exv10w1



 






Exhibit 10.1




SHAREHOLDERS’ AGREEMENT



dated as of



January 18, 2006




 









 








Table of Contents




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	ARTICLE 1
	 	 	 	 
	Definitions
	 	 	 	 
	 
	 	 	 	 
	Section 1.01. Definitions
	 	 	1	 
	 
	 	 	 	 
	ARTICLE 2
	 	 	 	 
	Corporate Governance
	 	 	 	 
	 
	 	 	 	 
	Section 2.01. Composition of the Board
	 	 	10	 
	Section 2.02. Removal
	 	 	11	 
	Section 2.03. Vacancies
	 	 	11	 
	Section 2.04. Action by the Board; Shareholders
	 	 	12	 
	Section 2.05. Charter Amendments
	 	 	13	 
	Section 2.06. Conflicting Charter Provisions
	 	 	13	 
	Section 2.07. Subsidiary Governance
	 	 	13	 
	 
	 	 	 	 
	ARTICLE 3
	 	 	 	 
	Restrictions on Transfer
	 	 	 	 
	 
	 	 	 	 
	Section 3.01. General
	 	 	14	 
	Section 3.02. Legends
	 	 	14	 
	Section 3.03. Permitted Transferees
	 	 	14	 
	Section 3.04. Restrictions on Transfers by the Institutional Shareholders
	 	 	15	 
	Section 3.05. Restrictions on Transfers by the Other Shareholders
	 	 	15	 
	Section 3.06. Restrictions on Transfer under a Credit Agreement,
Indenture or Other Agreement for Indebtedness
	 	 	16	 
	 
	 	 	 	 
	ARTICLE 4
	 	 	 	 
	Tag-along Rights; Drag-along Rights
	 	 	 	 
	 
	 	 	 	 
	Section 4.01. Rights to Participate in Transfer
	 	 	16	 
	Section 4.02. Right to Compel Participation in Certain Transfers
	 	 	20	 
	 
	 	 	 	 
	ARTICLE 5
	 	 	 	 
	Registration Rights
	 	 	 	 
	 
	 	 	 	 
	Section 5.01. Demand Registration
	 	 	23	 
	Section 5.02. Incidental Registration
	 	 	26	 
	Section 5.03. Holdback Agreements
	 	 	27	 
	Section 5.04. Registration Procedures
	 	 	27	 
	Section 5.05. Indemnification by the Company
	 	 	31	 
	Section 5.06. Indemnification by Participating Shareholders
	 	 	32	 
	Section 5.07. Conduct of Indemnification Proceedings
	 	 	32	 






i









 






	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	Section 5.08. Contribution
	 	 	33	 
	Section 5.09. Participation in Public Offering
	 	 	35	 
	Section 5.10. Other Indemnification
	 	 	35	 
	Section 5.11. Cooperation by the Company
	 	 	35	 
	Section 5.12. No Transfer of Registration Rights
	 	 	35	 
	 
	 	 	 	 
	ARTICLE 6
	 	 	 	 
	Certain Covenants and Agreements
	 	 	 	 
	 
	 	 	 	 
	Section 6.01. Confidentiality 
	 	 	35	 
	Section 6.02. Information 
	 	 	37	 
	Section 6.03. Reports 
	 	 	38	 
	Section 6.04. Cooperation in Refinancing 
	 	 	38	 
	Section 6.05. Appointment of Shareholder Representatives 
	 	 	38	 
	Section 6.06. Decisions by Institutional Shareholders 
	 	 	40	 
	 
	 	 	 	 
	ARTICLE 7
	 	 	 	 
	Miscellaneous
	 	 	 	 
	 
	 	 	 	 
	Section 7.01. Entire Agreement
	 	 	40	 
	Section 7.02. Effectiveness; Binding Effect; Benefit
	 	 	40	 
	Section 7.03. Assignability
	 	 	40	 
	Section 7.04. Waiver; Amendment; Termination
	 	 	41	 
	Section 7.05. Notices
	 	 	41	 
	Section 7.06. Fees and Expenses
	 	 	42	 
	Section 7.07. Headings
	 	 	42	 
	Section 7.08. Counterparts
	 	 	42	 
	Section 7.09. Applicable Law
	 	 	42	 
	Section 7.10. Waiver of Jury Trial
	 	 	42	 
	Section 7.11. Specific Enforcement
	 	 	43	 
	Section 7.12. Consent to Jurisdiction
	 	 	43	 
	Section 7.13. Severability
	 	 	43	 
	Section 7.14. Recapitalization
	 	 	43	 
	Section 7.15. Limitations on Subsequent Registration Rights
	 	 	44	 
	Section 7.16. Conflicting Agreements
	 	 	44	 






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SHAREHOLDERS’ AGREEMENT




     SHAREHOLDERS’
AGREEMENT dated as of January 18, 2006 (the “Agreement”) among (i) SMART
Modular Technologies (WWH), Inc., an exempted company incorporated under the laws of the Cayman
Islands (the “Company”), (ii) T3 II SM, LLC (“T3 II”), TPG III SM, LLC (“TPG
III”) and TPG IV SM, LLC (“TPG IV”) (taken together, the “TPG Entities,” and each of the foregoing
in this clause (ii), a “TPG Entity”), (iii) Francisco Partners, L.P. (“FP”), Francisco Partners
Fund A, L.P. (“FP Fund A”) and FP Annual Fund Investors, LLC (“FP Annual Fund”) (taken together,
the “FP Entities,” and each of the foregoing in this clause (iii), an “FP Entity”), (iv) Shah
Capital Partners, L.P. (“Shah Capital”), (v) WestRiver Capital LLC, (vi) Patel Family Partners,
L.P. and (vii) such additional persons as may sign joinder agreements to this Agreement.



W I T N E S S E T H :




     WHEREAS, the Company and Modular, L.L.C. (“Modular”) previously entered into a Shareholder’s
Agreement and a Registration Rights Agreement, each dated as of March 8, 2005 (the “Original
Agreements”) in connection with Modular’s ownership of securities of the Company;



     WHEREAS, concurrently herewith, Modular is merging with and into Modular Merger LLC, the
Ordinary Shares (defined below) of the Company owned by Modular are being exchanged for, among
other things, the membership interests in Modular and the Original Agreements are being terminated
by the parties thereto; and



     WHEREAS, the parties hereto desire to enter into this Agreement to govern certain of their
rights, duties and obligations;



     NOW, THEREFORE, in consideration of the covenants and agreements contained herein, the parties
hereto agree as follows:



ARTICLE 1

Definitions




     Section 1.01. Definitions. (a) The following terms, as used herein, have the
following meanings:



     "Adverse Person” means any Person whom the Board determines in good faith is a competitor or a
potential competitor of the Company or its Subsidiaries.



 









 





     "Affiliate” means, with respect to any Person, any other Person directly or indirectly
controlling, controlled by or under common control with such Person, provided that no
securityholder of the Company shall be deemed an Affiliate of any other securityholder solely by
reason of any Investment in the Company. For the purpose of this definition, the term “control”
(including with correlative meanings, the terms “controlling,” “controlled by” and “under common
control with”), as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or otherwise.



     "Aggregate Ownership” means, with respect to any Shareholder or group of Shareholders, and
with respect to any class of Company Securities, the total amount of such class of Company
Securities “beneficially owned” (as such term is defined in Rule 13d-3 of the Exchange Act)
(without duplication) by such Shareholder or group of Shareholders as of the date of such
calculation, calculated on a Fully Diluted basis.



     "Aggregate Ownership Percentage” means, with respect to any Shareholder (or group of
Shareholders), and with respect to any class of Company Securities, the percentage equal to such
Shareholder’s (or group of Shareholders’) Aggregate Ownership of such class of Company Securities
divided by all outstanding Company Securities of such class, calculated on a Fully Diluted basis.



     "Board” means the board of directors of the Company.



     "Business Day” means any day except a Saturday, Sunday or other day on which commercial banks
in San Francisco or New York City are authorized by law to close.



     "Charter” means the Amended and Restated Memorandum and Articles of Association of the
Company, as the same may be amended from time to time.



     "Company Securities” means (i) the Ordinary Shares, (ii) securities convertible into or
exchangeable for Ordinary Shares, and (iii) options, warrants or other rights to acquire Ordinary
Shares or any other equity or equity-linked security issued by the Company.



     "Distribution in Kind” means, with respect to the applicable Institutional Shareholder, (A)
any Transfer by any TPG Entities’ fund that is a partnership, limited liability company,
corporation or other entity of any of its Ordinary Shares to any partner, member, shareholder or
other constituent of such entity pursuant to a distribution that is made to such partner, member,
shareholder or other constituent in accordance with the respective partnership, limited liability
company agreement, certificate or articles of incorporation or other organizational



2









 







document of
such any TPG Entities’ fund without payment of consideration therefor by such partner, member,
shareholder or other constituent, (B) any
Transfer by any FP Entities’ fund that is a partnership, limited liability company,
corporation or other entity of any of its Ordinary Shares to any partner, member, shareholder or
other constituent of such entity pursuant to a distribution that is made to such partner, member,
shareholder or other constituent of such entity in accordance with the respective partnership,
limited liability company agreement, certificate or articles of incorporation or other
organizational document of such FP fund without payment of consideration therefor by such partner,
member, shareholder or other constituent, and (C) any Transfer by any Shah Capital fund that is a
partnership, limited liability company, corporation or other entity of any of its Ordinary Shares
to any partner, member, shareholder or other constituent of such entity pursuant to a distribution
that is made to such partner, member, shareholder or other constituent of such entity in accordance
with the respective partnership, limited liability company agreement, certificate or articles of
incorporation or other organizational document of such Shah Capital fund without payment of
consideration therefor by such partner, member, shareholder or other constituent.



     "Drag-Along Portion” means, with respect to any Other Shareholder, (i) the Aggregate Ownership
of Ordinary Shares by such Other Shareholder multiplied by (ii) a fraction, the numerator of which
is the number of Ordinary Shares proposed to be sold by the Institutional Shareholders in the
applicable Compelled Sale under Section 4.02 and the denominator of which is the Aggregate
Ownership of Ordinary Shares by the Institutional Shareholders.



     "Exchange Act” means the Securities Exchange Act of 1934, as amended.



     "First Public Offering” means the first Public Offering of Ordinary Shares.



     "Five Percent Shareholder” means a Shareholder whose Aggregate Ownership Percentage of
Ordinary Shares is 5% or more.



     "Foreign Subsidiary” means, with respect to the Company, any entity organized under the laws
of a jurisdiction other than a State of the United States of America of which securities or other
ownership interests having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or indirectly owned by the
Company.



     "Fully Diluted” means, with respect to any class of Company Securities, all outstanding shares
of such class of Company Securities and all shares issuable in respect of securities convertible
into or exchangeable for such shares, all stock appreciation rights, options, warrants and other
rights to purchase or subscribe for



3









 







such Company Securities or securities convertible into or
exchangeable for such Company Securities; provided that if any of the foregoing stock appreciation
rights, options, warrants or other rights to purchase or subscribe for such Company Securities are subject to vesting, the Company Securities subject to
vesting shall be included in the definition of “Fully Diluted” only upon and to the extent of
such vesting.



     "Initial Ownership” means, (i) with respect to any Shareholder and any class of Company
Securities, the Aggregate Ownership of such class by such Shareholder as of the date hereof (as
indicated on Schedule I hereto), provided that if such Shareholder sells Ordinary Shares to the
underwriters pursuant to the underwriting agreement relating to the First Public Offering of
Company Securities, such Shareholder’s Initial Ownership as of the date hereof shall be deemed to
be the Aggregate Ownership indicated on Schedule I hereto less the number of Ordinary Shares
actually sold to such underwriters pursuant to the underwriting agreement, or, (ii) with respect to
any Person who shall become a party to this Agreement on a later date, such Person’s Aggregate
Ownership of such class as of such later date (as indicated on the joinder agreement signed by such
Person), in each case taking into account any stock split, stock dividend, reverse stock split or
similar event.



     "Insignificant Subsidiary” means a subsidiary of the Company that does not meet any of the
conditions contained in the definition of “significant subsidiary” as defined in Rule 1-02(w) of
Regulation S-X promulgated under the Securities Act.



     "Institutional Shareholders” means the TPG Entities, the FP Entities and Shah Capital.



     "Investment” means, with respect to any Person, (i) any direct or indirect purchase or other
acquisition by such Person of any notes, obligations, instruments, stock, securities or ownership
interest (including any partnership, limited liability and joint venture interest) of any other
Person and (ii) any capital contribution by such Person to any other Person.



     "Ordinary Shares” means the Ordinary Shares, par value $0.000166667 per share, of the Company.



     "Other Shareholders” means all Shareholders other than the Institutional Shareholders.



