exv10w4



 






Exhibit
10.4




February 11, 2004




Iain MacKenzie

10818 Inspiration Circle

Dublin, CA 94568


Dear Iain:




     On behalf of Modular, L.L.C. (the “Parent”), I am pleased to set forth the terms of your
continued employment with SMART Modular Technologies (the “Company”) after the closing of the
acquisition of the Company and related entities from Solectron by the Parent and its subsidiaries
(the “Acquisition”). This letter agreement (this “Letter Agreement”) is contingent on, and will be
effective upon the date of, the closing of the Acquisition (the “Effective Date”) and supersedes
the Change of Control and Employment Agreement dated as of July 3 , 2003 between you and the
Company (the “Existing Change of Control Agreement”). By signing this Letter Agreement, you agree
that the Existing Change of Control Agreement will terminate immediately as of the Effective Date
and you agree to take any additional action necessary to effectuate such termination.



     The terms of your continued employment with the Company and its affiliates will be as follows:



	 	 	 
	Position:

	 	Your position will be President, initially
reporting to the Board of Directors. While
employed by the Company or its affiliates,
you will be expected to devote your full
working time and attention to the business
of the Company and its affiliates and not
engage or participate in any business that
is competitive with the business of the
Company and its affiliates.
	 
	 	 
	Base Salary:

	 	You will receive an initial annual base
salary of $277,200 to be paid in regular
installments in accordance with the
Company’s usual payroll practices. It is
expected that salary reviews will be
conducted on an annual basis, and you will
be entitled to such increases in your base
salary as determined by the Board of
Directors in its sole discretion.
	 
	 	 
	Performance Bonus:

	 	You will be eligible to receive an annual
performance bonus. Your target bonus
opportunity will be 100% of your base
salary. Your actual bonus will depend upon
the achievement of performance criteria
(which may be based on the Company’s and
its affiliates’ performance,






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	 	individual
performance, or a combination thereof)
established by the Board of Directors in
its sole discretion
from time to time in consultation with the management team.
	 
	 	 
	Integration Bonus:

	 	Within 90 days after the Effective Date,
you will receive a one-time integration
bonus equal to 100% of your annual base
salary.
	 
	 	 
	Stock Option:

	 	Promptly after the Effective Date, you will
be granted an option (the “Option”) to
purchase shares of common stock of Parent
(or one of its affiliates) representing
approximately 1.75% of such entity’s
outstanding common stock. The Option will
have an exercise price equal to the fair
market value of the stock as of the date of
grant. The Option will vest and become
exercisable over four years subject to your
continued employment on the applicable
vesting date, with 25% of the Option
vesting after the first year and monthly
vesting thereafter; provided that in the
event you are terminated by the Company
without Cause (as defined below) before the
first 25% of the Option vests, the Option
will immediately become 25% vested. Except
as set forth herein, the Option will be
subject to the terms of the stock plan and
the applicable award agreement.
	 
	 	 
	Equity Investment:

	 	You have agreed that you will invest up to
100% of any sale bonus that is paid by
Solectron to you in connection with the
acquisition of the Company by the Parent in
equity securities of the Parent or its
affiliates to the extent permitted by the
Parent and its stockholders. Such
investment may be subject to restrictions
on transfer, fair market value repurchase
rights and other conditions as are deemed
acceptable by the Parent as well as your
representation as to financial
sophistication and other matters.
	 
	 	 
	Benefits:

	 	You will be provided employee benefits
(including fringe benefits, vacation, life,
health, accident and disability insurance,
401(k) plan) on the same basis as those
benefits are generally made available to
senior executives of the Company, which
benefits will be substantially similar to
those benefits of Solectron in which you
participate as of the date hereof. In
addition, you will be reimbursed by the
Company for certain immigration-related
expenses.






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	At-Will Employment

	 	Your employment with the Company is
“at-will”, meaning either you or the
Company may terminate your
employment for any reason at any time, with or without cause.
	 
