Subsequent Events

12 Months Ended

Aug. 26, 2022

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

Acquisition of Stratus Technologies

On August 29, 2022, SGH completed its previously announced acquisition of all of the outstanding shares of Storm Private Holdings I Ltd., a Cayman Islands exempted company (“Stratus Holding Company” and together with its subsidiaries, “Stratus Technologies”), pursuant to a Share Purchase Agreement (the “Purchase Agreement”), dated as of June 28, 2022.

At the closing of the transaction, SGH paid to the seller a cash purchase price of $225 million, subject to certain adjustments. In addition, the seller has the right to receive, and SGH will be obligated to pay, contingent consideration (if

any) of up to $50 million (the “Earnout”) based on the gross profit performance of the Stratus business during the first full 12 fiscal months of Stratus following the closing. The Earnout, if any, will be payable in cash, ordinary shares of SGH or a mix of cash and SGH Shares, at SGH’s election.

Stratus is a global leader in simplified, protected, and autonomous computing platforms and services in the data center and at the Edge. For more than 40 years, Stratus has provided high-availability, fault-tolerant computing to Fortune 500 companies and small-to-medium sized businesses enabling them to securely and remotely run critical applications with minimal downtime.

First Supplemental Indenture to Indenture Governing 2.25% Convertible Senior Notes Due 2026

On August 26, 2022, SGH entered into the First Supplemental Indenture (the “First Supplemental Indenture”) to the Indenture, dated February 11, 2020 (the “Indenture”), between SGH and U.S. Bank National Association, as trustee, governing SGH’s outstanding 2.25% Convertible Senior Notes due 2026 (the “2026 Notes”). The First Supplemental Indenture became effective on August 27, 2022.

Pursuant to the First Supplemental Indenture, SGH irrevocably elected (i) to eliminate SGH’s option to elect Physical Settlement (as defined in the Indenture) on any conversion of 2026 Notes that occurs on or after the date of the First Supplemental Indenture and (ii) that, with respect to any Combination Settlement (as defined in the Indenture) for a conversion of the 2026 Notes, the Specified Dollar Amount (as defined in the Indenture) that will be settled in cash per $1,000 principal amount of the 2026 Notes shall be no lower than $1,000. As a result of our election, upon any conversion of our 2026 Notes, we will be required to pay cash in an amount at least equal to the principal portion while continuing to have the option to settle any amount in excess of the principal portion in cash and/or ordinary shares. Following the election, only the amounts expected to be settled in excess of the principal portion are considered dilutive in calculating earnings per share under the if-converted method.

Amended Credit Facility

On August 29, 2022, SGH and SMART Modular Technologies, Inc. entered into an incremental amendment to the Credit Agreement (the “Incremental Amendment,” and together with the Credit Agreement, the “Amended Credit Agreement”). The Incremental Amendment (i) provides for incremental term loans in an aggregate amount of $300 million (the “Incremental 2027 TLA”), which Incremental 2027 TLA is on the same terms as the 2027 TLA , (ii) increases the maximum First Lien Leverage Ratio (as defined in the Amended Credit Agreement) financial covenant from 3.00:1.00 to 3.25:1.00 and (iii) increases the aggregate amount of unrestricted cash and permitted investments netted from the definitions of Consolidated First Lien Debt and Consolidated Net Debt under the Amended Credit Agreement from $100 million to $125 million. The 2027 TLA, the Incremental 2027 TLA and the 2027 Revolver are referred to together as the “Amended Credit Facility.” The Amended Credit Facility matures on February 7, 2027.

Prepayment of Earnout Note

On August 29, 2022, substantially simultaneously with entering into the Incremental Amendment, we repaid in full the $101.8 million outstanding under the Earnout Note. See “Business Acquisition – LED Business – Contingent Consideration.”