“Permitted Transferee” means





     (i) in the case of any TPG Entity and its Permitted Transferees, (A) any
TPG Entity, TPG Entities’ fund or co-investment



4









 







partnership, (B) any general or limited
partner of any TPG Entity, TPG Entities’ fund or co-investment partnership (collectively,
a “TPG Partner”), and any corporation, partnership or other entity that is an Affiliate of
any TPG Partner (collectively “TPG Affiliates”), (C) any managing director, general
partner, director, limited partner, officer or employee of any TPG Entity, TPG Entities’
fund, any TPG Partner or any
TPG Affiliate, or any spouse, lineal descendant, sibling, parent, heir, executor,
administrator, testamentary trustee, legatee or beneficiary of any of the foregoing
persons described in this clause (C) (collectively, “TPG Associates”), and (D) any trust,
the beneficiaries of which, any charitable trust, the grantor of which, or any
corporation, limited liability company or partnership, the stockholders, members or
general or limited partners of which, include only the TPG Entities, TPG Partners, TPG
Affiliates, TPG Associates, their spouses or their lineal descendants;




     (ii) in the case of any FP Entity and its Permitted Transferees, (A) any FP
Entity, FP fund or co-investment partnership, (B) any general or limited partner of any FP
Entity, FP fund or co-investment partnership (collectively, an “FP Partner”), and any
corporation, partnership or other entity that is an Affiliate of any FP Partner
(collectively “FP Affiliates”), (C) any managing director, general partner, director,
limited partner, officer or employee of any FP Entity, FP fund, any FP Partner or any FP
Affiliate, or any spouse, lineal descendant, sibling, parent, heir, executor,
administrator, testamentary trustee, legatee or beneficiary of any of the foregoing
persons described in this clause (C) (collectively, “FP Associates”), and (D) any trust,
the beneficiaries of which, any charitable trust, the grantor of which, or any
corporation, limited liability company or partnership, the stockholders, members or
general or limited partners of which, include only the FP Entities, FP Partners, FP
Affiliates, FP Associates, their spouses or their lineal descendants;




     (iii) in the case of Shah Capital and its Permitted Transferees, (A) Shah
Capital, any Shah Capital fund or co-investment partnership, (B) any general or limited
partner of Shah Capital, any Shah Capital fund or co-investment partnership (collectively,
a “Shah Capital Partner”), and any corporation, partnership or other entity that is an
Affiliate of any Shah Capital Partner (collectively “Shah Capital Affiliates”), (C) any
managing director, general partner, director, limited partner, officer or employee of Shah
Capital, any Shah Capital fund, any Shah Capital Partner or any Shah Capital Affiliate, or
any spouse, lineal descendant, sibling, parent, heir, executor, administrator,
testamentary trustee, legatee or beneficiary of any of the foregoing persons described in
this clause (C) (collectively, “Shah Capital Associates”), and (D) any trust, the
beneficiaries of which, any charitable trust, the grantor of which, or any corporation,
limited liability company or partnership, the stockholders,



5









 







members or general or limited
partners of which, include only Shah Capital, Shah Capital Partners, Shah Capital
Affiliates, Shah Capital Associates, their spouses or their lineal descendants; and




     (iv) in the case of any Other Shareholder that is or becomes a party to
this Agreement, (A) a Person to whom Company Securities are Transferred from such Other
Shareholder (1) by will or the laws of descent and distribution or (2) by gift without
consideration of any kind, provided
that, in the case of clause (2), such transferee is the spouse or the lineal
descendant, sibling or parent of such Shareholder, or (B) a trust that is for the
exclusive benefit of such Other Shareholder or its Permitted Transferees under (A) above.



     "Person” means an individual, corporation, limited liability company, partnership,
association, trust or other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.



     "Public Offering” means an underwritten public offering of Registrable Securities of the
Company pursuant to an effective registration statement under the Securities Act other than
pursuant to a registration statement on Form S-4 or Form S-8 or any similar or successor form.



     "Registrable Securities” means, at any time, any Ordinary Shares and any securities issued or
issuable in respect of such Ordinary Shares by way of conversion, exchange, stock dividend, split
or combination, recapitalization, merger, consolidation, other reorganization or otherwise until
(i) a registration statement covering such Ordinary Shares has been declared effective by the SEC
and such Ordinary Shares have been disposed of pursuant to such effective registration statement,
(ii) such Ordinary Shares are sold under circumstances in which all of the applicable conditions of
Rule 144 (or any similar provisions then in force) under the Securities Act are met or (iii) such
Ordinary Shares are otherwise transferred, the Company has delivered a new certificate or other
evidence of ownership for such Ordinary Shares not bearing the legend required pursuant to this
Agreement and such Ordinary Shares may be resold without subsequent registration under the
Securities Act.



     "Registration Expenses” means any and all expenses incident to the performance of or
compliance with any registration or marketing of securities, including all (i) registration and
filing fees, and all other fees and expenses payable in connection with the listing of securities
on any securities exchange or automated interdealer quotation system, (ii) fees and expenses of
compliance with any securities or “blue sky” laws (including reasonable fees and disbursements of
counsel in connection with “blue sky” qualifications of the securities registered), (iii) expenses
in connection with the preparation, printing, mailing and delivery of any registration statements,
prospectuses and other documents in connection



6









 







therewith and any amendments or supplements thereto,
(iv) security engraving and printing expenses, (v) internal expenses of the Company (including,
without limitation, all salaries and expenses of its officers and employees performing legal or
accounting duties), (vi) fees and disbursements of counsel for the Company and customary fees and
expenses for independent certified public accountants retained by the Company (including the
expenses relating to any comfort letters or costs associated with the delivery by independent
certified public accountants of any comfort letters requested pursuant to Section 5.04(h) hereof),
(vii) reasonable fees and expenses of any special experts retained by the Company in connection
with such registration, (viii) fees, out-of-pocket costs and expenses of the
Shareholders, including one counsel for all of the Shareholders participating in the offering
selected (A) by the participating Institutional Shareholders, in the case of any offering in which
any of the Institutional Shareholders participate, or (B) in any other case, by the Shareholders
holding the majority of the Registrable Securities to be sold for the account of all Shareholders
in the offering, (ix) fees and expenses in connection with any review by the National Association
of Securities Dealers, Inc. (the “NASD”) of the underwriting arrangements or other terms of the
offering, and all fees and expenses of any “qualified independent underwriter,” including the fees
and expenses of any counsel thereto, (x) fees and disbursements of underwriters customarily paid by
issuers or sellers of securities, but excluding any underwriting fees, discounts and commissions
attributable to the sale of Registrable Securities, (xi) costs of printing and producing any
agreements among underwriters, underwriting agreements, any “blue sky” or legal investment
memoranda and any selling agreements and other documents in connection with the offering, sale or
delivery of the Registrable Securities, (xii) transfer agents’ and registrars’ fees and expenses
and the fees and expenses of any other agent or trustee appointed in connection with such offering,
(xiii) expenses relating to any analyst or investor presentations or any “road shows” undertaken in
connection with the registration, marketing or selling of the Registrable Securities, (xiv) fees
and expenses payable in connection with any ratings of the Registrable Securities, including
expenses relating to any presentations to rating agencies and (xv) all out-of pocket costs and
expenses incurred by the Company or its appropriate officers in connection with their compliance
with Section 5.04(m).



     "Rule 144” means Rule 144 (or any successor provisions) under the Securities Act.



     "Rule 144A” means Rule 144A (or any successor provisions) under the Securities Act.



     "SEC” means the Securities and Exchange Commission.



     "Securities Act” means the Securities Act of 1933, as amended.



7









 





     "Sell-down Percentage” means, with respect to any Shareholder (or group of Shareholders), and
with respect to any class of Company Securities, the percentage equal to such Shareholder’s (or
group of Shareholders’) Aggregate Ownership of such class of Company Securities divided by such
Shareholder’s (or group of Shareholders’) Initial Ownership of such class of Company Securities.



     "Shareholder” means at any time, any Person (other than the Company) who shall then be a party
to or bound by this Agreement, so long as such Person shall “beneficially own” (as such term is
defined in Rule 13d-3 of the Exchange Act) any Company Securities.



     "Shortform Registration” means a registration statement on Form S-3 (or any successor form
thereto).



     "Subsidiary” means, with respect to any Person, any entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or indirectly owned by such
Person.



     "Tag-Along Portion” means the product of the Aggregate Ownership of Ordinary Shares by the
Tagging Person immediately prior to such Transfer and a fraction the numerator of which is the
maximum number of Ordinary Shares that the buyer in the Tag-Along Sale is willing to purchase, and
the denominator of which is the Aggregate Ownership of Ordinary Shares by all Shareholders.



     "Third Party” means a prospective purchaser(s) (other than a Permitted Transferee or other
Affiliate of a Shareholder) of Company Securities in an arm’s-length transaction from such
Shareholder.



     "Transfer” means, with respect to any Company Security, (i) when used as a verb, to sell,
assign, dispose of, exchange, pledge, encumber, hypothecate or otherwise transfer such security or
any participation or interest therein, whether directly or indirectly, or agree or commit to do any
of the foregoing and (ii) when used as a noun, a direct or indirect sale, assignment, disposition,
exchange, pledge, encumbrance, hypothecation or other transfer of such security or any
participation or interest therein or any agreement or commitment to do any of the foregoing.



     (b) The term “Institutional Shareholder,” to the extent such entity shall have
transferred any of its Company Securities to any of its “Permitted Transferees,” shall mean the
Institutional Shareholder and such Permitted Transferees, taken together; provided that any
Permitted Transferee who receives Company Securities pursuant to Section 3.03(b) shall not be
included in the term “Institutional Shareholder” to the extent of its Company Securities received
pursuant to Section 3.03(b).



8









 





     (c) Each of the following terms is defined in the Section set forth opposite such
term:



	 	 	 	 	 
	Term	 	Section
	Additional Directors

	 	 	2.01	(a)
	Agreement

	 	Preamble

	Applicable Holdback Period

	 	 	5.03	 
	Cause

	 	 	2.02	 
	Company

	 	Preamble

	Compelled Sale

	 	 	4.02	(a)
	Compelled Sale Notice

	 	 	4.02	(a)
	Compelled Sale Notice Period

	 	 	4.02	(a)
	Compelled Sale Price

	 	 	4.02	(a)
	Confidential Information

	 	 	6.01	(b)
	Demand Registration

	 	 	5.01	(a)
	Distributing Institution

	 	 	3.03	(b)
	Drag-Along Rights

	 	 	4.02	(a)
	Eligible Shareholder

	 	 	4.01	(a)
	Escrow Amount

	 	 	4.01	(f)
	Escrow Notice

	 	 	4.01	(f)
	FP

	 	Preamble

	FP Annual Fund

	 	Preamble

	FP Fund A

	 	Preamble

	FP Entities

	 	Preamble

	FP Entity

	 	Preamble

	FP Shareholder Representative

	 	 	6.05	(b)
	Holders

	 	5.01(a)(ii)

	Incidental Registration

	 	 	5.02	(a)
	Indemnified Party

	 	 	5.07	 
	Indemnifying Party

	 	 	5.07	 
	Inspectors

	 	 	5.04	(g)
	Maximum Offering Size

	 	 	5.01	(e)
	Modular

	 	Recitals

	Non-Requesting Shareholder

	 	 	5.01	(a)
	Original Agreements

	 	Recitals

	Records

	 	 	5.04	(g)
	Replacement Nominee

	 	 	2.03	(a)
	Representatives

	 	 	6.01	(b)
	Requesting Shareholder

	 	 	5.01	(a)
	Shah Capital

	 	Preamble

	Shah Capital Shareholder Representative

	 	 	6.05	(c)
	T3 II

	 	Preamble

	Tag-Along Notice

	 	 	4.01	(a)
	Tag-Along Notice Period

	 	 	4.01	(a)






9









 






	 	 	 	 	 
	Term	 	Section
	Tag-Along Offer

	 	 	4.01	(a)
	Tag-Along Response Notice

	 	 	4.01	(a)
	Tag-Along Right

	 	 	4.01	(a)
	Tag-Along Sale

	 	 	4.01	(a)
	Tag-Along Seller

	 	 	4.01	(a)
	Tagging Person

	 	 	4.01	(a)
	TPG III

	 	Preamble

	TPG IV

	 	Preamble

	TPG Entities

	 	Preamble

	TPG Entity

	 	Preamble

	TPG Shareholder Representative

	 	 	6.05	(a)
	Unused Tag Amount

	 	 	4.01	(d)






ARTICLE 2

Corporate Governance




     Section 2.01 . Composition of the Board. (a) The Board shall consist of nine
directors, and the Shareholders agree that the directors shall be nominated as follows: (i) so
long as the TPG Entities’ Aggregate Ownership Percentage of Ordinary Shares is at least 10%, up to
two directors will be nominated by the TPG Entities, acting collectively, and so long as the TPG
Entities’ Aggregate Ownership Percentage of Ordinary Shares is at least 5%, one director will be
nominated by the TPG Entities, acting collectively; (ii) so long as the FP Entities’ Aggregate
Ownership Percentage of Ordinary Shares is at least 10%, up to two directors will be nominated by
the FP Entities, acting collectively, and so long as the FP Entities’ Aggregate Ownership
Percentage of Ordinary Shares is at least 5%, one director will be nominated by the FP Entities,
acting collectively; (iii) so long as Shah Capital’s Aggregate Ownership Percentage of Ordinary
Shares is at least 5%, one director will be nominated by Shah Capital, (iv) the Chief Executive
Officer of the Company will be nominated by the Shareholders, acting collectively; and (v) three
directors will be nominated by the Chief Executive Officer and the Institutional Shareholders
together; provided that, to the extent required under the Exchange Act rules and the rules of the
securities exchange or quotation system on which the Ordinary Shares are traded, each such director
nominated pursuant to this clause (v) shall (x) not be an “Affiliate” or an “Associate” (as such
terms are used within the meaning of Rule 12b-2 under the Exchange Act) of any of the Institutional
Shareholders and (y) be an “independent director,” as such term is defined by the rules of the
securities exchange or quotation system on which the Ordinary Shares are traded. If the number of
directors that comprise the entire Board is increased, the number of directors added to the Board
(the “Additional Directors”) must be a multiple of two, and the Institutional Shareholders shall
continue to be entitled to nominate a majority of the Board as provided in this Section 2.01.



