluetooth telephony device company, from April 2008 to August 2008. Prior to that, Mr. Furr was at Adobe Systems, Inc., where he served as Senior Vice President, Business Process Improvement from May 2007 to January 2008, as Senior Vice President and Interim Chief Information Officer from November 2006 to May 2007, and as Executive Vice President and Chief Financial Officer from May 2006 to November 2006. Before joining Adobe Systems, Inc., Mr. Furr spent 13 years at Sanmina Corporation, an electronics manufacturing services provider, where he served as President and Chief Operating Officer from 1996 to 2005 and as Executive Vice President and Chief Financial Officer from 1992 to 1996. Mr. Furr served as a director of Sanmina Corporation from 1998 until 2005. Mr. Furr holds a Bachelor of Business Administration degree from the University of Oklahoma and is a Certified Public Accountant.

We believe that Mr. Furr’s substantial experience as an executive at several public companies in the technology sector, as well as his background as a Certified Public Accountant, make him well qualified for service as a director.

Ajay Shah, age 61, has served as director and Chairman of the Board of SMART Global Holdings since its inception in 2011 and became Executive Chairman in August 2020. Mr. Shah was previously the Co-CEO starting in March 2018 and then President and Chief Executive Officer of SMART Global Holdings from June 2018 to August 2020.

Mr. Shah joined Silver Lake, a global investment firm, in 2007, and is the co-founder and Managing Partner of the firm’s middle market fund, Silver Lake Sumeru. Since 2014, Mr. Shah has also served as a Senior Operating Partner of Sumeru Equity Partners, a middle-market private equity firm. Previously, he founded Shah Capital Partners, a private equity firm. Mr. Shah co-founded SMART Modular in 1988 and served as Chairman of the board of directors and Chief Executive Officer through SMART Modular’s initial public offering in 1995 and until 1999, when it was acquired by Solectron.

Mr. Shah currently serves on the boards of directors of a number of private technology companies including Alpha Petroleum, Healthgrades and Velocity Technology Solutions, Inc. Mr. Shah previously served on the

 

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boards of directors of many public and private technology companies including Magellan Navigation, Inc., AVI-SPL, Inc., CMAC MicroTechnology, Flex, Ingenient Technologies Inc., Power-One, Inc., PulseCore Semiconductor, Spansion Inc. and TES Electronic Solutions.

Mr. Shah also previously served on the board of Northern California Public Broadcasting, is currently a senior fellow of the American Leadership Forum, serves on the boards of National Audubon Society and The Indian School of Business, India and is a Trustee of the American India Foundation. Mr. Shah has a B.S. in Engineering from the University of Baroda, India and an M.S. degree in Engineering Management from Stanford University.

As co-founder and former Chief Executive Officer of SMART Modular, Mr. Shah brings to our Board extensive strategic and operational experience, as well as considerable historical knowledge about our Company and industry. We believe that these factors, combined with Mr. Shah’s substantial experience in investing and finance and his service on the boards and board committees of technology companies make him well qualified for service as a director and Executive Chairman of the Board of Directors of SMART Global Holdings.

Jason White, age 39, has served as a director since 2011. He joined Silver Lake in 2006 and is its Chief Financial Officer, a position he has held since January 2020, and Managing Director. Prior to joining Silver Lake, Mr. White was an investment banker with the Media & Communications Investment Banking Group and the Equity Products Group at Morgan Stanley & Co. LLC, an investment bank, from 2003 to 2006. Mr. White currently serves on the boards of directors of Achievers Corp. and Blackhawk Network Holdings, Inc. Previously, he was on the boards of directors of Ancestry.com and SolarWinds Corporation. Mr. White holds a B.S.E. degree in Operations Research & Financial Engineering from Princeton University.

We believe that Mr. White’s experience in investment banking and private equity make him well qualified for service as a director.

Mark Adams, age 56, became our President and CEO as of August 31, 2020 and has served as a director since September 2020. Mr. Adams served as the CEO of Lumileds, Inc. from February 2017 until March 2019, and he currently remains in an advisory role to Lumileds, Inc. Previously, Mr. Adams served as the President of Micron Technology, Inc. from February 2012 to February 2016. From 2006 to February 2012, Mr. Adams served in a number of positions at Micron Technology, Inc., including as the Vice President of Worldwide Sales and the Vice President of Digital Media. Prior to joining Micron Technology, Inc., Mr. Adams served as the Chief Operating Officer of Lexar Media, Inc. in 2006. Mr. Adams also served as the Vice President of Sales and Marketing of Creative Labs, Inc. from 2002 to 2006. In addition, he held numerous roles at Creative Labs, Inc. prior to 2002, including five years as the General Manager of Latin America. Prior to joining Creative Labs, Inc., Mr. Adams spent five years in major account sales for the enterprise server business of NCR Corporation. Mr. Adams has served as a member of the Board of Directors of Seagate Technology PLC since 2017, the Board of Directors of Cadence Design Systems, Inc. since 2015, and the Board of Directors of Whistle Sports, Inc. since 2014. Mr. Adams holds a Master of Business Administration degree from Harvard University, focused in finance and international marketing.

As our top executive, Mr. Adams has direct responsibility for strategy development and execution. We believe that Mr. Adams’ substantial experience in investing and finance and his service as a senior executive and on the boards and board committees of technology companies, make him well qualified for service as a director of SMART Global Holdings.

 

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CORPORATE GOVERNANCE AND BOARD MATTERS

This section describes key corporate governance guidelines and practices that we have adopted. Complete copies of our Corporate Governance Guidelines, the charters of the committees of the Board and our Code of Business Conduct and Ethics, described below, can be found in the Governance section of the Investors section of our website at http://www.smartgh.com/. Information on our website is not incorporated by reference in this Proxy Statement. Alternatively, you can request a copy of any of these documents free of charge by writing to: Bruce Goldberg, Vice President, Chief Legal Officer, Chief Compliance Officer and Secretary, c/o SMART Modular Technologies, Inc., 39870 Eureka Drive, Newark, CA 94560.

Board Composition

Our Board currently consists of nine members. In accordance with our Articles of Association, our Board is divided into three classes with staggered terms. At each annual meeting of shareholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. The number of directors may be changed by the affirmative vote of a majority of the directors or, at any time when Silver Lake collectively owns at least 40% of our outstanding ordinary shares, by the affirmative vote of a majority of our outstanding ordinary shares.

Our directors are divided among the three classes as follows:

 

   

Class I directors consist of Sandeep Nayyar, Mukesh Patel and Maximiliane Straub, whose terms expire at the 2021 Annual Meeting of Shareholders;

 

   

Class II directors consist of Randy Furr, Ajay Shah and Jason White, whose terms expire at the 2022 Annual Meeting of Shareholders; and

 

   

Class III directors consist of Bryan Ingram, Kenneth Hao and Mark Adams, whose terms expire at the 2023 Annual Meeting of Shareholders.

Independence of the Board of Directors

The Board has determined that, of all the nominees and continuing directors, only Mr. Furr, Mr. Ingram, Mr. Nayyar, Mr. Patel and Ms. Straub are independent directors. We define “independent directors” pursuant to the rules of the SEC and NASDAQ. To be considered independent, a director cannot be an officer or employee of our Company or its subsidiaries, and cannot have a relationship with our Company or its subsidiaries that, in the opinion of our Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making the “independence” determination, our Board considered all relevant facts and circumstances, including the director’s commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships. Our Board consults with our Company’s legal counsel to ensure that its determinations are consistent with all relevant laws, rules and regulations regarding the definition of “independent director,” including applicable securities laws and the rules of the SEC and NASDAQ. There are no family relationships between any director and any of our executive officers.

Board Leadership Structure

The Board believes that it is important to retain the flexibility to structure its board leadership in any manner that it determines to be in the best interests of the Company at any point in time. This includes flexibility to determine whether to maintain a separate office of Executive Chairman of the Board. Our policies do not preclude our Chief Executive Officer from also serving as a Board member or as chair. Currently, Mr. Shah serves as our Executive Chairman of our Board of Directors, Mr Adams serves as our President and Chief Executive Officer and Mr. Nayyar serves as our Lead Independent Director. The Board reviews its leadership structure periodically, but believes that its current structure provides effective leadership.

Effective in December 2020, we have established a Lead Independent Director role with broad authority and responsibility, as described further below. The independent and non-executive members of the Board of Directors also meet regularly without management and going forward, the Lead Independent Director will chair those meetings. Mr. Nayyar currently serves as Lead Independent Director.

 

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Our Lead Independent Director is elected by and from our independent and non-executive directors. Each term of service in the Lead Independent Director position is one year or until a replacement is appointed. The Lead Independent Director has the following responsibilities:

 

   

preside at all meetings of our independent and non-executive directors, including executive sessions;

 

   

call meetings of our independent and non-executive directors;

 

   

review meeting agendas in advance of board meetings;

 

   

act as a liaison between the other independent and non-executive directors and the Chairman of the Board;

 

   

authorize the retention of outside advisors and consultants who report directly to the independent and non-executive directors; and

 

   

any other responsibilities that the Board may determine from time to time.

Role of the Board in Risk Oversight

Risk is inherent with every business, and we face a number of risks, including strategic, financial, business and operational, legal and compliance, and reputational risks. A list of risk factors associated with our business can be found in our Annual Report on Form 10-K for our fiscal year ended August 28, 2020. One of the Board’s key functions is informed oversight of the Company’s risk management process. The Board believes that its current leadership structure facilitates its risk oversight responsibilities. The Board does not have a standing risk management committee, but rather administers this oversight function directly through the Board as a whole, as well as through various Board standing committees that address risks inherent in their respective areas of oversight. For example, the Board acts as the ultimate decision-making body of the Company and advises and oversees management, who are responsible for the day-to-day operations and management of the Company. The Audit Committee monitors compliance with legal and regulatory requirements, in addition to oversight of the performance of our internal audit function and our system of internal controls. The NCG Committee monitors the effectiveness of our corporate governance guidelines and policies. The Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking.

It is the responsibility of the committee chairs to report findings regarding material risk exposures to the Board as quickly as possible. The Company’s Chief Legal Officer and Chief Financial Officer coordinate between the Board and management with regard to the determination and implementation of responses to any problematic risk management issues.

Meetings of the Board of Directors

The Board oversees our business. It establishes overall policies and standards and reviews the performance of management. During the fiscal year ended August 28, 2020, the Board held eight meetings. Each Board member attended 75% or more of the aggregate meetings of the Board and of the committees on which he or she served held during the period for which he or she was a director or committee member. The Company’s directors are encouraged to attend our annual meetings of shareholders, but we do not currently have a policy relating to director attendance. All of the then members of our Board attended our previous annual meeting of shareholders, either in-person or via teleconference.

The independent and non-executive members of our Board meet regularly in executive sessions outside of the presence of management. The independent and non-executive directors met regularly prior to, and/or after, regularly scheduled meetings of the Board during fiscal year 2020. The independent and non-executive directors also conducted telephonic meetings and/or updates during fiscal year 2020.

 

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Effective in December 2020, we have established a Lead Independent Director role with broad authority and responsibility, as described further above. Going forward, the Lead Independent Director will chair the meetings of the independent and non-executive directors of the Board. Mr. Nayyar currently serves as Lead Independent Director.

Information Regarding Committees of the Board of Directors

The Board has a number of committees that perform certain functions for the Board. The current committees of the Board are the Audit Committee, the Compensation Committee and the NCG Committee. Below is a description of each of these committees. Each of the committees has authority to engage legal counsel or other experts or consultants as it deems appropriate to carry out its responsibilities.

We refer to members of our Board of Directors who were nominated by Silver Lake as the Silver Lake Directors. Pursuant to the Sponsor Shareholder Agreement, for so long as Silver Lake has the right to nominate an individual for membership on our Board of Directors, Silver Lake is entitled to have their nominee, if elected, serve as a member of each of the committees of the Board; however, if we establish a committee to consider a proposed transaction between Silver Lake and us, then such Board committee may exclude from participation such Silver Lake Director nominated by the Silver Lake entity which transaction is being considered by such committee. See “Certain Relationships and Related Party Transactions—Sponsor Shareholder Agreement” elsewhere in this Proxy Statement.

The following table sets forth information on the committee membership of our directors:

 

Name

   Audit Committee    Compensation
Committee
   Nominating and
Corporate Governance
Committee

Mark Adams

Randy Furr(1)

  

X

  

Chair

  

Kenneth Hao

        

Bryan Ingram(1)

      X    X

Sandeep Nayyar(1)

   Chair       X

Mukesh Patel(1)

      X    Chair

Ajay Shah

        

Maximiliane Straub(1)

   X      

Jason White

        

 

(1)

As noted in “Independence of the Board of Directors,” we consider Mr. Furr, Mr. Ingram, Mr. Nayyar, Mr. Patel and Ms. Straub to be independent directors.

Audit Committee

The Board has a separately designated standing Audit Committee established in accordance with Section 3(a)(58) of the Exchange Act. The Audit Committee was established by the Board to assist the Board in its oversight of the integrity of our financial statements and internal controls, the design, implementation and performance of our internal audit function, and our compliance with legal and regulatory requirements. In addition, the Audit Committee assists the Board in its oversight of the qualification, independence and performance of our independent registered public accounting firm and recommends to the Board the appointment of our independent registered public accounting firm.

The Audit Committee is currently composed of three directors: Mr. Furr, Ms. Straub and Mr. Nayyar (Chair). In fiscal 2020, the Audit Committee held seven meetings. The Audit Committee is governed by a written charter, which can be found under Documents in the Governance section of the Investors section of our website at http://www.smartgh.com/. Information on our website is not incorporated by reference in this Proxy Statement. The Audit Committee has the authority to obtain, at our expense, advice and assistance from internal and external

 

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legal, accounting or other advisors and consultants and other external resources that the Audit Committee considers necessary or appropriate in the performance of its duties.

The Audit Committee’s charter provides for periodic self-evaluation. The Audit Committee also reviews and assesses the adequacy of its charter at least annually, and recommends any proposed changes to the Board for approval. The Audit Committee is also responsible for overseeing compliance with the Code of Business Conduct and Ethics and reporting on such compliance to the Board.

The Board has determined that Mr. Furr, Ms. Straub and Mr. Nayyar all satisfy the “independence” requirements of NASDAQ and the Exchange Act applicable to members of an audit committee of a listed company’s board of directors. The Board has determined that all members are qualified as audit committee financial experts within the meaning of SEC regulations. The Audit Committee oversees our accounting and financial reporting processes and the audits of the financial statements of the Company.

Report of the Audit Committee of the Board of Directors

The Audit Committee reviews the Company’s financial reporting process on behalf of the Board. Management has the primary responsibility for the preparation and integrity of the consolidated financial statements and the reporting process, including establishing and monitoring the system of internal financial controls. In this context, during fiscal year 2020, the Audit Committee met and held discussions with management and Deloitte & Touche LLP (Deloitte), the Company’s independent registered public accounting firm. Management has represented to the Audit Committee that the Company’s consolidated financial statements for the fiscal year ended August 28, 2020 were prepared in accordance with accounting principles generally accepted in the United States of America, and the Audit Committee has reviewed and discussed the audited financial statements of the Company with management of the Company and with Deloitte. In addition, the Audit Committee has discussed with Deloitte the matters required to be discussed by Auditing Standard No. 16, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board (PCAOB). The Audit Committee has received from Deloitte the written disclosures and the letter required by applicable requirements of the PCAOB regarding Deloitte’s communications with the Audit Committee concerning independence and has discussed with Deloitte the independence of Deloitte from the Company and its management. The Audit Committee has also concluded that the provision of the non-audit services to the Company in fiscal year 2020 was compatible with Deloitte’s independence. Based on the foregoing, the Audit Committee has recommended to the Board, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 28, 2020, for filing with the SEC. The Audit Committee and the Board have also recommended the selection of Deloitte as the Company’s independent registered public accounting firm for the fiscal year ending August 27, 2021.

The material in this report is not deemed “soliciting material,” is not deemed “filed” with the SEC, is not subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Exchange Act, and is not to be incorporated by reference into any filing of SMART under the Securities Act of 1933, as amended (the Securities Act), or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

Respectfully submitted by the members of the Audit Committee of the Board of Directors:

Sandeep Nayyar, Chair

Randy W. Furr

Maximiliane Straub

Compensation Committee

The Compensation Committee acts on behalf of the Board to oversee the Company’s director and executive compensation and benefits policies, and to evaluate executive officer performance and compensation. Among other things, the Compensation Committee is responsible for:

 

   

reviewing and approving, or recommending to the Board to approve, the compensation for our senior executives;

 

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reviewing and approving the compensation for independent directors;

 

   

reviewing and evaluating our executive compensation and benefits policies generally;

 

   

reporting to our Board periodically;

 

   

evaluating its own performance and reporting to our Board on such evaluation;

 

   

reviewing and assessing periodically the adequacy of its charter and recommending any proposed changes to the Board for approval; and

 

   

such other matters that are specifically delegated to the Compensation Committee by our Board from time to time.

The Compensation Committee is currently composed of three directors: Mr. Ingram, Mr. Patel and Mr. Furr (Chair). The Board has determined that Mr. Furr, Mr. Ingram and Mr. Patel all satisfy the “independence” requirements of NASDAQ and the Exchange Act applicable to members of a compensation committee of a listed company’s board of directors. During fiscal 2020, the Compensation Committee held five meetings.

The Compensation Committee is governed by a written charter, which can be found under Documents in the Governance section of the Investors section of our website at http://www.smartgh.com/. Information on our website is not incorporated by reference in this Proxy Statement. The Compensation Committee charter grants the Compensation Committee sole authority to retain or obtain the advice of a compensation consultant, legal counsel or other adviser, including the authority to approve the consultant’s reasonable compensation. The Compensation Committee may select such advisers, or receive advice from any other adviser, only after taking into consideration all factors relevant to that person’s independence from management, including those independence factors enumerated by NASDAQ.

Consideration and Determination of Our Compensation Programs for Executives and Directors

The Compensation Committee is responsible for overseeing our compensation programs for executive officers and directors and all related policies and practices. Our Compensation Committee, which reports to our Board of Directors, meets at least quarterly during the year and retains a compensation consultant (described below under “Role of the Compensation Consultant”) to provide support to the Committee, including an annual review and assessment of our compensation programs for executive officers and directors. The annual compensation review includes a determination of the companies to be considered in our peer group, and a review of external market compensation comparisons relative to our peer companies and other comparable companies, including executive base salaries, cash incentives and long-term equity awards, as well as fees and equity awards for directors. The Compensation Committee reviews and determines whether and to what extent to approve all final recommendations from management regarding all forms of compensation for the Named Executive Officers (other than the CEO). The Compensation Committee also evaluates the performance of the CEO, reviews all forms of compensation paid to the CEO and can either approve the compensation or make recommendations to the Board of Directors for its consideration and approval.

Role of Management

In carrying out its responsibilities, the Compensation Committee asks the CEO and the Chief Operating and Financial Officer to provide information on Company and individual performance, market data, and management’s perspective and recommendations on compensation matters. The Compensation Committee believes that it is important to consider the CEO’s input, particularly his evaluation of individual performance as well as the expected contribution and future potential of the other Named Executive Officers, because of his daily interaction with them. The CEO may recommend changes in base salaries, target cash incentives, and annual equity awards for executive officers (other than himself), and assists the Compensation Committee in assessing the individual performance of each executive officer for purposes of determining amounts to be paid under our semi-annual bonuses. The CEO’s role in determining the compensation of executive officers is advisory only and the Compensation Committee (or the Board, on the recommendation of the Compensation Committee) provides

 

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final approval of all compensation matters for Named Executive Officers. The CEO also recommends the annual operating plan, or AOP, to the Board of Directors for approval, which includes corporate and division, or business unit performance objectives and financial goals for the fiscal year.

The CEO also reviews the compensation data gathered from compensation surveys and analyses to make his recommendations to the Compensation Committee on base salary, annual cash incentive target amounts and equity awards for each Named Executive Officer other than himself. Our Executive Vice President, Chief Operating and Financial Officer assists the CEO in reviewing the performance of our Named Executive Officers as well as market compensation data to help determine the compensation recommendations that the CEO will make.

