Document:

EX-10.1 STANDBY PURCHASE AGREEMENT

 

Exhibit 10.1

STANDBY PURCHASE AGREEMENT

     STANDBY PURCHASE AGREEMENT (this “Agreement”) dated as of June 28, 2006, by and among Exide
Technologies, a Delaware corporation (the “Company”), Tontine Capital Partners, L.P., a Delaware
limited partnership (“Tontine”), Legg Mason Investment Trust, Inc., a Maryland corporation (“Legg
Mason” and together with Tontine, the “Standby Purchasers”), and Arklow Capital, LLC, a Delaware
limited liability company (the “Additional Standby Purchaser”).

W I T N E S S E T H:

     WHEREAS, the Company proposes, as soon as practicable after the Rights Offering Registration
Statement, as defined herein, becomes effective, and the Proxy Statement, as defined herein, has
been mailed, to distribute to holders of its common stock (the “Common Stock”) of record as of the
close of business on the record date of the Rights Offering (the “Record Date”), non-transferable
rights (the “Rights”) to subscribe for and purchase additional shares of Common Stock (the “New
Shares”) at a subscription price (the “Subscription Price”) in accordance with the term sheet
attached hereto as Annex A (such term sheet, the “Term Sheet” and such offering, the “Rights
Offering”); and

     WHEREAS, pursuant to the Rights Offering, stockholders of record will receive one Right for
each share of Common Stock held by them as of the Record Date, and each Right will entitle the
holder to purchase the number of New Shares of Common Stock as determined pursuant to the Term
Sheet at the Subscription Price (the “Basic Subscription Privilege”); and

     WHEREAS, the Company has requested the Standby Purchasers and the Additional Standby Purchaser
to agree to purchase from the Company upon expiration of the Rights Offering, and the Standby
Purchasers and the Additional Standby Purchaser are willing to so purchase, New Shares, at the
Subscription Price, to the extent such New Shares are not purchased by stockholders pursuant to the
exercise of Rights; and

     WHEREAS, the Standby Purchasers shall purchase, or if the Rights Offering is not consummated,
shall have the right to purchase and the Company shall sell to the Standby Purchasers additional
shares; and

     WHEREAS, in order to further induce the Standby Purchasers and the Additional Standby
Purchaser to enter into this Agreement, the Company has agreed to grant the Standby Purchasers and
the Additional Standby Purchaser (including any of their permitted assignees) registration rights
with respect to the Securities (as defined below) purchased by them pursuant to this Agreement
pursuant to a registration rights agreement substantially in the form attached hereto as Annex B
(the “Registration Rights Agreement”);

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

     Section 1.
Certain Other Definitions. The following terms used herein shall have the meanings set
forth below:

     “Additional Standby Purchaser” shall have the meaning set forth in the preamble hereof.

     “Additional Subscription Shares” shall have the meaning set forth in Section 2(c) hereof.

     “Agreement” shall have the meaning set forth in the preamble hereof.

     “Backstop Termination Date” shall have the meaning set forth in Section 3 hereof.

     “Basic Subscription Privilege” shall have the meaning set forth in the recitals hereof.

 

 

     “Board” shall have the meaning set forth in Section 7(a)(i) hereof.

     “Business Day” shall mean any day that is not a Saturday, a Sunday or a day on which banks are
required or permitted to be closed in the State of New York.

     “Closing” shall mean the closing of the purchases described in Section 2 hereof, which shall
be held at 10:00 a.m. on the Closing Date at the offices of Weil, Gotshal & Manges LLP located at
767 Fifth Avenue, New York, New York 10153, or such other time and place as may be agreed to by the
parties hereto, provided that if the purchases described in Section 2 hereof do not occur and the
option pursuant to Section 3 is exercised, then “Closing” shall mean the closing of purchases
described in Section 3 hereof.

     “Closing Date” shall mean the date that is three (3) Business Days after the Rights Offering
Expiration Date, or such other date as may be agreed to by the
parties hereto, provided that if the
Rights Offering does not occur and the option is exercised pursuant to Section 3 hereof, then
“Closing Date” shall mean the date that is three (3)
Business Days after such option is exercised, or such other date as may be agreed to by the
parties hereto.

     “Commission” shall mean the United States Securities and Exchange Commission, or any successor
agency thereto.

     “Common Stock” shall have the meaning set forth in the recitals hereof.

     “Company” shall have the meaning set forth in the preamble hereof.

     “Company
SEC Documents” shall have the meaning set forth in Section 4(h) hereof.

     “Company Stock Approval” shall have the meaning set forth in Section 3 hereof.

     “Complete Option”
shall have the meaning set forth in Section 3 hereof.

     “Convertible Notes” shall have the meaning set forth in Section 3 hereof.

     “Credit Agreement” shall mean the Credit Agreement dated May 5, 2004, as amended, by and among
the Company and Exide Global Holding Netherlands C.V. as borrowers, the lenders party thereto, and
Deutsche Bank AG New York Branch as the administrative agent.

     “Designee” shall have the meaning set forth in Section 8 hereof.

     “Excess Shares” shall have the meaning set forth in Section 7(f) hereof.

     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated by the Commission thereunder.

     “Expenses” shall have the meaning set forth in Section 7(c) hereof.

     “HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

     “Legg Mason” shall have the meaning set forth in the preamble hereof.

     “Market Adverse Effect” shall have the meaning set forth in Section 9(a)(iv) hereof.

     “Material Adverse Effect” shall mean a material adverse effect on the financial condition, or
on the earnings, financial position, operations, assets, results of operation, business or
prospects of the Company and its subsidiaries taken as a whole.

 

 

     “New Shares” shall have the meaning set forth in the recitals hereof.

     “Observer Rights” shall have the meaning set forth in Section 8 hereof.

     “Option Period” shall have the meaning set forth in Section 3 hereof.

     “Partial Option” shall have the meaning set forth in Section 3 hereof.

     “Person” shall mean an individual, corporation, partnership, association, joint stock company,
limited liability company, joint venture, trust, governmental entity, unincorporated organization
or other legal entity.

     “Plan” shall have the meaning set forth in Section 4(c) hereof.

     “Prospectus” shall mean a prospectus, as defined in Section 2(10) of the Securities Act, that
meets the requirements of Section 10 of the Securities Act and is current with respect to the
securities covered thereby.

     “Proxy Statement” shall mean a definitive proxy statement filed with the Commission relating
to the Rights Offering and the transactions contemplated hereunder, together with all amendments,
supplements and exhibits thereto.

     “Registration Rights Agreement” shall have the meaning set forth in the recitals hereof.

     “Record Date” shall have the meaning set forth in the recitals hereof.

     “Representative” shall have the meaning set forth in Section 7(b) hereof.

     “Rights” shall have the meaning set forth in the recitals hereof.

     “Rights Offering” shall have the meaning set forth in the recitals hereof.

     “Rights Offering Expiration Date” shall mean the date on which the subscription period under
the Rights Offering expires.

     “Rights Offering Prospectus” shall mean the final Prospectus included in the Rights Offering
Registration Statement for use in connection with the issuance of the Rights.

     “Rights Offering Registration Statement” shall mean the Company’s Registration Statement on
Form S-3 under the Securities Act or such other appropriate form under the Securities Act, pursuant
to which the Rights and underlying shares of Common Stock will be registered pursuant to the
Securities Act.

     “Securities” shall mean those of the New Shares, Unsubscribed Shares and Additional
Subscription Shares that are purchased by the Standby Purchasers pursuant to Section 2 or 3 hereof,
as the case may be.

     “Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and
regulations promulgated by the Commission thereunder.

     “Standby Purchaser” shall have the meaning set forth in the preamble hereof.

     “Subscription Agent” shall have the meaning set forth in Section 7(a)(vii) hereof.