	 	 
	Termination Without Cause:

	 	Upon the termination of your employment by the Company
without Cause (as defined below), or your resignation for
Good Reason (as defined below), during any applicable
employment term under a definitive employment agreement,
you would be entitled to the following benefits subject to
your execution and effectiveness of a general release in a
form acceptable to the Company: (i) 12 months of your base
salary as then in effect; and (ii) your target bonus
opportunity for the year of termination. The Company may
elect to pay such benefits either (x) in a lump sum payment
within 10 days after you execute and let become effective
the release or (y) over the 12-month period following your
date of termination in accordance with the Company’s normal
payroll practice.
	 
	Definitions:

	 	For purposes of this Letter Agreement, the following terms
have the following meanings:
	 
	 	 
	 

	 	(a) “Cause” means: (i) an act of dishonesty
made by you in connection with your responsibilities which the
Company reasonably believes will damage its business, (ii) your
conviction of, or plea of nolo contendere to, a felony which the
Board of Directors reasonably believes had or will have a material
detrimental effect on the reputation or business of the Company or
its affiliates, (iii) your gross misconduct, or (iv) your continued
substantial violations of your duties after you have received a
written demand for performance from the Company or one of its
affiliates which specifically sets forth the factual basis for its
belief that you have not substantially performed your duties.

	 
	 	 
	 

	 	(b) “Good Reason” means (i) a significant
reduction in your compensation; provided that a reduction in actual
annual bonus received due to failure to meet performance goals
shall not be deemed to be a







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	 	reduction in compensation; or (ii) a
significant reduction in your operational duties and responsibilities.

	 
	Restrictive Covenants:

	 	As a condition to your employment and the grant of the
Options, you have executed or, if requested, agree to execute
the Company’s standard form of proprietary information and
confidentiality agreement.
	 
	 	 
	 

	 	In addition, you agree that you will not, during the term of your
employment with the Company and for a period of 12 months following the
termination of your employment, on your own behalf or on behalf of or in
connection with any other Person, without the prior written consent of
the Company, directly or indirectly, in any capacity whatsoever, alone
or through or in connection with any person (a) solicit the business of
(or procure or assist the canvassing or soliciting of the business of)
any customer or prospective customer of the Company and its affiliates
identified and known to you at the time of termination of employment,
either away from the Company or as it relates directly to the business
of the Company; or (b) solicit the employment or engagement of or
otherwise entice away from the employment or engagement of the Company
or any of its affiliates, any individual who is employed or engaged by
the Company or any of its affiliates.
	 
	 	 
	 

	 	You agree that a material breach or threatened breach of these
restrictive covenants may cause the Company irreparable injury for which
adequate remedies are not available at law. Therefore, you agree that,
if you materially breach any of those covenants during or following
termination of employment, the Company may be entitled to an injunction
or other equitable relief in addition to any other relief to which the
Company may become entitled.
	 
	 	 
	Miscellaneous:

	 	All amounts due hereunder are subject to payroll
deductions and withholdings as are required by law. Any
amounts due hereunder will be reduced by any payments,
benefits or notice required pursuant to law in
connection with a termination of employment, including
under the WARN Act or similar state law, and will be in
lieu of any Company severance policy, plan or other
agreement. This






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	 	Letter Agreement may be assigned by the
Parent to the Company or any of its affiliates.
	 
	 	 
	Entire Agreement:

	 	This Letter Agreement represents the entire
understanding between you and the Parent or any of its
affiliates regarding the matters discussed herein and
supersedes all prior
agreements (other than any existing proprietary information and
confidentiality agreement), written or oral, between you and the
Company, the Parent or any of their affiliates, including the Existing
Change of Control Agreement.
	 
	 	 
	Governing Law:

	 	This Letter Agreement will be governed by California law, without application of the
conflict of law principles thereof.






     To indicate your acceptance of this offer, please sign and return this Letter Agreement.



	 	 	 	 	 
	 

	 	Very truly yours,	 	 
	 

	 	 	 	 
	 

	 	 	 	 
	Agreed and accepted:
	 	 	 	 
	 
	/s/ Iain MacKenzie
	 	 	 	 
	 
	 	 	 	 
	Name: Iain MacKenzie
	 	 	 	 
	Date: February 11, 2004
	 	 	 	 







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