Role of the Compensation Consultant

During fiscal year 2020, the Compensation Committee retained Compensia, Inc. as its outside, independent compensation consultant. Compensia reports directly to and is accountable to the Compensation Committee. Compensia has been engaged to provide advice, information and recommendations relating to compensation of our executive officers and directors, including base salary, cash incentive and equity incentive levels and program structures, as well as other retention incentives, and how this compensation compares to compensation for executive officers and directors of members of SMART’s peer group and comparably sized technology companies. In addition, Compensia assists the Compensation Committee with the development of a peer group and the design and refinement of SMART’s compensation philosophy. Compensia also advises the Compensation Committee regarding compensation disclosures, share ownership guidelines, shareholder proposals, and trends and best practices in executive and director pay.

In the course of its work, Compensia interacts with management to understand existing Company programs and policies, collects current pay program data, reviews competitive compensation data, obtains feedback on industry trends and best practices, and provides input on the Compensation Discussion and Analysis disclosure in our proxies. Compensia does not provide, and has not been retained to provide, any services to SMART outside of the work assigned by the Compensation Committee.

Compensation Committee Interlocks and Insider Participation

In fiscal year 2020, only Messrs. Furr, Ingram and Patel served as members of our Compensation Committee.

Mr. Patel was an officer of the Company at times prior to our fiscal year 2020. Mr. Patel co-founded SMART Modular in 1988, and served as a director and in various management and executive roles from 1988 until SMART Modular’s acquisition by Solectron in 1999.

None of our executive officers currently serves, or served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our Board of Directors or Compensation Committee.

Nominating and Corporate Governance Committee

The NCG Committee is generally responsible for identifying qualified Board candidates, recommending director nominees and appointments to Board committees, evaluating Board performance, reviewing management succession planning and overseeing the Company’s Corporate Governance Guidelines. To that end, the NCG Committee is responsible for, without limitation:

 

   

reviewing qualifications of candidates for membership on our Board, and identifying and recommending to the Board qualified individuals for membership on the Board and its committees;

 

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evaluating, at least once every other year starting in fiscal 2019, the performance of the directors as well as the committee’s own performance and reporting to the Board on such evaluation;

 

   

reviewing the adequacy of the composition of the Board and its committees;

 

   

overseeing compliance with the Corporate Governance Guidelines reporting on such compliance to the Board; and

 

   

reviewing and assessing periodically the adequacy of its charter and recommending any proposed changes to the Board for approval.

The NCG Committee is composed of three directors, Messrs. Ingram, Nayyar and Patel (Chair). The NCG Committee held four meetings during fiscal 2020. The Board determined that Messrs. Ingram, Nayyar and Patel are all independent within the meaning of the NASDAQ rules.

The NCG Committee is governed by a written charter. The NCG Committee charter can be found under Documents in the Governance section of the Investors section of our website at http://www.smartgh.com/. Information on our website is not incorporated by reference in this Proxy Statement. The NCG Committee charter complies with the guidelines established by NASDAQ.

The charter of the NCG Committee grants the NCG Committee authority to retain and terminate any advisers, including search firms to identify director candidates, and sole authority to approve all such advisers’ fees and other retention terms. In selecting candidates for recommendation to the Board, the NCG Committee considers the long-term interests of the shareholders, the needs of the Company and the appropriate skills, characteristics and experience of the candidates, including multiple factors such as independence; understanding of and experience in semiconductor and electronic equipment manufacturing and supply chain; understanding of technology, operations, finance and marketing; understanding and experience in government business and international markets; and gender and ethnic diversity. The Company is committed to actively seeking women and minority candidates for the pool from which candidates will be selected.

The NCG Committee’s charter provides for a self-evaluation at least once every other year starting in fiscal 2019. The NCG Committee also periodically reviews and assesses the adequacy of its charter and recommends any proposed changes to the Board for approval.

Shareholder Communications with the Board of Directors

Our relationship with our shareholders is an important part of our corporate governance program. Engaging with our shareholders helps us to understand how they view us, to set goals and expectations for our performance, and to identify emerging issues that may affect our strategies, corporate governance, compensation practices or other aspects of our operations. Our shareholder and investor outreach includes investor road shows, analyst meetings, and investor conferences and meetings. We also communicate with shareholders and other stakeholders through various media, including our annual report and SEC filings, proxy statement, news releases, and our website. Our conference calls for quarterly earnings releases are open to all. These calls are available in real time and as archived webcasts on our website for a period of time. Information on our website is not incorporated by reference in this Proxy Statement.

As set forth in our Corporate Governance Guidelines, unless otherwise indicated in such Guidelines or the Company’s policies, all requests for communications with individual directors or the Board by shareholders shall initially be made to our Secretary.

Code of Business Conduct and Ethics

The Board has adopted a Code of Business Conduct and Ethics that is applicable to all employees and directors. A copy of our Code of Business Conduct and Ethics is available under Documents in the Governance section of the Investors section of our website at http://www.smartgh.com/. Information on our website is not incorporated by reference in this Proxy Statement. If we make any substantive amendments to our Code of

 

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Business Conduct and Ethics or grant any waiver from a provision of our Code of Business Conduct and Ethics to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website in accordance with the requirements of Item 5.05 of Form 8-K.

Director Equity Ownership Guidelines

As stated in the Corporate Governance Guidelines, the Board believes that directors should hold meaningful equity ownership positions in the Company. The Compensation Committee may recommend to the Board specific director ownership guidelines. In fiscal 2020 the board adopted a Director and Officer Equity Retention Policy which provides equity ownership guidelines for our independent directors and Section 16 officers.

Anti-Hedging and Anti-Pledging Policy

Under our insider trading policy, all of our executive officers and directors are prohibited from engaging in short sales, transactions in put or call options, hedging transactions or other inherently speculative transactions in SMART shares and from pledging SMART shares in any circumstance, including by purchasing SMART shares on margin or holding SMART shares in a margin account.

Director Compensation

Our Board of Directors has adopted the following policy for compensation of our independent directors, starting in fiscal 2018:

 

   

Annual cash retainers, paid quarterly and with no separate meeting fees:

 

Board

             

Member

      $ 60,000  

Committee

   Chair      Member  

Audit

   $ 20,000      $ 10,000  

Compensation

   $ 15,000      $ 7,500  

Nominating & Corporate Governance

   $ 10,000      $ 5,000  

 

   

Annual equity grants: On the first Friday following the date of the annual shareholder meeting, each independent director who has served on the Board of Directors for at least 12 months will receive restricted share units (RSUs) with a grant date value of approximately $120,000, vesting in full on the first anniversary (or, if earlier, on the date of the next annual shareholder meeting at which the director’s term would expire).

 

   

Initial equity grants: Upon first becoming appointed to the board, each new independent director will receive an RSU grant the size of which shall be determined as follows: ($10,000 per month for the number of months from the first day of the calendar month of appointment to the Board, through and including January 31st of the second January after appointment occurs) divided by (the closing price of the Company’s ordinary shares at the close of trading on the last trading day immediately prior to the date of grant). This award covers the director’s first partial year of service and his or her following full year of service. These initial equity grants vest in part on the first anniversary of the grant, with the remainder vesting in the second January after the appointment.

We do not provide separate compensation for service on our Board of Directors to directors who also serve as employees and officers of the Company, or to directors who have been nominated by Silver Lake but we provide all of our directors with reimbursement for expenses incurred in connection with their service on our Board.

 

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The following table shows the compensation of our non-employee directors for fiscal 2020. Our only employee director during fiscal 2020, Mr. Shah, did not receive separate compensation for his service as a director during that year. Information on Mr. Shah’s compensation for fiscal 2020 is disclosed in the Summary Compensation Table below.

Director Compensation Table for Fiscal 2020

 

Name

   Fees Earned or Paid
in Cash ($)
     Share
Awards ($)(3)(4)
     Total ($)  

Randy Furr

     85,000        119,991        204,991  

Kenneth Hao(1)

     —          —          —    

Bryan Ingram

     72,500        119,991        192,491  

Paul Mercadante(1)(2)

     —          —          —    

Sandeep Nayyar

     85,000        119,991        204,991  

Mukesh Patel

     77,500        119,991        197,491  

Maximiliane Straub

     70,000        —          70,000  

Jason White(1)

     —          —          —    

 

(1)

Messrs. Hao, Mercadante and White were nominated to our Board of Directors by Silver Lake and, accordingly, are not compensated by the Company for their service on our Board.

(2)

Mr. Mercadante resigned from service on our Board of Directors in September 2020 in connection with the appointment of Mr. Adams.

(3)

Represents the grant date fair value of 3,635 RSUs granted to each of Messrs. Furr, Ingram, Nayyar and Patel during fiscal 2020, as calculated in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification (ASC) Topic 718. See Note 9(a) to the consolidated financial statements included in our Form 10-K for the fiscal year ended August 28, 2020 for the assumptions used in calculating these amounts.

(4)

As of August 28, 2020, each of Messrs. Furr, Ingram, Nayyar and Patel held 3,635 unvested RSUs and Ms. Straub held 5,209 unvested RSUs. No other non-employee director held any equity awards.

 

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PROPOSAL NO. 2: RATIFICATION OF THE SELECTION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL NO. 2.

The Board has selected and approved of Deloitte & Touche LLP (Deloitte) as the Company’s independent registered public accounting firm for the fiscal year ending in August 27, 2021. Deloitte has served as our independent registered public accounting firm since 2014. Representatives of Deloitte plan to attend the Annual Meeting and will be available to answer appropriate questions from shareholders. They will have the opportunity to make a statement if they desire to do so.

Neither our Articles of Association nor other governing documents or law require shareholder ratification of the selection of Deloitte as the Company’s independent registered public accounting firm; however, the Board is submitting the selection of Deloitte to the shareholders for ratification as a matter of good corporate practice. If the shareholders fail to ratify the selection, the Board will reconsider whether or not to retain Deloitte. Even if the selection is ratified, the Board in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the Board determines that such a change would be in the best interests of the Company and its shareholders.

Independent Registered Public Accounting Firm

The following is a summary of the fees and services provided by Deloitte to the Company for fiscal years 2020 and 2019:

 

     Fiscal Year  

Description of Services Provided by Deloitte

   2020      2019  

Audit Fees(1)

   $ 4,294,257      $ 4,688,356  

Audit-Related Fees(2)

     193,380        165,000  

Tax Fees(3)

     442,255        304,255  

All Other Fees(4)

     3,790        3,790  
  

 

 

    

 

 

 

TOTAL

   $ 4,933,682      $ 5,161,401  
  

 

 

    

 

 

 

 

(1)

Audit fees for Deloitte for fiscal 2020 and 2019 were for professional services rendered for the audits of our financial statements, review of interim financial statements, audit of internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, assistance with registration statements filed with the SEC, and services that are normally provided by Deloitte in connection with statutory and regulatory filings or engagements. Fees for the fiscal year ended August 28, 2020, include amounts associated with company’s February 2020 offering memorandum and related accounting and audit procedures associated with convertible notes. Fees for the fiscal year ended August 30, 2019 include amounts associated with our acquisitions of Artesyn Embedded Computing, Inc. and Inforce Computing, Inc. in July 2019.

(2)

Fees for fiscal year 2020 include due diligence fees associate with our future acquisition of Cree Inc.’s LED Products business unit. Fees for fiscal year 2019 include due diligence fees associate with our acquisition of Artesyn Embedded Computing.

(3)

Includes fees for tax compliance, tax advice and tax planning services. These services include assistance regarding federal, state and international tax compliance, tax return review, tax audits and miscellaneous consulting services.

(4)

Includes fees for professional services other than the services reported above. These services include permissible business advisory and consulting services, such as training seminars and subscriptions to an accounting regulatory database.

 

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The Audit Committee or delegate thereof pre-approves the scope of the audit, audit-related and tax services provided by our independent registered public accounting firm, as well as all associated fees and terms, pursuant to pre-approval policies and procedures established by the Audit Committee. The Audit Committee evaluates the independent registered public accounting firm’s qualifications, performance and independence, and presents its conclusions to the full Board on at least an annual basis. All of the services provided by Deloitte in fiscal 2020 and 2019, and fees for such services, were pre-approved by the Audit Committee in accordance with these standards.

 

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PROPOSAL NO. 3: ADVISORY VOTE ON THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL NO. 3.

Background and Purpose of Proposal

Our Board of Directors is committed to excellence in governance. At our 2019 annual meeting of shareholders, our Board of Directors recommended and our shareholders approved, in a non-binding advisory vote, that a non-binding advisory vote on executive compensation be held every year. Consistent with this preference expressed by our shareholders, the Board determined that our shareholders should be provided with an opportunity to vote on a say-on-pay proposal every year.

The Company utilizes a “pay-for-performance” philosophy as the foundation for all decisions regarding compensation of the Company’s Named Executive Officers. In designing the compensation program for the Company’s Named Executive Officers, we start by evaluating our businesses’ objectives and take into account the complexity of our businesses in tailoring our compensation program toward furthering these objectives. We implement corporate governance best practices into our executive compensation programs, along with high standards of risk management, in order to protect the interests of our shareholders.

Our executive compensation philosophy and program, approved by our Compensation Committee, have been central to the Company’s objective to attract, retain and motivate individuals who can assist in our efforts to achieve superior shareholder returns. The Compensation Committee is engaged in reevaluating our compensation philosophy and the Company’s compensation programs and practices. Please refer to “Compensation Discussion and Analysis” below for a more detailed explanation of the compensation of the Company’s Named Executive Officers.

Pursuant to Schedule 14A of the Exchange Act, we are asking for shareholder approval, in the form of an advisory resolution, of the compensation of our Named Executive Officers as disclosed in this Proxy Statement in accordance with SEC rules, which includes the disclosure under “Compensation Discussion and Analysis” below, the compensation tables and the narrative discussion following the compensation tables. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the executive compensation policies and practices described in this Proxy Statement. This advisory vote gives you, as a shareholder, the opportunity to endorse or not endorse the compensation of our Named Executive Officers through the following resolution:

RESOLVED, that the shareholders approve, in the form of an advisory resolution, the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K in the Compensation Discussion and Analysis section and compensation tables, as well as the other narrative executive compensation disclosures, contained in this Proxy Statement.”

While we intend to carefully consider the voting results of this proposal, this vote is advisory and therefore not binding on the Company, the Compensation Committee or the Board of Directors. The Board and the Compensation Committee value the opinions of our shareholders and, to the extent there is any significant vote against the named executive officer compensation as disclosed in this Proxy Statement, we will consider those shareholders’ concerns, and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.

 

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PROPOSAL NO. 4: APPROVAL OF AN AMENDMENT TO THE SMART GLOBAL HOLDINGS, INC. AMENDED AND RESTATED 2017 SHARE INCENTIVE PLAN TO INCREASE THE ORDINARY SHARES AVAILABLE FOR ISSUANCE UNDER THAT PLAN BY 1,000,000

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL NO. 4.

Background and Purpose of Proposal

We are asking shareholders to approve an amendment to the SMART Global Holdings, Inc. Amended and Restated 2017 Share Incentive Plan, which, as amended, we refer to as the “2017 Share Incentive Plan” or the “Plan,” to increase the ordinary shares available for issuance under the Plan by 1,000,000.

The Plan provides for grants of incentive share options (ISOs), nonstatutory share options (NSOs), restricted share awards (RSAs), restricted stock unit awards (RSUs), share appreciation rights (SARs), performance share awards and other forms of equity compensation, as well as cash-based awards, all of which may be granted to employees, including officers, and all of which, other than ISOs, may be granted to non-employee directors and consultants. Our Board of Directors adopted the Plan prior to our initial public offering (IPO), and after the IPO, our shareholders approved the Plan, as an amendment and restatement of our prior plan.

Upon our IPO in May 2017, we initially reserved 1,500,000 ordinary shares for future grants under this Plan, plus any shares returned to the Plan as a result of forfeiture or other termination or cancelation of outstanding awards. In January 2019, the shareholders approved an amendment to the Plan which increased the ordinary shares available for issuance under the Plan by 1,500,000.

The number of shares reserved under the Plan is subject to an automatic annual increase on the first day of each fiscal year for ten years from the May 2017 adoption date, equal to the lesser of (i) 1,500,000 shares, (ii) 2.5% of the ordinary shares outstanding on the last day of the immediately preceding fiscal year and (iii) such smaller number of shares as determined by our Board of Directors or committee. As of August 28, 2020, 1,432,721 ordinary shares remained reserved for future issuance under the Plan. As of September 1, 2020, pursuant to the evergreen provision of the Plan, the number of ordinary shares reserved for future issuance under the Plan increased by 610,485 to 2,043,206. As of November 4, 2020 we had 1,401,938 ordinary shares available for grant.

The amendment is only intended to reserve an additional 1,000,000 of our ordinary shares for issuance under the Plan. It is not intended to modify the annual increase in ordinary shares reserved for awards under the current terms of the Plan, which will continue through our fiscal year beginning September 1, 2026 unless otherwise modified or terminated by the Board. The amendment will also not alter any of the other terms and conditions of the Plan.

We expect to continue to use this Plan, as amended, to provide annual awards to our employees, officers and non-employee directors. The value of these awards will depend on future increases or fluctuations in the trading price of our ordinary shares. The awards will link the compensation paid to our employees, officers and non-employee directors to the value delivered to shareholders through share price appreciation.

Why We Are Asking For Shareholder Approval

In fiscal 2018, 2019, 2020 and in the first quarter of fiscal 2021 we issued equity awards covering 5,429,327 ordinary shares including as set forth below, consisting of annual retention awards to independent directors and existing employees, standard new hire and promotion grants, retention awards in connection with the acquisitions of Penguin Computing, Inc., SMART Embedded Computing, Inc. (formerly known as Artesyn Embedded Computing, Inc.) and SMART Wireless Computing, Inc. (formerly known as Inforce Computing, Inc.), and awards to both our former CEO Ajay Shah and to Mark Adams who became our CEO on August 31, 2020.

 

   

In fiscal 2018, awards covering 16,878 shares for our independent directors, 900,000 shares for our then incoming CEO, Mr. Shah whose compensation consisted predominantly of equity awards, 91,729

 

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shares for our Named Executive Officers other than Mr. Shah, and 457,285 shares for other existing officers and employees as part of our general retention awards.

 

   

In fiscal 2019, time-based RSUs covering 133,000 shares and performance-based PSUs covering 150,000 shares; and in fiscal 2020 time-based RSAs covering 180,000 shares and performance-based RSAs, or PSAs covering 90,000 shares to Ajay Shah as the predominant form of compensation for his service as our CEO.

 

   

In the first quarter of fiscal 2021, time-based RSAs covering 225,000 shares, market-based RSAs covering 250,000 shares and time-based options covering 250,000 shares to Mark Adams in connection his accepting an offer to become our CEO on August 31, 2020.

 

   

Awards covering 278,958 shares to employees of Penguin Computing, Inc. in connection with our acquisition of Penguin Computing, Inc. in June 2018.

 

   

Awards covering 163,704 shares to employees of SMART Embedded Computing, Inc. in connection with our acquisition of SMART Embedded Computing, Inc. in July 2019.

 

   

Awards covering 73,028 shares to employees of SMART Wireless Computing, Inc. in connection with our acquisition of SMART Wireless Computing, Inc. in July 2019.

 

   

Awards covering 74,151 shares to newly hired and promoted employees in fiscal 2018 other than from the acquisition of Penguin Computing, Inc.

 

   

Awards covering 164,177 shares to newly hired and promoted employees other than from the acquisitions of SMART Embedded Computing, Inc. and SMART Wireless Computing, Inc. in fiscal 2019.

 

   

Awards covering 301,301 shares to newly hired and promoted employees in fiscal 2020.

 

   

In fiscal 2019, annual awards covering 31,566 shares for our independent directors, 190,000 shares for our Named Executive Officers other than Mr. Shah, and 232,250 shares for other officers and employees as part of our general retention awards.

 

   

In fiscal 2020, annual awards covering 14,540 shares for our independent directors, 252,000 shares for our Named Executive Officers other than Mr. Shah, and 161,650 shares for other officers and employees as part of our general retention awards.

As of November 4, 2020, only 1,401,938 ordinary shares remain reserved and available for grants under the Plan, and the next scheduled increase will not occur until August 30, 2021.

In October 2020 we announced our intention to acquire certain assets in connection with the LED business of Cree, Inc. If the acquisition is consummated, we expect to hire approximately 1,900 additional employees. While we may be able to issue awards outside of the Plan in connection with the acquisition to induce new employees who are award-eligible to join the Company, in future years, we expect to utilize shares under the Plan to incentivize and retain this significant increase in the employee population as part of the general retention awards for the combined companies’ award-eligible employees and non-employee independent directors.