     “Subscription Price” shall have the meaning set forth in the recitals hereof.

     “Termination Date” shall have the meaning set forth in Section 3 hereof.

 

 

     “Term Sheet” shall have the meaning set forth in the recitals hereof.

     “Threshold” shall have the meaning set forth in Section 7(f) hereof.

     “Tontine” shall have the meaning set forth in the preamble hereof.

     “Transfer” shall have the meaning set forth in Section 10(a) hereof.

     “Unsubscribed Shares” shall have the meaning set forth in Section 2(b) hereof.

     Section 2.
Standby Purchase Commitment.

     (a) Each of the Standby Purchasers and the Additional Standby Purchaser hereby agrees to
purchase from the Company, and the Company hereby agrees to sell to each of the Standby Purchasers
and the Additional Standby Purchaser, at the Subscription Price, all of the New Shares that will be
available for purchase by each of the Standby Purchasers and the Additional Standby Purchaser
pursuant to its Basic Subscription Privilege.

     (b) The Standby Purchasers and the Additional Standby Purchaser hereby agree to purchase from
the Company, and the Company hereby agrees to sell to the Standby Purchasers and the Additional
Standby Purchaser, at the Subscription Price, any and all New Shares if and to the extent such
shares are not purchased by the Company’s stockholders (the “Unsubscribed Shares”) pursuant to the
exercise of Rights. It is understood and agreed that, if and to the extent that the Standby
Purchasers and the Additional Standby Purchaser are required to purchase Unsubscribed Shares
pursuant to this subsection (b), Tontine shall purchase 54% of the Unsubscribed Shares, Legg Mason
shall purchase 36% of the Unsubscribed Shares and the Additional Standby Purchaser shall purchase
10% of the Unsubscribed Shares, provided that if the Additional Standby Purchaser does not purchase
such Unsubscribed Shares, Tontine shall purchase 60% of the Unsubscribed Shares and Legg Mason
shall purchase 40% of the Unsubscribed Shares, provided,
further, that Tontine, Legg Mason and the
Additional Standby Purchaser reserve the right to agree among themselves to reallocate the
percentage of the Unsubscribed Shares that they shall each purchase so long as they purchase 100%
of the Unsubscribed Shares in the aggregate.

     (c) The Standby Purchasers hereby agree to purchase from the Company, and the Company hereby
agrees to sell to the Standby Purchasers, at the Subscription Price, between 11,111,111 and
16,666,667 shares of Common Stock (the “Additional Subscription Shares”) in accordance with the
Term Sheet. It is understood and agreed that Tontine shall purchase 60% of the Additional
Subscription Shares and Legg Mason shall purchase 40% of the Additional Subscription Shares,
provided that Tontine and Legg Mason reserve the right to agree between each other to reallocate
the percentage of the Additional Subscription Shares that they shall each purchase so long as
Tontine and Legg Mason purchase 100% of the Additional Subscription Shares in the aggregate.

     (d) Notwithstanding anything else contained in this Agreement, none of Tontine, Legg Mason or
the Additional Standby Purchaser shall acquire Securities hereunder which would result in it or any
“group” (within the meaning of Section 13(d)(3) of the Exchange Act) of which it is a member owning
(i) 30% or more of the issued and outstanding shares of Common Stock on fully diluted basis without
the requisite prior written consent of the Company’s lenders under the Credit Agreement or (ii)
greater than 50% of the issued and outstanding shares of Common Stock. If either Standby Purchaser
would otherwise exceed such maximum number of shares, such excess shall be purchased by the other
Standby Purchaser. If the Additional Standby Purchaser would otherwise exceed such maximum number
of shares, such excess shall be purchased 60% by Tontine and 40% by Legg Mason.

     (e) Payment of the Subscription Price for the Securities shall be made, on the Closing Date,
against delivery of certificates evidencing the Securities, in United States dollars by means of
certified or cashier’s checks, bank drafts, money orders or wire transfers.

     (f) If the number of Unsubscribed Shares and Additional Subscription Shares which Legg Mason
is entitled to purchase hereunder at the Closing has an aggregate Subscription Price of less than
$25,000,000, Tontine agrees, upon request from Legg Mason, to allocate to Legg Mason a portion of
the Securities it is entitled to

 

 

purchase so that Legg Mason’s aggregate Subscription Price equals $25,000,000.

     Section 3.
Option. (i) If the Closing has not occurred on or prior to September 30, 2006 (the
“Backstop Termination Date”), for any reason whatsoever, other than a material breach hereunder by
the Standby Purchasers or failure of the closing condition specified in Section 9(a)(iv), or (ii)
if the Company terminates this Agreement prior thereto other than as a result of a material breach
hereunder by the Standby Purchasers or (iii) if the Standby Purchasers terminate this Agreement
prior thereto (other than pursuant to Section 11(a)(ii) hereof) in accordance with the terms hereof
(such dates in clauses (i), (ii) and (iii) above referred to as the “Termination Date”), each
Standby Purchaser shall have the option to purchase the Additional Subscription Shares for a period
of ten (10) Business Days following the Termination Date (the “Option Period”) upon delivery of
written notice to the Company. If the stockholders of the Company shall have approved the Rights
Offering and the transactions contemplated hereby, the Standby Purchasers may elect to purchase any
or all of the Additional Subscription Shares (the “Complete Option”), at the Subscription Price. If
the stockholders of the Company shall not have approved the Rights Offering and the transactions
contemplated hereby, the Standby Purchasers may elect to purchase a portion of the Additional
Subscription Shares equal to up to 19.9% of the issued and outstanding Common Stock (the “Partial
Option”), at a purchase price of $4.50 per share. It is understood and agreed that (i) with respect
to the Partial Option, Tontine shall have the option to purchase 50% of the Additional Subscription
Shares and Legg Mason shall have the option to purchase 50% of the Additional Subscription Shares
and (ii) with respect to the Complete Option, Tontine
shall have the option to purchase 60% of the Additional Subscription Shares and Legg Mason
shall have the option to purchase 40% of the Additional Subscription Shares pursuant to this
Section 3, provided that Tontine and Legg Mason reserve the right to agree between each other to
reallocate the percentage of the Additional Subscription Shares that they shall each purchase upon
exercise of the Complete Option or Partial Option, as the case may be.

     Section 4.
Representations and Warranties of the Company. The Company represents and warrants
to the Standby Purchasers and the Additional Standby Purchaser as follows:

     (a) The Company is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite corporate power and authority to carry on
its business as now conducted and as proposed to be conducted.

     (b) This Agreement has been duly and validly authorized, executed and delivered by the Company
and, subject to approval by the Company’s stockholders, constitutes a binding obligation of the
Company enforceable against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’
rights and remedies generally, and subject, as to enforceability, to general principles of equity,
including principles of commercial reasonableness, good faith and fair dealing (regardless of
whether enforcement is sought in a proceeding at law or in equity).

     (c) The authorized capital of the Company consists of (i) 61,500,000 shares of Common Stock,
of which, (A) 24,551,008 shares were issued and outstanding, as of June 9, 2006, (B) 3,454,231
shares are reserved for issuance upon conversion of the Company’s Floating Rate Convertible Senior
Subordinated Notes due September 18, 2013 (the “Convertible Notes”), as of the date hereof, (C)
6,250,000 shares are reserved for issuance upon exercise of the Company’s warrants issued and
issuable under the Company’s 2004 plan of reorganization, as amended (the “Plan”), as of the date
hereof, (D) 1,234,042 shares are reserved for issuance upon exercise of options and other awards
granted under the Company’s stock option and incentive plans, as of June 22, 2006 and (E) shares
issuable as provided in the Plan, of which 543,000 shares of Common Stock and warrants to acquire
1,358,000 shares of Common Stock are currently reserved for issuance under the Plan with respect to
disputed claims, as of the date hereof; and (ii) 1,000,000 shares of preferred stock, par value
$0.01 per share, none of which preferred stock has been issued, as of the date hereof. All of the
outstanding shares of Common Stock have been duly authorized, are validly issued, fully paid and
nonassessable and were offered, sold and issued in compliance with all applicable federal and state
securities laws and without violating any contractual obligation or any other preemptive or similar
rights.