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     (b) Each Shareholder entitled to vote for the election of directors to the Board
agrees that it will vote its Ordinary Shares or execute a proxy or written consent, as the case may
be, and take all other necessary action in order to ensure (including causing the Company to call a
special meeting of Shareholders), to the extent possible, that the composition of the Board is as
set forth in this Section 2.01.



     The Company agrees to take all other necessary actions (including calling a special meeting of
the Board and/or Shareholders) to ensure, to the extent possible, that the nominations to the Board
are as contemplated by this Section 2.01.



     Section 2.02 . Removal. Each Shareholder agrees that if at any time it is then
entitled to vote for the removal of directors from the Board, it will not vote any of its Ordinary
Shares in favor of the removal of any director who shall have been nominated in accordance with
Section 2.01 hereof, unless such removal shall
be for Cause or the Person or Persons entitled to nominate such director shall have consented
to such removal in writing; provided that if the Person or Persons entitled to nominate any
director pursuant to Section 2.01 hereof shall request in writing the removal, with or without
Cause, of such director, such Shareholder shall vote its Ordinary Shares in favor of such removal.
Removal for “Cause” shall mean removal of a director because of such director’s (a) willful and
continued failure substantially to perform his or her statutory or fiduciary duties to the Company
in his or her established position, (b) participation in a fraud, act of dishonesty or other
misconduct that is injurious, monetarily or otherwise, to the Company or any of its Subsidiaries,
(c) having been charged with or pleading guilty to a felony or a crime involving fraud or
dishonesty, (d) violation of any state or federal law that has an adverse effect on the Company or
(e) abuse of illegal drugs or other controlled substances or habitual intoxication.



     Section 2.03 . Vacancies. If, as a result of death, disability, retirement,
resignation, removal (with or without Cause) or otherwise, there shall exist or occur any vacancy
on the Board:



     (a) the Person or Persons entitled under Section 2.01 hereof to nominate such
director whose death, disability, retirement, resignation or removal resulted in such vacancy may,
subject to the provisions of Section 2.01 hereof, nominate another individual (the “Replacement
Nominee”) to fill such vacancy and serve as a director on the Board; and



     (b) subject to Section 2.01 hereof, each Shareholder then entitled to vote for the
election of the Replacement Nominee as a director of the Company agrees that it will vote its
Ordinary Shares, or execute a proxy or written consent, as the case may be, in order to ensure that
the Replacement Nominee be elected to the Board.



11









 





     Section 2.04 . Action by the Board; Shareholders. Until such time as the
Institutional Shareholders collective Aggregate Ownership Percentage of Ordinary Shares is less
than 25%, (1) no action by the Company (including but not limited to any action by the Board or any
committee thereof) shall be taken with respect to any of the following matters without the prior
written consent of the Institutional Shareholders, acting collectively:




     (i) the declaration of any dividend on or the making of any distribution
with respect to, or the recapitalization, reclassification, redemption, repurchase or
other acquisition of, any securities of the Company or any Subsidiary, except as expressly
permitted by this Agreement;




     (ii) any incurrence, refinancing, alteration of material terms or
prepayment by the Company or any Subsidiary of indebtedness for borrowed money in excess
of $10,000,000 in the aggregate (or the guaranty by the Company or any Subsidiary of any
such indebtedness);




     (iii) any approval of the annual business plan, budget and long-term
strategic plan of the Company or any Subsidiary;




     (iv) any modification of the long-term business strategy or scope of the
business of the Company or any Subsidiary or any material customer relationships thereof;




     (v) (A) any merger or consolidation of the Company with or into any Person,
other than a wholly owned Subsidiary, or of any Subsidiary with or into any Person other
than the Company or any other wholly owned Subsidiary, or (B) any sale of the Company or
any Subsidiary or any significant operations of the Company or any Subsidiary or any joint
venture transaction, acquisition or disposition of assets, business, operations or
securities by the Company or any Subsidiary (in a single transaction or a series of
related transactions) having a value in each case in this clause (B) in excess of
$10,000,000;




     (vi) any liquidation, dissolution, commencement of bankruptcy, liquidation
or similar proceedings with respect to the Company or any Subsidiary;




     (vii) the issuance of any security by the Company or any Subsidiary (not
including issuances of such securities in connection with employee or stock option plans
previously approved by the Board), other than as specifically contemplated by this
Agreement;



12









 






     (viii) any determination of compensation, benefits, perquisites and other
incentives for the Chief Executive Officer, President or the Chief Financial Officer of
the Company or its Subsidiaries and the approval or amendment of any plans or contracts in
connection therewith, and any approval or amendment to any equity or other compensation or
benefit plans for employees of the Company or its Subsidiaries;




     (ix) any appointment or dismissal of any of the Chief Executive Officer,
President, Chief Financial Officer or any other executive officer in any similar capacity
of the Company or any Subsidiary; or




     (x) any increase or decrease to the number of Directors that comprise the
entire Board of the Company or any Subsidiary; and



     (2) the Company (including but not limited to any action by the Board or any committee
thereof) shall not, nor permit any of its Subsidiaries to, without the prior written consent of
each Institutional Shareholder, enter into or amend, modify or supplement, any material agreement,
transaction or arrangement with any of the Company’s equity holders, executive officers, directors
or Affiliates thereof or any individual related by blood, marriage or adoption to any such
individual or with any entity in which any such Person or individual owns a
beneficial interest of 5% or more, except as otherwise expressly contemplated by this
Agreement.



     Section 2.05 . Charter Amendments. Each Shareholder entitled to vote for any
amendment to the Charter or any adoption of or amendment to the certificate of incorporation or
bylaws of any Subsidiary, agrees that it will not vote nor execute a proxy or written consent, as
the case may be, in favor of any such amendment or adoption unless each Institutional Shareholder
has provided prior written consent to such amendment or adoption.



     Section 2.06 . Conflicting Charter Provisions. Each Shareholder shall vote its
Ordinary Shares or execute proxies or written consents, as the case may be, and shall take all
other actions necessary to ensure, to the extent possible, that the Charter (i) facilitates, and
does not at any time conflict with, any provision of this Agreement and (ii) permits each
Shareholder to receive the benefits to which each such Shareholder is entitled under this
Agreement.



     Section 2.07 . Subsidiary Governance. The Company and each Shareholder agree that
(i) the board of directors or other persons performing similar functions of each Subsidiary of the
Company (other than any Foreign Subsidiary and any Insignificant Subsidiary) shall be comprised of
the individuals who are serving as directors on the Board and (ii) the board of directors or other
persons performing similar functions of any Subsidiary of the Company shall be subject to all the
provisions of this Article 2. Each Shareholder agrees to vote its Ordinary Shares



13









 







and to cause the
members of the Board nominated by the Institutional Shareholders, subject to their fiduciary
duties, to vote and take other appropriate action to effectuate the agreements in this Section 2.07
in respect of any Subsidiary of the Company.



ARTICLE 3

Restrictions on Transfer




     Section 3.01 . General. Each Shareholder understands and agrees that the Company
Securities acquired prior to the date of this Agreement were not acquired in a transaction
registered under the Securities Act and are restricted securities under such Act and the rules and
regulations promulgated thereunder. Each Shareholder agrees that it will not Transfer any Company
Securities (or solicit any offers in respect of any Transfer of any Company Securities), except in
compliance with the Securities Act, any applicable foreign or state securities or “blue sky” laws,
and the terms and conditions of this Agreement.



     Section 3.02 . Legends. (a) In addition to any other legend that may be required,
each certificate for Company Securities that is issued to any Shareholder shall bear a legend in
substantially the following form:



     “THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
FOREIGN OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT IN COMPLIANCE THEREWITH.
THIS SECURITY IS ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE
SHAREHOLDERS’ AGREEMENT DATED AS OF JANUARY 18, 2006, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST
FROM SMART MODULAR TECHNOLOGIES (WWH), INC. OR ANY SUCCESSOR THERETO.”



     (b) If any Company Securities shall cease to be Registrable Securities under clause
(i) or clause (ii) of the definition thereof, the Company, upon the written request of the holder
thereof, shall issue to such holder a new certificate evidencing such shares without the first
sentence of the legend required by Section 3.02(a) hereof endorsed thereon. If any Company
Securities cease to be subject to any and all restrictions on Transfer set forth in this Agreement,
the Company, upon the written request of the holder thereof, shall issue to such holder a new
certificate evidencing such Company Securities without the second sentence of the legend required
by Section 3.02(a) hereof endorsed thereon.



     Section 3.03 . Permitted Transferees. (a) Notwithstanding anything in this
Agreement to the contrary, each Shareholder may at any time Transfer any or all of its Company
Securities to one or more of its Permitted Transferees without the



14









 







consent of the Board or any
other Shareholder or group of Shareholders and without compliance with Sections 3.04, 3.05, 4.01
and 4.02 so long as the Transfer to such Permitted Transferee is not in violation of applicable
federal or state securities laws; provided that for any such Transfer prior to the 12-month
anniversary of the First Public Offering, such Permitted Transferee must also agree in writing to
be bound by the terms of this Agreement in the form of Exhibit A attached hereto.



     (b) Notwithstanding the foregoing, the restriction in the proviso to Section 3.03(a)
shall not apply to a Distribution in Kind by an Institutional Shareholder (the “Distributing
Institution”), and any transferees pursuant to such Distribution in Kind shall not be bound by the
provisions of this Agreement so long as Institutional Shareholders holding more than 50% of the
then outstanding Ordinary Shares held by all Institutional Shareholders have consented in writing
prior to such Distribution in Kind, to the timing of the Distribution in Kind and the number of
each class of Company Securities subject to the Distribution in Kind.



     Section 3.04 . Restrictions on Transfers by the Institutional Shareholders. (a)
Except as provided in Section 3.03, each Institutional Shareholder may transfer its Company
Securities only as follows:




     (i) (x) at any time prior to the 12-month anniversary of the First Public
Offering with the prior written consent of Institutional
Shareholders holding more than 50% of the then outstanding Ordinary Shares held by
all Institutional Shareholders and (y) at any time after the 12-month anniversary of the
consummation of the First Public Offering, in a Transfer made at the conclusion of the
Applicable Holdback Period (as defined in Section 5.03) following the First Public
Offering,




     (ii) in a Transfer made in compliance with Section 4.02, or




     (iii) in a Public Offering in connection with the exercise of its rights
under Article 5 hereof or in the First Public Offering.



     (b) No Institutional Shareholder shall Transfer Company Securities to an Adverse
Person (other than by Transfer pursuant to Section 4.02, in a Public Offering or through a national
securities exchange) at any time.



     Section 3.05 . Restrictions on Transfers by the Other Shareholders. (a) Except as
provided in Section 3.03, each Other Shareholder may transfer its Company Securities only as
follows:




     (i) as a Tagging Person in a Transfer made in compliance with Section 4.01,



15









 






     (ii) in a Transfer made in compliance with Section 4.02,




     (iii) in any Transfer made in compliance with Section 4.01 as a Tag-Along
Seller (provided that, other than any Transfer to any Institutional Shareholder that
Institutional Shareholders holding more than 50% of the then outstanding Ordinary Shares
held by all Institutional Shareholders have consented to in writing prior to such
Transfer, no Other Shareholder shall be permitted to Transfer shares of any class of
Company Securities pursuant to this Section 3.05(a)(iii) if such Transfer would cause such
Other Shareholder’s Sell-down Percentage to fall below the Sell-down Percentage of the TPG
Entities, the FP Entities or Shah Capital (whichever is the lowest) immediately prior to
such Transfer by such Other Shareholder), or in a Transfer made after Section 4.01 is
terminated in accordance with Section 4.01(i) thereof,




     (iv) in a Public Offering in connection with the exercise of its rights
under Article 5 hereof or in the First Public Offering, or




     (v) (x) at any time prior to the 12-month anniversary of the First Public
Offering with the prior written consent of Institutional Shareholders holding more than
50% of the then outstanding Ordinary Shares held by all Institutional Shareholders and (y)
at any time after the 12-month anniversary of the consummation of the First Public
Offering, in a Transfer made at the conclusion of the Applicable Holdback Period (as
defined in Section 5.03) following the First Public Offering and in compliance with
Rule 144 under the Securities Act.



     (b) No Other Shareholder shall Transfer Company Securities to an Adverse Person
(other than by Transfer pursuant to Section 4.02, in a Public Offering or through a national
securities exchange) at any time.



     Section 3.06 . Restrictions on Transfer under a Credit Agreement, Indenture or
Other Agreement for Indebtedness. Notwithstanding the foregoing provisions of this Article 3, if a
Transfer otherwise permitted hereunder would trigger, under the terms of any outstanding (as of the
date hereof) credit agreement, indenture or any other agreement for indebtedness of the Company,
(i) a change of control requiring repayment or (ii) other adverse consequence, then such Transfer
shall be prohibited.