We have yet to determine the number of shares that will be used for annual awards or awards to newly hired or promoted employees under the Plan in fiscal 2021 or future years, but if we were to issue such awards in fiscal 2021 at a rate similar to the rate of comparable awards in fiscal 2020 and 2019, taking into account the growth in our number of eligible employees resulting from the acquisitions of Penguin Computing, SMART Embedded Computing and SMART Wireless Computing, we would expect to consume approximately 700,000 shares in fiscal 2021. If the transaction to acquire the Cree LED business is completed that number could increase to 850,000 shares of annual retention grants. In order to maintain our fiscal 2020 rate of annual new hire and promotion awards (adjusted for the Penguin, SMART Embedded Computing, SMART Wireless Computing and, if the transaction is completed, the Cree LED acquisitions) for fiscal 2021 and future years, we would utilize more than an additional 200,000 shares per year. The annual refresh of up to 2.5% of issued and outstanding shares scheduled

 

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for the first day of each fiscal year under the Plan would be expected to provide us with approximately 610,000 additional shares for each fiscal year after fiscal 2021 for the remaining term of the Plan. Accordingly, a reservation of 1,000,000 additional shares as provided for in the proposed amendment could allow us to continue awards at the adjusted rate for our current fiscal year, 2021, and our next fiscal year, fiscal 2022, taking into account the annual refresh, or evergreen provision. The additional shares could also serve to provide us with flexibility to address further acquisitions or other growth, if any should occur in the future.

The Board believes that approving the amendment to the Plan will assist the Company in maintaining the competitiveness of our compensation programs for our employees, officers and non-employee directors, and provide the Company with flexibility in its efforts to attract and retain talented employees and independent directors, and to incentivize individuals who may become employees through acquisitions if any occur in the future.

Shareholder approval of the amendment to the Plan will not affect share awards currently outstanding to our employees, officers or directors.

If our shareholders approve the amendment to the Plan, then an additional 1,000,000 of our ordinary shares will be reserved for future awards under the Plan. If our shareholders do not approve the amendment to the Plan, the amendment will be treated as void and of no effect and we will continue to grant awards pursuant to the Plan in its current form, to the extent that ordinary shares remain or become available to make such awards under the Plan’s current terms.

Summary of Material Features of the Plan

The following is a summary of the Plan. This summary does not purport to be complete, and is qualified in its entirety by reference to the full text of the Plan. Exhibit A to this Proxy Statement contains the text of the amendment to our 2017 Share Incentive Plan. Exhibit A is incorporated by reference into the following plan summary, which is qualified in its entirety by this reference.

Purposes and Eligibility under the Plan

The Plan is intended to help the Company secure and retain the services of eligible award recipients, provide incentives for such persons to exert maximum efforts for the success of the Company and provide a means by which the eligible recipients may benefit from increases in value of our ordinary shares. The Plan allows for awards to the Company’s employees, directors and consultants, although actual recipients are in the sole discretion of the administrator of the Plan. Under the Company’s current guidelines with respect to equity compensation, as of November 4, 2020, approximately 537 of the Company’s 1,789 employees (including six executive officers), five of its nine directors (all of them independent directors) and none of the Company’s twelve consultants are considered as eligible to receive awards under the Plan.

Pursuant to the terms of the Plan, our Board of Directors, or a committee appointed by our Board, will act as the administrator of the Plan.

Authorized Shares.

As amended and restated in connection with our IPO in May 2017, the Plan initially reserved 1,500,000 ordinary shares for future grants, which was increased by 1,500,000 shares by an amendment approved by the shareholders in January 2019, along with any shares that are returned to the Plan as a result of forfeiture or other termination of outstanding awards. Under the terms of the Plan, the number of shares reserved is subject to an annual increase on the first day of each fiscal year for ten years beginning in 2017, in an amount equal to the lesser of (i) 1,500,000 shares, (ii) 2.5% of the ordinary shares outstanding on the last day of the immediately preceding fiscal year and (iii) such smaller number of shares as determined by our Board of Directors or committee.

 

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As of August 28, 2020, equity awards for 2,109,469 options to purchase ordinary shares were outstanding with a weighted-average exercise price of approximately $29.45 per ordinary share, other awards with respect to 1,273,441 shares were outstanding, and 1,432,721 ordinary shares remained available for future grants.

As of November 4, 2020, 1,401,938 ordinary shares remain reserved and available for grant under the Plan.

If our shareholders approve the amendment to the Plan, then an additional 1,000,000 of our ordinary shares will be reserved for awards granted under the Plan on or after February 12, 2021.

Other Limits on Awards.

Subject to the provisions relating to adjustments upon changes in the ordinary shares, no participant may be granted during any calendar year (i) options and SARs covering more than 2,000,000 ordinary shares, (ii) performance awards denominated in shares covering more than 1,000,000 shares, and (iii) with respect to any performance award or cash-based award denominated by dollar value, $10,000,000 during any calendar year.

In addition, subject to the provisions below relating to adjustments upon changes in the ordinary shares, during any calendar year, no non-employee director may be granted (i) award(s) (denominated in shares) with a grant date fair value exceeding $750,000 or (ii) award(s) denominated in cash in excess of $750,000.

Performance Goals

For any performance awards intended to be performance-based compensation, the performance awards shall be conditioned upon the achievement of pre-established goals relating to one or more performance measures, as determined in writing by an applicable committee, which may include: cash flow; cash flow from operations; earnings (including, but not limited to, earnings before interest, taxes, depreciation and amortization or some variation thereof); earnings per share, diluted or basic; earnings per share from continuing operations; net asset turnover; inventory turnover; capital expenditures; debt; debt reduction; working capital; return on investment; return on sales; net or gross sales; market share; economic value added; cost of capital; change in assets; expense reduction levels; productivity; delivery performance; safety record and/or performance; environmental record and/or performance; share price; return on equity; total or relative increases to shareholder return; return on invested capital; return on assets or net assets; revenue; income or net income; operating income or net operating income; operating profit or net operating profit; gross margin; operating margin or profit margin; completion of acquisitions; business expansion; product diversification; new or expanded market penetration; and other non-financial operating and management performance objectives. Performance measures may be determined either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit or subsidiary entity thereof, either individually, alternatively or in any combination, and measured over a period of time including any portion of a year, annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous fiscal years’ results or to a designated comparison group, in each case as specified by the committee.

Other Material Terms of Awards

Options and SARs granted under the Plan will have exercise or base prices of no less than the fair market value of such shares on the grant date and have a maximum term of ten years. The vesting requirements, as well as any other terms and conditions, of equity and cash awards will be determined by the Board or the committee. Vesting may be time-based or performance-based or a combination.

In the event of any share dividend, share split, reverse share split, reorganization, recapitalization, merger, amalgamation, consolidation, spin-off, combination, transaction or exchange of shares, or other corporate exchange, or any cash dividend or distribution to shareholders other than ordinary cash dividends or any transaction similar to the foregoing, the Board or the committee shall equitably adjust:

 

   

the number or kind of shares or securities issued or reserved for issuance pursuant to the Plan or pursuant to outstanding awards under the Plan, as well as any individual award limits under the Plan;

 

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the exercise price of any option; and/or

 

   

any other affected terms of such awards.

Upon a change in control, as defined in the Plan, the Board or the committee may cause any outstanding award to be:

 

   

continued by us;

 

   

assumed, or substituted with a substantially equivalent award, by the successor company (or its parents or any of its subsidiaries); or

 

   

canceled in consideration of a cash payment or alternative award equal in value to the consideration to be paid in the change in control transaction, directly or indirectly, to holders of the same number of shares subject to such award (or if no consideration is paid, then the fair market value) over the aggregate exercise price.

In the event of a dissolution or liquidation, then all outstanding awards will terminate immediately prior to such event. The Board or the committee may amend, modify or terminate any award under the Plan; provided that any such amendment, modification or termination that would adversely affect a participant’s rights requires the consent of such participant.

The Plan will terminate in 2027 unless the term is extended or terminated earlier by the Board of Directors.

U.S. Federal Income Tax Information

The information set forth below is only a summary and does not purport to be complete. The information is based upon federal income tax rules in effect as of December 1, 2020 and therefore is subject to change when those rules change. Because the tax consequences to any participant may depend on his or her particular situation, each participant should consult his or her tax adviser regarding the federal, state, local, and other tax consequences of the grant or exercise of a share award or the disposition of shares acquired under an award. The Plan is not qualified under the provisions of Section 401(a) of the Code and is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974. Our ability to realize the benefit of any tax deductions described below depends on our generation of taxable income and the recognition of the deductions are subject to the requirement that the amounts constitute an ordinary and necessary business expense for us and are reasonable in amount, the limitation on the deduction of executive compensation under Section 162(m) of the Code and the timely satisfaction of our tax reporting obligations.

Incentive Share Options. Incentive share options under the Plan are intended to be eligible for the favorable federal income tax treatment accorded “incentive share options” under Section 422 of the Code. There generally are no federal income tax consequences to the participant or our Company by reason of the grant or exercise of an incentive share option. However, the exercise of an incentive share option may increase the participant’s alternative minimum tax liability, if any. If a participant holds shares acquired through exercise of an incentive share option for more than two years from the date on which the option is granted and more than one year from the date on which the shares are transferred to the participant upon exercise of the option, any gain or loss on a disposition of such shares will be a long-term capital gain or loss. Generally, if the participant disposes of the shares before the expiration of either of these holding periods (a “disqualifying disposition”), then at the time of disposition the participant will realize taxable ordinary income equal to the lesser of (i) the excess of the share’s fair market value on the date of exercise over the exercise price, or (ii) the participant’s actual gain, if any, on the purchase and sale. The participant’s additional gain or any loss upon the disqualifying disposition will be a capital gain or loss, which will be long-term or short-term depending on whether the share was held for more than one year. To the extent the participant recognizes ordinary income by reason of a disqualifying disposition, subject to certain requirements and limitations, including the provisions of Section 162(m) of the Code and the satisfaction of a tax reporting obligation, we may be entitled to a corresponding deduction in the tax year in which the disqualifying disposition occurs.

 

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Nonstatutory Share Options, Restricted Share Awards, Restricted Share Unit Awards and Share Appreciation Rights. Nonstatutory share options, restricted share awards and RSUs granted under the Plan generally have the following federal income tax consequences: There are no tax consequences to the participant or our Company by reason of the grant. Upon acquisition of a share, the participant normally will recognize taxable ordinary income equal to the excess, if any, of the share’s fair market value on the acquisition date over the purchase price or strike price. However, to the extent the share is subject to certain types of vesting restrictions, the taxable event will be delayed until the vesting restrictions lapse unless the participant elects to be taxed on receipt of the share. With respect to employees, we are generally required to withhold an amount based on the ordinary income recognized. Subject to certain requirements and limitations, including the provisions of Section 162(m) of the Code and the satisfaction of a tax reporting obligation, we may be entitled to a corresponding deduction. Upon disposition of the share, the participant will recognize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for such share plus any amount recognized as ordinary income upon acquisition (or vesting) of the share. Such gain or loss will be long-term or short-term depending on whether the share was held for more than one year.

Plan Benefits

Since the adoption of the Plan through December 18, 2020, we have granted the following equity awards, including stock options, RSUs, RSAs, PSUs and PSAs, under the Plan to the individuals and groups listed below. In all cases, the securities underlying such equity awards were our ordinary shares.

 

Name and Position

   Number of shares
subject to equity
awards
 

Ajay Shah, Chief Executive Officer and Chairman of the Board in fiscal 2020, and now Executive Chairman of the Board

     2,128,000  

Jack Pacheco, Executive Vice President, Chief Operating Officer, Chief Financial Officer and, as of September 2020, President of SMART Memory Solutions

     190,000  

KiWan Kim, Executive Vice President, President Emerging Markets (during fiscal 2020, Senior Vice President, Emerging Markets and President of SMART Brazil)

     159,000  

Alan Marten, Senior Vice President, Specialty Memory

     129,000  

Bruce Goldberg, Vice President, Chief Legal Officer and Chief Compliance Officer

     85,729  

All Current Executive Officers as a group (including Mr. Adams and all Named Executive Officers)

     3,416,729  

Sandeep Nayyar, Director and Lead Independent Director

     11,692  

Mukesh Patel, Director

     11,692  

Maximiliane Straub, Director

     11,458  

All Current Directors who are not executive officers as a group

     60,364  

All employees who are not executive officers as a group

     2,072,834  

Other than the annual grant of restricted share units with a value of $120,000 to our independent non-employee directors, because the amount, form and recipients of awards under the Plan are in the discretion of the plan administrator, any actual awards that may be granted in the future to any individual (or any group of individuals) is not determinable. Also see the sections entitled “Corporate Governance and Board Matters—Director Compensation” and “Executive Compensation” for information regarding awards granted to our executive officers and directors during our most recent fiscal year.

As of December 18, 2020, the fair market value of an ordinary share was $33.58.

 

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OTHER INFORMATION RELATED TO SMART, THE DIRECTORS AND EXECUTIVE OFFICERS

Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

Each of our ordinary shares entitles its holder to one vote. The following table presents the beneficial ownership of our shares as of November 4, 2020 for:

 

   

each of our Named Executive Officers (as defined in our “Compensation Discussion & Analysis” below);

 

   

each of our directors;

 

   

each person known to us to be the beneficial owner of more than 5% of our ordinary shares; and

 

   

all of our executive officers and directors as a group.

We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the tables below have sole voting and investment power with respect to all ordinary shares that they beneficially own, subject to applicable community property laws.

Ordinary shares subject to options under the SMART Global Holdings Amended and Restated 2017 Share Incentive Plan (as amended, the Plan) that are currently exercisable or exercisable within 60 days of November 4, 2020, and RSUs scheduled to be released within 60 days of November 4, 2020 (but excluding any performance or market-based awards where the performance or market conditions have not been satisfied as of such date) are deemed to be outstanding and to be beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Percentage ownership is based on 24,713,818 ordinary shares outstanding on November 4, 2020.

Unless otherwise indicated, the mailing address of each of the individuals below is c/o SMART Modular Technologies, Inc., 39870 Eureka Drive, Newark, California 94560.

 

Name of Beneficial Owner

   Amount and
Nature of
Beneficial
Ownership(1)
     Percentage of
Shares Beneficially
Owned 
 

5% Shareholders:

     

Entities affiliated with Silver Lake Partners(2)

     6,171,171        25.0

Entities affiliated with Silver Lake Sumeru(3)

     3,085,584        12.5

BlackRock, Inc.(4)

     2,102,828        8.8

Directors and Named Executive Officers:

     

Ajay Shah(2)(3)(5)

     761,951        3.1

Mark Adams(6)

     9,820        *  

Randy Furr(7)

     12,652        *  

Kenneth Hao(2)(3)

     —           

Bryan Ingram(8)

     5,600        *  

Sandeep Nayyar(9)

     8,058        *  

Mukesh Patel(10)

     192,197        *  

Maximiliane Straub(11)

     6,249        *  

Jason White(2)(3)

     —           

Jack Pacheco(12)

     114,842        *  

KiWan Kim(13)

     55,059        *  

Alan Marten(14)

     209,920        *  

Bruce Goldberg(15)

     22,743        *  

All directors and executive officers as a group (13 persons)(16)

     1,399,091        4.1

 

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*

Represents beneficial ownership of less than 1%

(1)

Shares shown in the table above include shares held in the beneficial owner’s name or jointly with others, or in the name of a bank, nominee or trustee for the beneficial owner’s account.

(2)

Consists of (i) 6,138,094 shares held of record by Silver Lake Partners III Cayman (AIV III), L.P. (“SLP III Cayman”), the general partner of which is Silver Lake Technology Associates III Cayman, L.P. (“SLTA III Cayman”), and (ii) 33,077 shares held of record by Silver Lake Technology Investors III Cayman, L.P. (together with SLP III Cayman and SLTA III Cayman, the “SLP III Cayman Entities”), the general partner of which is SLTA III Cayman. Silver Lake (Offshore) AIV GP III, Ltd. (“SL III Offshore Ltd”) is the general partner of SLTA III Cayman. As such, SL III Offshore Ltd may be deemed to have beneficial ownership of the securities over which any of the SLP III Cayman Entities has voting or dispositive power. SL III Offshore Ltd is controlled by a board of eight directors that acts by majority approval and possesses sole voting and dispositive power with respect to the shares held by the SLP III Cayman Entities. The individual members of such board are Messrs. Kenneth Hao, Michael Bingle, Greg Mondre, Egon Durban, Joe Osnoss, Jason White and Andrew Schader, and Ms. Karen King. Excludes 536,951 shares held of record by Mr. Shah and his affiliated investment vehicles and 225,000 shares issuable pursuant to outstanding share options held by Mr. Shah which are currently exercisable, described in footnote (7) below, that may be deemed to be beneficially owned by entities affiliated with Silver Lake Partners and Silver Lake Sumeru by virtue of relationships and agreements among such persons. The mailing address for each of the entities referenced above is c/o Silver Lake, 2775 Sand Hill Road, Suite 100, Menlo Park, CA 94025.

(3)

Consists of (i) 3,048,465 shares held of record by Silver Lake Sumeru Fund Cayman, L.P. (“SLS Cayman”), the general partner of which is Silver Lake Technology Associates Sumeru Cayman, L.P. (“SLTA Sumeru Cayman”), the general partner of which is SLTA Sumeru (GP) Cayman, L.P. (“SLTA Sumeru GP Cayman”), and (ii) 37,119 shares held of record by Silver Lake Technology Investors Sumeru Cayman, L.P. (together with SLS Cayman, SLTA Sumeru Cayman and SLTA Sumeru GP Cayman, the “SLS Cayman Entities”), the general partner of which is SLTA Sumeru Cayman. Silver Lake Sumeru (Offshore) AIV GP, Ltd. (“SL Sumeru Offshore Ltd”) is the general partner of SLTA Sumeru GP Cayman. As such, SL Sumeru Offshore Ltd may be deemed to have beneficial ownership of the securities over which any of the SLS Cayman Entities has voting or dispositive power. SL Sumeru Offshore Ltd. is controlled by a board of nine directors that acts by majority approval and possesses sole voting and dispositive power with respect to the shares held by the SLS Cayman Entities. The individual members of such board are Messrs. Ajay Shah, Paul Mercadante, Kyle Ryland, John Brennan, Egon Durban, Kenneth Hao, Andrew Schader and Jason White and Ms. Karen King. Excludes 536,951 shares held of record by Mr. Shah and his affiliated investment vehicles and 225,000 shares issuable pursuant to outstanding share options held by Mr. Shah which are currently exercisable, described in footnote (7) below that may be deemed to be beneficially owned by entities affiliated with Silver Lake Partners and Silver Lake Sumeru by virtue of relationships and agreements among such persons. The mailing address for each of the entities referenced above is c/o Silver Lake, 2775 Sand Hill Road, Suite 100, Menlo Park, CA 94025.

(4)

The number of shares listed for BlackRock, Inc. is based on a Schedule 13G filed on February 6, 2020. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.

(5)

Consists of (i) 74,124 shares held of record by Krishnan-Shah Family Partners, L.P. Fund No. 1, for which Mr. Shah serves as a trustee, (ii) 8,339 shares held of record by Krishnan-Shah Family Partners, L.P. Fund No. 3, for which Mr. Shah serves as a trustee, (iii) 440,183 shares held of record by The Ajay B. Shah and Lata K. Shah 1996 Trust (U/A/D 5/28/1996), for which Mr. Shah serves as a trustee, (iv) 14,305 shares held of record by Krishnan-Shah Family Partners, L.P. Fund No. 4, for which Mr. Shah serves as a trustee, and (v) 225,000 shares issuable pursuant to outstanding share options held by Mr. Shah which are currently exercisable. The address for Mr. Shah is c/o Silver Lake, 2775 Sand Hill Road, Suite 100, Menlo Park, CA 94025.

(6)

Consists of 9,820 shares held of record by Mr. Adams.

(7)

Consists of 12,652 shares held of record by the Furr Revocable Living Trust dated December 28, 2011.

(8)

Consists of 5,600 shares held of record by Mr. Ingram.

 

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(9)

Consists of 8,058 shares held of record by the Nayyar Revocable Living Trust dated December 9, 2008. The address for Mr. Nayyar is c/o Power Integrations, Inc., 5245 Hellyer Avenue, San Jose, CA 95138.