     (d) At the time the Rights Offering Registration Statement becomes effective, the Rights
Offering Registration Statement will comply in all material respects with the requirements of the
Securities Act and will not

 

 

contain an untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. The Prospectus, at the
time the Rights Offering Registration Statement becomes effective and at the Closing Date, will not
include an untrue statement or a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the representations and warranties in this subsection shall not
apply to statements in or omissions from the Rights Offering Registration Statement or the
Prospectus made in reliance upon and in conformity with the information furnished to the Company in
writing by the Standby Purchasers or the Additional Standby Purchaser for use in the Rights
Offering Registration Statement or in the Prospectus.

     (e) The Proxy Statement will not, on the date it is first mailed to stockholders of the
Company, contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading and will not, at the time the stockholders
of the Company vote at a meeting of the stockholders of the Company, to approve this Agreement and
the transactions hereunder and an amendment to the Company’s Certificate of Incorporation providing
for an increase in the number of authorized shares of Common Stock (“Company Stockholder
Approval”), omit to state any material fact necessary to correct any statement in any earlier
communication from the Company with respect to the solicitation of proxies for the Company
Stockholder Approval which shall have become false or misleading in any material respect. The Proxy
Statement will comply as to form in all material respects with the applicable requirements of the
Exchange Act. Notwithstanding the foregoing, the Company makes no representation or warranty with
respect to information furnished to the Company in writing by the Standby Purchasers or the
Additional Standby Purchaser for inclusion or incorporation by reference in any of the foregoing
documents.

     (f) All of the Securities and New Shares will have been duly authorized for issuance prior to
the Closing (assuming Company Stockholder Approval has been obtained) and the shares issuable upon
exercise of the Partial Option are duly authorized for issuance, and, when issued and distributed
as set forth in the Prospectus, will be validly issued, fully paid and non-assessable; and none of
the Securities or New Shares will have been issued in violation of the preemptive rights of any
security holders of the Company arising as a matter of law or under or pursuant to the Company’s
Certificate of Incorporation, as amended, the Company’s bylaws, as amended, or any agreement or
instrument to which the Company is a party or by which it is bound.

     (g) The documents incorporated by reference into the Prospectus pursuant to Item 12 of Form
S-3 under the Securities Act, when they become effective or at the time they are filed with the
Commission, as the case may be, will comply in all material respects with the applicable provisions
of the Exchange Act.

     (h) Since May 2004, the Company has filed with the Commission all forms, reports, schedules,
statements and other documents required to be filed by it through the date hereof under the
Exchange Act, or the Securities Act (all such documents, as
supplemented and amended since the time of filing, collectively, the “Company SEC Documents”).
The Company SEC Documents, including without limitation all financial statements and schedules
included in the Company SEC Documents, at the time filed (and, in the case of registration
statements and proxy statements, on the dates of effectiveness and the dates of mailing,
respectively, and in the case of any Company SEC Document amended or superseded by a filing prior
to the date of this Agreement, then on the date of such amending or superseding filing), (i) did
not contain any untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and (ii) complied in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as applicable, subject to any
restatement of the financial statements for the fiscal year ended March 31, 2005 of the type
referenced in the Company’s press release dated June 14, 2006. The audited consolidated financial
statements of Company included in the Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2006 comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the Commission with respect thereto,
were prepared in accordance with United States generally accepted accounting principles applied on
a consistent basis during the periods involved, and present fairly in all material respects, the
consolidated financial position of the Company and its consolidated subsidiaries as at the dates
thereof and the consolidated results of their operations and cash flows for the periods then ended.

 

 

     (i) Since March 31, 2006, there have not been any events, changes, occurrences or state of
facts that, individually or in the aggregate, have had or would reasonably be expected to have a
Material Adverse Effect, except as disclosed in writing by the Company to the other parties hereto.

     Section 5.
Representations and Warranties of the Standby Purchasers and the Additional Standby
Purchaser. Each Standby Purchaser and the Additional Standby Purchaser, severally and not jointly,
represents and warrants to the Company, as to itself only, as follows:

     (a) Such Standby Purchaser or Additional Standby Purchaser is a corporation, partnership or
limited liability company duly organized, validly existing and in good standing under the laws of
its state of organization.

     (b) This Agreement has been duly and validly authorized, executed and delivered by such
Standby Purchaser or Additional Standby Purchaser and constitutes a binding obligation of such
Standby Purchaser or Additional Standby Purchaser enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).

     (c) Such Standby Purchaser or Additional Standby Purchaser is an “accredited
investor” within the meaning of Rule 501(a) under the Securities Act and is acquiring the
Securities for investment for its own account, with no present intention of dividing its
participation with others (other than in accordance with Sections 2(b), 2(c) and 15 hereof) or
reselling or otherwise distributing the same in violation of the Securities Act or any applicable
state securities laws.

     (d) The Standby Purchasers and the Additional Standby Purchaser are not “affiliates” (within
the meaning of Rule 405 of the Securities Act) of one another, are not acting in concert and are
not members of a “group” (within the meaning of Section 13(d)(3) of the Exchange Act) and have no
current intention to act in the future in a manner that would make them members of such a group.

     (e) The Standby Purchasers and the Additional Standby Purchaser understand that: (i) other
than pursuant to the Registration Rights Agreement, the resale of the Securities has not been and
is not being registered under the Securities Act or any applicable state securities laws, and the
Securities may not be sold or otherwise transferred unless (a) the Securities are sold or
transferred pursuant to an effective registration statement under the Securities Act, (b) at the
Company’s request, the Standby Purchasers or the Additional Standby Purchaser, as the case may be,
shall have delivered to the Company an opinion of counsel (which opinion shall be in form,
substance and scope reasonably satisfactory to the Company’s counsel) to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such
registration, or (c) the Securities are sold pursuant to Rule 144 promulgated under the Securities
Act; (ii) any sale of such Securities made in reliance on Rule 144 under the Securities Act may be
made only in accordance with the terms of such Rule; and (iii) except as set forth in the
Registration Rights Agreement, neither the Company nor any other Person is under any obligation to
register such Securities under the Securities Act or any state securities laws or to comply with
the terms and conditions of any exemption thereunder. The Standby Purchasers and the Additional
Standby Purchaser acknowledge that an appropriate restrictive legend will be placed on the
certificate or certificates representing the Securities that may be issued pursuant to this
Agreement.

     Section 6.
Deliveries at Closing.

     (a) At the Closing, the Company shall deliver to each of the Standby Purchasers and the
Additional Standby Purchaser the following:

          (i) A certificate or certificates representing the number of shares of Common Stock issued to
each of the Standby Purchasers and the Additional Standby Purchaser pursuant to Section 2 or 3
hereof, as the case may be; and

 

 

          (ii) A certificate of an officer of the Company on its behalf to the effect that the
representations and warranties of the Company contained in this Agreement are true and correct in
all material respects on and as of the Closing Date, with the same effect as if made on the Closing
Date.

     (b) At the Closing, each of the Standby Purchasers shall deliver to the Company the
following:

          (i) Payment of the Subscription Price of the Securities purchased by such Standby Purchaser,
as set forth in Section 2(e) or 3 hereof, as the case may be; and

          (ii) A certificate of such Standby Purchaser to the effect that the representations and
warranties of such Standby Purchaser contained in this Agreement are true and correct in all
material respects on and as of the Closing Date with the same effect as if made on the Closing
Date.

