**Shareholders’ Agreement**This Shareholders’ Agreement (the “Agreement”) is made and entered into thisday of April 22, 2011 in Beijing, the People’s Republic of China (excluding the Hong Kong SpecialAdministrative Region, the Macao Special Administrative Region, and Taiwan area for purpose of theAgreement, hereinafter referred to as the “PRC”) by and among the following parties:1. Techfaith Wireless Communication Technology (Hangzhou) Ltd., a limited liability company dulyincorporated and validly existing under the laws of the PRC, with its domicile at the podiumbuilding of Building 1, No. 4028 South Ring Road, Binjiang District, Hangzhou, itsregistration number of business license for enterprise legal person being 330100400006332, andits legal representative being Wang Zhongbao (hereinafter referred to as “Party A”);2. Techfaith Intelligent Handset Technology (Beijing) Ltd., a limited liability company dulyincorporated and validly existing under the laws of the PRC, with its domicile at Building 1,No. 13 Yong Chang North Road, Beijing Economic-Technological Development Area (Yizhuang),Beijing, its registration number of business license for enterprise legal person being110000410270278, and its legal representative being Dong Deyou (hereinafter referred to as“Party B”); and3. Beijing E-Town International Investment & Development Co., Ltd., a limited liability companyduly incorporated and validly existing under the laws of the PRC, with its domicile at Room405, No. 10 Hongda North Road, Beijing Economic-Technological Development Area, Beijing, itsregistration number of business license for enterprise legal person being 10302011626480, andits legal representative being Zhao Guangyi (hereinafter referred to as “Party C”).Party A, Party B, and Party C are collectively referred to as “a Party” individually, and as “theParties” collectively, and a Party’s opposite parties are referred to as the “other Parties”.**WHEREAS,**For the purposes of actively responding to the call of the *Action Plan for Stimulating theDevelopment of Southern Area of the City*formulated by Beijing Municipal Government and building anew area of modern manufacturing industry in the southern area, the Parties intend to start theTechfaith High-end Manufacture Project in Daxing District, Beijing. The project will make full useof the industrial and resource advantages of Beijing, Daxing and Beijing Economic-TechnologicalDevelopment Area, combine excellent product designs with advanced production lines, and gathermanufacturers of accessories and parts so as to build Daxing District into the largestmanufacturing base of high-end smart mobile terminal products such as smart mobile phones andtablet computers in China in three to five years and an advanced manufacturing center with anoutput value of RMB tens of billions.
 
 

 
**NOW THEREFORE,**the Parties agree on the establishment of a joint venture company by jointinvestment through friendly consultations as follows:**1.** **Representation and Warranties**Each Party represents and warrants that the following representations and warranties made by itare true and accurate:1.1 It did not participate in any fraudulent activities that will cause significant adverseeffects on any matters under the Agreement or on the Other Parities;1.2 The Parties guarantee that their signing and performance of the Agreement does not violateany existing applicable laws of the PRC, any existing provisions of any Chinese governmentdepartment, any existing judgment, ruling or decision of any court, arbitral tribunal oradministrative department, any of their corporate documents, or any agreement, license or anyother document binding upon them, made when or before the Agreement is executed; and1.3 The parties guarantee that they are not subjects of dissolution, liquidation, or bankruptcy,did not and will not distribute their assets among their creditors and/or shareholders for thepurpose of cease of their operations; they have not received any administrative order on,filed any application for, adopted any resolution on, or convened any meeting for dissolution,liquidation, or bankruptcy; and no event that can or will cause the filing of an applicationfor any abovementioned dissolution, liquidation, or bankruptcy of them according to anyapplicable laws, regulations, or policies has occurred.**2.** **Incorporation of the Joint Venture Company**2.1 The Parties agree that they will incorporate a joint venture company in accordance with the*Company Law of the People’s Republic of China*, other relevant laws and regulations and theprovisions in this Agreement as soon as possible after the execution of the Agreement.2.2 The joint venture company is a limited liability company to be incorporated in DaxingDistrict, Beijing under the laws of the PRC.**3.** **Business Scope and Term of the Joint Venture Company**3.1 The business scope of the joint venture company covers the development and production ofmobile communication terminal equipment; manufacture of mobile phones, base stations, exchangeequipment, and digital-set system equipment of mobile communication systems (including GSM,CDMA, DCS1800, DECT, and IMT2000); transfer of self-owned technology, technologicaldevelopment, technical consultations; and sales of self-made products.3.2 The Parities shall make joint efforts to appropriately expand the business scope of the jointventure company according to its business development needs in accordance with relevant lawsand regulations of the PRC through friendly consultations.
 