(10)

Consists of (i) 7,528 shares held of record by Mr. Patel, (ii) 8,057 shares held by the Patel Revocable Living Trust dated June 6, 2002 and (iii) 176,612 shares held by Invati Capital LLC.

(11)

Consists of 6,249 shares held of record by Ms. Straub.

(12)

Consists of (i) 33,318 shares held of record by Mr. Pacheco, and (ii) 81,524 shares issuable pursuant to outstanding share options held by Mr. Pacheco that are currently exercisable or exercisable within 60 days of November 4, 2020.

(13)

Consists of 4,435 shares of record held by Mr. Kim and (ii) 50,624 shares issuable pursuant to outstanding share options held by Mr. Kim that are currently exercisable or exercisable within 60 days of November 4, 2020.

(14)

Consists of (i) 93,291 shares held of record by Mr. Marten and (ii) 116,629 shares issuable pursuant to outstanding share options held by Mr. Marten that are currently exercisable or exercisable within 60 days of November 4, 2020.

(15)

Consists of (i) 1,341 shares held of record by Mr. Goldberg and (ii) 21,402 shares issuable pursuant to outstanding share options held by Mr. Goldberg that are currently exercisable or exercisable within 60 days of November 4, 2020.

(16)

Includes 495,179 shares issuable pursuant to outstanding share options that are currently exercisable or exercisable within 60 days of November 4, 2020 and 1,500 shares issuable pursuant to outstanding RSUs within 60 days of November 4, 2020.

Executive Officers

In addition to Mr. Adams, our Chief Executive Officer, the following table sets forth information concerning our executive officers as of December 9, 2020.

 

Name

   Age     

Position with SMART

Jack Pacheco

     60     

Executive Vice President, Chief Operating Officer and Chief Financial Officer and President SMART Memory Solutions

Alan Marten

     61     

Senior Vice President, Specialty Memory

KiWan Kim

     58      Executive Vice President, SMART Global Holdings
President Emerging Markets

Bruce Goldberg

     65     

Vice President, Chief Legal Officer, Chief Compliance Officer and Secretary

Jack Pacheco has served as our Executive Vice President, Chief Operating Officer and Chief Financial Officer since December 2017, as president of SMART Memory Solutions since September 2020 and previously as our Senior Vice President, Chief Operating Officer and Chief Financial Officer since October 2011. Previously, from 2004 to 2008, Mr. Pacheco served as our Chief Financial Officer. Prior to rejoining us, from 2008 to 2011, Mr. Pacheco served as Vice President and Chief Financial Officer of Mirion Technologies, Inc., a provider of radiation detection, measurement, analysis and monitoring products. From 2001 to 2004, Mr. Pacheco served as Chief Financial Officer for Ignis Optics, Inc., an optical components startup acquired by Bookham Technology Inc. He holds an M.B.A. degree from Golden Gate University and a B.S. degree in Business Administration from Washington State University.

Alan Marten has served as our Senior Vice President since October 2007. Previously, he served as Vice President and General Manager of our Memory Business Unit from April 2004 to October 2007 and held an equivalent position when our Company was a business unit within Solectron from 1999 through its divestiture in 2004. Mr. Marten also held the positions of Vice President of Sales and Marketing from 1995 to 1999 and Director of Sales from 1990 to 1994. Prior to that, Mr. Marten served as Director of Product Management, Semiconductor and Memory Products, at Arrow Electronics, Inc. from 1987 to 1989. Mr. Marten began his career at Advanced Micro Devices, Inc. as a financial analyst and product marketing manager. Mr. Martens holds a B.S. degree in Economics from Santa Clara University.

 

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KiWan Kim has served as our Executive Vice President and President of Emerging Markets since September 2020 and previously as our Senior Vice President, Emerging Markets and President, SMART Brazil since January 2010 and is responsible for developing strategies to grow our business in emerging markets. Previously, from December 2000 to December 2009, Mr. Kim served in various positions in our Company, including Vice President of Strategic Planning and Advanced Packaging from November 2006 to December 2009, Vice President and General Manager of our Display Products Group from October 2004 to October 2006 and Vice President of our DRAM Business Unit from December 2000 to September 2004. Mr. Kim began his career at Samsung Electronics, where he spent 13 years in various positions, ultimately serving as Sales Director. Mr. Kim holds a B.B.A. degree from Yonsei University in Seoul, South Korea.

Bruce Goldberg has served as our Vice President, Chief Legal Officer and Chief Compliance Officer since August 2009 and as our Secretary since December 2016. Previously, from 1988 to 2007, Mr. Goldberg served in various legal and executive positions at All American Semiconductor, Inc., ultimately serving as President and Chief Executive Officer from 1997 to 2007. From 2007 to 2008, Mr. Goldberg served as a consultant to a public telecommunications company and, in 2008, as interim General Counsel for VeriFone Systems Inc. Mr. Goldberg holds a Bachelor of Business Administration degree in Finance from the University of Miami School of Business and a J.D. from the University of Miami School of Law.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than 10% of a registered class of our equity securities to file reports of ownership and reports of changes in the ownership with the SEC. Executive officers, directors and greater than 10% shareholders are required by the SEC to furnish us with copies of all Section 16(a) filings they make.

To the best of our knowledge and based solely on a review of the copies of such reports furnished to us, during the fiscal year ended August 28, 2020, all Section 16(a) filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with on a timely basis.

Report of the Compensation Committee

The following Report of the Compensation Committee of the Board of Directors shall not be deemed to be “soliciting material” or “filed” with the SEC or incorporated by reference into any future filing under the Securities Act of 1933 (the “Securities Act”) or the Securities Exchange Act of 1934 (the “Exchange Act”), each as amended, except to the extent that we specifically incorporate it by reference into such filing.

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy Statement. Based upon this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

Members of the Compensation Committee

Randy Furr, Chair

Mukesh Patel

Bryan Ingram

 

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COMPENSATION DISCUSSION AND ANALYSIS

Our Compensation Discussion and Analysis addresses the following topics with respect to executive officer compensation processes and decisions:

 

   

Executive Compensation Philosophy and Framework

 

   

Evaluation of Executive Officer Compensation

For fiscal 2020, the following executive officers named in the Summary Compensation Table below are considered to be our Named Executive Officers:

 

   

Ajay Shah, Executive Chairman of the Board (during fiscal 2020, President, Chief Executive Officer and Chairman of the Board)

 

   

Jack Pacheco, Executive Vice President, Chief Operating Officer, Chief Financial Officer and, as of September 2020, President of SMART Memory Solutions

 

   

KiWan Kim, Executive Vice President, President Emerging Markets (during fiscal 2020, Senior Vice President, Emerging Markets and President of SMART Brazil)

 

   

Alan Marten, Senior Vice President, Specialty Memory

 

   

Bruce Goldberg, Vice President, Chief Legal Officer and Chief Compliance Officer

Executive Compensation Philosophy and Framework

Compensation Philosophy

Our executive compensation philosophy is to make our total cash compensation (base salary and target cash incentives) competitive with the companies in our peer group and other comparably sized technology companies by providing comparatively lower guaranteed compensation levels in the form of base salary while offering the opportunity to earn relatively high rewards based on performance. The application of our philosophy to particular aspects of our executive compensation program continues to evolve as a result of our growth and maturation as a public company. Historically, we have paid salaries to our executives that were generally less than salaries paid to executives of comparably sized public companies. The lower salaries were offset by cash incentives that we felt brought total cash compensation to competitive market levels and equity awards that had the potential to provide significant value if the executives were successful in increasing our stock price and value to our shareholders over the long term.

We continue to believe that the opportunity to share in the creation of shareholder value through equity compensation is critical to retaining our executive talent and for providing appropriate incentive to drive Company performance. We believe that shareholder value is a reasonable measure of long-term success and, therefore, we use equity awards, primarily in the form of time-based stock options and RSUs, as a key component of our executive compensation program. The Compensation Committee believes that a mix of options, which do not have any value unless our share price increases after the date of grant, and RSUs, which provide a more stable compensation opportunity, is effective in supporting our pay-for-performance as well as retention objectives associated with our executive compensation program.

Compensation Objectives

Consistent with our pay-for-performance philosophy, our executive compensation program is designed around four primary objectives:

 

   

Maintaining modest levels of guaranteed compensation relative to our peer group and comparably sized companies.

 

   

Motivating and rewarding executives for performance against our annual operating plan.

 

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Aligning shareholder and executive interests by sharing appreciation in shareholder value through equity awards that increase in value as our stock price rises.

 

   

Improving quality of life and reducing distractions by way of health and welfare benefits, including severance protection.

Compensation Mix

As noted above, we generally provide our Named Executive Officers with a mix of compensation elements that emphasize cash incentives and long-term equity incentives. The primary elements of SMART’s executive officer compensation program in fiscal 2020, for all executive officers other than Mr. Shah, were base salary, semi-annual cash incentives, and stock options and RSUs. In addition, our Compensation Committee determined in March 2020 that PSUs would be awarded to Messrs. Pacheco, Kim and Marten based on performance to our annual operating plan, or AOP. These awards were granted in September 2020 after the close of our fiscal 2020 and are discussed in more detail under Equity Compensation, below. These elements are discussed below in greater detail under “Evaluation of Executive Officer Compensation. We also provided health and welfare benefits to our Named Executive Officers on substantially similar terms and conditions as provided to most of our U.S. employees, and severance under individual arrangements with each Named Executive Officer.

The variable nature of our executive compensation program ties significant portions of total compensation to Company and individual performance, through a combination of cash performance incentives and equity compensation. We believe that this performance and equity focus aligns our executive compensation with the performance of individuals and the Company as a whole.

Mr. Shah’s Compensation Mix

As described in more detail below within this discussion of our “Executive Compensation Philosophy and Framework,” Mr. Shah’s compensation mix reflects a unique profile designed to emphasize and reward for exceptional long-term performance. To achieve this objective, Mr. Shah’s compensation as our CEO was delivered almost entirely in the form of equity awards, including stock options, time-based and performance-based restricted share units and restricted share awards. In fiscal 2020, Mr. Shah received additional equity awards in the form of both time-based restricted share awards (RSAs) and performance-based RSAs (PSAs) for which vesting was contingent upon achievement of pre-specified goals approved by the Compensation Committee and the Board. Mr. Shah also received a nominal base salary and was not eligible for cash incentives. He also received health and welfare, retirement, and severance benefits, on substantially similar terms and conditions as provided to most of our U.S. employees.

On August 28, 2020, Mr. Shah resigned as our President and CEO in transition to his current role as Executive Chairman of our Board of Directors. In connection with this transition, the Compensation Committee approved modifications to certain of Mr. Shah’s outstanding stock option awards to permit them to remain outstanding and eligible to vest during Mr. Shah’s continued service on the Board and, in the case of the market-based options, subject to achievement of the applicable market performance criteria. More information is provided under Equity Compensation—Modification of Outstanding CEO Stock Option, below.

Mr. Adams’ Compensation Mix

Upon joining the Company on August 31, 2020 after the start of fiscal 2021, Mr. Adams received a sign-on bonus of $200,000, an annual base salary of $750,000 and will participate in the Company’s cash incentive program with a bonus target of 100% of his base salary. The portion of Mr. Adams bonus for the first semi-annual period of fiscal 2021 will be no less than $175,000. Mr. Adams was also granted 225,000 time-based restricted share awards (RSAs), 125,000 performance or market-based RSAs (PSAs) contingent on the value of a share of the Company equaling or exceeding for at least sixty consecutive trading days, $37.80 (which was based

 

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on being 150% of the trading price on Mr. Adams’ start date), 125,000 market-based PSAs contingent on the value of a share of the Company equaling or exceeding for at least sixty consecutive trading days, $50.40 (which was based on being 200% of the trading price on Mr. Adams’ start date), and 250,000 time-based options with an exercise price set at the close of trading on the day prior to grant, or $26.99. All of the aforesaid equity awards vest over four years subject to continued service as the Company’s CEO on the applicable vesting dates, and, with respect to the PSAs, conditioned on meeting the price appreciation targets for at least sixty consecutive trading days at any time during the one-year period immediately preceding the applicable vesting date. Mr. Adams also receives health and welfare, retirement, disability, life insurance and severance benefits, on substantially similar terms and conditions as provided to other top executives of the Company.

Target Positioning

We do not set compensation based on specific competitive levels, but as discussed earlier, our base salaries have generally fallen at the lower half of the competitive range, while our cash and equity incentives have combined to create a total compensation package that is competitive. Actual pay to Named Executive Officers is determined using the following factors, the first three of which are weighed more heavily:

 

   

Company and individual performance

 

   

Scope of the individual’s role

 

   

Experience

 

   

Qualifications

 

   

Competitive compensation data from our peer group and other comparably sized companies

Comparative Framework

In order to assess the competitiveness and the levels of our executive compensation program, the Compensation Committee, with the assistance of the Company’s independent compensation consultant Compensia, each year develops and/or evaluates a peer group intended to represent companies with technology product manufacturing operations and a similar financial profile to SMART. The peer group for fiscal 2020 was selected using the following criteria:

 

   

Publicly traded, U.S. headquartered companies

 

   

Comparable semiconductor, semiconductor equipment, communications equipment and electronic manufacturing services companies

 

   

Market capitalization generally targeted between $250 million and $2 billion

 

   

Revenue for the most recent four quarters was generally targeted between $450 million and $1.5 billion

For fiscal 2020, taking into consideration the above criteria, the Compensation Committee approved the following companies for peer group comparisons:

 

Alpha & Omega Semiconductor    Extreme Networks    OSI Systems
Cohu    FormFactor    Photronics
CTS    Ichor Holdings    SunPower
Diodes    Infinera    Synaptics
Electronics for Imaging    Methode Electronics    Ultra Clean Holdings

Individual Performance Reviews

As part of its review of executive compensation, the Compensation Committee reviews how each Named Executive Officer, other than the CEO, performs in the following categories:

 

   

Strategic Capability: How well does the executive identify and develop relevant business strategies and plans and accomplish objectives?

 

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Execution: How well did the executive execute strategies and plans?

 

   

Leadership: How well does the executive lead and develop the organization and its people?

Although we did not establish specific individual goals for Named Executive Officers or have a quantitative methodology for applying the individual performance review results to the individual compensation amounts during fiscal 2020, the Compensation Committee does consider this review of each Named Executive Officer as important. As such, this subjective review is included as part of its overall executive compensation program.

At least twice per year (prior to awarding bonuses), the CEO assesses each Named Executive Officer’s performance during the applicable semi-annual period, taking into account accomplishments, areas of strength and opportunities for development. The CEO bases his evaluation on his knowledge of each Named Executive Officer’s performance and the individual’s self-assessment. Recommendations for semi-annual payments under the Company’s cash incentive plan are guided by the CEO’s assessment of the individual’s accomplishments during the applicable period in relation to the criteria listed above, coupled with the Company’s overall performance. The CEO presents his assessment of each Named Executive Officer’s performance to the Compensation Committee. Named Executive Officers do not propose or seek approval of their own compensation or participate in the discussion of their performance with the Compensation Committee. The CEO submits these recommendations to the Compensation Committee and the Compensation Committee has final approval authority, but also can recommend any changes to compensation of the Named Executive Officers to the Board for approval.

The CEO’s annual performance review has been conducted by the Compensation Committee and by all of the independent directors of our Board acting as a committee. For the CEO’s review, input is received from the independent directors as well as the Company’s senior management. The independent directors meet as a group in an executive session to prepare the review, which is then presented to the CEO. This evaluation, which is also based on the categories above, takes into account several factors. The independent directors first consider overall Company actual performance relative to targeted Company performance for the fiscal year. They also consider the CEO’s individual contributions to Company performance, including his leadership and stewardship in the attainment of the Company’s actual performance. They then consider these evaluations in conjunction with the input received from the other directors and executive management to come up with an overall evaluation of the CEO’s performance. The independent directors consider whether any changes to the CEO’s compensation are warranted in light of this review, and recommend any such changes to the Board for its final approval.

As described further below, our former CEO, Mr. Shah, did not participate in our cash incentive program and received only a nominal salary. As a result, the evaluation of Mr. Shah’s performance by the independent directors of our Board was used mainly to determine the level of equity grants, satisfaction of performance conditions contained in his PSUs and modifications and acceleration of certain of his equity awards.

Evaluation of Executive Officer Compensation

Elements of Executive Compensation

In fiscal 2020, our executive compensation program was composed of four primary elements:

 

   

Base salary

 

   

Semi-annual cash incentives

 

   

Long-term equity incentives, which in fiscal 2020 included stock options, RSUs, RSAs, PSAs and PSUs

 

   

Health and welfare benefits and limited personal benefits, including severance

As described herein, the executive compensation program for Mr. Shah included only a minimum required base salary and did not include cash incentives.

 

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What Each Compensation Element Is Designed to Reward and How It Relates to Our Objectives

Each element of our compensation program is designed to reward different results as shown below.

 

Compensation Element

  

Designed to Reward

  

Relationship to Compensation
Objectives

Base Salary    Experience, knowledge of SMART and the industry, dedication to assigned job, and performance by the executive on behalf of SMART.    Provide a baseline of pay to attract and retain talented executives.
Variable Pay (Cash Incentives)    Success in financial and operational goals. Individual performance. Improvement in specific strategic and operating objectives.    Motivate and reward executives to achieve annual business objectives. Provide competitive pay to attract and retain talented executives.
Long-Term Equity Incentives    Increases in shareholder value.    Align the executives’ interests with long-term shareholder interests. Provide competitive pay to attract and retain talented executives.
Severance Arrangements    Initial and continued employment by the executives, including through any transitions relating to a change of control.    Align the executives’ interests with long-term shareholder interests. Provide competitive assurances to attract and retain talented executives, including through any change of control transitions.
Benefits and Other Perquisites    Initial and continued employment by the executives.    Provide modest benefits to improve quality of life and reduce distractions from work.

Base Salary

Generally, the Compensation Committee reviews the base salaries of our executives, including the Named Executive Officers, as part of its annual review of our executive compensation program. Historically, our practice had been to hold executive salaries low relative to comparably sized companies. Mr. Shah received the minimum salary allowing him to be exempt as an executive from overtime pay requirements under California law (currently approximately $55,016 per year).

Other than for Mr. Shah, the base salaries of individual Named Executive Officers are determined using the following factors:

 

   

Company and individual performance

 

   

Scope of the individual’s role

 

   

Experience

 

   

Qualifications

 

   

Competitive compensation data from our peer group and other comparably sized companies

 

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Cash Incentives

SMART’s Named Executive Officers, other than Mr. Shah, are eligible to participate in our cash incentive program, or bonus plan, which is designed primarily to reward overall Company performance, but also to encourage individual performance and individual contribution to overall Company performance. For fiscal 2020, performance was measured on two semi-annual periods. Performance targets for each period related to our annual operating plan, or AOP. Our operating plan for each fiscal year is approved by the Board of Directors before the beginning of the year or as soon as practicable thereafter and establishes the Company’s budgets and performance goals for the year. Under our cash incentive plan, a cash incentive pool is funded for each performance period based on Company performance relative to the Board-approved operating plan for the applicable period.

The funding level for the cash incentive plan pool for fiscal 2020 was determined 80% in connection with achievement of Non-GAAP Operating Income targets and 20% in connection with achievement of net revenue targets. The cash incentives for fiscal 2020 for the Named Executive Officers other than Mr. Shah were determined 80% in connection with achievement of Non-GAAP Operating Income targets and 20% in connection with achievement of net revenue targets.

The Board believes that certain Non-GAAP measures are better and more reliable indicators of actual Company performance than the comparable GAAP measures because they are useful in assessing our core operating performance and in evaluating and comparing our results of operations on a consistent basis from period to period. For purposes of determining cash incentive targets and attainment, and as used in this document, “Non-GAAP Operating Income” is defined as GAAP income from operations excluding stock-based compensation expense, amortization expense, acquisition-related expenses, integration and restructuring expenses and other infrequent or unusual items.

In order to provide an incentive to reward over-achievement and long-term positive performance, the bonus pool funding and resulting payout for cash incentives accelerates upward if achievement is above 100%, and accelerates downward if achievement is below 100%. In fiscal 2020, no bonus pool would have been funded unless the Company achieved more than 50% of the weighted financial targets. For achievement above this threshold level of performance, the cash incentive pool would have been funded, increasing on a sliding scale from 0% funding for performance at 50% of target, to 100% of the targeted funding amount for achievement at 100% of the performance target, to a maximum of 175% of the targeted funding amount for performance at or above 150% of the performance target.