     (c) At the Closing of the transactions contemplated under Section 2, the Additional Standby
Purchaser shall deliver to the Company the following:

          (i) Payment of the Subscription Price of the New Shares purchased by the Additional Standby
Purchaser, as set forth in Section 2(e) hereof; and

          (ii) A certificate of the Additional Standby Purchaser to the effect that the representations
and warranties of the Additional Standby Purchaser contained in this Agreement are true and correct
in all material respects on and as of the Closing Date with the same effect as if made on the
Closing Date.

     Section 7.
Covenants.

     (a) Covenants. The Company agrees as follows between the date hereof and the Closing Date:

          (i) To use its reasonable best efforts to have the board of directors of the Company
(“Board”)
recommend to the stockholders of the Company to approve this Agreement and the transactions
contemplated hereunder;

          (ii) To as soon as reasonably practicable (A) seek Company Stockholder Approval of the Rights
Offering, the transactions contemplated hereunder and an increase in the number of authorized
shares of the Common Stock in an amount sufficient to have enough shares of Common Stock available
to issue all of the shares of Common Stock contemplated to be issued hereunder and (ii) file with
the Commission the Rights Offering Registration Statement and the Proxy Statement;

          (iii) To use reasonable best efforts to cause the Rights Offering Registration Statement and
any amendments thereto to become effective as promptly as possible;

          (iv) To use reasonable best efforts to effectuate the Rights Offering;

          (v) As soon as reasonably practicable after the Company is advised or obtains knowledge thereof, to
advise the Standby Purchasers and the Additional Standby Purchaser with a confirmation in writing,
of (A) the time when the Rights Offering Registration Statement or any
amendment thereto has been filed or declared effective or the Prospectus or any amendment or
supplement thereto has been filed, (B) the issuance by the Commission of any stop order, or of the
initiation or threatening of any proceeding, suspending the effectiveness of the Rights Offering
Registration Statement or any amendment thereto or any order preventing or suspending the use of
any preliminary prospectus or the Prospectus or any amendment or supplement thereto, (C) the
issuance by any state securities commission of any notice of any proceedings for the suspension of
the qualification of the New Shares for offering or sale in any jurisdiction or of the initiation,
or the threatening, of any proceeding for that purpose, (D) the receipt of any comments from the
Commission, and (E) any request by the Commission for any amendment to the Rights Offering
Registration Statement or any amendment or supplement to the Prospectus or for additional
information. The Company will use its reasonable best efforts to prevent the issuance of any such
order or the imposition of any

 

 

such suspension and, if any such order is issued or suspension is imposed, to obtain the
withdrawal thereof as promptly as possible;

          (vi) To operate the Company’s business in the ordinary course of business consistent with past
practice;

          (vii) To notify, or to cause the subscription agent for the Rights Offering (the “Subscription
Agent”) to notify, on each Friday during the exercise period of the Rights, or more frequently if
reasonably requested by any Standby Purchaser or the Additional Standby Purchaser, the Standby
Purchasers and the Additional Standby Purchaser of the aggregate number of Rights known by the
Company or the Subscription Agent to have been exercised pursuant to the Rights Offering as of the
close of business on the preceding Business Day or the most recent practicable time before such
request, as the case may be;

          (viii) Not to issue any shares of capital stock of the Company, or options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, securities convertible into or
exchangeable for capital stock of the Company, or other agreements or rights to purchase or
otherwise acquire capital stock of the Company, (A) except for shares of Common Stock issuable upon
exercise of the Company’s presently outstanding warrants and stock options and other awards or upon
conversion of the Convertible Notes and (B) except for warrants and Common Stock issuable under the
Plan and (C) except for new stock options and other awards granted to employees of the Company
hired after the date hereof covering not more than 75,000 shares of Common Stock under the
Company’s incentive plans and (D) except for the effects of the antidilution provisions in the
Company’s warrants issued under the Plan and the indenture governing the terms of the Convertible
Notes;

          (ix) Not to authorize any stock split, stock dividend, stock combination or similar
transaction affecting the number of issued and outstanding shares of Common Stock;

          (x) Not to declare or pay any dividends or repurchase any shares of Common Stock; and

          (xi) Not to incur any indebtedness or guarantees thereof, other than borrowings in the ordinary
course of business and consistent with past practice.

     (b) No
Shop. Subject to the fiduciary duties of the Board after receipt of the advice of the
Company’s outside legal counsel, the Company shall not, and shall not permit any of its affiliates,
directors, officers, employees, representatives or agents of the Company (collectively, the
“Representatives”) to, directly or indirectly, other than with respect to the disposition of
non-core assets of the Company, for a price not to exceed $30,000,000 in the aggregate, permitted
under the Credit Agreement, (i) discuss, knowingly encourage, negotiate, undertake, initiate,
authorize, recommend, propose or enter into, any transaction involving a merger, consolidation,
business combination, purchase or disposition of any material amount of the assets or any capital
stock of the Company or any of its subsidiaries other than the transactions contemplated by this
Agreement, (ii) facilitate, knowingly encourage, solicit or initiate discussions, negotiations or
submissions of proposals or offers in respect of any such alternative transaction, (iii) furnish or
cause to be furnished, to any Person, any information concerning the business, operations,
properties or assets of the Company or any of its subsidiaries in connection with any such
alternative transaction, or (iv) otherwise cooperate in any way with, or assist or participate in,
facilitate or knowingly encourage, any effort or attempt by any other Person to do or seek any of
the foregoing. The Company shall (and shall cause its Representatives to) immediately cease and
cause to be terminated any existing discussions or negotiations with any Persons conducted
heretofore with respect to any such alternative transaction, including, without limitation, the
sale of the Company’s European and rest of the world industrial energy business. This Section 7(b)
shall not apply to the possible sale of businesses identified in writing by the Company to the
Standby Purchasers on or prior to the date hereof.

     (c) Expense
Reimbursement. The Company agrees to promptly reimburse each Standby Purchaser for
all of its reasonable out-of-pocket costs and expenses and reasonable attorneys’ fees
(collectively, “Expenses”) incurred by such Standby Purchaser in connection with this Agreement,
its due diligence investigation of the Company and other activities relating to the transactions
contemplated hereunder upon the Company’s receipt of all

 

 

reasonably requested documentation to support the incurrence by such Standby Purchaser of
such Expenses. If any travel or travel-related expenses incurred by principals or employees of any
Standby Purchaser are required in connection with the foregoing activities, the Company’s
reimbursement of such travel-related expenses will be subject to the terms applicable to the
Company’s advisors in connection with the transactions contemplated hereunder.

     (d) Registration
Rights Agreement. The Company, the Standby Purchaser and
the Additional Standby Purchaser shall execute and deliver to each other and any of their
permitted assignees on or prior to the Closing Date the Registration Rights Agreement.

     (e) Public
Statements. Neither the Company nor the Standby Purchasers and the Additional
Standby Purchaser shall issue any public announcement, statement or other disclosure with respect
to this Agreement or the transactions contemplated hereby without the prior consent of the other
parties hereto, which consent shall not be unreasonably withheld or delayed, except (i) if such
public announcement, statement or other disclosure is required by applicable law or applicable
stock market regulations, in which case the disclosing party shall consult in advance with respect
to such disclosure with the other parties to the extent reasonably practicable, or (ii) the filing
of any Schedule 13D or Schedule 13G, to which a copy of this Agreement and the Registration Rights
Agreement may be attached as an exhibit thereto.