ARTICLE 4

Tag-along Rights; Drag-along Rights




     Section 4.01 . Rights to Participate in Transfer. (a) Subject to Sections 3.03,
3.04, 3.05, 3.06 and 4.01(h), if any Shareholder or group of Shareholders (such



16









 







Shareholder or
group of Shareholders, the “Tag-Along Seller”) proposes to Transfer any number of Ordinary Shares
(a “Tag-Along Sale”), the Shareholders other than the Tag-Along Seller (each, an “Eligible
Shareholder”) may elect, at their option, to exercise their rights under this Section 4.01 (each
such Shareholder, a “Tagging Person”).



     In the event of such a proposed Transfer, the Tag-Along Seller shall provide each Eligible
Shareholder written notice of the terms and conditions of such proposed transfer (“Tag-Along
Notice”) and offer each Tagging Person the opportunity to participate in such sale. The Tag-Along
Notice shall identify the number of Ordinary Shares subject to the offer (“Tag-Along Offer”), the
cash price at which the Transfer is proposed to be made, and all other material terms and
conditions of the Tag-Along Offer, including the form of the proposed agreement, if any.



     From the date of the receipt of the Tag-Along Notice, each Tagging Person shall have the right
(a “Tag-Along Right”), exercisable by written notice (“Tag-Along Response Notice”) given to the
Tag-Along Seller within seven Business Days after its receipt of the Tag-Along Notice (the
"Tag-Along Notice Period”), to request that the Tag-Along Seller include in the proposed Transfer
the number of Ordinary Shares held by such Tagging Person as is specified in such notice, provided
that, if the aggregate number of Ordinary Shares proposed to be sold by the Tag-Along Seller and
all Tagging Persons in such transaction exceeds the number of Ordinary Shares that can be sold on
the terms and conditions set forth in the Tag-Along Notice, then (i) each Tagging Person shall be
entitled to include in the Tag-Along Sale only its Tag-Along Portion of
Ordinary Shares and (ii) the Tag-Along Seller shall be entitled to include the number of
Ordinary Shares proposed to be Transferred by the Tag-Along Seller as set forth in the Tag-Along
Notice (reduced, to the extent necessary, so that each Tagging Person shall be able to include its
Tag-Along Portion) and such additional Ordinary Shares as permitted by Section 4.01(d). Each
Tagging Person that exercises its Tag-Along Rights hereunder shall deliver to the Tag-Along Seller,
together with its Tag-Along Response Notice, the certificate or certificates representing the
Ordinary Shares of such Tagging Person to be included in the Transfer, together with a limited
power-of-attorney authorizing the Tag-Along Seller to Transfer such Ordinary Shares on the terms
set forth in the Tag-Along Notice. Delivery of such certificate or certificates representing the
Ordinary Shares to be Transferred and the limited power-of-attorney authorizing the Tag-Along
Seller to Transfer such Ordinary Shares shall constitute an irrevocable acceptance of the Tag-Along
Offer by such Tagging Persons. Each Tag-Along Response Notice shall include wire transfer
instructions for payment of the purchase price for the Ordinary Shares to be sold in such Tag-Along
Sale. The Tagging Persons shall (a) be required (i) to bear their proportionate share of any
escrows, holdbacks or adjustments in purchase price and any transaction expenses and (ii) to make
such representations, warranties and covenants and enter into



17









 







such agreements as are customary for
transactions of the nature of the Tag-Along Offer, in each case under the terms of any definitive
agreement(s) relating to such Tag-Along Offer and (b) benefit from all of the same provisions of
the definitive agreements as the Tag-Along Seller, it being understood that any liability of any
Tagging Person for indemnification or similar post-closing obligations shall not exceed the
consideration such Tagging Person receives in the Tag-Along Sale and shall not exceed a
proportional share of any such liability based on such Tagging Person’s share of the aggregate
consideration in the Tag-Along Sale.



     If, at the end of a 90-day period after such delivery (which 90-day period shall be extended
if any of the transactions contemplated by the Tag-Along Offer are subject to regulatory approval
until the expiration of five Business Days after all such approvals have been received, but in no
event later than 180 days following receipt of the Tag-Along Response Notice by the Tag-Along
Seller), the Tag-Along Seller has not completed the Transfer of all such Ordinary Shares on
substantially the same terms and conditions set forth in the Tag-Along Notice, the Tag-Along Seller
shall (i) return to each Tagging Person the limited power-of-attorney (and all copies thereof)
together with all certificates representing the Ordinary Shares that such Tagging Person delivered
for Transfer pursuant to this Section 4.01(a) and (ii) not conduct any Transfer of Ordinary Shares
without again complying with this Section.



     (b) Concurrently with the consummation of the Tag-Along Sale, the Tag-Along Seller
shall notify the Tagging Persons thereof, shall remit to the Tagging Persons the total
consideration (by bank or certified check) for the Ordinary Shares of the Tagging Persons
transferred pursuant thereto, and shall, promptly after the consummation of such Tag-Along Sale,
furnish such other
evidence of the completion and time of completion of such transfer and the terms thereof as
may be reasonably requested by the Tagging Persons.



     (c) If at the termination of the Tag-Along Notice Period any Eligible Shareholder
shall not have elected to participate in the Tag-Along Sale, such Eligible Shareholder will be
deemed to have waived its rights under Section 4.01(a) with respect to the Transfer of its
securities pursuant to such Tag-Along Sale.



     (d) If (i) any Eligible Shareholder declines to exercise its Tag-Along Rights or
(ii) any Tagging Person elects to exercise its Tag-Along Rights with respect to less than such
Tagging Person’s Tag-Along Portion, the Tag-Along Seller shall be entitled to Transfer, pursuant to
the Tag-Along Offer, a number of Ordinary Shares held by it equal to the Unused Tag Amount (reduced
to the extent necessary so that each Tagging Person who has elected to exercise its Tag-Along
Rights for the full amount of its Tag-Along Portion shall be able to include its Tag-Along Portion
with respect to the Unused Tag Amount) and each Tagging Person who has elected to exercise its
Tag-Along Rights for the full amount of its



18









 







Tag-Along Portion shall be entitled to Transfer in the
Tag-Along Sale its Tag-Along Portion of the Unused Tag Amount. “Unused Tag Amount” means the
number of Ordinary Shares constituting the sum of (i) the Tag-Along Portion of any Eligible
Shareholder that declined to exercise its Tag-Along Rights and (ii) the portion of the Tag-Along
Portion with respect to which Tag-Along Rights were not exercised by any Tagging Person that
exercised its Tag-Along Rights with respect to less than such Tag-Along Person’s Tag-Along Portion.



     (e) The Tag-Along Seller may Transfer, on behalf of itself and any Tagging Person
who exercises the Tag-Along Rights pursuant to this Section 4.01(a), the Ordinary Shares subject to
the Tag-Along Offer and elected to be Transferred on the terms and conditions set forth in the
Tag-Along Notice within 90 days (or such longer period as extended under Section 4.01(a)) of the
date on which all Tag-Along Rights shall have been waived, exercised or expire; provided that, if
such Tag-Along Sale is subject to regulatory approval, such 90 day period shall be extended until
the expiration of five Business Days after all such approvals have been received, but in no event
later than 180 days following the effective date of the Tag-Along Sale Notice.



     (f) Notwithstanding the requirements of this Section 4.01, a Tag-Along Seller may
Transfer Ordinary Shares at any time without complying with the requirements of paragraphs (a) and
(b) of Section 4.01 so long as such Transfer is solely for cash and the Tag-Along Seller deposits
into escrow with an independent third party at the time of Transfer that amount of the
consideration received in the sale equal to the Escrow Amount. The “Escrow Amount” shall equal
that amount of consideration that all the Eligible Shareholders would have been entitled to receive
if each of the Eligible Shareholders had the opportunity to participate in the Transfer as a
Tagging Person to the extent of its Tag-Along Portion, determined as if each such Eligible
Shareholder (i) delivered a Tag-Along Response Notice to the Tag-Along Seller in the time period
set forth in Section 4.01(a) and (ii) proposed to include all of its Ordinary Shares which it
would have been entitled to include in the Transfer.



     No later than the date of the Transfer, the Tag-Along Seller shall notify the Company in
writing of the proposed Transfer. Such notice (the “Escrow Notice”) shall set forth the
information required in the Tag-Along Notice, and in addition, such notice shall state the name of
the escrow agent and the account number of the escrow account. The Company shall promptly, and in
any event within 10 days, deliver or cause to be delivered the Escrow Notice to each Eligible
Shareholder.



     An Eligible Shareholder may exercise the tag-along right described in this clause (f) by
delivery to the Tag-Along Seller, within seven Business Days of the date after the Company
delivered or caused to be delivered the Escrow Notice, of (i) a written notice specifying the
number of Ordinary Shares it proposes to sell



19









 







(which such number shall not exceed such Eligible
Shareholder’s Tag-Along Portion), and (ii) the certificates representing such securities, with
transfer powers duly endorsed in blank.



     Promptly after the expiration of the seventh Business Day after the Company has delivered or
caused to be delivered the Escrow Notice, (i) the Tag-Along Seller shall purchase that number of
Ordinary Shares as the Tag-Along Seller would have been required to include in the sale had the
Tag-Along Seller complied with the provisions of Section 4.01(a), (ii) the Company shall cause to
be released from the escrow to the Eligible Shareholder from whom the Tag-Along Seller purchases
Ordinary Shares pursuant to clause (i) of this paragraph the applicable amount of consideration due
to such Eligible Shareholder together with any interest thereon, and (iii) all remaining funds and
other consideration held in escrow shall be released to the Tag-Along Seller.



     (g) Notwithstanding anything contained in this Section 4.01, there shall be no
liability on the part of the Tag-Along Seller to the Tagging Persons (other than the obligation to
return any certificates evidencing Ordinary Shares received by the Tag-Along Seller) if the
Transfer of Ordinary Shares pursuant to this Section 4.01 is not consummated for whatever reason.
Whether to effect a Transfer of Ordinary Shares pursuant to this Section 4.01 by the Tag-Along
Seller is in the sole and absolute discretion of the Tag-Along Seller.



     (h) The provisions of this Section 4.01 shall not apply to any proposed Transfer of
Ordinary Shares by the Tag-Along Seller (A) in a Public Offering or pursuant to Rule 144 or (B)
pursuant to Section 3.03 or 4.02.



     (i) This
Section 4.01 shall terminate upon the earlier to occur of (i) the third
anniversary of the date of this Agreement and (ii) the date on which the Aggregate Ownership of
Ordinary Shares by the Institutional Shareholders
collectively falls below 30% of the aggregate Initial Ownership of Ordinary Shares by such
Institutional Shareholders.



     Section 4.02 . Right to Compel Participation in Certain Transfers. (a) If the
Institutional Shareholders collectively propose (i) to Transfer not less than 50% of their Initial
Ownership of Ordinary Shares to a Third Party in a bona fide sale or (ii) a Transfer in which the
Ordinary Shares to be Transferred by the Institutional Shareholders collectively, plus the Ordinary
Shares to be Transferred by the Other Shareholders pursuant to this Section 4.02(a), constitute
more than 50% of the outstanding Ordinary Shares (a “Compelled Sale”), the Institutional
Shareholders collectively may at their option require all Other Shareholders to Transfer the
Drag-Along Portion of Ordinary Shares (“Drag-Along Rights”) then held by every Other Shareholder
and, at the closing of the Compelled Sale, to exercise such number of options or warrants for
Ordinary Shares held by every Other Shareholder as is required in order that a sufficient number of
Ordinary Shares are



20









 







available to Transfer the relevant Drag-Along Portion of each such Other
Shareholder, for the same consideration per Ordinary Share and otherwise on the same terms and
conditions as the Institutional Shareholders, provided that any Other Shareholder who holds options
or warrants the exercise price per share of which is greater than the per share price at which the
Ordinary Shares are to be Transferred to the Third Party may, if required by the Institutional
Shareholders to exercise such options, in place of such exercise, submit to irrevocable
cancellation thereof without any liability for payment of any exercise price with respect thereto.
If the Compelled Sale is not consummated with respect to any Ordinary Shares acquired upon exercise
of such options or warrants, or the Compelled Sale is not consummated, such options or warrants
shall be deemed not to have been exercised or canceled, as applicable. The Institutional
Shareholders shall provide written notice of such Compelled Sale to the Other Shareholders (a
"Compelled Sale Notice”) not later than the 15th day prior to the proposed Compelled Sale. The
Compelled Sale Notice shall identify the transferee, the number of Ordinary Shares subject to the
Compelled Sale, the consideration for which a Transfer is proposed to be made (the “Compelled Sale
Price”) and all other material terms and conditions of the Compelled Sale. The number of Ordinary
Shares to be sold by each Other Shareholder will be the Drag-Along Portion of the Ordinary Shares
that such Other Shareholder owns. Each Other Shareholder shall be required to participate in the
Compelled Sale on the terms and conditions set forth in the Compelled Sale Notice and to tender its
Ordinary Shares as set forth below. The price payable in such Transfer shall be the Compelled Sale
Price. Not later than the 10th day following the date of the Compelled Sale Notice (the “Compelled
Sale Notice Period”), each of the Other Shareholders shall deliver to a representative of the
Institutional Shareholders designated in the Compelled Sale Notice certificates, and in the case of
warrants, the applicable instrument, representing all Company Securities comprising the Drag-Along
Portion held by such Other Shareholder, duly endorsed, together with all other documents required
to be executed in connection with such Compelled Sale or, if such delivery is not permitted by
applicable law, an unconditional agreement to deliver
such Company Securities pursuant to this Section 4.01(a) at the closing for such Compelled
Sale against delivery to such Other Shareholder of the consideration therefor. If an Other
Shareholder should fail to deliver such certificates or other applicable instruments to the
Institutional Shareholders, the Company (subject to reversal under Section 4.02(b)) shall cause the
books and records of the Company to show that such Company Securities are bound by the provisions
of this Section 4.02(a) and that such Company Securities shall be Transferred to the Third Party
immediately upon surrender for Transfer by the holder thereof. The Other Shareholders shall (a) be
required (i) to bear their proportionate share of any escrows, holdbacks or adjustments in purchase
price and any transaction expenses and (ii) to make such representations, warranties and covenants
and enter into such agreements as are customary for transactions of the nature of the Compelled
Sale, in each case under the terms of any definitive agreements relating to such



21









 







Compelled Sale and
(b) benefit from all of the same provisions of the definitive agreements as the Institutional
Shareholders, it being understood that any liability of any Other Shareholder for indemnification
or similar post-closing obligations shall not exceed the consideration such Other Shareholder
receives in the Compelled Sale and shall be a proportional share of any such liability based on
such Other Shareholder’s share of the aggregate consideration in the Compelled Sale.