We set the target performance levels for Non-GAAP Operating Income at $40.6 million and $69.1 million for the first and second semi-annual periods of fiscal 2020, respectively, and set the target performance levels for net revenue at $535.6 million and $664.4 million for the first and second semi-annual periods of fiscal 2020, respectively.

During the first half of fiscal 2020, the Company achieved $35.5 million of Non-GAAP Operating Income, which was 87% of the target. With 80% of the attainment weighted on Non-GAAP Operating Income, this resulted in 70% attainment of the target. During the first half of fiscal 2020, the Company also achieved $544.1 million of net revenue, which was 102% of the target. With 20% of the attainment weighted on net revenue, this resulted in an additional 20% attainment for a total weighted attainment of 90%. As a result of attaining under 100% of the weighted target, the accelerator decreased the total cash incentive payout to 80% of the targeted payout.

During the second half of fiscal 2020, the Company achieved $48.7 million of Non-GAAP Operating Income, which was 71% of the target. With 80% of the attainment weighted on Non-GAAP Operating Income, this resulted in 57% attainment of the target. During the second half of fiscal 2020, the Company also achieved $578.3 million of net revenue, which was 87% of the target. With 20% of the attainment weighted on net

 

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revenue, this resulted in an additional 17% attainment for a total weighted attainment of 74%. As a result of attaining under 100% of the weighted target, the accelerator decreased the total cash incentive payout to 48% of the targeted payout.

The individual target cash incentive for each performance period of fiscal 2020 as a percentage of unadjusted base salary was 85% for Mr. Pacheco, and 65% for Messrs. Kim, Marten and Goldberg.

As the number of employees eligible to participate in the bonus payout and the mix of actual bonus target rates and dollar amounts at the time the actual bonus calculations are made always differs from such amounts that were assumed prior to the beginning of the fiscal year when the overall bonus pool amount was approved by the Board, any amounts for which funding was received that exceeds the aggregation of all of the employees individual bonus percentages is distributed over all of the employees eligible for a bonus pro rata based on employee salary levels. In addition, when certain business units or departments achieve a lower percentage of their targets than the Company as a whole, the unfunded portions of the pool for those business units or departments are distributed to all of the business units or departments on a weighted basis related to each business unit or department’s particular attainment percentage.

As a result of the actual Company performance as set forth above, the individual cash incentive payouts as a percentage of the individual target cash incentives were 80% and 48% for Mr. Pacheco, 151% and 143% for Mr. Kim, 59% and 50% for Mr. Marten, and 80% and 48% for Mr. Goldberg for the first semi-annual and second semi-annual periods, respectively. Each participating employee was required to be actively employed on the date the cash incentive was paid in order to earn the applicable semi-annual or year-end cash incentive.

The table below shows the reconciliation from GAAP to the non-GAAP measures for relevant periods in fiscal 2020 as used to determine the cash incentive attainments for our Named Executive Officers.

SMART Global Holdings, Inc. and Subsidiaries

Reconciliation of Non-GAAP Operating Income to GAAP Operating Income

(In thousands)

 

     Fiscal Year Ended August 28, 2020  
     First Half
2020
     Second Half
2020
     Total
Fiscal 2020
 

GAAP Operating Income

   $ 14,036      $ 27,294      $ 41,330  

Share-based compensation expense

     10,603        8,113        18,716  

Amortization of intangible assets

     6,826        6,828        13,654  

Acquisition-related expenses

     946        —          946  

Integration/Restructuring expenses

     3,092        5,980        9,072  

COVID-19 expenses

     —          510        510  
  

 

 

    

 

 

    

 

 

 

Non-GAAP Operating Income

   $ 35,503      $ 48,725      $ 84,228  
  

 

 

    

 

 

    

 

 

 

Equity Compensation

In fiscal 2020, we granted time-based stock options and RSUs to each of our then Named Executive Officers other than Mr. Shah, who received only the RSAs and PSAs discussed below.

The stock options have exercise prices equal to the closing price of our stock on the date of grant; therefore, the options will only have value if our stock price increases over time from the grant date to the date they become exercisable. New hire stock option grants generally vest 50% on the second anniversary of the date of grant and 1/48 of the original grant amount per month thereafter until fully vested. Annual stock option grants generally vest 25% on the first anniversary of the date of grant, and 1/48 of the original grant amount per month thereafter

 

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until fully vested. These vesting schedules are intended to increase the retention value of the option grants. New hire RSU grants generally vest 50% on the second anniversary of the date of grant and either 1/16 each quarter or 1/8 on a semi-annual basis thereafter until fully vested. Annual RSU grants generally vest 25% on the first anniversary of the date of grant, and either 1/16 each quarter or 1/8 on a semi-annual basis thereafter until fully vested.

We believe that equity awards provide long-term incentives that will aid in retaining executive talent by providing opportunities to be compensated commensurate with SMART’s performance and rewarding executives for creating shareholder value. In determining individual equity awards, we consider many factors, the first two of which are the most important:

 

   

Organizational criticality of the individual’s role

 

   

Individual performance

 

   

Company performance

 

   

Competitive market practices

 

   

Unvested equity position

Equity awards granted in fiscal 2020 to our Named Executive Officers included option awards and RSUs for Messrs. Pacheco, Kim, Marten and Goldberg. Together with PSUs granted to Messrs. Pacheco, Kim and Marten in fiscal 2021 and described in the paragraph below, these awards were granted as part of a company-wide grant to balance retention incentives for all executives and top management. The magnitude of equity awarded to our Named Executive Officers is generally a function of an evaluation of the factors listed above. In fiscal 2020, annual equity awards for our Named Executive Officers, other than Mr. Shah, were reviewed and approved by our Compensation Committee in March 2020, our third fiscal quarter.

In March 2020 the Board also determined that grants of PSUs would be made to Messrs. Pacheco, Kim and Marten, with a twelve-month performance period and performance criteria to be determined by Mr. Shah subject to approval by the Compensation Committee, subject to vesting over a three year period running from the date of grant. These grants were approved in October 2020 upon completion of the AOP targets for fiscal 2021 which occurred after the close of our fiscal year 2020, with the grants being subject to satisfaction of the 2021 AOP targets.

In May 2020, Mr. Shah was granted restricted share awards (RSAs) relating to ordinary shares of SMART. As further detailed below, these RSAs included:

 

   

180,000 time-based RSAs subject only to Mr. Shah’s continued service to the Company, vesting over three years with 60,000 shares scheduled to vest on April 20, 2021 and the remainder vesting 30,000 shares every six months thereafter;

 

   

90,000 performance-based RSAs (PSAs) subject to Mr. Shah’s continued service to the Company, vesting over three years with 34% of the shares for which performance conditions are satisfied (Qualified Shares) scheduled to vest on April 20, 2021 and the remainder of the Qualified shares scheduled to vest 16.5% every six months thereafter on each October 20 and April 20, subject to the satisfaction of the following performance conditions as of the end of fiscal 2020:

 

   

30,000 shares for satisfaction of COVID health and safety performance;

 

   

30,000 shares for satisfaction of succession planning objectives; and

 

   

30,000 shares for satisfaction of positive cash flow requirements.

Stock options, RSUs, PSUs, RSAs and PSAs granted to Named Executive Officers in fiscal 2020 are listed in the “Grants of Plan-Based Awards table.

 

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Modification of Outstanding CEO Stock Options

When Mr. Shah became our Co-CEO in March 2018, in addition to other grants that were cancelled in fiscal 2019, Mr. Shah was granted 450,000 time-based stock options and 225,000 market-based stock options to purchase ordinary shares of SMART each with an exercise price of $39.82 per share (the closing trading price of a share of SMART on the date of grant). The market-based options will vest only if (i) the 30-trading-day rolling average closing price of a share of the Company equals or exceeds 150% of the per share exercise price of the market-based option. Of the 450,000 time-based options, 225,000 were vested as of August 2020 and vesting of the remaining 225,000 time-based options and vesting of all 225,000 market-based options were subject to Mr. Shah’s continued service as CEO or Co-CEO. In August 2020, our Compensation Committee modified both of these option grants to remove the requirement of being CEO or Co-CEO in order for the awards to continue vesting subject to continued service on our Board of Directors.

Actions with Respect to Equity Awards after Fiscal 2020

In September 2020 the Compensation Committee convened a meeting in order to assess whether and to what extent the performance conditions in the 90,000 PSAs granted to Mr. Shah in May 2020 were achieved. The Compensation Committee determined that the achievement was 100% for all three conditions –COVID health and safety performance, succession planning objectives and positive cash flow requirements. Accordingly, the Committee recommended to the Board that 100% of these objectives were achieved. Upon the recommendation of the Compensation Committee, the Board certified 100% achievement of these objectives and determined that the performance conditions were satisfied in full with respect to all 90,000 PSAs. Upon this certification, all shares covered by these PSAs continued as restricted shares subject only to service-based vesting over three years with 34% of the 90,000 shares scheduled to vest on April 20, 2021 and the remainder scheduled to vest 16.5% every six months thereafter on each October 20 and April 20.

In October 2020, after Mr. Shah had assisted in recruiting a successor CEO and in recognition of Mr. Shah’s outstanding service to the Company during his tenure as President and CEO, the Board, excluding Mr. Shah, determined to accelerate and fully vest, free of restrictions, all of the 180,000 time-based RSAs and all of the 90,000 PSAs granted to Mr. Shah in May 2020.

Benefits and Perquisites

Executive officers are eligible to participate in all of our employee benefit plans, such as medical, dental, vision, group life, disability, and accidental death and dismemberment insurance and our 401(k) plan on substantially the same basis as other employees, except that the Named Executive Officers do not participate in our employee stock purchase plan. We also provide paid holidays to most of our employees, and all of our executive officers, that are generally comparable to those provided at peer companies. For our Named Executive Officers we provide limited additional benefits that include higher life insurance coverage, higher disability insurance coverage, annual physical exams and reimbursement for financial counseling services.

Executive Life Insurance Benefits

We provide each of our Named Executive Officers with enhanced life insurance coverage. For Messrs. Shah, Pacheco, Kim and Marten, this coverage is for seven times annual base salary. For Mr. Goldberg this coverage is for six times annual base salary. In each case, the benefit is capped at $2,000,000.

Executive Disability Benefits

We provide each of our Named Executive Officers with enhanced disability benefits, including short-term benefits of 80-100% of weekly pay, up to $6,000 a week, for up to 52 weeks; and long-term benefits of up to $17,000 a month until age 65 with an extension of 24 months if disability commences after age 65.

 

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Post-Employment Benefits

We have entered into agreements to provide severance benefits to certain of the Named Executive Officers in the event of a termination without cause or a resignation for good reason, separate from or in connection with a change of control. The Compensation Committee believes that these arrangements help sustain the Named Executive Officers’ continued attention and dedication to each of their respective assigned duties, and thus enables each to focus on the best interests of our shareholders. For additional information about these arrangements with each of the Named Executive Officers, refer to the disclosure under “Employment and Severance Agreements; Potential Payments upon Termination or Change of Control, below.

Clawback Policy

We maintain a clawback policy that allows our Board of Directors to seek recovery of certain excess incentive compensation paid to our executive officers, including our Named Executive Officers, in the event of a restatement of our financials. This policy also allows our Board of Directors to recover certain incentive compensation from an individual Named Executive Officer in the event of that executive’s misconduct that has caused, or could cause, financial or reputational harm to the Company.

Consideration of Shareholder Advisory Vote on Executive Compensation

As we were an emerging growth company under the JOBS Act at the beginning of our fiscal year 2018 and made our initial public offering in May 2017, we were not required to hold a non-binding advisory shareholder vote to approve compensation provided to our Named Executive Officers (“say on pay”) until our 2020 Annual Meeting of Shareholders which was held in February 2020. At the 2020 Annual Meeting of Shareholders 98.76% of the shares voted on this proposal, voted for approval of the compensation provided to our Named Executive Officers in fiscal 2019 as disclosed in the proxy solicitation for that meeting. Although this advisory vote is not binding on our Compensation Committee, the Committee considers this result to be an endorsement of the Company’s executive compensation programs and policies, and takes into account that support in reviewing those programs and policies.

Tax Considerations

Section 162(m) of the Internal Revenue Code of 1986 (as amended, the Code) establishes a limitation on the deductibility of compensation payable in any particular tax year to certain executive officers. Section 162(m) generally provides that publicly held companies cannot deduct compensation paid to such executive officers to the extent that such compensation exceeds $1 million per officer.

Prior to the enactment of the Tax Cuts and Jobs Act in December 2017, Section 162(m) provided an exemption from this deduction limitation for compensation that qualified as “performance-based compensation”; however, the exemption for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017, subject to transition relief for certain arrangements in place as of November 2, 2017. Given the uncertain scope of the transition relief and the absence of any rulemaking at this time, the full impact of the new Section 162(m) on the Company and its executive compensation practices is not yet known, but we will continue to monitor developments in this regard.

Corporations that have recently become publicly held are generally permitted a transition period before the deduction limit of Section 162(m) becomes applicable to compensation paid in accordance with plans and arrangements that were in effect at the time of their initial public offering, subject to certain exceptions. This transition period may extend until our 2021 Annual Meeting, unless it is terminated earlier under Treasury regulations issued under Section 162(m) or as a result of the amendments to Section 162(m) under the Tax Cuts and Jobs Act of 2017, effective for taxable years beginning after December 31, 2017.

While the Compensation Committee attempts to maximize the deductibility of compensation paid to our Named Executive Officers, the Committee retains the discretion and flexibility necessary to provide total

 

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compensation in line with competitive practice, our compensation philosophy and the interests of our shareholders. Accordingly, from time to time, the Compensation Committee may approve, and our Company may pay, compensation to our Named Executive Officers that is not fully deductible under Section 162(m).

Summary Compensation Table

The following table sets forth information concerning the compensation paid to each of our Named Executive Officers for fiscal 2020, and, for the individuals who were also Named Executive Officers for the respective fiscal year, for fiscal 2019 and 2018.

 

Name and Principal Position

  Year
(1)
    Salary ($)     Bonus
($) (2)
    Share
Awards
($) (3)
    Option
Awards ($)
(3) (4) (5)
    Non-Equity
Incentive Plan
Compensation
($) (6)
    All Other
Compensation
($) (7)
    Total ($)  

Ajay Shah

    2020       51,749       —         6,725,700       —         —         2,175       6,779,624  

President and Chief Executive Officer

    2019       48,485       —         6,101,480       —         —         1,939       6,151,904  
    2018       23,665       —         —         16,078,883       —         385       16,102,933  

Jack Pacheco

    2020       425,000       —         441,360       585,408       215,264       14,387       1,681,419  

Executive Vice President, Chief Financial Officer and Chief Operating Officer

    2019       425,000       —         —         673,715       231,517       14,821       1,345,053  
    2018       416,346       —         726,000       —         811,364       14,476       1,968,186  
               

KiWan Kim

    2020       320,000       —         331,020       409,786       364,000       13,582       1,438,388  

Executive Vice President, President Emerging Markets

    2019       318,385       —         —         481,225       123,434       15,079       938,123  
    2018       300,000       195,000       —         792,712       494,780       15,405       1,797,897  

Alan Marten

    2020       320,000       —         331,020       409,786       111,213       10,768       1,182,787  

Senior Vice President, Specialty Memory

    2019       318,385       —         —         481,225       191,792       11,200       1,002,602  
    2018       300,000       —         439,400       —         343,912       11,000       1,094,912  

Bruce Goldberg

    2020       285,000       —         331,020       292,704       110,388       15,435       1,034,547  

Chief Legal Officer and
Chief Compliance Officer

               

 

(1)

Information is included for each of our Named Executive Officers for fiscal 2020, and for the previous two fiscal years if disclosure was previously made for that officer as a Named Executive Officer for the fiscal year in question.

(2)

The amount for Mr. Kim for fiscal 2018 represents a bonus paid to Mr. Kim for fiscal 2018 under a special bonus program for officers and key employees of SMART Brazil.

(3)

Each amount represents the grant date fair value of the option awards, RSUs or PSUs granted during the applicable fiscal year, as calculated in accordance with ASC Topic 718. The time-based stock options and RSUs are valued using the fair value method, and the market-based stock options are valued using a Monte Carlo valuation model. See Note 9(a) to the consolidated financial statements included in our Form 10-K for the fiscal year ended August 28, 2020 for the assumptions used in calculating this amount. For Mr. Shah, the figure for 2019 includes the grant date fair value of 150,000 PSUs that were granted in fiscal 2019 but were canceled in fiscal 2020 as the performance conditions were not achieved.

(4)

The figure shown for Mr. Shah for fiscal 2018 includes the value of two market-based option awards granted in fiscal 2018. For accounting purposes, these market-based awards (which are subject to vesting only if the per share price of our ordinary shares increases to 150% of the exercise price for one of the awards, and to 200% of the exercise price for the other award) were considered subject to a market condition. As required by SEC regulations, the included amounts for these two awards represent the value of these awards at the grant date based upon the probable outcome of the applicable market conditions, consistent with the estimate of aggregate compensation cost to be recognized over the service period. Assuming that no market condition applied to these awards, the total grant date fair value of Mr. Shah’s option awards for fiscal 2018 would have been $16,163,640. In November 2019, our Board of Directors terminated the market-based option that was subject to vesting only if the per share price of our ordinary shares increases to 200% of the exercise price; absent this award, the figure shown for Mr. Shah for fiscal 2018 would have been $11,860,695, and the total grant date fair value for awards made in fiscal 2018 assuming no market condition applied would have been $12,122,730.

(5)

Effective August 28, 2020, our Compensation Committee modified options held by Mr. Shah to acquire 675,000 ordinary shares of SMART at an exercise price of $39.82 per share (the closing trading price of SMART shares on the date of grant) to remove a requirement of Mr. Shah’s continued service as CEO or Co-CEO and allow for continued vesting in Mr. Shah’s service on our Board of Directors. These included a time-based option to acquire 450,000 ordinary

 

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  shares, of which half remained unvested at the time of this modification, and a market-based option to acquire 225,000 ordinary shares that remains subject to an increase in the per share value of our ordinary shares (as measured by the 30-trading-day rolling average closing price of an ordinary share) at any time during the four-year period following the 2018 grant date, to 150% or more of the exercise price. The incremental fair value of these awards as modified as of August 28, 2020 was $0, and accordingly no amount is included in this column for fiscal 2020 for Mr. Shah.
(6)

See the “Annual Cash Incentive” section below for a description of these amounts and “Compensation Disclosure and Analysis – Cash Incentives” above for an explanation of the calculations.

(7)

Amounts in this column for 2020 include a matching contribution under our 401(k) plan of $2,078, $11,263, $10,555, $10,588 and $11,200 for Messrs. Shah, Pacheco, Kim, Marten and Goldberg, respectively, and miscellaneous amounts for executive physical examinations, financial advice and gymnasium memberships.

For fiscal 2020, aggregate cash compensation paid to our Named Executive Officers as a percentage of each individual’s total compensation represented less than 1% for Mr. Shah, consistent with the emphasis on equity awards in his compensation package as discussed under “Executive Compensation Philosophy and Framework” above; approximately 38% for Mr. Pacheco, 48% for Mr. Kim, 36% for Mr. Marten and 39% for Mr Goldberg.

Grants of Plan-Based Awards – Fiscal 2020

The following table provides information on non-equity incentive awards for fiscal 2020, and RSU, PSU, RSA, PSA and option awards granted in fiscal 2020, for each of our Named Executive Officers. There can be no assurance that the grant date fair value for any RSU, PSU, RSA, PSA or option award, as listed in this table, will ever be realized. The grant date fair value amounts reported here are also included in the “Stock Awards” and “Option Awards” columns of the Summary Compensation Table.