     (f) HSR
Filing. If Legg Mason determines a filing is or may be required under the HSR Act in
connection with the transactions contemplated hereunder, the Company and Legg Mason shall use
reasonable best efforts to promptly prepare and file all necessary documentation and to effect all
applications that are necessary or advisable under the HSR Act with respect to the transactions
contemplated hereunder so that the applicable waiting period shall have expired or been terminated
as soon as practicable after the date hereof. The filing fee required by the HSR Act for such
filings shall be paid by the Company. If all conditions to the Closing have been satisfied or
waived, other than the condition set forth in Section 9(d)(v), the number of shares of Common Stock
purchased by Legg Mason hereunder shall be reduced so that the Subscription Price payable by Legg
Mason is below the threshold (the “Threshold”) which would require a filing under the HSR Act,
provided that Tontine shall purchase such shares of Common Stock above the Threshold up to an
amount that would not cause Tontine to own 30% or more of the issued and outstanding Common Stock
on a fully diluted basis, and if there are any such shares of Common Stock (the “Excess Shares”)
which would cause Tontine to acquire 30% or more of the issued and outstanding Common Stock on a
fully diluted basis, the number of shares of Common Stock the Standby Purchasers are required to
purchase hereunder shall be reduced by such number of Excess Shares.

     Section 8.
Observer Rights. The Company acknowledges and agrees that for so long as Tontine
and/or its affiliates retain over 50% of its shares of Common Stock held immediately after the
Closing under Section 2, if no employee of Tontine is serving as a member of the Board, Tontine
shall have the right to designate one person who is either an employee of Tontine or is otherwise
reasonably acceptable to the Board (the “Designee”) to act as an observer to the Board as provided
below (“Observer Rights”). During such time as Tontine has Observer Rights, the Company shall
invite the Designee to attend any meetings of the Board of Directors of the Company and any
committees thereof (at the same time directors are invited thereto) and provide the Designee with
such materials (at the same time such materials are provided to directors) as the Company provides
to directors in connection with their service on the Board and any committees thereof, provided
that the Designee need not be permitted to attend any portion of any such meeting or be provided
with any portion of such materials to the extent that so doing would jeopardize any legal
privilege, including the attorney-client privilege, and to the
extent the subject of such meeting or materials is potentially adverse to Tontine. The
exercise by Tontine of Observer Rights is conditioned upon the Company’s receipt of a
confidentiality agreement executed by Tontine and the Designee reasonably satisfactory to the
Company providing for Tontine’s and the Designee’s preservation of the confidentiality of any
materials provided or information received at any meeting of the Board or any committee thereof.
The Company will not be responsible for any expenses of the Observer’s attendance at such meetings.

     Section 9.
Conditions to Closing.

     (a) The obligations of each of the Standby Purchasers and the Additional Standby Purchaser to
consummate the transactions contemplated hereunder are subject to the fulfillment, prior to or on
the Closing Date,

 

 

of the following conditions:

          (i) The representations and warranties of the Company in Section 4 shall be true and correct
in all material respects as of the date hereof and at and as of the Closing Date as if made on such
date (except for representations and warranties made as of a specified date, which shall be true
and correct in all material respects as of such specified date);

          (ii) The Company shall have executed and delivered to the Standby Purchasers a duly executed
copy of the Registration Rights Agreement;

          (iii) Subsequent to the execution and delivery of this Agreement and prior to the Closing
Date, there shall not have been any Material Adverse Effect and no event shall have occurred or
circumstance shall exist which would reasonably likely result in a Material Adverse Effect; and

          (iv) As of the Closing Date, none of the following events shall have occurred and be
continuing: (A) trading in the Common Stock shall have been suspended by the Commission or the
Nasdaq National Market or trading in securities generally on the New York Stock Exchange or the
Nasdaq National Market shall have been suspended or limited or minimum prices shall have been
established on either such exchange or the Nasdaq National Market, (B) a banking moratorium shall
have been declared either by U.S. federal or New York State authorities, or (C) there shall have
occurred any material outbreak or material escalation of hostilities, declaration by the United
States of a national emergency or war or other calamity or crisis which has a material adverse
effect on the U.S. financial markets (collectively, a “Market Adverse Effect”).

     (b) The obligations of Tontine to consummate the transactions contemplated in Section 2 hereof
are subject to the election or appointment, on or prior to the
Closing Date, of two (2) nominees
of Tontine to the Board reasonably acceptable to the Board, which Board shall consist of not more
than nine (9) members immediately after giving effect to such additional two (2) directors; it
being understood that the Board shall be free to change the size of the Board after the Closing
Date to the extent permitted by the Company’s certificate of incorporation and bylaws and Delaware
law. If such condition
is not satisfied and Tontine elects not to close, neither Legg Mason nor the Additional
Standby Purchaser shall be obligated to close hereunder.

     (c) The obligations of the Company to consummate the transactions contemplated hereunder are
subject to the fulfillment, prior to or on the Closing Date, of the following conditions:

          (i) The representations and warranties of each of the Standby Purchasers and the Additional
Standby Purchaser in Section 5 shall be true and correct in all material respects as of the date
hereof and at and as of the Closing Date as if made as of such date (except for representations and
warranties made as of a specified date, which shall be true and correct in all material respects as
of such specified date); and

          (ii) Each Standby Purchaser shall have executed and delivered to the Company a duly executed
copy of the Registration Rights Agreement.

     (d) The obligations of each of the Company and the Standby Purchasers and the Additional
Standby Purchaser to consummate the transactions contemplated hereunder in connection with the
Rights Offering are subject to the fulfillment, prior to or on the Closing Date, of the following
conditions:

          (i) No judgment, injunction, decree or other legal restraint shall prohibit, or have the
effect of rendering unachievable, the consummation of the Rights Offering or the transactions
contemplated by this Agreement;

          (ii) The Rights Offering Registration Statement shall have been filed with the Commission and
declared effective; no stop order suspending the effectiveness of the Rights Offering Registration
Statement or any part thereof shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the Commission; and any request of the Commission for inclusion of
additional information in the Registration

 

 

Statement or otherwise shall have been complied with;

          (iii) The holders of a majority of the outstanding Common Stock shall have approved the Rights
Offering and the transactions contemplated hereunder;

          (iv) The New Shares and the Securities shall have been authorized for listing on the Nasdaq
Stock Market; and

          (v) If the purchase of Common Stock hereunder is subject to the terms of the HSR Act, the
applicable waiting period shall have expired or been terminated thereunder with respect to such
purchase.

     (e) If the Additional Standby Purchaser elects not to close because of a failure of a Closing
condition, it shall cease to have any rights or obligations hereunder. To the extent the Standby
Purchasers elect to waive such Closing condition which has not been satisfied, they shall purchase
their proportionate share of the New Shares that the
Additional Standby Purchaser would have purchased hereunder, all subject to, and in accordance
with, Section 2.

     Section 10. Restrictions on Transfer.

     (a) The Standby Purchasers and the Additional Standby Purchaser shall not, and shall ensure
that their respective Affiliates do not, purchase, sell, transfer, assign, convey, gift, mortgage,
pledge, encumber, hypothecate or otherwise dispose of, directly or indirectly (“Transfer”), any
Securities; provided, however, that the foregoing shall not restrict in any manner a Transfer (i)
by a Standby Purchaser or the Additional Standby Purchaser to one or more of its Affiliates,
provided that the transferee in each case agrees in writing to be subject to the terms of this
Section 10, or (ii) to any other person in a private transaction if the Company first shall have
been furnished with an opinion of legal counsel, reasonably satisfactory to the Company, to the
effect that such Transfer is exempt from the registration requirements of the Securities Act or
(iii) made in accordance with Rule 144 under the Securities Act, provided that the Company shall
have the right to receive an opinion of legal counsel for the holder, reasonably satisfactory to
the Company, to the effect that such Transfer is exempt from the registration requirements of the
Securities Act, prior to the removal of the legend subject to Rule 144 or (iv) made pursuant to a
registration statement declared effective by the Commission. Any purported Transfers of Securities
in violation of this Section 10 shall be null and void and no right, title or interest in or to
such Securities shall be Transferred to the purported transferee, buyer, donee, assignee or
encumbrance holder. The Company will not give, and will not permit the Company’s transfer agent to
give, any effect to such purported Transfer in its stock records.