 

 
3.3 The operating period of the joint venture company under the Agreement shall be thirty (30)years.**4.** **Registered Capital of the Joint Venture Company**4.1 Registered capital. The registered capital of the joint venture company under the Agreementshall be RMB five hundred million (RMB 500,000,000).4.2 Capital contribution. The contribution to the registered capital shall be made in fourinstallments. In the first installment, Party A and Party C shall make contribution to theregistered capital in monetary form; in the second installment, Party B shall makecontribution to the registered capital with its land-use right the value of which is shalllbe the evaluated price accepted by the Parties, and the deficiency (if any) of the value ofthe land-use right shall be made up by Party B in monetary form. The evaluation of theland-use right shall be conducted by reference to the cost price paid by Party B for acquiringthe land-use right by a qualified assets evaluation company that is engaged by the jointventure company and recognized by the Parties and the aforementioned cost price shall includeand be limited to the sum of the transaction price as well as relevant taxes and charges thathave been paid by Party B for acquiring the land-use right and can be verified by Party B bypresenting relevant transaction evidences such as the invoice; in the third installment, PartyC shall make contribution to the registered capital in monetary form; and in the fourthinstallment, Party A and Party C shall make contribution to the registered capital in monetaryform.4.3 Proportion of equity. Party A shall hold 49%, Party B 11%, and Party C 40% of the shares ofthe joint venture company.4.4 Amount (unit: RMB ten thousand), time and form of the capital contributions are as follows:         **Name of Shareholder** **Party A** **Party B** **Party C** **Total**Subscribed capital contribution 24,500 5,500 20,000 50,000Ratio of contribution 49% 11% 40% 100%The first installment        Amount of capital contribution 9,000   6,000 15,000Form of capital contribution In monetary form   In monetary form  Time of capital contribution Prior to April 30, 2011   Prior to April 30, 2011  
 
 

 
         **Name of Shareholder** **Party A** **Party B** **Party C** **Total**The second installment        Amount of capital contribution   5,500   5,500Form of capital contribution   Land-use right, the deficiency of which shall be made up in monetary form    Time of capital contribution   Prior to November 30, 2011    The third installment        Amount of capital contribution     3,667 3,667Form of capital contribution     In monetary form  Time of capital contribution     Prior to December 30, 2011  The fourth installment        Amount of capital contribution 15,500   10,333 25,833Form of capital contribution In monetary form   In monetary form  Time of capital contribution Prior to April 30, 2013   Prior to April 30, 2013  **5.** **The Shareholders’ Meeting of the Joint Venture Company**5.1 The shareholders’ meetings shall be composed of all the shareholders and is the authority ofthe joint venture company. The shareholders’ meetings include regular meetings, which shall beconvened yearly by the board of directors and presided over by the chairman of the board ofdirectors, and temporary meetings, which shall be convened upon the decision by theshareholder(s) holding no less than one tenth (1/10) of the voting power or the proposal by noless than one third (1/3) of the directors or supervisors of the joint venture company.5.2 The shareholders’ meeting of the joint venture company has the powers and rights to:1) determine operational guidelines and investment plans;2) elect and replace the directors and supervisors who are not the employees’ representativesand determine the matters relating to the remuneration of relevant directors and supervisors;
 
 