 

           Estimated Future
Payouts under Non-
Equity Incentive
Plan Awards
     Estimated
Future
Payouts
under
Equity
Incentive
Plan
Awards

Target
(# of
shares)(1)
     All
Other
Stock
Awards:
Number
of

Shares
of Stock
or Units
(#)(1)
     All Other
Option
Awards:
Number of
Securities
Underlying
Options
(1)
     Exercise
or Base
Price of
Option
Awards
($/Sh)
     Grant
Date Fair
Value of
Stock and
Option
Awards
($)(2)
 

Name

   Grant Date     Threshold
($)
     Target
($)
 

Ajay Shah

     5/17/2020(3     —          —          —          180,000        —          —          4,483,800  
     5/17/2020(4     —          —          90,000        —          —          —          2,241,900  

Jack Pacheco

                 (5     180,625        361,250        —          —          —          —          —    
     3/12/2020(6     —          —          —          24,000        —          —          441,360  
     3/12/2020(7     —          —          —          —          60,000        18.39        585,408  

KiWan Kim

                 (5     104,000        208,000        —          —          —          —          —    
     3/12/2020(6     —          —          —          18,000        —          —          331,020  
     3/12/2020(7     —          —          —          —          42,000        18.39        409,786  

Alan Marten

                 (5     104,000        208,000        —          —          —          —          —    
     3/12/2020(6     —          —          —          18,000        —          —          331,020  
     3/12/2020(7     —          —          —          —          42,000        18.39        409,786  

Bruce Goldberg

                 (5     92,625        185,250        —          —          —          —          —    
     3/12/2020(6     —          —          —          18,000        —          —          331,020  
     3/12/2020(7     —          —          —          —          30,000        18.39        292,704  

 

(1)

Each equity award included here was granted under the Plan.

(2)

Amounts in this column represent the grant date fair value of each option award and each RSU award, as calculated in accordance with ASC Topic 718. The time-based stock options and RSUs and the PSUs are valued using the fair value method, and the market-based stock options are valued using a Monte Carlo valuation model. See Note 9(a) to the consolidated financial statements included in our Form 10-K for the fiscal year ended August 28, 2020 for the assumptions used in calculating these amounts.

 

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(3)

Represents a grant of restricted ordinary shares with restrictions lapsing and shares vesting over a period of approximately three years, subject to continued service through each vesting date, with (x) 60,000 shares vesting on April 20, 2021 and (y) the remainder vesting in equal semi-annual installments of 30,000 shares on each of April 20 and October 20 of each year through the final vesting date. In October 2020, after Mr. Shah had assisted in recruiting a successor CEO and in recognition of Mr. Shah’s outstanding service to the Company during his tenure as President and CEO, the Board, excluding Mr. Shah, determined to accelerate and fully vest, free of restrictions, all of these 180,000 time-based RSAs.

(4)

Represents a grant of ordinary shares with restrictions lapsing and shares vesting over a period of approximately 3 years, subject to satisfaction of designated performance goals and continued service through each vesting date, with 34% of the shares vesting on April 20, 2021 and the remaining portion vesting thereafter in equal installments on October 20, 2021, April 20, 2022, October 20, 2022 and April 20, 2023. The performance goals for this award include goals relating to COVID health and safety performance as to 1/3 of the award, goals relating to succession planning objectives as to 1/3 of the award, and goals relating to positive cash flow requirements as to the remaining 1/3 of the award. In September 2020 upon the recommendation of the Compensation Committee, the Board certified 100% achievement and determined that the performance conditions were satisfied with respect to all 90,000 PSAs. In October 2020, after Mr. Shah had assisted in recruiting a successor CEO and in recognition of Mr. Shah’s outstanding service to the Company during his tenure as President and CEO, the Board, excluding Mr. Shah, determined to accelerate and fully vest, free of restrictions, all of the 90,000 PSAs.

(5)

Represents an opportunity to earn semiannual cash incentive awards, based on our attainment of pre-established goals with respect to Non-GAAP Operating Income and net revenue as described in detail under “Compensation Disclosure and Analysis – Cash Incentives” above.

(6)

Represents a grant of RSUs vesting over a period of approximately three years, subject to continued service through each vesting date, with (x) 33% vesting on April 20, 2021 and (y) the remainder vesting in equal semi-annual installments (1/6th of the original award) on each of April 20 and October 20 of each year through the final vesting date.

(7)

Represents an option to purchase our ordinary shares that is scheduled to vest and become exercisable, subject to continued service on each vesting date, as to 25% of the award on March 12, 2021, with the remaining shares vesting in equal amounts of 1/48th of the original grant amount per month thereafter through March 12, 2024.

Employment and Severance Agreements; Potential Payments upon Termination or Change of Control

We have entered into agreements with our Named Executive Officers, pursuant to which such officers will be eligible for severance and/or change of control benefits under specified conditions. The following summarizes the severance and change of control benefits under these agreements:

Ajay Shah

In March 2018, we entered into an agreement with Mr. Shah regarding an offer of employment as our Chief Executive Officer, following a transition period in which Mr. Shah served as our Executive Chairman and Co-Chief Executive Officer. Under the terms of his offer letter, Mr. Shah was awarded three option grants at the time he became Co-Chief Executive Officer. These include:

 

   

A “Time Based Option” to acquire up to 450,000 of our ordinary shares, with an exercise price of $39.82 per share. This award is scheduled to vest in four equal tranches of 25% upon each annual anniversary of the March 14, 2018 grant date, subject to Mr. Shah’s continued employment as CEO through and including the applicable anniversary of this grant date. In August 2020 in connection with the Company appointing a successor CEO, this Time Based Option was modified to eliminate the requirement of employment as CEO and to allow for vesting based on continued service on our Board of Directors.

 

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A “150% Performance Option” to acquire up to 225,000 of our ordinary shares, with an exercise price of $39.82 per share. This award is scheduled to vest in four equal tranches of 25% each upon each annual anniversary of the Grant Date. The shares scheduled to vest upon a given vesting date will vest only if (i) the 30-trading-day rolling average closing price of a share equals or exceeds 150% of the per share exercise price of the 150% Performance Option (such 30-trading-day average, the “150% Price Target”) on or at some time prior to the vesting date or (ii) if the 150% Price Target is satisfied after the given vesting date but within four years of the Grant Date, and Mr. Shah continues to be employed as CEO through the next vesting date to follow satisfaction of that goal. In August 2020 in connection with the Company appointing a successor CEO, this 150% Performance Option was modified to eliminate the requirement of employment as CEO and to allow for vesting based on continued service on our Board of Directors.

 

   

A “200% Performance Option” covering 225,000 of our ordinary shares, with an exercise price of $39.82 per share, scheduled to vest in four equal tranches of 25% each upon each annual anniversary of the Grant Date. The shares scheduled to vest upon a given vesting date will vest only if (i) the 30-trading-day rolling average closing price of a share equals or exceeds 200% of the per share exercise price of the 200% Performance Option (such 30-trading-day average, the “200% Price Target”) on or at some time prior to the vesting date or (ii) if the 150% Price Target is satisfied after the given vesting date but within four years of the Grant Date, and Mr. Shah continues to be employed as CEO through the next vesting date to follow satisfaction of that goal. This option was terminated by the Board of Directors in November 2019 with Mr. Shah’s consent.

The Time Based Option and the 150% Performance Option provided that, in the event of a termination of Mr. Shah’s employment as CEO without Cause or for death or disability or in the event Mr. Shah resigns his employment with Good Reason (as these terms are defined in the option awards), then Mr. Shah will vest in up to an additional 25% of the initial amount of the shares underlying the option, to the extent still outstanding but unvested.

These terms of acceleration would not apply in the event Mr. Shah ceases to be CEO or Co-CEO but continues on as Executive Chairman and remains involved in the day-to-day management of the Company at a level substantially more significant than the Company’s non-employee directors. For each of these options, “in connection with a Change in Control” refers to the period that begins two months before a Change in Control and ends 12 months after a Change in Control.

The following table quantifies the payments and benefits that would have been provided to Mr. Shah under different circumstances in connection with termination of his employment or a change of control, effective as of August 28, 2020, the last day of our most recently completed fiscal year.

 

     Trigger Event  

Name

 

Payment/Benefit Type

   Involuntary
Termination
($)
    Death
($)
    Disability
($)
    Change
of Control
($)
    Involuntary
Termination
after Change
of Control
($)
 

Ajay Shah

  Equity Awards(1)      —         —         —         —         —    
 

Life Insurance Benefit(2)

     —         386,000       —         —         —    
 

Disability Benefit(3)

     —         —         157,922       —         —    

 

(1)

Upon an involuntary termination or termination for death or disability on August 28, 2020, Mr. Shah would have vested in 25% of the Time Based Option, representing options to acquire 112,500 ordinary shares. Upon an involuntary termination after a change of control on August 28, 2020, Mr. Shah would have vested in 100% of the Time Based Option. Pursuant to SEC guidance, the value of these options is disclosed here as $0 because their exercise price of $39.82 is greater than $24.91, the closing price of our ordinary shares on August 28, 2020.

 

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(2)

Represents the life insurance benefit payable to Mr. Shah’s beneficiaries in an amount equal to seven times Mr. Shah’s current salary.

(3)

Represents the present value of a weekly short-term disability benefit for 52 weeks following termination on August 28, 2020, followed by a monthly long-term disability benefit until the month of Mr. Shah’s 65th birthday.

Jack Pacheco

In December 2018, in connection with a promotion, we entered into an amended and restated employment agreement (the Amended Employment Agreement) with Mr. Pacheco that provides for the severance payments and benefits described below. The initial term of Mr. Pacheco’s Amended Employment Agreement is for one year, at which time it automatically renewed for an additional one-year term, and has and will continue to be automatically renewed for successive one-year periods thereafter, unless either party provides written notice of termination no later than 90 days prior to the expiration of the then-current term.

Benefits provided upon involuntary termination. Subject to the execution and non-revocation of a release of claims against us or any of our affiliates within 60 days following termination, if Mr. Pacheco’s employment is terminated by us without cause (as defined in the Amended Employment Agreement), or if Mr. Pacheco terminates employment for good reason (as defined in the Amended Employment Agreement), then in any of these events, we will be obligated to (i) pay an amount equal to 75% of his then-current annual base salary, (ii) pay, to the extent a bonus could be earned for the year, the annual bonus for the then-current fiscal year prorated through the date of termination (based on the Board’s determination of our performance through the date of termination) and (iii) continue to provide for or reimburse health benefit continuation coverage until the earlier of nine months following the date of termination or the date Mr. Pacheco becomes eligible for health benefits with another employer. We are obligated to pay the foregoing benefits in accordance with our regular payroll practices in equal or substantially equal payments over a maximum of 12 months following the execution and non-revocation of Mr. Pacheco’s release of claims against us or any of our affiliates.

Benefits provided upon termination by us without cause, or termination by employee for good reason. Subject to the execution and non-revocation of a release of claims against us or any of our affiliates within 60 days following termination, if Mr. Pacheco’s employment is terminated by us without cause, or if Mr. Pacheco terminates employment for good reason, and such termination or resignation occurs outside of the Change in Control Protection Period (as defined in the Amended Employment Agreement), then we will be obligated to (i) pay an amount equal to 75% of his then-current annual base salary, (ii) pay, to the extent a bonus could be earned for the year, the annual bonus for the then-current fiscal year prorated through the date of termination (based on the Board’s determination of our performance through the date of termination), and (iii) continue to provide for or reimburse health benefit continuation coverage until the earlier of 9 months following the date of termination or the date Mr. Pacheco becomes eligible for health benefits with another employer. We are obligated to pay the foregoing benefits in accordance with our regular payroll practices in equal or substantially equal payments over a maximum of 12 months following the execution and non-revocation of Mr. Pacheco’s release of claims against us or any of our affiliates.

Benefits provided upon termination by us without cause or termination by employee for good reason related to a change of control. Subject to the execution and non-revocation of a release of claims against us or any of our affiliates, if Mr. Pacheco’s employment is terminated within 12 months following a Change in Control (as defined in the Amended Employment Agreement) by Mr. Pacheco for good reason or by us without cause, then in lieu of the basic severance above, we will be obligated to (i) pay an amount equal to 150% of his then-current annual base salary plus 150% of the annual bonus paid or payable for the most recently completed fiscal year (in addition to the annual bonus paid or payable for the most recently completed fiscal year), (ii) pay any annual bonus for the current fiscal year prorated through the date of termination (based on the Board’s determination of our performance through the date of termination), (iii) continue to provide for or reimburse health benefit continuation coverage until the earlier of 18 months following the date of termination or the date Mr. Pacheco

 

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becomes eligible for health benefits with another employer and (iv) accelerate the vesting of 100% of Mr. Pacheco’s unvested and outstanding equity awards. We are obligated to pay the foregoing benefits in accordance with our regular payroll practices in equal or substantially equal payments over a maximum of 12 months following the execution and non-revocation of Mr. Pacheco’s release of claims against us or any of our affiliates.

The following table quantifies the payments and benefits that would have been provided to Mr. Pacheco under different circumstances in connection with termination of his employment or a change of control, effective as of August 28, 2020, the last day of our most recently completed fiscal year.

 

    Trigger Event  

Name

 

Payment/Benefit Type

  Involuntary
Termination
($)
    Death
($)
    Disability
($)
    Change of
Control
($)
    Involuntary
Termination after
Change of Control
($)
 

Jack Pacheco

  Severance(1)     318,750       —         —         —         960,396  
  Prorated Bonus(2)     215,264       —         —         —         215,264  
  Equity Awards(3)     —         —         —         —         1,355,331  
  Continued Health Coverage(4)     19,414       —         —         —         38,804  
  Life Insurance Benefit(5)     —         2,000,000       —         —         —    
  Disability Benefit(6)     —         —         991,328       —         —    

 

(1)

Upon an involuntary termination on August 28, 2020, Mr. Pacheco would have received severance benefits including 75% of his base salary. Upon an involuntary termination after a change of control on August 28, 2020, Mr. Pacheco would have received severance benefits including 150% of his base salary and 150% of the annual bonus paid or payable for the most recently completed fiscal year.

(2)

Upon an involuntary termination or involuntary termination after change of control on August 28, 2020, Mr. Pacheco would have received his bonus for the fiscal year, prorated for his service during that year. These estimates are based on a deemed termination at the end of the fiscal year, so the bonus is not prorated.

(3)

Upon an involuntary termination after a change of control on August 28, 2020, Mr. Pacheco would have vested in 100% of his outstanding unvested equity awards. Pursuant to SEC guidance, the value of any accelerated vesting of Mr. Pacheco’s equity awards has been estimated using a price of $24.91 per share, the closing price of our ordinary shares on August 28, 2020.

(4)

Upon an involuntary termination on August 28, 2020, Mr. Pacheco would have received continued health coverage for up to 9 months following his termination. Upon an involuntary termination after a change of control on August 28, 2020, Mr. Pacheco would have received continued health coverage for up to 18 months following his termination.

(5)

Represents a life insurance benefit payable to Mr. Pacheco’s beneficiaries with a face value of seven times his base salary as in effect on August 28, 2020, with a maximum benefit of $2,000,000.

(6)

Represents the present value of a weekly short-term disability benefit for 52 weeks following termination on August 28, 2020, followed by a monthly long-term disability benefit until the month of Mr. Pacheco’s 65th birthday.

KiWan Kim

We have entered into a severance and change of control agreement with Mr. Kim providing for the severance and change of control benefits set forth below. The initial term of the agreement ended on December 10, 2015, at which time it automatically renewed for an additional one-year term, and has and will continue to be automatically renewed for successive one-year periods thereafter, unless we give written notice of termination at least 30 days prior to the expiration of the then-current term; provided that we may not give such notice if a change of control (as defined in Mr. Kim’s severance and change of control agreement) has occurred prior to such date until at least 12 months following such change of control.

 

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Benefits provided upon termination without cause. Subject to the execution and non-revocation of a release of claims against us or any of our affiliates, if Mr. Kim is terminated by us without cause (as defined in Mr. Kim’s severance and change of control agreement), we will be obligated to (i) pay an amount equal to 75% of his then-existing annual base salary in a lump sum within 60 days following termination, (ii) pay, to the extent a bonus could be earned for the current fiscal year, any annual bonus for the current fiscal year prorated through the date of termination in a lump sum within 60 days following termination and (iii) continue to provide and to pay for health benefit continuation coverage until the earlier of nine months following the date of termination or the date Mr. Kim becomes eligible for health benefits with another employer.

Benefits provided upon a change of control. Upon a change of control, a prorated portion of any options or share-based awards that remain subject to issuance or vesting based on performance shall be issued and/or vested based on performance measured immediately prior to the change of control. The remainder of the options or share-based awards that remain subject to issuance or vesting based on performance shall be issued and/or vested in equal monthly installments over the original performance period, unless the successor to the Company does not assume or substitute such remaining options or share-based awards with a substantially equivalent award, in which case such remaining options or share-based awards shall be issued and/or vested upon the change of control.

Benefits provided upon termination by us without cause or termination by employee for good reason related to a change of control. Subject to the execution and non-revocation of a release of claims against us or any of our affiliates, if within the two months prior to or the 12 months after a change of control Mr. Kim is terminated by us without cause or Mr. Kim resigns for good reason (as defined in Mr. Kim’s severance and change of control agreement), then in lieu of the basic severance above, we will be obligated to (i) pay an amount equal to 150% of his then-current annual base salary plus 150% of the annual bonus paid or payable for the most recently completed fiscal year (in addition to the annual bonus paid or payable for the most recently completed fiscal year) in a lump sum within 60 days following termination, (ii) pay, to the extent a bonus could be earned for the current fiscal year, any annual bonus for the current fiscal year prorated through the date of termination in a lump sum within 60 days following termination, (iii) continue to provide for or reimburse health benefit continuation coverage until the earlier of 18 months following the date of termination or the date Mr. Kim becomes eligible for health benefits with another employer and (iv) accelerate the vesting of 100% of Mr. Kim’s unvested and outstanding options or share-based awards.

The following table quantifies the payments and benefits that would have been provided to Mr. Kim under different circumstances in connection with termination of his employment or a change of control, effective as of August 28, 2020, the last day of our most recently completed fiscal year.

 

         Trigger Event  

Name

   Payment/Benefit Type   Involuntary
Termination
($)
    Death ($)     Disability
($)
    Change of
Control
($)
    Involuntary
Termination after
Change of Control
($)
 

KiWan Kim

   Severance(1)     240,000       —         —         —         1,026,000  
   Prorated Bonus(2)     364,000       —         —         —         364,000  
   Equity Awards(3)     —         —         —         —         823,722  
   Continued Health Coverage(4)     12,363       —         —         —         24,711  
   Life Insurance Benefit(5)     —         2,000,000       —         —         —    
   Disability Benefit(6)     —         —         1,493,194       —         —    

 

(1)

Upon an involuntary termination on August 28, 2020, Mr. Kim would have received severance benefits including 75% of his base salary. Upon an involuntary termination after a change of control on August 28, 2020, Mr. Kim would have received severance benefits including (a) 150% of his base salary and (b) 150% of the annual bonus paid or payable for the most recently completed fiscal year.

 

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(2)

Upon an involuntary termination or involuntary termination after change of control on August 28, 2020, Mr. Kim would have received his bonus for the fiscal year, prorated for his service during that year. These estimates are based on a deemed termination at the end of the fiscal year, so the bonus is not prorated.

(3)

Upon an involuntary termination after a change of control on August 28, 2020, Mr. Kim would have vested in 100% of his outstanding unvested equity awards. Pursuant to SEC guidance, the value of any accelerated vesting of Mr. Kim’s equity awards has been estimated using a price of $24.91 per share, the closing price of our ordinary shares on August 28, 2020.

(4)

Upon an involuntary termination on August 28, 2020, Mr. Kim would have received continued health coverage for up to nine months following his termination. Upon an involuntary termination after a change of control on August 28, 2020, Mr. Kim would have received continued health coverage for up to 18 months following his termination.

(5)

Represents a life insurance benefit payable to Mr. Kim’s beneficiaries with a face value of seven times his base salary as in effect on August 28, 2020, with a maximum benefit of $2,000,000.

(6)

Represents the present value of a weekly short-term disability benefit for 52 weeks following termination on August 28, 2020, followed by a monthly long-term disability benefit until the month of Mr. Kim’s 65th birthday.

Alan Marten

We have entered into a severance and change of control agreement with Mr. Marten providing for the severance and change of control benefits set forth below. The initial term of the agreement ended on December 10, 2015, at which time it automatically renewed for an additional one-year term, and has and will continue to be automatically renewed for successive one-year periods thereafter, unless we give written notice of termination at least 30 days prior to the expiration of the then-current term; provided that we may not give such notice if a change of control (as defined in Mr. Marten’s severance and change of control agreement) has occurred prior to such date until at least 12 months following such change of control.