     (b) Restrictive
Legends. The Standby Purchasers and the Additional Standby Purchaser
understand and agree that the Securities will bear a legend substantially similar to the legend set
forth below in addition to any other legend that may be required by applicable law or by any
agreement between the Company and any of the Standby Purchasers and the Additional Standby
Purchaser. The legend may be removed pursuant to Section 10(a)(iii) and Section 10(a)(iv) as
provided above. The legend shall be removed upon the effectiveness of a registration statement
filed pursuant to the Registration Rights Agreement.

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR REGISTERED AND/OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND REGISTRATION
AND/OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS, (B) IN A TRANSACTION WHICH IS EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND REGISTRATION AND/OR
QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS PROVIDED THAT AT THE
ISSUER’S REQUEST, THE TRANSFEROR THEREOF SHALL HAVE DELIVERED TO THE ISSUER AN OPINION OF COUNSEL
(WHICH OPINION SHALL BE IN FORM, SUBSTANCE AND SCOPE
REASONABLY SATISFACTORY TO THE ISSUER) TO THE EFFECT THAT SUCH SECURITIES MAY BE SOLD OR
TRANSFERRED PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION, OR (C) SUCH

 

 

SECURITIES MAY BE SOLD PURSUANT TO RULE 144 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.

     Section 11.
Termination.

     (a) This Agreement may be terminated at any time prior to the Closing Date, by either Standby
Purchaser by written notice to the other parties hereto if there is (i) a Material Adverse Effect
or (ii) a Market Adverse Effect that is not cured within twenty-one (21) days after the occurrence
thereof (the “Cure Period”), provided that the right to terminate this Agreement after the
occurrence of each Material Adverse Effect or a Market Adverse Effect, which has not been cured
within the Cure Period, shall expire 7 days after the expiration of such Cure Period.

     (b) This Agreement may be terminated at any time prior to the Closing Date, by the Company on
one hand or either of the Standby Purchasers on the hand by written notice to the other parties
hereto:

          (i) If there is a material breach of this Agreement by the other party that is not cured within
fifteen (15) days after receipt of written notice by such breaching party;

          (ii) As to Section 2, Section 7(a) (other than Sections 7(a)(ix) and 7(a)(x)) and
Section 7(b), after the Backstop Termination Date; or

          (iii) As to any obligations hereunder other than Section 2, after the expiration of the Option
Period.

     (c) The Additional Standby Purchaser may terminate its obligations to purchase New Shares
pursuant to Section 2 upon the occurrence of the any of the events set forth in this Section 11
which give rise to a right of the Standby Purchasers to terminate this Agreement. Upon such
termination by the Additional Standby Purchaser, the Additional Standby Purchaser shall cease to
have any rights and obligations hereunder. To the extent this Agreement is not terminated by the
Standby Purchasers, they shall purchase their proportionate share of the New Shares that the
Additional Standby Purchaser would have purchased hereunder, all subject to, and in accordance
with, Section 2.

     Section 12.
Indemnification and Contribution.

     (a) In the event of any registration of any Securities under the Securities Act pursuant to
this Agreement, the Company shall indemnify and hold harmless the Standby Purchasers, the
Additional Standby Purchaser and each other Person (including each underwriter) who participated in
the offering of such Securities and each other Person, if any, who controls such Standby Purchaser
or Additional Standby Purchaser or such participating Person within the meaning of the Securities
Act (all such Persons being hereinafter referred to, collectively, as the “Standby Indemnified
Persons”), against any losses, claims, damages or liabilities, joint or several, to which any of
the Standby Indemnified Persons may become subject (i) as a result of any breach by the Company of
any of its representations or warranties contained herein or in any certificate delivered hereunder
or (ii) under the Securities Act or any other statute or at common law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (A)
any alleged untrue statement of any material fact contained, on the effective date thereof, in any
registration statement under which such securities were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or (B) any alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and shall reimburse each such Standby
Indemnified Person for any reasonable legal or any other expenses reasonably incurred by such
Standby Indemnified Person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company shall not be liable in any such
case to any Standby Indemnified Person to the extent that any such loss, claim, damage or liability
arises out of or is based upon any actual or alleged untrue statement or actual or alleged omission
made in such registration statement, preliminary prospectus, prospectus or amendment or supplement
in reliance upon and in conformity with written information furnished to the Company by such
Standby Indemnified Person specifically for use therein or so furnished for such purposes by any
underwriter. Such indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Standby Indemnified

 

 

Person, and shall survive the transfer of such Securities or New Shares by such Standby Indemnified Person.

     (b) Each Standby Purchaser and the Additional Standby Purchaser by acceptance thereof,
severally, and not jointly, agree to indemnify and hold harmless the Company, its directors and
officers and each other Person, if any, who controls the Company within the meaning of the
Securities Act (all such Persons being hereinafter referred to, collectively, as the “Company
Indemnified Persons,” and together with the Standby Indemnified Persons, the “Indemnified Persons”)
against any losses, claims, damages or liabilities, joint or several, to which any of the Company
Indemnified Persons may become subject (i) as a result of any breach by such Standby Purchaser or
Additional Standby Purchaser of any of its representations or warranties contained herein or in any
certificate delivered hereunder or (ii) under the Securities Act or any other statute or at common
law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon information provided in writing to the Company
by such Standby Purchaser or Additional Standby Purchaser specifically for use in any
registration statement under which Securities were registered under the Securities Act at the
request of such Standby Purchaser or Additional Standby Purchaser, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereto.

     (c) Any Person entitled to indemnification hereunder will (i) give prompt written notice to
the indemnifying party of any claim with respect to which it seeks
indemnification (provided that
the failure to give such notice shall not limit the rights of such Person, except to the extent the
indemnifying party is actually prejudiced thereby) and (ii) unless in such indemnified party’s
reasonable judgment a conflict of interest between such indemnified and indemnifying parties may
exist with respect to such claim, permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the indemnified party; provided, however, that any
person entitled to indemnification hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of such counsel shall be at the
expense of such Person unless (A) the indemnifying party has agreed to pay such fees or expenses or
(B) the indemnifying party shall have failed to assume the defense of such claim and employ counsel
reasonably satisfactory to such Person. If such defense is not assumed by the indemnifying party as
permitted hereunder, the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent will not be unreasonably
withheld or delayed). If such defense is assumed by the indemnifying party pursuant to the
provisions hereof, such indemnifying party shall not settle or otherwise compromise the applicable
claim unless (i) such settlement or compromise contains a full and unconditional release of the
indemnified party or (ii) the indemnified party otherwise consents in writing, which consent shall
not be unreasonably withheld or delayed. An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more
than one counsel for all parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party, a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with respect to such
claim, in which event the indemnifying party shall be obligated to pay the reasonable fees and
disbursements of such additional counsel or counsels.

     (d) (i) If the indemnification provided for in this Section 12 is unavailable to an
Indemnified Person hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the indemnifying party, in lieu of indemnifying such Indemnified Person,
shall contribute to the amount paid or payable by such Indemnified Person as a result of such
losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the indemnifying party and Indemnified Person in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party and Indemnified
Persons shall be determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact, has been made by, or relates to information supplied by,
the indemnifying party or the Indemnified Persons, and their relative intent, knowledge,
access to information and opportunity to correct or prevent such action. The amount paid or payable
by a party as a result of the losses, claims, damages, liabilities and expenses referred to above
shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.

 

 

          (ii) The parties hereto agree that it would not be just and equitable if contribution pursuant
to this Section 12(d) were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the immediately
preceding paragraph. 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.