 
3) review and approve the reports of the board of directors;4) review and approve the reports of the supervisors;5) review and approve the annual financial budgetary plans and final accounting plans;6) review and approve the profit distribution plans and loss make-up plans ;7) make decisions on increasing or decreasing the registered capital;8) make decisions on issuing corporate bonds;9) make decisions on merger, separation, dissolution, liquidation or alteration oforganizational form of the joint venture company or on establishment of any branch orsubsidiary;10) modify the articles of association;11) determine the scope of authority of the chairman and the deputy chairman of the board ofdirectors; and12) review and approve the equity incentive scheme for the senior management.5.3 The shareholders may exercise their voting rights in accordance with the proportions of theircapital contributions at shareholders’ meetings. The shareholders’ resolutions shall beapproved by shareholder(s) holding more than half of total voting rights, and the resolutionson any of the matters set out in the items 6) to 12) of the section 5.2 hereof shall beapproved by shareholder(s) holding more than two thirds of total voting rights.5.4 Other matters relating to the shareholders’ meeting’s powers and rights, convening andresolutions shall be specified separately in the articles of association of the joint venturecompany.**6.** **The Board of Directors of the Joint Venture Company**6.1 The joint venture company shall establish a board of directors which is the executive body ofthe joint venture company. The board of directors shall be composed of five (5) directors, ofwhom two (2) shall be nominated by Party A, one (1) shall be nominated by Party B, and two (2)shall be nominated by Party C.6.2 The board of directors shall have one chairman to be nominated by Party A and one deputychairman to be nominated by Party C, and both the chairman and the deputy chairman shall beelected by the board of directors.6.3 In the event of increase or decrease of the share capital of the joint venture company, thenumber of director(s) to be nominated by each Party shall be determined according to eachParty’s shareholding in the joint venture company after such increase or decrease, and themembers of the board of directors shall be re-elected.
 
 

 
6.4 The board of directors of the joint venture company has the powers and rights to:1) convene shareholders’ meetings and report to them;2) implement the shareholders’ resolutions;3) make decisions on the matters relating to operational licensing, being licensed with,transfer of, and acceptance as a transferee of any know-how, patent or trademark;4) prepare operational plans and investment plans;5) prepare annual financial budgetary plans and final accounting plans;6) prepare the profit distribution plans and loss make-up plans;7) prepare plans on increasing or decreasing the registered capital or issuing corporate bonds;8) prepare plans on merger, separation, alteration of organizational form of the joint venturecompany, or dissolution;9) determine the establishment of internal managementarial organizations and the scope ofauthority of the senior management;10) establish basic management systems, including the systems of internal control, finance andremuneration;11) determine the appointment or dismissal of the general manager nominated by Party A, deputygeneral manager nominated by Party B and the chief financial officer nominated by Party C andtheir remuneration as well as the remuneration of the core technicians and business personnel;12) make decisions on the joint venture company’s investment in, guarantee for, loan to orassets disposal (including transfer, acceptance of assets as thetransferee and donation) to any entity, the amount of which shall be no more than RMB4,000,000 within one year (365 days); and13) make decisions on the joint venture company’s investment in, guarantee for, loan to orassets disposal (including transfer, acceptance of assets as the transferee and donation) toany entity, the amount of which shall be no more than RMB 4,000,000 within one year (365days).6.5 The meetings of the board of directors of the joint venture company can be duly convened whenbeing attended by more than two thirds (2/3) of the directors.6.6 Any resolution of the meeting of the board of directors shall be approved by affirmativevotes of more than half (1/2) of the directors, and the resolutions on any of the mattersspecified in item 13) of the section Article 6.4 hereof shall be approved by affirmative votesof more than two thirds (2/3) of the directors. In the process of voting at any meeting of theboard of directors, the one-man-one-vote system shall apply.
 
 

 
6.7 Other matters relating to the meeting of the board of directors’ powers and rights,convening and resolutions shall be specified in the articles of association of the jointventure company.**7.** **Supervisors of the Joint Venture Company**7.1 The joint venture company does not establish any board of supervisors and shall have two (2)supervisors, of whom one shall be nominated by Party A and the other shall be nominated byParty C, and the supervisors shall be elected by shareholders’ meeting.7.2 The supervisors’ powers and rights shall be specified in the articles of association.**8.** **Senior Management of the Joint Venture Company**8.1 The joint venture company shall have one (1) general manager who shall be nominated by PartyA. The appointment or dismissal of the general manager shall be determined by the board ofdirectors.8.2 The joint venture company shall have one (1) deputy general manager who shall be nominated byParty B. The appointment or dismissal of the deputy general manager shall be determined by theboard of directors.8.3 The joint venture company shall have one (1) chief financial officer, who shall be nominatedby Party C. The appointment or dismissal of the chief financial officer shall be determined bythe board of directors.**9.** **Share Transfer**The transfer of the shares in the joint venture company held by Party C shall be subject to theadministrative measures on government equity investments formulated by the Financial Bureau ofBeijing Municipal People’s Government for the commercialization of scientific and technologicalachievements and overallplanning of industrial projects.**10.** **Capital Increase**Upon the resolutions two thirds (2/3) of the shareholders, the joint venture company mayincrease its registered capital from time to time. The Parties are entitled to contribute tothe additional capital preemptively according to their respective proportion of shareholding inthe joint venture company upon such increase.**11.** **Distribution of Profits in the Joint Venture Company**The Parties agree that the joint venture company shall distribute its distributable and lawfulprofits of each fiscal year among the Parties in proportion to their respective shareholdingpercentages of the shares of the joint venture company according to the profit distributionplan adopted by the shareholders’ meeting.
 