Benefits provided upon termination without cause. Subject to the execution and non-revocation of a release of claims against us or any of our affiliates, if Mr. Marten is terminated by us without cause (as defined in Mr. Marten’s severance and change of control agreement), we will be obligated to (i) pay an amount equal to 75% of his then-existing annual base salary in a lump sum within 60 days following termination, (ii) pay, to the extent a bonus could be earned for the current fiscal year, any annual bonus for the current fiscal year prorated through the date of termination in a lump sum within 60 days following termination and (iii) continue to provide and to pay for health benefit continuation coverage until the earlier of nine months following the date of termination or the date Mr. Marten becomes eligible for health benefits with another employer.

Benefits provided upon a change of control. Upon a change of control, a prorated portion of any options or share-based awards that remain subject to issuance or vesting based on performance shall be issued and/or vested based on performance measured immediately prior to the change of control. The remainder of the options or share-based awards that remain subject to issuance or vesting based on performance shall be issued and/or vested in equal monthly installments over the original performance period, unless the successor to the Company does not assume or substitute such remaining options or share-based awards with a substantially equivalent award, in which case such remaining options or share-based awards shall be issued and/or vested upon the change of control.

Benefits provided upon termination by us without cause or termination by employee for good reason related to a change of control. Subject to the execution and non-revocation of a release of claims against us or any of our affiliates, if within the two months prior to or the 12 months after a change of control Mr. Marten is terminated by us without cause or Mr. Marten resigns for good reason (as defined in Mr. Marten’s severance and change of control agreement), then in lieu of the basic severance above, we will be obligated to (i) pay an amount equal to 150% of his then-current annual base salary plus 150% of the annual bonus paid or payable for the most recently completed fiscal year (in addition to the annual bonus paid or payable for the most recently completed fiscal

 

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year) in a lump sum within 60 days following termination, (ii) pay, to the extent a bonus could be earned for the current fiscal year, any annual bonus for the current fiscal year prorated through the date of termination in a lump sum within 60 days following termination, (iii) continue to provide for or reimburse health benefit continuation coverage until the earlier of 18 months following the date of termination or the date Mr. Marten becomes eligible for health benefits with another employer and (iv) accelerate the vesting of 100% of Mr. Marten’s unvested and outstanding options or share-based awards.

The following table quantifies the payments and benefits that would have been provided to Mr. Marten under different circumstances in connection with termination of his employment or a change of control, effective as of August 28, 2020, the last day of our most recently completed fiscal year.

 

        Trigger Event  

Name

 

Payment/Benefit Type

  Involuntary
Termination
($)
    Death ($)     Disability
($)
    Change
of Control
($)
    Involuntary
Termination after
Change of Control
($)
 

Alan Marten

  Severance(1)     240,000       —         —         —         646,819  
  Prorated Bonus(2)     111,213       —         —         —         111,213  
  Equity Awards(3)     —         —         —         —         998,721  
  Continued Health Coverage(4)     27,715       —         —         —         55,395  
  Life Insurance Benefit(5)     —         2,000,000       —         —         —    
  Disability Benefit(6)     —         —         885,908       —         —    

 

(1)

Upon an involuntary termination on August 28, 2020, Mr. Marten would have received severance benefits including 75% of his base salary. Upon an involuntary termination after a change of control on August 28, 2020, Mr. Marten would have received severance benefits including (a) 150% of his base salary and (b) 150% of the annual bonus paid or payable for the most recently completed fiscal year.

(2)

Upon an involuntary termination or involuntary termination after change of control on August 28, 2020, Mr. Marten would have received his bonus for the fiscal year, prorated for his service during that year. These estimates are based on a deemed termination at the end of the fiscal year, so the bonus is not prorated.

(3)

Upon an involuntary termination after a change of control on August 28, 2020, Mr. Marten would have vested in 100% of his outstanding unvested equity awards. Pursuant to SEC guidance, the value of any accelerated vesting of Mr. Marten’s equity awards has been estimated using a price of $24.91 per share, the closing price of our ordinary shares on August 28, 2020.

(4)

Upon an involuntary termination on August 28, 2020, Mr. Marten would have received continued health coverage for up to nine months following his termination. Upon an involuntary termination after a change of control on August 28, 2020, Mr. Marten would have received continued health coverage for up to 18 months following his termination.

(5)

Represents a life insurance benefit payable to Mr. Marten’s beneficiaries with a face value of seven times his base salary as in effect on August 28, 2020.

(6)

Represents the present value of a weekly short-term disability benefit for 52 weeks following termination on August 28, 2020, followed by a monthly long-term disability benefit until the month of Mr. Marten’s 65th birthday.

Bruce Goldberg

On August 28, 2020, we entered into a severance and change of control agreement providing for the severance and change of control benefits set forth below. This new agreement replaced a prior agreement with Mr. Goldberg entered into on December 10, 2010. The initial term of this new agreement ends on December 10, 2021, at which time it automatically renews for an additional one-year term, and will continue to be automatically renewed for successive one-year periods thereafter, unless we give written notice of termination at least 30 days prior to the expiration of the then-current term; provided that we may not give such notice if a change of control (as defined in Mr. Goldberg’s severance and change of control agreement) has occurred prior to such date until at least 12 months following such change of control.

 

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Benefits provided upon termination without cause. Subject to the execution and non-revocation of a release of claims against us or any of our affiliates, if Mr. Goldberg is terminated by us without cause (as defined in Mr. Goldberg’s severance and change of control agreement), we will be obligated to (i) pay an amount equal to 75% of his then-existing annual base salary in a lump sum within 60 days following termination, (ii) pay, to the extent a bonus could be earned for the current fiscal year, any annual bonus for the current fiscal year prorated through the date of termination in a lump sum within 60 days following termination and (iii) continue to provide and to pay for health benefit continuation coverage until the earlier of nine months following the date of termination or the date Mr. Goldberg becomes eligible for health benefits with another employer.

Benefits provided upon a change of control. Upon a change of control, a prorated portion of any options or share-based awards that remain subject to issuance or vesting based on performance shall be issued and/or vested based on performance measured immediately prior to the change of control. The remainder of the options or share-based awards that remain subject to issuance or vesting based on performance shall be issued and/or vested in equal monthly installments over the original performance period, unless the successor to the Company does not assume or substitute such remaining options or share-based awards with a substantially equivalent award, in which case such remaining options or share-based awards shall be issued and/or vested upon the change of control.

Benefits provided upon termination by us without cause or termination by employee for good reason related to a change of control. Subject to the execution and non-revocation of a release of claims against us or any of our affiliates, if within the two months prior to or the 12 months after a change of control Mr. Goldberg is terminated by us without cause or Mr. Goldberg resigns for good reason (as defined in Mr. Goldberg’s severance and change of control agreement), then in lieu of the basic severance above, we will be obligated to (i) pay an amount equal to 150% of his then-current annual base salary plus 150% of the annual bonus paid or payable for the most recently completed fiscal year (in addition to the annual bonus paid or payable for the most recently completed fiscal year) in a lump sum within 60 days following termination, (ii) pay, to the extent a bonus could be earned for the current fiscal year, any annual bonus for the current fiscal year prorated through the date of termination in a lump sum within 60 days following termination, (iii) continue to provide for or reimburse health benefit continuation coverage until the earlier of 18 months following the date of termination or the date Mr. Goldberg becomes eligible for health benefits with another employer and (iv) accelerate the vesting of 100% of Mr. Goldberg’s unvested and outstanding options or share-based awards.

The following table quantifies the payments and benefits that would have been provided to Mr. Goldberg upon termination by us without cause or termination by Mr. Goldberg for good reason, effective as of August 28, 2020, the last day of our most recently completed fiscal year.

 

         Trigger Event  

Name

   Payment/Benefit Type   Involuntary
Termination
($)
    Death ($)     Disability
($)
    Change
of Control
($)
    Involuntary
Termination after
Change of Control
($)
 

Bruce Goldberg

   Severance(1)     213,750       —         —         —         593,080  
   Prorated Bonus(2)     110,387       —         —         —         110,387  
   Equity Awards(3)     —         —         —         —         684,582  
   Continued Health Coverage(4)     12,363       —         —         —         24,711  
   Life Insurance Benefit(5)     —         1,710,000       —         —         —    
   Disability Benefit(6)     —         —         432,892       —         —    

 

(1)

Upon an involuntary termination on August 28, 2020, Mr. Goldberg would have received severance benefits including 75% of his base salary. Upon an involuntary termination after a change of control on August 28, 2020, Mr. Goldberg would have received severance benefits including (a) 150% of his base salary and (b) 150% of the annual bonus paid or payable for the most recently completed fiscal year.

 

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(2)

Upon an involuntary termination or involuntary termination after change of control on August 28, 2020, Mr. Goldberg would have received his bonus for the fiscal year, prorated for his service during that year. These estimates are based on a deemed termination at the end of the fiscal year, so the bonus is not prorated.

(3)

Upon an involuntary termination after a change of control on August 28, 2020, Mr. Goldberg would have vested in 100% of his outstanding unvested equity awards. Pursuant to SEC guidance, the value of any accelerated vesting of Mr. Goldberg’s equity awards has been estimated using a price of $24.91 per share, the closing price of our ordinary shares on August 28, 2020.

(4)

Upon an involuntary termination on August 28, 2020, Mr. Goldberg would have received continued health coverage for up to nine months following his termination. Upon an involuntary termination after a change of control on August 28, 2020, Mr. Goldberg would have received continued health coverage for up to 18 months following his termination.

(5)

Represents a life insurance benefit payable to Mr. Goldberg’s beneficiaries with a face value of six times his base salary as in effect on August 28, 2020.

(6)

Represents the present value of a weekly short-term disability benefit for 52 weeks following termination on August 28, 2020 followed by a monthly long-term disability benefit for 12 months.

Annual Cash Incentive

As discussed in detail in the Compensation Discussion and Analysis under “Cash Incentives” above, our Named Executive Officers other than Mr. Shah are eligible to participate in our cash incentive program, which is designed to reward for Company performance and to encourage individual performance and individual contribution to Company performance. The total amount of cash incentives paid to our Named Executive Officers for fiscal 2020 is set forth under the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. In fiscal 2020, the target cash incentives for our Named Executive Officers were 85%, 65%, 65% and 65%of base salary for Messrs. Pacheco, Kim, Marten and Goldberg, respectively. Mr. Shah did not participate in this program.

In fiscal 2020, 80% of this cash incentive was tied to Non-GAAP Operating Income and 20% was tied to net revenue.

In fiscal 2020, the individual cash incentive payouts as a percentage of the individual target cash incentives were 80% and 48% for Mr. Pacheco, 151% and 143% for Mr. Kim, 59% and 50% for Mr. Marten and 80% and 48% for Mr. Goldberg, for the first semi-annual and second semi-annual periods, respectively.

Equity Awards

We granted stock options, RSAs, PSAs and RSUs to our Named Executive Officers in our fiscal year 2020. The options entitle the officer to purchase ordinary shares after the applicable vesting date at a predetermined exercise price. The RSAs and PSAs represent awards of ordinary shares that are subject to restrictions during a vesting period. RSAs vest based on continued service over a specific period of time, while vesting of PSAs is also conditioned on satisfaction of certain performance conditions. RSUs entitle the recipient to receive ordinary shares on or promptly after the applicable vesting date. RSUs vest based on continued service over a specific period of time.

The grant date value of the equity awarded to each of our Named Executive Officers in each respective fiscal year are set forth above in the Summary Compensation Table, with details on the equity awarded to our Named Executive Officers in fiscal 2020 are set forth above under “Grants of Plan-Based Awards” and information on unvested RSAs, PSAs and RSUs, and vested and unvested options held by each Named Executive Officer at the end of our fiscal 2020, together with the remaining vesting conditions, is set forth below under “Outstanding Equity Awards at Fiscal Year-End.

As discussed under “Compensation Discussion & Analysis – Mr. Shah’s Compensation Mix” above, Mr. Shah’s compensation package for service as our CEO was primarily implemented by way of equity awards.

 

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In fiscal 2020, as Mr. Shah did not participate in the Company’s cash incentive plan and as Mr. Shah only received a minimum amount of base salary, the Company granted Mr. Shah 180,000 time-based RSAs and 90,000 PSAs subject to the performance conditions described above under “Compensation Discussion and Analysis—Equity Compensation”.

In fiscal 2020, our other executive officers received a mix of options and RSUs as part of their compensation. Option awards are generally subject to vesting as to 25% of the award on the first annual anniversary of the award, and then in substantially equal monthly installments of 1/48th of the original grant amount per month over the following three years, based on the executive’s continued employment through the respective vesting date. RSAs, PSAs, RSUs, and PSUs are generally subject to vesting as to 25% of the award at approximately the first annual anniversary of the award and, with respect to awards in fiscal 2020, 1/8th of the initial award amount every six months thereafter. For details on the vesting conditions on awards that were outstanding but not fully vested as of August 28, 2020, please see the footnotes to the “Outstanding Equity Awards at Fiscal Year-End” table below.

As described under “Employment and Severance Agreements; Potential Payments upon Termination or Change of Control” above, each of our Named Executive Officers has an employment, option award or change of control agreement setting forth any rights the officer may have to accelerated vesting. In general, any such accelerated vesting only occurs on a “double-trigger” basis, where the Named Executive Officer’s employment is terminated without cause or there is a resignation for good reason. For Messrs. Pacheco, Kim, Marten and Goldberg, any such termination must be in connection with a change of control, and then accelerated vesting will occur only to the extent provided under the executive’s employment agreement.

 

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Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information regarding options, RSUs, RSAs, PSUs and PSAs held by our Named Executive Officers as of August 28, 2020.

 

    Option Awards     Stock Awards  

Name

  Number of
securities
underlying
unexercised
options (#)
exercisable
     Number of
securities
underlying
unexercised
options (#)
unexercisable
    Equity
incentive plan
awards:
Number of
securities
underlying
unexercised
unearned
options (#)
    Option
exercise
price ($)
    Option
expiration
date
    Number of
shares or
units of
stock that
have not
vested (#)
    Market
value of
shares or
units of
stock that
have not
vested ($)
(1)
    Equity
incentive
plan
awards:
Number of
unearned
shares or
units that
have not
vested (#)
    Equity
incentive
plan
awards:
Market
value of
unearned
shares or
units that
have not
vested ($)
(1)
 

Ajay Shah

    225,000        225,000 (2)      —         39.82       3/14/2026       —         —         —         —    
    —          —         225,000 (3)      39.82       3/14/2026       —         —         —         —    
    —          —         —         —         —         91,438 (4)      2,277,721       —         —    
    —          —         —         —         —         180,000 (5)      4,483,800      
    —          —         —         —         —         —         —         90,000 (6)      2,241,900  

Jack Pacheco

    47,230        —         —         24.93       9/22/2024       —         —         —         —    
    753        —         —         11.55       5/23/2026       —         —         —         —    
    27,708        42,292 (7)      —         21.55       1/21/2029       —         —         —         —    
    —          60,000 (8)      —         18.39       3/11/2030       —         —         —         —    
    —          —         —         —         —         9,000 (9)      224,190       —         —    
    —          —         —         —         —         24,000 (10)      597,840       —         —    

KiWan Kim

    23,333        16,667 (11)      —         43.94       4/17/2028       —         —         —         —    
    19,791        30,209 (7)      —         21.55       1/21/2029       —         —         —         —    
    —          42,000 (8)      —         18.39       3/11/2030          
    —          —         —         —         —         18,000 (10)      448,380       —         —    

Alan Marten

    48,922        —         —         11.55       5/23/2026       —         —         —         —    
    39,860        6,806 (12)      —         15.21       3/20/2027       —         —         —         —    
    19,791        30,209 (7)      —         21.55       1/21/2029       —         —         —         —    
    —          42,000 (8)      —         18.39       3/11/2030       —         —         —         —    
    —          —         —         —         —         4,375 (13)      108,981       —         —    
    —          —         —         —         —         18,000 (10)      448,380       —         —    

Bruce Goldberg

    10,341        7,388 (11)      —         43.94       4/17/2028       —         —         —         —    
    7,916        12,084 (7)        21.55       1/21/2029       —         —         —         —    
    —          30,000 (8)      —         18.39       3/11/2030       —         —         —         —    
    —          —         —         —         —         18,000 (10)      448,380       —         —    

 

(1)

Based on a per share price of $24.91, the closing price of our ordinary shares on August 28, 2020.

(2)

This option award is scheduled to vest in four tranches of 25% each upon continued service through the first four anniversaries of the grant date of March 14, 2018.

(3)

This option award is scheduled to vest in four tranches of 25% each upon continued service through the first four anniversaries of the grant date of March 14, 2018, if the 30-trading-day rolling average closing price of our ordinary shares equals or exceeds 150% of the exercise price at any time during the four-year period following the grant date. If this target is not satisfied prior to a given vesting date, but is satisfied later during this four-year period, then any options scheduled to vest upon an earlier vesting date will vest upon Mr. Shah’s continued service through the first vesting date to follow such satisfaction.

(4)

Represents a grant of RSUs vesting over a period of approximately four years, subject to continued service through each vesting date, with (x) 25% vesting on April 20, 2020 and (y) the remainder vesting in equal quarterly installments (1/16th of the original award) on each of January 20, April 20, July 20 and October 20 of each year through the final vesting date.

(5)

Represents a grant of restricted ordinary shares with restrictions lapsing and shares vesting over a period of approximately three years, subject to continued service through each vesting date, with (x) 60,000 shares vesting on April 20, 2021 and (y) the remainder vesting in equal semi-annual installments of 30,000 shares on each of April 20 and October 20 of each year through the final vesting date. In October 2020, after Mr. Shah

 

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  had assisted in recruiting a successor CEO and in recognition of Mr. Shah’s outstanding service to the Company during his tenure as President and CEO, the Board, excluding Mr. Shah, determined to accelerate and fully vest, free of restrictions, all of these 180,000 time-based RSAs.
(6)

Represents a grant of ordinary shares with restrictions lapsing and shares vesting over a period of approximately 3 years, subject to satisfaction of designated performance goals and continued service through each vesting date, with 34% of the shares vesting on April 20, 2021 and the remaining portion vesting thereafter in equal installments on October 20, 2021, April 20, 2022, October 20, 2022 and April 20, 2023. The performance goals for this award include goals relating to COVID health and safety performance as to 1/3 of the award, goals relating to succession planning objectives as to 1/3 of the award, and goals relating to positive cash flow requirements as to the remaining 1/3 of the award. In September 2020 upon the recommendation of the Compensation Committee, the Board certified 100% achievement and determined that the performance conditions were satisfied with respect to all 90,000 PSAs. In October 2020, after Mr. Shah had assisted in recruiting a successor CEO and in recognition of Mr. Shah’s outstanding service to the Company during his tenure as President and CEO, the Board, excluding Mr. Shah, determined to accelerate and fully vest, free of restrictions, all of the 90,000 PSAs.

(7)

This option award is scheduled to vest and become exercisable as to 25% of the award upon continued service through January 22, 2020, with the remaining shares vesting in equal amounts of 1/48th of the original grant amount per month upon continued service through January 22, 2023.

(8)

This option award is scheduled to vest and become exercisable as to 25% of the award upon continued service through March 12, 2021, with the remaining shares vesting in equal amounts of 1/48th of the original grant amount per month upon continued service through March 12, 2024

(9)

These RSU awards vested as to 25% on January 5, 2019, as to 6.25% on the fifth day of April, July, August and November 2019 and will continue to vest as to 6.25% upon continued service through each three-month anniversary through January 5, 2022.

(10)

These RSU awards are scheduled to vest over a period of approximately three years, subject to continued service through each vesting date, with 33% of the award vesting on April 20, 2021 and then the remainder in equal semi-annual installments (1/6) of the original award through April 20, 2023.

(11)

This option award vested and became exercisable as to 25% of the award on April 18, 2019, with 1/48th of the original award amount vesting, subject to continued service, each month thereafter through April 18, 2022.

(12)

This option award vested and became exercisable as to 25% of the award on March 21, 2018, with 1/48th of the original award amount vesting, subject to continued service, each month thereafter through March 21, 2021.

(13)

These RSU awards vested as to 25% on April 18, 2019 and thereafter as to 6.25% upon continued service through each three-month anniversary through April 18, 2022.