     (b) The Institutional Shareholders shall have a period of 90 days from the date of
receipt of the Compelled Sale Notice to consummate the Compelled Sale on the terms and conditions
set forth in such Compelled Sale Notice, provided that, if such Compelled Sale is subject to
regulatory approval, such 90-day period shall be extended until the expiration of five Business
Days after all such approvals have been received, but in no event later than 180 days following the
effective date of the Compelled Sale Notice. If the Compelled Sale shall not have been consummated
during such period, the Institutional Shareholders shall return to each of the Other Shareholders
all certificates or other applicable instruments representing Company Securities that such Other
Shareholders delivered for Transfer pursuant hereto, together with any documents in the possession
of the Institutional Shareholders executed by the Other Shareholders in connection with such
proposed Transfer, and all the restrictions on Transfer contained in this Agreement or otherwise
applicable at such time with respect to such Company Securities owned by the Other Shareholders
shall again be in effect.



     (c) Concurrently with the consummation of the Transfer of Company Securities
pursuant to this Section 4.02, the Institutional Shareholders shall give notice thereof to the
Other Shareholders, shall remit to each of the Other Shareholders who have surrendered their
certificates or other applicable instruments the total consideration (the cash portion of which is
to be paid by bank or certified check) for the Company Securities Transferred pursuant hereto and
shall furnish such other evidence of the completion and time of completion of
such Transfer and the terms thereof as may be reasonably requested by such Other Shareholders.



     (d) Notwithstanding anything contained in this Section 4.02, there shall be no
liability on the part of the Institutional Shareholders to the Other Shareholders (other than the
obligation to return any certificates or other applicable instruments representing Company
Securities received by any Institutional Shareholders) if the Transfer of Company Securities
pursuant to this Section 4.02 is not consummated for whatever reason, regardless of whether the
Institutional Shareholders have delivered a Compelled Sale Notice. Whether to effect a Transfer of
Company Securities pursuant to this Section 4.02 by the Institutional Shareholders is in the sole
and absolute discretion of the Institutional Shareholders.



22









 





     (e) This Section 4.02 shall terminate upon the earlier to occur of (i) the third
anniversary of the date of this Agreement and (ii) the date on which the Aggregate Ownership of
Ordinary Shares by the Institutional Shareholders collectively falls below 30% of the aggregate
Initial Ownership of Ordinary Shares by such Institutional Shareholders.



ARTICLE 5

Registration Rights




     Section 5.01 . Demand Registration. (a) If, (i) at any time after the earlier of
180 days after the consummation of the First Public Offering and the Applicable Holdback Period,
the Company shall receive a written request from the Institutional Shareholders, acting
collectively, or, (ii) at any time after the 12-month anniversary of the consummation of the First
Public Offering, the Company shall receive a written request from any of the Institutional
Shareholders, that the Company effect the registration under the Securities Act of all or a portion
of such Requesting Shareholder’s Registrable Securities, and specifying the intended method of
disposition thereof (a “Demand Registration”), then the Company shall promptly give written notice
of such requested registration at least 15 days prior to the anticipated filing date of the
registration statement relating to such Demand Registration to each Non-Requesting Shareholder.
Upon the Company’s giving notice of a requested registration, the Company will use its reasonable
best efforts to effect, as expeditiously as possible, the registration under the Securities Act of:




     (x) the Registrable Securities that the Company has been so requested to register by
the Requesting Shareholders, then held by the Requesting Shareholders, and




     (y) subject to the restrictions set forth in Sections 5.01(e) and 5.02, all other
Registrable Securities of the same class as that requested to be registered by the
Requesting Shareholders which any Non-Requesting
Shareholder entitled to request the Company to effect an Incidental Registration pursuant
to Section 5.02 (all such Shareholders, together with the Requesting Shareholders, the
“Holders”) have requested the Company to register by written request received by the
Company within 15 days after the receipt by such Holders of such written notice given by
the Company,




all to the extent necessary to permit the disposition (in accordance with the intended
methods thereof as aforesaid) of the Registrable Securities so to be registered, provided
that the Company shall not be obligated to effect a Demand Registration unless either (x)
the aggregate proceeds expected to be received from the sale of the Ordinary Shares
requested to be included



23









 







in such Demand Registration equal or exceed $25,000,000 or, in
the case of a Shortform Registration, $5,000,000 or (y) the remaining portion of
Registrable Securities held by at least one Requesting Shareholder would be registered
pursuant to such Demand Registration. In no event will the Company be required to effect
more than one Demand Registration hereunder within any six-month period.



     "Requesting Shareholder” means, with respect to a Demand Registration, the Institutional
Shareholder or Institutional Shareholders exercising such Demand Registration and any Institutional
Shareholder that joins a Demand Registration made pursuant to Section 5.01(a)(ii). “Non-Requesting
Shareholder” means each Shareholder with respect to a Demand Registration that is not a Requesting
Shareholder.



     (b) Promptly after the expiration of the 15-day period referred to in Section
5.01(a)(y) hereof, the Company will notify all the Holders to be included in the Demand
Registration of the other Holders and the number of shares of Registrable Securities requested to
be included therein. At any time prior to the effective date of the registration statement
relating to such registration, the Requesting Shareholders may revoke such request, without
liability to any of the other Holders, by providing a written notice to the Company revoking such
request.



     (c) The Company will be liable for and pay all Registration Expenses in connection
with any Demand Registration, regardless of whether it is effected.



(d) A Demand Registration shall not be deemed to have occurred





     (i) unless the registration statement relating thereto (A) has become
effective under the Securities Act and (B) has remained effective for a period of at least
180 days (or such shorter period in which all Registrable Securities of the Holders
included in such registration have actually been sold thereunder), provided that such
registration statement shall not be considered a Demand Registration if, after any
registration statement requested pursuant to this Section 5.01 becomes effective, (x)
such registration statement is interfered with by any stop order, injunction or other
order or requirement of the SEC or other governmental agency or court and (y) less than
75% of the Registrable Securities included in such registration statement have been sold
thereunder, or




     (ii) if the Maximum Offering Size (as defined below) is reduced in
accordance with Section 5.01(e) such that less than 66? % of the Registrable Securities of
the Requesting Shareholders sought to be included in such registration are included.



24









 





     (e) If a Demand Registration involves an underwritten Public Offering and the
managing underwriter shall advise the Company and the Requesting Shareholders that, in its view,
the number of shares of Registrable Securities requested to be included in such registration
(including any securities that the Company proposes to be included that are not Registrable
Securities) exceeds the largest number of shares that can be sold without having an adverse effect
on such offering, including the price at which such shares can be sold (the “Maximum Offering
Size”), the Company will include in such registration, in the priority listed below, up to the
Maximum Offering Size:




     (A) first, all Registrable Securities requested to be registered by the
Requesting Shareholders and their Permitted Transferees and, in the case of a
Demand Registration exercised by more than one Institutional Shareholder, all
Registrable Securities requested to be registered by each of the Institutional
Shareholders and their Permitted Transferees (allocated, if necessary for the
offering not to exceed the Maximum Offering Size, pro rata among such entities
on the basis of the relative number of shares of Registrable Securities so
requested to be registered),




     (B) second, all Registrable Securities requested to be included in such
registration by any Non-Requesting Shareholder and its Permitted Transferees
(allocated, if necessary for the offering not to exceed the Maximum Offering
Size, pro rata among the Non-Requesting Shareholders and their Permitted
Transferees on the basis of the relative number of Registrable Securities so
requested to be included in such registration) excluding, for purposes of this
paragraph (B), the Registrable Securities of a Non-Requesting Institutional
Shareholder in the case of a Demand Registration in which such Non-Requesting
Institutional Shareholder is included in paragraph (A) above, and




     (C) third, any securities proposed to be registered for the account of any
other Persons (including the Company), with such priorities among them as the
Company shall determine.



     (f) Upon written notice to each Requesting Shareholder, the Company may postpone
effecting a registration pursuant to this Section 5.01 on one occasion during any period of 12
consecutive months for a reasonable time specified in the notice but not exceeding 90 days (which
period may not be extended or renewed), if (1) an investment banking firm of recognized national
standing shall advise the Company and the Requesting Shareholders in writing that effecting the
registration would materially and adversely affect an offering of securities of such Company the
preparation of which had then been commenced



25









 







or (2) the Company is in possession of material
non-public information the disclosure of which during the period specified in such notice the
Company believes would not be in the best interests of the Company.



     Section 5.02 . Incidental Registration. (a) If, at any time after the First Public
Offering, the Company proposes to register any Company Securities under the Securities Act (other
than a registration on Form S-8 or S-4, or any successor or similar forms, relating to Ordinary
Shares issuable upon exercise of employee stock options or in connection with any employee benefit
or similar plan of the Company or in connection with a direct or indirect acquisition by the
Company of another Person), whether or not for sale for its own account, it will each such time,
subject to the provisions of Section 5.02(b), give prompt written notice prior to the anticipated
filing date of the registration statement relating to such registration to each Shareholder, which
notice shall set forth such Shareholder’s rights under this Section 5.02 and shall offer such
Shareholder the opportunity to include in such registration statement the number of Registrable
Securities of the same class or series as those proposed to be registered as each such Shareholder
may request (an “Incidental Registration”), subject to the provisions of Section 5.02(b). Upon the
written request of any such Shareholder made within 15 days after the receipt of notice from the
Company (which request shall specify the number of Registrable Securities intended to be disposed
of by such Shareholder), the Company will use its reasonable best efforts to effect the
registration under the Securities Act of all Registrable Securities that the Company has been so
requested to register by all such Shareholders, to the extent requisite to permit the disposition
of the Registrable Securities so to be registered, provided that (i) if such registration involves
an underwritten Public Offering, all such Shareholders requesting to be included in the Company’s
registration must sell their Registrable Securities to the underwriters selected as provided in
Section 5.04(f) on the same terms and conditions as apply to the Company or the Requesting
Shareholder, as applicable, and (ii) if, at any time after giving written notice of its intention
to register any securities pursuant to this Section 5.02(a) and prior to the effective date of the
registration statement filed in connection with such registration, the Company shall determine for
any reason not to register such securities, the Company shall give written notice to all such
Shareholders and, thereupon, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration. No registration effected under this Section 5.02
shall relieve the Company of its obligations to effect a Demand Registration to the extent required
by Section 5.01. The Company shall pay all Registration
Expenses in connection with each registration of Registrable Securities requested pursuant to
this Section 5.02.



     (b) If a registration pursuant to this Section 5.02 involves an underwritten Public
Offering (other than any Demand Registration, in which case the provisions with respect to priority
of inclusion in such offering set forth in Section 5.01(e) shall apply) and the managing
underwriter advises the Company



26









 







that, in its view, the number of Shares that the Company and such
Shareholders intend to include in such registration exceeds the Maximum Offering Size, the Company
will include in such registration, in the following priority, up to the Maximum Offering Size:




     (i) first, so much of the securities proposed to be registered for the
account of the Company as would not cause the offering to exceed the Maximum Offering
Size,




     (ii) second, all Registrable Securities requested to be included in such
registration by the Institutional Shareholders and each of their Permitted Transferees,
(allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro
rata among such entities or persons on the basis of the relative number of shares of
Registrable Securities so requested to be included in such registration),




     (iii) third, any securities proposed to be registered for the account of
any other Persons with such priorities among them as the Company shall determine.



     Section 5.03 . Holdback Agreements. If any registration of Registrable Securities
shall become effective in connection with a Public Offering, each Institutional Shareholder and
each Other Shareholder and the Company agree not to effect any public sale or distribution,
including any sale pursuant to Rule 144 or Rule 144A under the Securities Act, of any Registrable
Securities, and not to effect any such public sale or distribution of any other security of the
Company or of any stock convertible into or exchangeable or exercisable for any Ordinary Shares (in
each case, other than as part of such Public Offering) during the 14 days prior to the effective
date of the applicable registration statement (except as part of such registration) or during the
period after such effective date equal to the lesser of (i) such period of time as the Company and
the lead managing underwriter shall agree and (ii) 90 days (such lesser period, the “Applicable
Holdback Period”).