 

 
**12.** **Transfer of this Agreement**Without the prior written consent of the other Parities, any Party shall not transfer or assignits rights or obligations hereunder. This Agreement shall be binding upon each Party and itssuccessors and assignees recognized by the other Parties.**13.** **Severability of this Agreement**In the event that any provision of this Agreement is determined to be invalid in whole or inpart, other provisions shall be performed by the Parties.**14.** **No Partnership, Cooperative Operation, Joint Operation, or Agency among the Parties**No provision of the Agreement may be deemed as establishment of any partnership, cooperativeoperation or joint operation among the Parties for any purpose, nor shall any Party be treatedas the agent of the other Parties.**15.** **Taxes and Other Expenses**Unless otherwise provided or agreed in this Agreement or by the Parties in writing, each Partyshall bear its own taxes and other expenses incurred in the preparation, negotiation, executionand performance of this Agreement.**16.** **Breach and Remedy**16.1 A Party is in breach of this Agreement if:i) it breaches its representations or warranties in this Agreement;ii) it or its representative breaches any provision of this Agreement in the process ofexercising its voting power at shareholders’ meeting;iii) the director(s) nominated by it breaches any provision of this Agreement in the processof exercising its voting power at any meeting of the board of directors;iv) any other breach occurs, including the breaches specified in sections 17.2.3 (ii) or(iii) hereof; orv) it breaches the articles of association and harms the interests of the joint venturecompany or any other shareholder.16.2 In the event that a breaching Party fails to effectively remedy the breach within thirty (30)days after receiving the other Parties’ notice, either of the other Parties is entitled totake, at its sole discretion, one or more remedy measures set out below:i) to suspend the performance of its obligations under this Agreement and resume suchperformance after the abovementioned breach has been remedied (Notes: such suspendedperformance does not constitute any failure of delay of performance of any obligations);
 
 

 
ii) to claim for compensation for the losses of the joint venture company or thenon-breaching parties according to relevant laws and regulations and the provisions of thisAgreement; to require, in its own name and on behalf of the joint venture company, thebreaching party to compensate for the losses of the joint venture company;iii) to require the breaching party hereto to specifically perform its obligations under thisAgreement and to apply to the arbitral authority specified in section 23 hereof for making anarbitration award requiring the specific performance of the breaching party’s obligationsunder this Agreement; andiv) to issue a written notice to the breaching party to terminate this Agreement promptly.16.3 The rights and remedies specified in this Agreement are accumulative without prejudice to aParty’s rights to claim for other rights or remedies according to relevant laws.**17.** **Term, Modification and Termination of this Agreement**17.1 The Agreement shall remain valid and effective unless and until terminated according torelevant laws or by the Parties according to section 17.2 hereof.17.2 Modification and Termination of this Agreement17.2.1 Any modification or termination of this Agreement shall be made by written agreements amongthe Parties, unless a Party terminates this Agreement unilaterally according to the provisionsof this Agreement.17.2.2 The modification or termination of this Agreement shall not affect each Party’s rights toclaim for damages under this Agreement. In the event that any modification or termination ofthe Agreement causes losses to a Party, the breaching party shall liable to compensate forsuch losses, unless it is exempted from such liabilities by law.17.2.3 A Party may issue a notice to terminate this Agreement (hereafter referred to as the “Noticeof Termination”) and this Agreement may be terminated unilaterally if:i) either of the other Parties fails to make its contribution to the registered capital of thejoint venture company within six (6) months after the deadline for it to make suchcontribution;ii) either of the other Parties fails to perform any of its substantive obligations under thisAgreement and thus causes material and adverse impact on the joint venture company’s businessoperations under this Agreement;
 