Option Exercises and Ordinary Share Awards Vested

The following table sets forth information regarding options exercised by, and shares vested under RSU awards granted to, our Named Executive Officers for the fiscal year ending August 28, 2020.

 

     Option Awards      Ordinary Share Awards  

Name

   Number of
Shares
Acquired on
Exercise
(#)
     Value
Realized
on Exercise
($)(1)
     Number of
Shares
Acquired on
Vesting
(#)
     Value
Realized
on Vesting
($)(2)
 

Ajay Shah

     —          —          41,562        1,002,058  

Jack Pacheco

     7,500        38,025        24,984        778,876  

KiWan Kim

     —          —          7,084        227,538  

Alan Marten

     —          —          2,500        72,116  

Bruce Goldberg

     —          —          2,267        72,816  

 

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(1)

Values were determined based on the difference between the fair market value of our ordinary shares on the date of exercise and the exercise price of the options.

(2)

Values were determined based on the fair market value of our ordinary shares on the date of release.

Pension Benefits and Nonqualified Deferred Compensation

We do not provide a pension plan for our employees, and none of our Named Executive Officers participated in a nonqualified deferred compensation plan in fiscal 2020.

401(k) Plan

We maintain a tax-qualified retirement plan, or the 401(k) plan, for U.S. employees that provides eligible employees with an opportunity to save for retirement on a tax-advantaged basis. Eligible employees are able to contribute up to 60% of eligible compensation, either on a pre-tax or post-tax (Roth) basis, subject to applicable annual limits under the Internal Revenue Code. The 401(k) plan permits us to make matching contributions and profit-sharing contributions to eligible participants. In fiscal 2020, we continued our recent practice of matching 100% of participant contributions up to 3% of eligible compensation, and 50% of participant contributions of the next 2% of eligible compensation. Participants’ interests in their elective contributions and our matching contributions are 100% vested at the time of contribution.

Pay Ratio

In accordance with the requirements of Section 953(b) of the Dodd-Frank Act and Item 402(u) of Regulation S-K (which we collectively refer to as the “Pay Ratio Rule”), we are providing the following estimated information for fiscal 2019:

 

   

the annual total compensation of our median employee (excluding our Chief Executive Officer) was $27,409;

 

   

the annual total compensation of our Chief Executive Officer was $6,779,624; and

 

   

the ratio of these two amounts was 247 to 1. We believe that this ratio is a reasonable estimate calculated in a manner consistent with the requirements of the Pay Ratio Rule.

SEC rules for identifying the median employee and calculating the pay ratio allow companies to apply various methodologies and assumptions and, as a result, the pay ratio reported by us may not be comparable to the pay ratio reported by other companies. We identified our median employee by considering base pay and overtime paid for the period beginning on January 1, 2020 and ending on August 28, 2020 to individuals who were our employees on August 28, 2020. Each resulting compensation figure in a currency other than U.S. dollars was converted to a U.S. dollar figure using a simple average of the relevant currency conversion rates for the months in the measurement period. For purposes of this identification, we excluded three individuals who did not perform services during the measurement period pursuant to unpaid leaves of absence.

The annual total compensation of our median employee was determined in a manner consistent with the calculation of compensation required to be disclosed for each of our Named Executive Officers in the Summary Compensation Table. The resulting figure was converted to a U.S. dollar figure using the relevant currency conversion rate for August 28, 2020.

 

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Equity Compensation Plan Information

The following table summarizes information regarding our share incentive plans as of August 28, 2020.

 

Plan Category

   Number of securities to be
issued upon exercise of
outstanding options, warrants
and rights(1)
     Weighted-average exercise price
of outstanding options, warrants
and rights(2)
     Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column (a))(3)
 
     (a)      (b)      (c)  

Equity compensation plans approved by security holders

     3,382,910      $ 29.45        2,115,905  

Equity compensation plans not approved by security holders

     —          —          —    

Total

     3,382,910      $ 29.45        2,115,905  

 

(1)

Includes 2,109,469 shares underlying outstanding options and 1,273,441 shares underlying outstanding RSUs under the SMART Global Holdings, Inc. Amended and Restated 2017 Share Incentive Plan.

(2)

The calculation of the weighted average exercise price does not include shares subject to RSUs that do not have an exercise price.

(3)

Represents 1,432,721 ordinary shares reserved for future issuance under the Plan and 683,184 ordinary shares reserved for future purchases under the SMART Global Holdings, Inc. 2018 Employee Share Purchase Plan (the ESPP). Starting with fiscal 2018 and continuing for 10 years, at the beginning of each fiscal year the number of shares reserved under the Plan may be increased by the lesser of (x) 1,500,000 shares, (y) 2.5% of the outstanding ordinary shares on the last day of the prior fiscal year and (z) another amount determined by our Board of Directors. Accordingly, on August 29, 2020, the reserve under the Plan was increased by 2.5%, or 610,485 shares. Starting with fiscal 2018 and continuing for 10 years, at the beginning of each fiscal year the number of shares reserved for purchase under the ESPP may be increased by an amount equal to the smallest of (a) one and one half percent (1.5%) of the number of ordinary shares issued and outstanding on the immediately preceding fiscal year end date, (b) 300,000 shares or (c) an amount determined by the Board. On September 1, 2020, the reserve under the ESPP was increased by 300,000 shares.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Transactions with Related Persons, Promoters and Certain Control Persons

In July 2019, the Company acquired Inforce Computing, Inc. (Inforce) in exchange for cash and ordinary shares of the Company with a total value of approximately $14.6 million. In addition to shares of the Company issued as consideration for the acquisition in fiscal 2019, in fiscal 2020, certain of the Company’s officers and directors became entitled to receive additional payments in cash pursuant to the required purchase price adjustment set forth in the original agreement. The following is a list of the Company’s related persons who had a direct or indirect material interest in the transaction, along with the approximate value of each such interest:

 

   

Ajay Shah, Executive Chairman of the Board of the Company, with a direct interest of approximately $4.2 million received in fiscal 2019 with an additional $76,037 payable to Mr. Shah as a result of a purchase price adjustment;

 

   

Paul Mercadante, a former member of the Board of Directors of the Company, with a direct interest of approximately $1.1 million received in fiscal 2019 with an additional $19,022 payable to Mr. Mercadante as a result of a purchase price adjustment; and

 

   

Mukesh Patel, a member of the Board of Directors of the Company, with an indirect interest by way of Invati Capital, LLC, an investment company wholly owned by Mr. Patel, of approximately $4.2 million received in fiscal 2019 with an additional $76,037 payable to Invati Capital as a result of a purchase price adjustment.

Due to the financial interests of these three members of our Board of Directors, the Board arranged for a group of disinterested, independent directors to oversee the evaluation process for the transaction and for an independent third party to provide the Board with a valuation report. Following SEC disclosure requirements, the approximate interests disclosed above reflect the amounts involved in the transaction and not any person’s profits from the transaction.

Other than as described above, since the beginning of fiscal 2020, there has not been, nor is there any transaction proposed in which we were or will be a party, in which the amount involved exceeded or will exceed $120,000 and in which any director, executive officer, holder of more than 5% of any class of our voting securities, or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than as set forth below and in the compensation, employment arrangements and other agreements and transactions that are described elsewhere in this Proxy Statement.

Sponsor Shareholder Agreement

In connection with the acquisition of substantially all of the equity interests of SMART Worldwide by Silver Lake in August 2011, which we refer to as the Acquisition, we initially entered into the Sponsor Shareholder Agreement with Silver Lake and Ajay Shah and his affiliated investment vehicles. The Sponsor Shareholder Agreement was amended and restated upon the completion of our initial public offering (IPO). The Sponsor Shareholder Agreement, as further described below, contains specific rights, obligations and agreements of the parties as owners of our ordinary shares. In addition, the Sponsor Shareholder Agreement contains provisions related to the composition of our Board of Directors and its committees, which are discussed elsewhere in this Proxy Statement.

Sponsor Approvals

Under the Sponsor Shareholder Agreement, the actions listed below by us or any of our subsidiaries require the approval of Silver Lake for so long as Silver Lake collectively owns ordinary shares in an amount equal to or

 

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greater than 25% of our ordinary shares outstanding immediately following the consummation of our IPO. The actions include:

 

   

entering into change of control transactions;

 

   

acquiring or disposing of assets or entering into joint ventures with a value in excess of $5 million;

 

   

incurring capital expenditures in any fiscal year in excess of 10% over the amount of capital expenditures provided for in the annual budget;

 

   

incurring indebtedness for borrowed money;

 

   

initiating any liquidation, dissolution, bankruptcy or other insolvency proceeding involving any of our subsidiaries;

 

   

making any material change in the nature of the business conducted by us or our subsidiaries;

 

   

terminating the employment of our Chief Executive Officer or Chief Financial Officer or hiring a new Chief Executive Officer or Chief Financial Officer;

 

   

changing the size or composition of our Board;

 

   

entering into certain transactions with Silver Lake Partners, Silver Lake Sumeru or any of our other affiliates;

 

   

amending, waiving or otherwise modifying the Investors Shareholders Agreement (described below) or any other key contractual terms with our management;

 

   

adopting or amending the annual operating plan of the Company; and

 

   

delegation of any of the above actions to any committee of the Board.

Employee Investors Shareholders Agreement

In connection with the closing of the Acquisition, and as a condition to being eligible to receive future grants of share-based incentives, certain employee investors entered into a shareholder agreement, which we refer to as the Employee Investors Shareholders Agreement, with us and Silver Lake. Under the Employee Investors Shareholders Agreement, the employee investors became subject to certain transfer restrictions, drag-along rights and call rights. The drag-along rights and call rights terminated upon the occurrence of our IPO; however, certain transfer restrictions survived our IPO, including that no such employee investor may transfer our ordinary shares without the consent of Silver Lake to any person that is a competitor or potential competitor of ours or that is known to hold (directly or indirectly) more than 5% ownership interest in any such competitor (other than in a registered public offering or under Rule 144 through a securities exchange or national quotation system or through a broker, dealer or other market maker, in a manner in which the identity of the purchaser has not been designated by the seller and is effected in a manner through which the identity of the purchaser would not customarily be available to the seller).

Investors Shareholders Agreement

In connection with the closing of the Acquisition, certain management and employee investors entered into a shareholder agreement with us and Silver Lake, which we refer to as the Investors Shareholders Agreement. The Investors Shareholders Agreement was amended and restated as of November 5, 2016 in connection with the amendment and restatement of our credit agreement entered into in August 2011 (the Original Credit Agreement), at which time the lenders party to the Original Credit Agreement, or the Warrant Holders, became parties to the Investors Shareholders Agreement. The Investors Shareholders Agreement was further amended on May 30, 2017 in connection with our IPO and again on October 17, 2017, January 29, 2018 and June 20, 2018.

Under the Investors Shareholders Agreement, the Warrant Holders and certain members of our management became subject to transfer restrictions, tag-along rights, drag-along rights, participation rights and call rights. The

 

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tag-along rights, drag-along rights, participation rights and call rights terminated upon the occurrence of our IPO; however, certain transfer restrictions survived our IPO, including that no such Warrant Holders or management investors may transfer our ordinary shares without the consent of Silver Lake to any person that is a competitor or potential competitor of ours or that is known to hold (directly or indirectly) more than 5% ownership interest in any such competitor (other than in a registered public offering or under Rule 144 through a securities exchange or national quotation system or through a broker, dealer or other market maker, in a manner in which the identity of the purchaser has not been designated by the seller and is effected in a manner through which the identity of the purchaser would not customarily be available to the seller).

Indemnification

Under the Sponsor Shareholder Agreement, we agreed, subject to certain exceptions, to indemnify Silver Lake and various affiliated persons from certain losses arising out of the indemnified persons’ investment in, or actual, alleged or deemed control or ability to influence, us.

We also have entered into indemnification agreements with our directors and executive officers and intend to continue doing so in the future.

Registration Rights Agreement

We entered into a registration rights agreement, dated August 26, 2011, with Silver Lake, Mr. Ajay Shah and certain entities affiliated with him, Mr. Mukesh Patel and certain entities affiliated with him and certain of our executive officers. This agreement was amended and restated as of November 5, 2016 in connection with the amendment and restatement of our Original Credit Agreement, at which time the Warrant Holders became parties to the agreement, which we refer to in this Proxy Statement as the Registration Rights Agreement. If not otherwise exercised, the rights described below will expire (a) with the prior consent of Silver Lake in connection with any other change of control, as defined in the Registration Rights Agreement, or (b) with respect to any party to the Registration Rights Agreement, at such time such party does not beneficially own any registrable shares subject to the Registration Rights Agreement.

Shelf Registration Rights

Silver Lake may at any time request in writing that we file a shelf registration statement to permit the sale or distribution of all or a portion of their registrable shares. Subject to specified limitations set forth in the Registration Rights Agreement, holders may request that their registrable shares be joined to this request. Subject to specified limitations set forth in the Registration Rights Agreement, we may delay filing a registration statement pursuant to this provision on no more than two occasions in any 12-month period.

Demand Registration Rights

Subject to specified limitations set forth in the Registration Rights Agreement, Silver Lake may demand in writing that we register all or a portion of the registrable shares under the Securities Act if the total amount of registrable shares registered can reasonably be anticipated to have a net aggregate offering price of at least $25 million. Subject to specified limitations set forth in the Registration Rights Agreement, we may delay filing a registration statement pursuant to this provision on no more than two occasions in any 12-month period.

Piggyback Registration Rights

In the event that we propose to register any of our shares under the Securities Act, either for our own account or for the account of other security holders, each holder of registrable shares is entitled to notice of such registration and is entitled to certain “piggyback” registration rights allowing them to include their shares in such

 

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registration, subject to certain marketing and other limitations. Any such limitations on the number of registrable securities that may be included by such holders must be on a pro-rata basis.

The Registration Rights Agreement also contains certain customary cross-indemnification provisions.

Participation in Our IPO

Silver Lake Partners III Cayman (AIV III), L.P. and Silver Lake Sumeru Fund Cayman, L.P., as well as each of their co-investment vehicles, which are collectively our principal shareholders and are each affiliates of certain of our directors, purchased an aggregate of 1,500,000 ordinary shares at our IPO price of $11.00 per share and on the same terms as the other purchasers in the offering, except as affiliates they paid no underwriting spread in our IPO. We received the full amount of the gross proceeds from the additional investment.

Other Relationships

In the normal course of business, we sold goods and services of $75.8 million to affiliates of Silver Lake during fiscal 2020.

Procedures for Approval of Related Person Transactions

Pursuant to our Articles of Association, a director who is in any way interested in a contract or transaction with the Company will declare the nature of his interest at a meeting of the Board of Directors. A director may vote in respect of any such contract or transaction notwithstanding that he may be interested therein and if he does so his vote will be counted and he may be counted in the quorum at any meeting of the Board of Directors at which any such contract or transaction shall come before the meeting of the Board of Directors for consideration. Pursuant to our written Audit Committee charter, the Audit Committee must review all related party transactions required to be disclosed in our financial statements and approve any such related party transaction, unless the transaction is approved by another independent committee of our Board. In approving or rejecting the proposed agreement, our Audit Committee shall consider the relevant facts and circumstances available and deemed relevant to the Audit Committee, including, but not limited to, the risks, costs and benefits to us, the terms of the transaction, the availability of other sources for comparable services or products and, if applicable, the impact on a director’s independence. In addition, our written Code of Business Conduct and Ethics requires that directors, executive officers and employees make appropriate disclosure of potential conflicts of interest situations to the Audit Committee, in the case of directors and executive officers, or to the supervisor who will then seek authorization from the compliance officer, in the case of employees.

 

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HOUSEHOLDING OF PROXY MATERIALS

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for Proxy Availability Notice or other Annual Meeting materials with respect to two or more shareholders sharing the same address by delivering a single Proxy Availability Notice or other Annual Meeting Materials addressed to those shareholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for shareholders and cost savings for companies. Shareholders who participate in householding will continue to be able to access and receive separate proxy cards.

This year, a number of brokers with account holders who are our shareholders will be householding our proxy materials. A Proxy Availability Notice or proxy materials will be delivered in one single envelope to multiple shareholders sharing an address unless contrary instructions have been received from one or more of the affected shareholders. Once you have received notice from your broker that they will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate Proxy Availability Notice or proxy materials, please notify your broker or contact our Secretary, 39870 Eureka Drive, Newark, CA 94560-4809, or by telephone: (510) 623-1231. Shareholders who currently receive multiple copies of the Proxy Availability Notice or proxy materials at their address and would like to request householding of their communications should contact their broker. In addition, we will promptly deliver, upon written or oral request to the address or telephone number above, a separate copy of the Proxy Availability Notice or proxy materials to a shareholder at a shared address to which a single copy of the documents was delivered.

OTHER MATTERS

The Board knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the Annual Meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.

A copy of our Annual Report on Form 10-K for the year ended August 28, 2020, as filed with the SEC on October 22, 2020, is available without charge upon written request to our Secretary, 39870 Eureka Drive, Newark, CA 94560-4809, or by accessing a copy on SMART’s website at http://www.smartgh.com/ in the Investors section under “SEC Filings.” Information on our website is not incorporated by reference in this Proxy Statement.

 

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EXHIBIT A—AMENDMENT TO THE SMART GLOBAL HOLDINGS, INC. AMENDED AND RESTATED 2017 SHARE INCENTIVE PLAN (THE “PLAN”)

 

1.

Section 4—Effective as of February 13, 2021, Section 4 of the Plan shall be amended to replace the first full sentence of Section 4(a) thereof with the following:

Subject to adjustment as provided in this Section, the number of Shares with respect to which Awards may be granted under the Plan on and following the Effective Date shall be 1,500,000 as of the Effective Date, plus 1,500,000 as of February 1, 2019 (the “2019 Reserved Shares”), plus 1,000,000 as of February 13, 2021, plus an annual increase on the first day of each fiscal year during the term of the Plan beginning with the fiscal year starting September 1, 2017 and continuing for ten fiscal years (ending with the fiscal year starting September 1, 2026), in each case in an amount equal to the lesser of (i) 1,500,000 shares, (ii) 2.5% of the number of shares of the ordinary shares outstanding on such date, or (iii) an amount determined by the Board. To the extent that the Plan is and remains exempt from Section 162(m) of the Code pursuant to Treasury Regulation section 1.162-27(f) as a plan that existed during the period in which the Company was not publicly held, the 2019 Reserved Shares shall not be available for awards to any person who at the time of the award is a covered employee within the meaning of Section 162(m) of the Code.

 

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LOGO

SMART GLOBAL HOLDINGS, INC. C/O SMART MODULAR TECHNOLOGIES, INC. 39870 EUREKA DRIVE NEWARK, CA 94560-4809 VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. Eastern Time on February 11, 2021. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. Eastern Time on February 11, 2021. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D28434-P45790 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. SMART GLOBAL HOLDINGS, INC. The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees: For Against Abstain 1a. Sandeep Nayyar 1b. Mukesh Patel 1c. Maximiliane Straub The Board of Directors recommends you vote FOR proposals 2, 3 and 4. For Against Abstain 2. Ratification of the selection by the Board of Directors of the Company (the Board or the Board of Directors) of Deloitte & Touche LLP (Deloitte) as the Company’s independent registered public accounting firm for the Company’s fiscal year ending August 27, 2021. 3. Approval, by a non-binding advisory vote, of the compensation of the Named Executive Officers of SMART Global Holdings, Inc. as disclosed in the proxy statement for our 2021 Annual Meeting of Shareholders. 4. Approval of an amendment to the SMART Global Holdings, Inc. Amended and Restated 2017 Share Incentive Plan to increase the number of ordinary shares available for issuance by 1,000,000. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date


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LOGO

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and 10-K Wrap are available at www.proxyvote.com. D28435-P45790 SMART GLOBAL HOLDINGS, INC. Annual Meeting of Shareholders February 12, 2021 10:00 AM PST This proxy is solicited by the Board of Directors The shareholder(s) hereby appoint(s) Bruce Goldberg and Jack Pacheco, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the ordinary shares of SMART GLOBAL HOLDINGS, INC. that the shareholder(s) is/are entitled to vote at the Annual Meeting of Shareholders to be held at 10:00 AM, PST on February 12, 2021, at the Company’s U.S. corporate headquarters, 39870 Eureka Drive, Newark, CA 94560, and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations. Continued and to be signed on reverse side