     Section 13.
Survival. The representations and warranties of the Company and each of the
Standby Purchasers and the Additional Standby Purchaser contained in this Agreement or in any
certificate delivered hereunder shall survive the Closing hereunder.

     Section 14.
Notices. All notices, communications and deliveries required or permitted by this
Agreement shall be made in writing signed by the party making the same, shall specify the Section
of this Agreement pursuant to which it is given or being made and shall be deemed given or made (i)
on the date delivered if delivered by telecopy or in person, (ii) on the third (3rd)
Business Day after it is mailed if mailed by registered or certified mail (return receipt
requested) (with postage and other fees prepaid) or (iii) on the day after it is delivered,
prepaid, to an overnight express delivery service that confirms to the sender delivery on such day,
as follows:

     (a) if to Tontine, at:

c/o Tontine Capital Management L.L.C.

55 Railroad Avenue, 3rd Floor

Greenwich, Connecticut 06830

Attention: Joseph V. Lash

Telecopy No.: (203) 769-2010

with a copy to:

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York
10153

Attention: Ted S. Waksman

Telecopy No.: (212) 310-8007

     (b) if to Legg Mason, at:

Legg Mason Opportunity Trust

c/o Legg Mason Capital Management

100 Light Street

Baltimore, Maryland 21202

Attention: General Counsel

Telecopy No.: (410) 454-5372

with a copy to:

Legg Mason Legal & Compliance

100 Light Street

Baltimore, Maryland 21202

Attention: Asset Management-Mutual Fund Practice Group

Telecopy No.: (410) 454-4408

 

 

     (c) if to Additional Standby Purchaser, at:

Arklow Capital, LLC

237 Park Avenue

New York, N.Y. 10017

Attention: Chief Executive Officer

Telecopy No.: (212) 808-3789

with a copy to:

Gottfried & Associates

1328 Boston Post Road

Larchmont, N.Y. 10538

Attention: Michael N. Gottfried

Telecopy No.: (914) 833-9202

     (d) if to the Company, at:

Exide Technologies

13000 Deerfield Parkway, Building 200

Alpharetta, Georgia 30004

Attention: Gordon A. Ulsh

Telecopy No.: (678) 566-9171

with a copies to:

Exide Technologies

13000 Deerfield Parkway, Building 200

Alpharetta, Georgia 30004

Attention: Law Department

Telecopy No.: (678) 566-9342

and

Kirkland & Ellis LLP

200 East Randolph Drive

Chicago, IL 60601

Attention: Carter W. Emerson, P.C.

Telecopy No.: (312) 660-0374

or to such other representative or at such other address of a party as such party hereto may
furnish to the other parties in writing in accordance with this Section 14. If notice is given
pursuant to this Section 14 of any assignment to a permitted successor or assign of a party hereto,
the notice shall be given as set forth above to such successor or permitted assign of such party.

 

 

     Section 15. Assignment. This Agreement will be binding upon, and will inure to the benefit of
and be enforceable by, the parties hereto and their respective successors and assigns, including
any person to whom Securities are transferred in accordance herewith. This Agreement, or the
Standby Purchasers’ or the Additional Standby Purchaser’s obligations hereunder, may be assigned,
delegated or transferred, in whole or in part, by either Standby Purchaser or the Additional
Standby Purchaser to any Affiliate (as defined in Rule 12b-2 under the Exchange Act) of such
Standby Purchaser or the Additional Standby Purchaser over which such Standby Purchaser or the
Additional Standby Purchaser or any of its Affiliates exercises investment authority, including,
without limitation, with respect to voting and dispositive rights, provided that any such assignee
assumes the obligations of such Standby Purchaser or the Additional Standby Purchaser hereunder and
agrees in writing to be bound by the terms of this Agreement in the same manner as such Standby
Purchaser or Additional Standby Purchaser, as the case may be. Notwithstanding the foregoing or any
other provisions herein, no such assignment will relieve such Standby Purchaser or Additional
Standby Purchaser, as the case may be, of its obligations hereunder if such assignee fails to
perform such obligations.

     Section 16. Entire Agreement. This Agreement embodies the entire agreement and understanding
between the parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties, or undertakings, other than those set forth or referred to
herein, with respect to the standby purchase commitments or the registration rights granted by the
Company with respect to the Securities and the New Shares. This Agreement supersedes all prior
agreements and understandings between the parties with respect to the subject matter of this
Agreement.

     Section 17. Governing Law. This Agreement shall be governed by and construed in accordance
with the internal laws of the State of New York (other than its rules of conflict of laws to the
extent the application of the laws of another jurisdiction would be required thereby).

     Section 18. Severability. If any provision of this Agreement or the application thereof to any
person or circumstances is determined by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or unenforceable, shall remain
in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long
as the economic or legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party.
Upon such determination, the parties shall negotiate in good faith in an effort to agree upon
a suitable and equitable substitute provision to effect the original intent of the parties.

     Section 19. Extension or Modification of Rights Offering. Without the prior written consent of
the Standby Purchasers, the Company may (i) waive irregularities in the manner of exercise of the
Rights, and (ii) waive conditions relating to the method (but not the timing) of the exercise of
the Rights to the extent that such waiver does not materially adversely affect the interests of the
Standby Purchasers.

     Section 20. Miscellaneous.

     (a) The Company shall not after the date of this Agreement enter into any agreement with
respect to its securities which is inconsistent with or violates the rights granted to holders of
Securities in this Agreement.

     (b) The headings in this Agreement are for purposes of reference only and shall not limit or
otherwise affect the meaning of this Agreement.

     (c) This Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, but all of which, when taken together, shall constitute one and the same
instrument.

[Remainder of this page intentionally left blank.]

 

 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered
as of the date first above written.

	 	 	 	 	 	 	 
	 	 	EXIDE TECHNOLOGIES
	 	 	By:	 	/s/ Gordon A. Ulsh
	 	 	 	 	 
	 	 	Name: Gordon A. Ulsh
	 	 	Title: President and Chief Executive Officer
	 
	 	 	 	 	 	 
	 	 	TONTINE CAPITAL PARTNERS, L.P.
	 
	 	 	 	 	 	 
	 	 	By: TONTINE CAPITAL MANAGEMENT, L.L.C.,
	 
	 	 	 	 	 	 
	 	 	its general partner
	 	 	By:	 	/s/ Jeffrey L. Gendell
	 	 	 	 	 
	 	 	Name: Jeffrey L. Gendell
	 	 	Title: Managing Member
	 
	 	 	LEGG MASON INVESTMENT TRUST, INC.
	 
	 	 	By:	 	/s/ Gregory Merz
	 	 	 	 	 
	 	 	Name: Gregory Merz
	 	 	Title: Vice President
	 
	 	 	ARKLOW CAPITAL, LLC
	 
	 	 	By:	 	/s/ Gregory Shrock
	 	 	 	 	 
	 	 	Name:	 	Gregory Shrock
	 	 	Title:	 	President

 

 

Annex A

To the extent that terms and conditions herein overlap with the terms and conditions in the
Standby Purchase Agreement and the Registration Rights Agreement (the “Definitive Agreements”), the
terms and conditions in the Definitive Agreements shall govern.

	 	 	 
	Issuer

	 	Exide Technologies (the “Company”).
	 

	 	$125.0 million, comprised of a $75.0 million rights offering and

a $50.0 million additional subscription privilege for the Standby
	 
	 	 
	Aggregate Offering Size

	 	Purchasers.
	 
	 	 
	Authorization

	 	Prior approval of the Company’s board of directors (the “Board ”)
and subject to shareholder approval.
	 
	 	 
	Rights Offering

	 	The Company is distributing to holders of its common stock, at
no charge, one subscription right for every one share of the
Company’s common stock that holders owned as of the Record Date.
	 