 

 
iii) either of the other Parties (a) is insolvent; (b) cannot repay its matured debts; (c)causes a receiver, trustee, or executor of all or part of its property, income, or itself to beappointed; (d) adopts a resolution on its dissolution; or (e) has filed an application to thecompetent court for bankruptcy liquidation or will be or have been dissolved according to theorder of competent administrative authorities;iv) the license or authorization that is necessary for the performance of this Agreement andrequired by the laws or regulations of the PRC fails to be obtained, has been withdrawn ormodified, or fails to be renewed within the joint venture company’s operating term under thisAgreement;v) major assets or property of either of the other Parties or the joint venture company in thePRC has been confiscated or expropriated; orvi) the party is affected by force majeure (as defined in section 18 hereof).**18.** **Force Majeure**18.1 The force majeure means any unforeseeable, uncontrollable or unavoidable event that occursafter this Agreement is executed, causes total or part failure to perform this Agreement andleads to a failure to achieve the joint venture company’s purposes of operation under thisAgreement. The force majeure events include strike, fires not attributable to any Party,flood, earthquake, typhoon and other natural disasters, diseases, war (whether declared ornot), turmoil, exercise of govermental power or declaration of such exercise, actions oflegislature, court or government, blockade, embargo and shortage or disruption of energy, rawmaterials or transportation.18.2 In the event of force majeure, a Party or the Parities affected may suspend its/ theirperformance of this Agreement within the scope and period affected by the force majeure, andmay postpone the performance of this Agreement to the length of period equal to that affectedby the force majeure provided that it will assume no liability for its postponement. A Partythat declares that it has been affected by the force majeure shall notify the other Partiesand the joint venture company of the same promptly in an appropriate manner and presentreasonably substantial evidences verifying the existence and the duration of the adverseeffect of the force majeure to the other Parties and the joint venture companyand shall try its best to reduce or eliminate the influence of the force majeure on itsperformance of its obligations under this Agreement.18.3 In the event of the force majeure, the Parties shall cooperate with each other to reach anappropriate resolution and make reasonable efforts to reduce the consequences of the forcemajeure. In the event that the Parties fail to reach a resolution within six (6) months afterthe force majeure occurs, a Party that is affected by the adverse consequences of the forcemajeure is entitled to issue a Notice of Termination in accordance with section 17.2.3 (vi). Ameeting of the board of directors of the joint venture company shall be convened within twenty(20) days after the other Parties receive the Notice of Termination.
 
 

 
**19.** **Validity of this Agreement**19.1 This Agreement constitutes a true and complete declaration of intention among the Parties toestablish the joint venture company and shall supersede any and all agreements (oral orwritten), memorandums and arrangements on the incorporation of the joint venture company. Noparty enters into the Agreement merely depending on any declaration, representation orwarranty not specified or mentioned herein.19.2 This Agreement and the articles of association of the joint venture company constitute a setof legal documents. In the event of any discrepancy between this Agreement and the articles ofassociation of the joint venture company, the articles of association shall prevail.**20.** **Confidentiality**20.1 Each Party shall keep confidential any information relating to the following (the“Confidential Information”):i) businesses or assets of the joint venture company, each Party or their associates;ii) existence or contents of the Agreement; oriii) all the information provided by a Party to the other Parties according to the provisionsof this Agreement.Unless under the circumstances specified in section 20.2 hereof, without the prior writtenconsent of the other Parties, a Party shall not use or disclose any Confidential Information toany third party for the purposes of, among others, its own business.20.2 The obligations of confidentiality specified in section 20.1 hereof shall not apply to any ofthe following circumstances:i) A Party discloses any information to its own associates or professional advisors forfulfilling this Agreement;ii) A Party discloses the information independently developed by itself, the information itobtained third parties that are entitled to disclose the same, or theinformation that is publicly known by the means not in violation of any provision of the abovesection 20.1 hereof;iii) A Party discloses any information in accordance with relevant laws, rules of the relatedstock exchange or binding judgements, orders or requirements of any competent court, regulatoryauthority, or any other government department, or the requirements of the procedures of anyregulatory authority or any other government department; oriv) A Party discloses any information to any tax authority for the taxation matters of it orits associates.20.3 The provisions of section 20.1 hereof shall survive during the two (2) years immediatelyfollowing the termination of this Agreement.
 
 

 
**21.** **Notice**Any notice, claim, request, or requirement (collectively referred to as “Notice”) relating tothis Agreement or to the matters under this Agreement shall be made in Chinese and shall bedeemed to having been served upon the recipient after it is delivered to the following address:In the event of a Notice to Party A:Name: Techfaith Wireless Communication Technology (Hangzhou) Ltd.