     Section 5.04 . Registration Procedures. Whenever Shareholders request that any
Registrable Securities be registered pursuant to Section 5.01 or 5.02 hereof, subject to the
provisions of such Sections, the Company will use its reasonable best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the intended method of
disposition thereof as quickly as practicable, and in connection with any such request:



     (a) The Company will as expeditiously as possible (but in any event within (i) 45
days of receipt of a request for a Demand Registration or (ii) 21 days, in the case of a Shortform
Registration) prepare and file with the SEC a registration statement on any form reasonably
acceptable to the Requesting



27









 







Shareholders for which the Company then qualifies or that counsel for
the Company shall deem appropriate and which form shall be available for the sale of the
Registrable Securities to be registered thereunder in accordance with the intended method of
distribution thereof, and use its reasonable best efforts to cause such filed registration
statement to become and remain effective for a period of not less than 180 days, or in the case of
a shelf registration statement, one year (or such shorter period in which all of the Registrable
Securities of the Holders included in such registration statement shall have actually been sold
thereunder).



     (b) Prior to filing a registration statement or prospectus or any amendment or
supplement thereto, the Company will, if requested, furnish to each participating Shareholder and
each underwriter, if any, of the Registrable Securities covered by such registration statement
copies of such registration statement as proposed to be filed, and thereafter the Company will
furnish to such Shareholder and underwriter, if any, such number of copies of such registration
statement, each amendment and supplement thereto (in each case including all exhibits thereto and
documents incorporated by reference therein), the prospectus included in such registration
statement (including each preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 or Rule 430A under the Securities Act and such other documents as
such Shareholder or underwriter may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by such Shareholder. Each Institutional Shareholder shall have the
right to request that the Company modify any information contained in such registration statement,
amendment and supplement thereto pertaining to such Institutional Shareholder and the Company shall
use all reasonable efforts to comply with such request, provided, however, that the Company shall
not have any obligation so to modify any information if so doing would cause the prospectus to
contain an untrue statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.



     (c) After the filing of the registration statement, the Company shall (i) cause the
related prospectus to be supplemented by any required prospectus supplement, and, as so
supplemented, to be filed pursuant to Rule 424 under the Securities Act, (ii) comply with the
provisions of the Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement during the applicable period in accordance with the intended
methods of disposition by the sellers thereof set forth in such registration statement or
supplement to such prospectus and (iii) promptly notify each Shareholder holding Registrable
Securities covered by such registration statement of any stop order issued or threatened by the SEC
or any state securities commission under state
blue sky laws and take all reasonable actions required to prevent the entry of such stop order
or to remove it if entered.



28









 





     (d) The Company will use its reasonable best efforts to (i) register or qualify the
Registrable Securities covered by such registration statement under such other securities or blue
sky laws of such jurisdictions in the United States as any Shareholder holding such Registrable
Securities reasonably (in light of such Shareholder’s intended plan of distribution) requests and
(ii) cause such Registrable Securities to be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the business and operations of the Company
and do any and all other acts and things that may be reasonably necessary or advisable to enable
such Shareholder to consummate the disposition of the Registrable Securities owned by such
Shareholder, provided that the Company will not be required to (A) qualify generally to do business
in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (d),
(B) subject itself to taxation in any such jurisdiction or (C) consent to general service of
process in any such jurisdiction.



     (e) The Company will immediately notify each Shareholder holding such Registrable
Securities covered by such registration statement, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the occurrence of an event requiring the
preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of
a material fact or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading and promptly prepare and make available to each such
Shareholder and file with the SEC any such supplement or amendment.



     (f) (i) The selling Institutional Shareholders acting collectively will have the
right, in their sole discretion, to select an underwriter or underwriters in connection with any
Public Offering resulting from the exercise of a Demand Registration, which underwriter or
underwriters may include any Affiliate of any Institutional Shareholder, and (ii) the Company will
select an underwriter or underwriters in connection with any other Public Offering. In connection
with any Public Offering, the Company will enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions as are reasonably required in
order to expedite or facilitate the disposition of such Registrable Securities in any such Public
Offering, including the engagement of a “qualified independent underwriter” in connection with the
qualification of the underwriting arrangements with the NASD.



     (g) Upon execution of confidentiality agreements in form and substance reasonably
satisfactory to the Company, the Company will make available for inspection by any Shareholder and
any underwriter participating in any disposition pursuant to a registration statement being filed
by the Company
pursuant to this Section 5.04 and any attorney, accountant or other professional



29









 







retained by
any such Shareholder or underwriter (collectively, the “Inspectors”), all financial and other
records, pertinent corporate documents and properties of the Company (collectively, the “Records”)
as shall be reasonably necessary or desirable to enable them to exercise their due diligence
responsibility, and cause the Company’s officers, directors and employees to supply all information
reasonably requested by any Inspectors in connection with such registration statement. Records
that the Company determines, in good faith, to be confidential and that it notifies the Inspectors
are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records
is necessary to avoid or correct a misstatement or omission in such registration statement or (ii)
the release of such Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction. Each Shareholder agrees that information obtained by it as a result of
such inspections shall be deemed confidential and shall not be used by it or its Affiliates as the
basis for any market transactions in the Company Securities unless and until such is made generally
available to the public. Each Shareholder further agrees that, upon learning that disclosure of
such Records is sought in a court of competent jurisdiction, it will give notice to the Company and
allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the
Records deemed confidential.



     (h) The Company will furnish to each such underwriter, if any, a signed counterpart,
addressed to such underwriter, of (i) an opinion or opinions of counsel to the Company and (ii) a
comfort letter or comfort letters from the Company’s independent public accountants, each in
customary form and covering such matters of the kind customarily covered by opinions or comfort
letters, as the case may be, as the managing underwriter therefor reasonably requests.



     (i) The Company will otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its securityholders, as soon as
reasonably practicable, an earnings statement or such other document covering a period of 12
months, beginning within three months after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder.



     (j) The Company may require each such Shareholder promptly to furnish in writing to
the Company such information regarding the distribution of the Registrable Securities as the
Company may from time to time reasonably request and such other information as may be legally
required in connection with such registration.



     (k) Each such Shareholder agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 5.04(e) hereof, such Shareholder
will forthwith discontinue disposition of Registrable Securities pursuant to the registration
statement covering such



30









 







Registrable Securities until such Shareholder’s receipt of the copies of
the supplemented or amended prospectus contemplated by Section 5.04(e) hereof, and, if so directed
by the Company, such Shareholder will deliver to the Company all copies, other than any permanent
file copies then in such Shareholder’s possession, of the most recent prospectus covering such
Registrable Securities at the time of receipt of such notice. In the event that the Company shall
give such notice, the Company shall extend the period during which such registration statement
shall be maintained effective (including the period referred to in Section 5.04(a) hereof) by the
number of days during the period from and including the date of the giving of notice pursuant to
Section 5.04(e) hereof to the date when the Company shall make available to such Shareholder a
prospectus supplemented or amended to conform with the requirements of Section 5.04(e) hereof.



     (l) The Company will use its reasonable best efforts to list all Registrable
Securities covered by such registration statement on any securities exchange or quotation system on
which any of the Registrable Securities are then listed or traded.



     (m) The Company shall have appropriate officers of the Company (i) prepare and make
presentations at any “road shows” and before analysts and rating agencies, as the case may be, (ii)
take other actions to obtain ratings for any Registrable Securities and (iii) otherwise use their
reasonable best efforts to cooperate as reasonably requested by the underwriters in the offering,
marketing or selling of the Registrable Securities.



     (n) The Company will provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration statement from and after a
date not later than the effective date of such registration statement.



     Section 5.05 . Indemnification by the Company. The Company agrees to indemnify and
hold harmless each Shareholder holding Registrable Securities covered by a registration statement,
its officers, directors, employees, partners and agents, and each Person, if any, who controls such
Shareholder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act from and against any and all losses, claims, damages and liabilities (including reasonable
expenses of investigation and reasonable attorneys’ fees and expenses) caused by any untrue
statement or alleged untrue statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Securities (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by
any omission or alleged omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or alleged untrue
statement or omission so made



31









 







based upon information furnished in writing to the Company by such
Shareholder or on such Shareholder’s behalf expressly for use therein. The Company also agrees to
indemnify any underwriters of the Registrable Securities, their officers
and directors and each person who controls such underwriters on substantially the same basis
as that of the indemnification of the Shareholders provided in this Section 5.05.



     Section 5.06 . Indemnification by Participating Shareholders. Each Shareholder
holding Registrable Securities included in any registration statement agrees, severally but not
jointly, to indemnify and hold harmless the Company, its officers, directors and agents and each
Person, if any, who controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the
Company to such Shareholder, but only (i) with respect to information furnished in writing by such
Shareholder or on such Shareholder’s behalf expressly for use in any registration statement or
prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any
preliminary prospectus or (ii) to the extent that any loss, claim, damage, liability or expense
described in Section 5.05 results from the fact that a current copy of the prospectus (or such
amended or supplemented prospectus, as the case may be) was not sent or given to the Person
asserting any such loss, claim, damage, liability or expense at or prior to the written
confirmation of the sale of the Registrable Securities concerned to such Person if it is determined
that it was the responsibility of such Shareholder to provide such Person with a current copy of
the prospectus (or such amended or supplemented prospectus, as the case may be) and such current
copy of the prospectus (or such amended or supplemented prospectus, as the case may be) would have
cured the defect giving rise to such loss, claim, damage, liability or expense. Each such
Shareholder also agrees to indemnify and hold harmless underwriters of the Registrable Securities,
their officers and directors and each Person who controls such underwriters on substantially the
same basis as that of the indemnification of the Company provided in this Section 5.06. As a
condition to including Registrable Securities in any registration statement filed in accordance
with Article 5 hereof, the Company may require that it shall have received an undertaking
reasonably satisfactory to it from any underwriter to indemnify and hold it harmless to the extent
customarily provided by underwriters with respect to similar securities. No Shareholder shall be
liable under this Section 5.06 for any loss, claim, damage, liability or expense in excess of the
net proceeds realized by such Shareholder in the sale of Registrable Securities of such Shareholder
to which such loss, claim, damage, liability or expense relates.



     Section 5.07 . Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any Person in respect of
which indemnity may be sought pursuant to this Article 5, such Person (an “Indemnified Party”)
shall promptly notify the Person against whom such indemnity may be sought (the “Indemnifying
Party”)



32









 







in writing and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Party, and shall assume the
payment of all fees and expenses, provided that the failure of any Indemnified Party so to notify
the Indemnifying Party shall not relieve the
Indemnifying Party of its obligations hereunder except to the extent that the Indemnifying
Party is materially prejudiced by such failure to notify. In any such proceeding, any Indemnified
Party shall have the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the
Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) in the
reasonable judgment of such Indemnified Party representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between them. It is
understood that, in connection with any proceeding or related proceedings in the same jurisdiction,
the Indemnifying Party shall not be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified
Parties, and that all such fees and expenses shall be reimbursed as they are incurred. In the case
of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by
the Indemnified Parties. The Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such consent, or if there be a
final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such
Indemnified Parties from and against any loss or liability (to the extent stated above) by reason
of such settlement or judgment. Without the prior written consent of the Indemnified Party, no
Indemnifying Party shall effect any settlement of any pending or threatened proceeding in respect
of which any Indemnified Party is or could have been a party and indemnity could have been sought
hereunder by such Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability arising out of such proceeding.



     Section 5.08 . Contribution. If the indemnification provided for in this Article 5
is unavailable to the Indemnified Parties in respect of any losses, claims, damages or liabilities
referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such
losses, claims, damages or liabilities (i) as between the Company and the Shareholders holding
Registrable Securities covered by a registration statement on the one hand and the underwriters on
the other, in such proportion as is appropriate to reflect the relative benefits received by the
Company and such Shareholders on the one hand and the underwriters on the other, from the offering
of the Registrable Securities, or if such allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits but also the relative fault
of the Company and such Shareholders on the one hand and of such underwriters on the



33









 







other in
connection with the statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations and (ii) as between the Company
on the one hand and each such Shareholder on the other, in such proportion as is appropriate to
reflect the relative fault of the Company and of each such Shareholder in connection with such
statements or omissions, as well as any other relevant equitable
considerations. The relative benefits received by the Company and such Shareholders on the
one hand and such underwriters on the other shall be deemed to be in the same proportion as the
total proceeds from the offering (net of underwriting discounts and commissions but before
deducting expenses) received by the Company and such Shareholders bear to the total underwriting
discounts and commissions received by such underwriters, in each case as set forth in the table on
the cover page of the prospectus. The relative fault of the Company and such Shareholders on the
one hand and of such underwriters on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the Company and such
Shareholders or by such underwriters. The relative fault of the Company on the one hand and of
each such Shareholder on the other shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by such party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent such statement or
omission.



     The Company and the Shareholders agree that it would not be just and equitable if contribution
pursuant to this Section 5.08 were determined by pro rata allocation (even if the underwriters were
treated as one entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or
liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject
to the limitations set forth above, any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5.08, no underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the Registrable Securities
underwritten by it and distributed to the public were offered to the public exceeds the amount of
any damages that such underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no Shareholder shall be required to
contribute any amount in excess of the amount by which the total price at which the Registrable
Securities of such Shareholder were offered to the public exceeds the amount of any damages that
such Shareholder has otherwise been required to pay by reason of such untrue or



34









 







alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation. Each Shareholder’s obligation
to contribute pursuant to this Section 5.08 is several in the proportion that the proceeds of the
offering received by such Shareholder bears to the total proceeds of the offering received by all
such Shareholders and not joint.



     Section 5.09 . Participation in Public Offering. No Person may participate in any
Public Offering hereunder unless such Person (a) agrees to sell such Person’s securities on the
basis provided in any underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements and (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required under the terms of
such underwriting arrangements and the provisions of this Agreement in respect of registration
rights.



     Section 5.10 . Other Indemnification. Indemnification similar to that specified
herein (with appropriate modifications) shall be given by the Company and each Shareholder
participating therein with respect to any required registration or other qualification of
securities under any federal or state law or regulation or governmental authority other than the
Securities Act.



     Section 5.11 . Cooperation by the Company. If any Shareholder shall transfer any
Registrable Securities pursuant to Rule 144 or Rule 144A under the Securities Act, the Company
shall cooperate, to the extent commercially reasonable, with such Shareholder and shall provide to
such Shareholder such information as such Shareholder shall reasonably request.



     Section 5.12 . No Transfer of Registration Rights. None of the rights of
Shareholders under this Article 5 shall be assignable by any Shareholder to any Person acquiring
Securities in any Public Offering or pursuant to Rule 144 or Rule 144A of the Securities Act.



ARTICLE 6

Certain Covenants and Agreements




     Section 6.01 . Confidentiality. (a) Each Shareholder agrees that Confidential
Information (as defined below) furnished and to be furnished to it was and will be made available
in connection with such Shareholder’s Investment in the Company. Each Shareholder agrees that it
will use, and that it will cause any Person to whom Confidential Information is disclosed pursuant
to clause (i) below to use, the Confidential Information only in connection with its Investment in
the Company and not for any other purpose (including, without limitation, to



35









 







disadvantage
competitively the Company or any other Shareholder). Each Shareholder further acknowledges and
agrees that it will not disclose any Confidential Information to any Person, provided that
Confidential Information may be disclosed (i) to such Shareholder’s Representatives (as defined
below) in the normal course of the performance of their duties or to any financial institution
providing credit to such Shareholder, (ii) to the extent required by applicable law, rule or
regulation (including complying with any oral or written questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar process to which a
Shareholder is subject, provided that such Shareholder gives the Company prompt notice of such
request(s), to the extent practicable, so that the Company may seek an appropriate protective
order or similar relief (and the Shareholder shall cooperate with such efforts by the Company, and
shall in any event make only the minimum disclosure required by such law, rule or regulation)),
(iii) to any Person to whom such Shareholder is contemplating a Transfer of its Company Securities
(provided that such Transfer would not be in violation of the provisions of this Agreement and as
long as such potential transferee is advised of the confidential nature of such information and
agrees to be bound by a confidentiality agreement in form and substance satisfactory to the Company
and consistent with the provisions hereof), (iv) to any regulatory authority or rating agency to
which the Shareholder or any of its affiliates is subject or with which it has regular dealings, as
long as such authority or agency is advised of the confidential nature of such information or (v)
if the prior written consent of the Board shall have been obtained. Nothing contained herein shall
prevent the use (subject, to the extent possible, to a protective order) of Confidential
Information in connection with the assertion or defense of any claim by or against the Company or
any Shareholder.



     (b) "Confidential Information” means any information concerning the Company and
Persons that are or become its Subsidiaries or the financial condition, business, operations or
prospects of the Company and Persons that are or become its Subsidiaries in the possession of or
furnished to any Shareholder (including, without limitation by virtue of its present or former
right to designate a director of the Company), provided that the term Confidential Information does
not include information that (i) is or becomes generally available to the public other than as a
result of a disclosure by a Shareholder or its partners, directors, officers, employees, agents,
counsel, investment advisers or representatives (all such persons being collectively referred to as
"Representatives”) in violation of this Agreement, (ii) is or was available to such Shareholder on
a non-confidential basis prior to its disclosure to such Shareholder or its Representatives by the
Company or (iii) was or becomes available to such Shareholder on a non-confidential basis from a
source other than the Company, provided that such source is or was (at the time of receipt of the
relevant information) not, to the best of such Shareholder’s knowledge, bound by a confidentiality
agreement with (or other confidentiality obligation to) the Company or another Person.



36









 





     Section 6.02 . Information. The Company agrees to furnish to any Institutional
Shareholder that is a Five Percent Shareholder:



     (a) After the end of the first three fiscal quarters, as soon as practicable and in
any event on or before the applicable filing date for filing quarterly reports on Form 10-Q (or any
successor form) with the SEC, consolidated balance sheets of the Company and its Subsidiaries as at
the end of such period and the related consolidated statements of income, stockholders’ equity and
cash flow of the Company and its Subsidiaries for such fiscal quarter, setting forth in each case
in comparative form the consolidated figures for the corresponding periods of the previous fiscal
year, all in reasonable detail and certified by the Company’s Chief Financial Officer that they
fairly present the financial condition of the Company
and its Subsidiaries as at the dates indicated and the results of their operations and changes
in their financial position for the periods indicated, subject to normal year-end adjustments;



     (b) After the end of each fiscal year as soon as practicable and in any event on or
before the applicable filing date for filing annual reports on Form 10-K (or any successor form),
consolidated balance sheets of the Company and its Subsidiaries as at the end of such year and the
related consolidated statements of income, stockholders’ equity and cash flow of the Company and
its Subsidiaries for such fiscal year, setting forth in each case, in comparative form, the
consolidated figures for the previous year, all in reasonable detail and accompanied by a report
thereon of independent certified public accountants of recognized national standing selected by the
Company, which report shall be unqualified as to going concern and scope of audit and shall state
that such consolidated financial statements present fairly the financial position of the Company
and its Subsidiaries as at the dates indicated and the results of their operations and changes in
their financial position for the periods indicated in conformity with generally accepted accounting
principles applied on a basis consistent with prior years (except as otherwise stated therein) and
that the examination by such accountants in connection with such consolidated financial statements
has been made in accordance with generally accepted auditing standards;



     (c) As soon as practicable and in any event no later than 20 days after the end of
each fiscal month of the Company, the Company monthly management report for such month,
substantially in the form of and covering the items set forth in Exhibit B hereto;



     (d) Promptly upon receipt thereof, copies of all reports submitted to the Company by
independent public accountants in connection with each annual, interim or special audit of the
Company’s financial statements made by such accountant, including, without limitation, the comment
letter submitted by such accountants to management in connection with their annual audit;




37










 






     (e) Promptly upon their becoming available, copies of all financial statements,
reports, notices and proxy statements sent or made available generally by the Company to its
securityholders or by any Subsidiary of the Company to its securityholders other than the Company
or another Subsidiary, of all regular and periodic reports and all registration statements and
prospectuses, if any, filed by the Company or any of its Subsidiaries with any securities exchange
or with the SEC or any governmental authority succeeding to any of its functions, and of all press
releases and other written statements made available generally by the Company or any Subsidiary to
the public concerning material developments in the business of the Company and its Subsidiaries;



     (f) All information provided in writing to the banks pursuant to the Company’s
principal credit facility; and



     (g) From time to time such additional information regarding the financial position
or business of the Company and its Subsidiaries as such Institutional Shareholder may reasonably
request.



     The Company’s obligation to provide information pursuant to paragraphs (a) and (b) of this
Section 6.02 and Section 6.03 shall be deemed satisfied upon the timely filing of such information
with the SEC.



     Section 6.03. Reports. The Company will furnish the Shareholders with the
quarterly and annual financial reports that the Company is required to file with the SEC pursuant
to Section 13 or Section 15(d) of the Exchange Act or, in the event the Company is not required to
file such reports, quarterly and annual reports containing the same information as would otherwise
be required in such reports.



     Section 6.04. Cooperation in Refinancing. Each Shareholder agrees to cooperate to
the extent commercially reasonable with the Company and take such steps as the Board reasonably
deems appropriate in any financing of debt of the Company and any of its Subsidiaries, including
executing such documents as the Board reasonably determines should be filed with any governmental
agency and conducting presentations to potential investors and rating agencies. This Section 6.04
shall not be construed to require any Shareholder to contribute any additional capital to the
Company.



     Section 6.05. Appointment of Shareholder Representatives. (a) Each TPG Entity
and, to the extent that any Permitted Transferee of any TPG Entity shall have become a Shareholder,
such Shareholder irrevocably appoints the TPG Shareholder Representative its agent and true and
lawful attorney-in-fact, with full power of substitution, to take the actions, receive notices and
exercise the powers delegated to the TPG



38









 







Shareholder Representative under this Agreement in the
name of each such Shareholder, together with such actions and powers as are reasonably incidental thereto. Notwithstanding the foregoing, the TPG Shareholder Representative shall not take any
action or exercise any power to the extent that the holders of the majority of the Fully Diluted
Ordinary Shares held by the TPG Entities and their Permitted Transferees shall have voted to
prevent the Shareholder Representative from taking such action or exercising such power. “TPG
Shareholder Representative” means TPG IV as agent for the TPG Entities and their Permitted
Transferees that are Shareholders. The entity appointed as the TPG Shareholder Representative may
be replaced at any time and from time to time by the vote of a majority of the Fully Diluted
Ordinary Shares held by the TPG Entities and their Permitted Transferees. The new TPG Shareholder
Representative shall notify the Company of such appointment as promptly as practicable after such
appointment.



     (b) Each FP Entity and, to the extent that any Permitted Transferee of any FP Entity
shall have become a Shareholder, such Shareholder irrevocably appoints the FP Shareholder
Representative its agent and true and lawful attorney-in-fact, with full power of substitution, to
take the actions, receive notices and exercise the powers delegated to the FP Shareholder Representative under this Agreement in the
name of each such Shareholder, together with such actions and powers as are reasonably incidental
thereto. Notwithstanding the foregoing, the FP Shareholder Representative shall not take any
action or exercise any power to the extent that the holders of the majority of the Fully Diluted
Ordinary Shares held by the FP Entities and their Permitted Transferees shall have voted to prevent
the Shareholder Representative from taking such action or exercising such power. “FP Shareholder
Representative” means FP as agent for the FP Entities and their Permitted Transferees that are
Shareholders. The entity appointed as the FP Shareholder Representative may be replaced at any
time and from time to time by the vote of a majority of the Fully Diluted Ordinary Shares held by
the FP Entities and their Permitted Transferees. The new FP Shareholder Representative shall
notify the Company of such appointment as promptly as practicable after such appointment.



     (c) Each of Shah Capital and, to the extent that any Permitted Transferee of Shah
Capital shall have become a Shareholder, such Shareholder irrevocably appoints the Shah Capital
Shareholder Representative its agent and true and lawful attorney-in-fact, with full power of
substitution, to take the actions, receive notices and exercise the powers delegated to the Shah
Capital Shareholder Representative under this Agreement in the name of each such Shareholder,
together with such actions and powers as are reasonably incidental thereto. Notwithstanding the
foregoing, the Shah Capital Shareholder Representative shall not take any action or exercise any
power to the extent that the holders of the majority of the Fully Diluted Ordinary Shares held by
Shah Capital and its Permitted Transferees shall have voted to prevent the Shareholder
Representative from taking such action or exercising such power. “Shah Capital Shareholder
Representative” means Shah Capital, as agent for Shah Capital and its Permitted Transferees that
are Shareholders. The entity appointed as the Shah



39









 







Capital Shareholder Representative may be
replaced at any time and from time to time by the vote of a majority of the Fully Diluted Ordinary
Shares held by Shah Capital and its Permitted Transferees. The new Shah Capital Shareholder
Representative shall notify the Company of such appointment as promptly as practicable after such
appointment.



     Section 6.06. Decisions by Institutional Shareholders. In instances that the
Institutional Shareholders may, or are required to, collectively vote, request, consent or decide
on any matter under this Agreement, such vote, request, consent or decision shall be make in
accordance with the result of the vote on such matter of a majority of the Ordinary Shares held at
such time by the Institutional Shareholders and their Permitted Transferees.



ARTICLE 7

Miscellaneous




     Section 7.01. Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto and supersede all prior and contemporaneous agreements and understandings,
both oral and written, among the parties hereto with respect to the subject matter hereof and
thereof.



     Section 7.02. Effectiveness; Binding Effect; Benefit. This Agreement shall become
effective immediately upon the merger of Modular with and into Modular Merger LLC and the exchange
of the Ordinary Shares held by the members of Modular for their membership interests in Modular
Merger, L.L.C. This Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective heirs, successors, legal representatives and permitted assigns. Nothing in
this Agreement, expressed or implied, is intended to confer on any Person other than the parties
hereto, and their respective heirs, successors, legal representatives and permitted assigns, any
rights, remedies, obligations or liabilities under or by reason of this Agreement.



     Section 7.03. Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be assignable by any party
hereto pursuant to any Transfer of Company Securities or otherwise, except that, subject to Section
3.03(b) hereof, any Permitted Transferee acquiring Company Securities and any Person acquiring
Company Securities who is required by the terms of this Agreement or any employment agreement or
stock purchase, option, stock option or other compensation plan of the Company or any Subsidiary to
become a party hereto shall (unless already bound hereby) execute and deliver to the Company an
agreement to be bound by this Agreement in the form of Exhibit A hereto and shall thenceforth be a
Shareholder. Any Shareholder who ceases to own beneficially any Company Securities shall cease to
be bound by the terms hereof (other than (i) the provisions of Sections 5.05,



40









 







5.06, 5.07, 5.08 and
5.10 applicable to such Shareholder with respect to any offering of Registrable Securities
completed before the date such Shareholder ceased to own any Company Securities and (ii) Sections
6.01, 7.09, 7.10 and 7.11).



     Section 7.04. Waiver; Amendment; Termination. (a) No provision of this Agreement
may be waived except by an instrument in writing executed by the party against whom the waiver is
to be effective. Subject to the provisions of Section 7.04(b), no provision of this Agreement may
be amended or otherwise modified except by an instrument in writing executed by the Company with
approval of the Board and Shareholders (including the Institutional Shareholders) holding at least
50% of the then outstanding Ordinary Shares held by the parties hereto at the time of such proposed
amendment or modification.



     (b) Any amendment or modification of any provision of this Agreement that would
adversely affect a right hereunder of any Institutional Shareholder may be effected only
with the consent of such Institutional Shareholder, except for  any amendment or modification of any
provision of this Agreement that would affect any right hereunder of the
Institutional Shareholders  to collectively vote, request, consent or
decide on any matter (which may be effected with the consent of Institutional Shareholders holding
a majority of the Ordinary Shares held at such time and their Permitted Transferees). The
Shareholders may amend or modify the provisions of Article 4
without the consent of the Company.



     Section 7.05. Notices. All notices, requests and other communications to any
party shall be in writing (including facsimile transmissions) and shall be given,



     if to the Company to:


SMART Modular Technologies (WWH), Inc.

4211 Starboard Drive

Fremont, CA 94538

Attention: President

Fax: (510) 360-8500




     with a copy to the TPG Entities, the FP Entities and Shah Capital at the addresses on Schedule
I hereto



41









 





     with a copy to:


Davis Polk & Wardwell

1600 El Camino Real

Menlo Park, CA 94025

Attention: Alan F. Denenberg

Fax: (650) 752-3604




     if to any other party to the address beside its name on Schedule I.



     All notices, requests and other communications shall be deemed received on the date of receipt
by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a
Business Day in the place of receipt. Otherwise, any such notice, request or communication shall
be deemed not to have been received until the next succeeding Business Day in the place of receipt.
Any notice, request or other written communication sent by facsimile transmission shall be
confirmed by certified mail, return receipt requested, posted within one Business Day, or by
personal delivery, whether courier or otherwise, made within two Business Days after the date of
such facsimile transmissions.



     Any Person who becomes a Shareholder shall provide its address and fax number to the Company,
which shall promptly provide such information to each other Shareholder.



     Section 7.06. Fees and Expenses. The Company shall pay all out-of-pocket costs
and expenses of the Shareholders, including the fees and expenses of counsel, incurred in connection with the preparation of this Agreement, or any amendment or
waiver hereof, and the transactions contemplated hereby and all matters related hereto.



     Section 7.07. Headings. The headings contained in this Agreement are for
convenience only and shall not affect the meaning or interpretation of this Agreement.



     Section 7.08. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument.



     Section 7.09. Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware, without regard to the conflicts of laws
rules of such state.



     Section 7.10. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO



42









 







THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.



     Section 7.11. Specific Enforcement. Each party hereto acknowledges that the
remedies at law of the other parties for a breach or threatened breach of this Agreement would be
inadequate and, in recognition of this fact, any party to this Agreement, without posting any bond,
and in addition to all other remedies that may be available, shall be entitled to obtain equitable
relief in the form of specific performance, a temporary restraining order, a temporary or permanent
injunction or any other equitable remedy that may then be available.



     Section 7.12. Consent to Jurisdiction. The parties hereby agree that any suit,
action or proceeding seeking to enforce any provision of, or based on any matter arising out of or
in connection with, this Agreement or the transactions contemplated hereby shall be brought in the
United States District Court for the District of Delaware or any Delaware State court sitting in
Delaware, so long as one of such courts shall have subject matter jurisdiction over such suit,
action or proceeding, and that any cause of action arising out of this Agreement shall be deemed to
have arisen from a transaction of business in the State of Delaware, and each of the parties hereby
irrevocably consents to the nonexclusive jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the
fullest extent permitted by law, any objection that it may now or hereafter have to the laying of
the venue of any such suit, action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an inconvenient form. Process in
any such suit, action or proceeding may be served on any party anywhere in the world, whether
within or without the jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 7.05 shall be deemed effective
service of process on such party.



     Section 7.13. Severability. If one or more provisions of this Agreement are held
to be unenforceable to any extent under applicable law or constitute a breach or violation of the
rules or listing requirements of the securities exchange or quotation system on which the Ordinary
Shares are traded, such provision shall be interpreted as if it were written so as to be
enforceable or in compliance with the rules or listing requirements, as applicable, to the maximum
possible extent so as to effectuate the parties’ intent to the maximum possible extent, and the
balance of the Agreement shall be interpreted as if such provision were so excluded or interpreted
and shall be enforceable in accordance with its terms to the maximum extent permitted by law.



     Section 7.14. Recapitalization. If any capital stock or other securities are
issued in respect of, in exchange for, or in substitution of, any Company Securities by reason of
any reorganization, recapitalization, reclassification,



43









 







merger, consolidation, spin-off, partial or
complete liquidation, stock dividend, split-up, sale of assets, distribution to shareholders or
combination of the Company Securities or any other change in capital structure of the Company,
appropriate adjustments shall be made with respect to the relevant provisions of this Agreement so
as fairly and equitably to preserve, as far as practicable, the original rights and obligations of
the parties hereto under this Agreement.



     Section 7.15. Limitations on Subsequent Registration Rights. The Company agrees
that it shall not enter into any agreement without the prior written consent of any Institutional
Shareholder that is a Five Percent Shareholder with any holder or prospective holder of any
securities of the Company (a) that would allow such holder or prospective holder to include such
securities in any Demand Registration or Incidental Registration unless, under the terms of such
agreement, such holder or prospective holder may include such securities in any such registration
only to the extent that their inclusion would not reduce the amount of the Registrable Securities
of the Shareholders included therein or (b) on terms otherwise more favorable than this Agreement.



     Section 7.16. Conflicting Agreements. The Company represents and agrees that it
shall not (i) grant any proxy or enter into or agree to be bound by any voting trust or agreement
with respect to the Company Securities, except as expressly contemplated by this Agreement, (ii)
enter into any agreement or arrangement of any kind with any Person with respect to the Company
Securities inconsistent with the provisions of this Agreement or for the purpose or with the effect
of denying or reducing the rights of any other Shareholder under this Agreement, including
agreements or arrangements with respect to the Transfer or voting of the Company Securities or
(iii) act, for any reason, as a member of a group or in concert with any other Person in connection
with the Transfer or voting of its Company Securities in any manner that is inconsistent with the
provisions of this Agreement.



44









 





     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.



	 	 	 	 	 
	SMART MODULAR TECHNOLOGIES (WWH), INC.

 	 	 
	By:  	/s/
Iain MacKenzie	 	 
	 	Name:  	Iain MacKenzie 	 	 
	 	Title:  	Chief Executive Officer and President 	 	 
	 
	T3 II SM, LLC

 	 	 
	By:  	/s/
Gene Frantz	 	 
	 	Name:  	Gene Frantz	 	 
	 	Title:  	Vice President	 	 
	 
	TPG III SM, LLC

 	 	 
	By:  	/s/
Gene Frantz	 	 
	 	Name:  	Gene Frantz	 	 
	 	Title:  	Vice President	 	 
	 
	TPG IV SM, LLC

 	 	 
	By:  	/s/
Gene Frantz	 	 
	 	Name:  	Gene Frantz	 	 
	 	Title:  	Vice President	 	 
	 



 









 






	 	 	 	 	 
	FRANCISCO PARTNERS, L.P. 



By: Francisco GP, LLC, its General Partner

 	 
	By:  	/s/ Dipanjan Deb
 	 
	 	Name:  	Dipanjan Deb 	 
	 	Title:  	Partner 	 
	 
	FRANCISCO PARTNERS FUND A, L.P.



By: Francisco GP, LLC, its General Partner

 	 
	By:  	/s/ Dipanjan Deb
 	 
	 	Name:  	Dipanjan Deb 	 
	 	Title:  	Partner 	 
	 
	FP ANNUAL FUND INVESTORS, LLC



By: Francisco GP, LLC, its General Partner

 	 
	By:  	/s/ Dipanjan Deb
 	 
	 	Name:  	Dipanjan Deb 	 
	 	Title:  	Partner 	 
	 
	SHAH CAPITAL PARTNERS, L.P.



By and on behalf of itself and as nominee for Krishnan Shah Fund, L.P.



By: Shah Management Partners, L.L.C., its General Partner



By: Shah Management, LLC, its Managing Member

 	 
	By:  	/s/ Ajay Shah
 	 
	 	Name:  	Ajay Shah 	 
	 	Title:  	Manager 	 
	 













 






	 	 	 	 	 
	WESTRIVER CAPITAL LLC



By WestRiver Management, LLC

 	 
	By:  	/s/ Erik J. Anderson
 	 
	 	Name:  	Erik J. Anderson 	 
	 	Title:  	Managing Member 	 
	 
	PATEL FAMILY PARTNERS, L.P .

 	 
	By:  	/s/ Mukesh Patel
 	 
	 	Name:  	Mukesh Patel 	 
	 	Title:  	General Partner 	 
	 














 





Schedule I




Shareholder Contact Information




	 	 	 
	Shareholder:	 	Contact Information:
	T3 II SM, LLC
	 	 
	TPG III SM, LLC
	 	 
	TPG IV SM, LLC
	 	 
	Francisco Partners, L.P.
	 	 
	Francisco Partners Fund A, L.P.
	 	 
	FP Annual Fund Investors, LLC
	 	 
	Shah Capital Partners, L.P.
	 	 
	WestRiver Capital LLC
	 	 
	Patel Family Partners, L.P.
	 	 






 









 








EXHIBIT A




JOINDER TO SHAREHOLDERS’ AGREEMENT




     This Joinder Agreement (this “Joinder Agreement”) is made as of the date written below by the
undersigned (the “Joining Party”) in accordance with the Shareholders’ Agreement dated as of
[                    ], 2006 (the “Shareholders’ Agreement”) among (i) SMART Modular Technologies (WWH), Inc.,
(ii) T3 II SM, LLC (“T3 II”), TPG III SM, LLC (“TPG III”) and TPG IV SM, LLC
(“TPG IV”) (taken together, the “TPG Entities,” and each of the foregoing in this clause (ii), a
"TPG Entity”), (iii) Francisco Partners, L.P. (“FP”), Francisco Partners Fund A, L.P. (“FP Fund A”)
and FP Annual Fund Investors, LLC (“FP Annual Fund”) (taken together, the “FP Entities,” and each
of the foregoing in this clause (iii), an “FP Entity”), (iv) Shah Capital Partners, L.P. (“Shah
Capital”), (v) WestRiver Capital LLC, (vi) Patel Family Partners, L.P. and (vii) such additional
persons as may sign joinder agreements thereto as the same may be amended from time to time.
Capitalized terms used, but not defined, herein shall have the meaning ascribed to such terms in
the Shareholders’ Agreement.



     The Joining Party hereby acknowledges, agrees and confirms that, by its execution of this
Joinder Agreement, the Joining Party shall be deemed to be a party to the Shareholders’ Agreement
as of the date hereof and shall have all of the rights and obligations of a “Shareholder”
thereunder as if it had executed the Shareholders’ Agreement. The Joining Party hereby ratifies,
as of the date hereof, and agrees to be bound by, all of the terms, provisions and conditions
contained in the Shareholders’ Agreement.



     The Joining Party’s Aggregate Ownership is                      Ordinary Shares as of the date written
below.



     IN WITNESS WHEREOF, the undersigned has executed this Joinder Agreement as of the date written
below.



Date:                           , 20     




	 	 	 	 	 
	 	[NAME OF JOINING PARTY]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	Address for Notices:

 	 
	 	 	 
	 	 	 
	 	 	 



 









 






	 	 	 	 	 



EXHIBIT B




MATTERS TO BE INCLUDED IN THE COMPANY’S

MONTHLY MANAGEMENT REPORT





	1.	 	The unaudited consolidated balance sheet of the Company and its Subsidiaries as at the end of
such month and the related unaudited statement of operations and cash flow for such month, and
for the portion of the fiscal year then ended, in each case prepared in accordance with GAAP,
setting forth in comparative form the figures for the corresponding month and portion of the
previous fiscal year, and the figures for the corresponding month and portion of the then
current fiscal year as in the Company’s annual operating budget.
	 
	2.	 	Projected monthly income statements prepared on the same basis as those specified in Item 1,
including revenue forecasts by customer and expense budget by major expense category, for
periods extending through a minimum of one year from the date of the report.
	 
	3.	 	A summary of realized and projected sales bookings for the most recent month and for periods
extending through a minimum of one year from the date of the report, including
probability-weighted “pipeline” projections of new bookings to the extent that the Company
compiles such data for internal purposes.