	 	 
	Subscription Privilege

	 	Each subscription right entitles Eligible Participants to
purchase, for every one share of common stock they owned as of the
Record Date, between 1.02 and 0.68 shares of common stock upon
payment of between $3.00 and $4.50 per share, depending on the
Subscription Price formula described below.
	 
	 	 
	Launch Date

	 	The offering will be launched shortly after the mailing of the
proxy statement for the Company’s annual shareholder meeting, which
will be held in August 2006. The expected launch date is July 27, 2006.
	 
	 	 
	Record Date

	 	The Record Date is expected to be July 27, 2006 at 5:00 p.m.,
New York City time. Only the Company’s stockholders as of the Record
Date (the “Eligible Participants ”) will receive rights to subscribe
for shares in the rights offering.
	 
	 	 
	Expiration Date

	 	It is expected that the rights would expire at or shortly after
the Company’s annual meeting but in no event more than 40 days after
the launch date. Rights not exercised by the Expiration Date will be
null and void. The Company has the option, with the approval of the
Standby Purchasers, to extend the expiration of the rights offering
for any reason, for a period not to exceed 15 business days.
	 
	 	 
	Subscription Price

	 	Subscription Price will be payable in cash and set at a 20%
discount to the average closing price of the Company’s common stock
for the 30 trading day period ending July 6, 2006. Notwithstanding
the above, at no time shall the Subscription Price be higher than
$4.50 per share nor shall it be lower than $3.00 per share. All
payments must be cleared on or before the Expiration Date.
	 
	 	 
	Transferability of Rights

	 	The subscription rights may not be sold, transferred or assigned.
	 
	 	 
	Subscription Commitment
of Tontine

	 	Tontine Capital Partners, L.P. ( “Tontine”), who, as of June 15,
2006, beneficially owned approximately 9.9% of the Company’s common
stock, will agree to act as a standby purchaser in the rights
offering in the amount up to 54% of the unsubscribed shares.
	 
	 	 
	Subscription Commitment
of Legg Mason

	 	Legg Mason Investment Trust, Inc. ( “Legg Mason ”), who, as of
June 15, 2006, beneficially owned 0.0% of the Company’s common stock,
will agree to act as a Standby Purchaser in the rights offering in
the amount up to 36% of the unsubscribed shares.
	 
	 	 
	Subscription Commitment
of Arklow

	 	Arklow Capital, LLC. ( “Arklow ”), who, as of June 15, 2006,
beneficially owned 4.2% of the Company’s common stock, will agree to
act as a Standby Purchaser in the rights offering in the amount up to
10% of the unsubscribed shares.
	 
	 	 
	Reallocation of
Percentage of Subscription

	 	Tontine, Legg Mason and Arklow reserve the right to agree among
themselves to reallocate the percentage of the unsubscribed shares
that they shall each purchase (so long as Tontine, Legg Mason and
Arklow purchase 100% of the unsubscribed shares in the aggregate).
	 
	 	 
	Subscription Commitment

Fee

	 	Additional subscription privilege of $50.0 million to be
allocated pro rata to Tontine and Legg Mason based on subscription
commitments, subject to change of control limitations described
below.

 

 

	 	 	 
	Additional Subscription

Privilege for the Standby

Purchasers

	 	The Company is granting Tontine and Legg Mason the right to
acquire between 11.1 million and 16.7 million shares of the Company’s
common stock at the Subscription Price after completion of the Rights
Offering. They will commit to purchase such shares.
	 
	 	 
	Reallocation of
Percentage of Additional
Subscription

	 	Tontine and Legg Mason reserve the right to agree between each
other to reallocate the percentage of the additional subscription
shares referred to above that they shall each purchase (so long as
Tontine and Legg Mason purchase 100% of the additional subscription
shares in the aggregate).
	 
	 	 
	Change of Control

	 	No purchaser, or group of which that purchaser is a member, may
acquire shares in the equity offering that would result in a Change
of Control under the Company’s Senior Credit Facility (30%
fully — diluted ownership) or Second-Lien Notes agreement (50% of
outstanding shares).
	 
	 	 
	Subscription Agent

	 	[TBD].
	 
	 	 
	Use of Proceeds

	 	Proceeds will be used to provide additional liquidity for
working capital, capital expenditures and general corporate purposes.
	 
	 	 
	Board of Directors

	 	Tontine shall have the right to
nominate 2 directors on the
Board reasonably acceptable to the Board, which Board shall consist
of not more than 9 members immediately after giving effect to such
additional 2 directors; it being understood that the Board shall be
free to change the size of the Board after the closing date of the
rights offering to the extent permitted by the Company’s certificate
of incorporation and by-laws and Delaware law.
	 
	 	 
	Registration Rights

	 	Tontine, Legg Mason and Arklow shall have registration rights,
which shall consist of an immediate evergreen shelf registration
statement, demand registrations if the shelf registration statement
is not effective, unlimited Form S — 3 registrations so long as the
Company is eligible to use such Form and piggyback registration
rights.

 

 

Annex B

REGISTRATION RIGHTS AGREEMENT

     Registration Rights Agreement, dated as of ___, 2006, by and among Exide Technologies, a Delaware
corporation (“Company”), and the stockholders signatories
hereto.

W I T N E S S E T H :

     WHEREAS, this Agreement is being entered into in connection with the Standby Purchase
Agreement dated as of June [_____], 2006 (the “Standby Purchase Agreement”) among the parties to this
Agreement (as defined below);

     NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, it
is agreed as follows:

     1. Definitions. Unless otherwise defined herein, capitalized terms used herein and in the
recitals above shall have the following meanings:

     “Additional Holders” shall mean the Permitted Assignees of Registrable Securities who, from
time to time, acquire Registrable Securities from a Holder or Holders and own Registrable
Securities at the relevant time, agree to be bound by the terms hereof and become Holders for
purposes of this Agreement.

     “Affiliate” of a Person shall mean any Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with, such other Person.
For purposes of this definition, “control” shall mean the ability of one Person to direct the
management and policies of another Person.

     “Agreement” shall mean this Registration Rights Agreement, including all amendments,
modifications and supplements and any exhibits or schedules to any of the foregoing, and shall
refer to the Agreement as the same may be in effect at the time such reference becomes operative.

     “Business Day” shall mean any day that is not a Saturday, a Sunday or a day on which banks are
required or permitted to be closed in the State of New York.

     “Closing Date” shall have the meaning assigned to such term in the Standby Purchase Agreement.

     “Commission” shall mean the Securities and Exchange Commission or any other federal agency
then administering the Securities Act and other federal securities laws.

     “Common Stock” shall mean the shares of common stock, $.01 par value per share, of Company, as
adjusted to reflect any merger, consolidation, recapitalization, reclassification, split-up, stock
dividend, rights offering or reverse stock split made, declared or effected with respect to the
Common Stock.

     “Company” shall have the meaning assigned to such term in the preamble.

     “Demand Registration” shall have the meaning assigned to such term in Section 2(b) hereof.

     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all as the same shall
be in effect from time to time.

     “Holder” shall mean any (i) Person who owns Registrable Securities at the relevant time and is
a party to this Agreement or (ii) any Additional Holder.

 

 

     “Majority Holders” shall mean Holders holding at the time, shares of Registrable Securities
representing more than 50% of the then outstanding Registrable Securities.

     “Permitted Assignee” shall mean any (a) Affiliate of any Holder who acquires Registrable
Securities from such Holder, or its Affiliates, or (b) any other Person who acquires any
Registrable Securities of any Holder or Holders who is designated as a Permitted Assignee by such
Holder in a written notice to Company; provided, however, that the rights of any Person designated
as a Permitted Assignee referred to in the foregoing clause (b) shall be limited if, and to the
extent, provided in such notice.

     “Person” shall mean any individual, corporation, partnership, limited liability company, joint
venture, association, joint-stock company, trust, unincorporated organization, government or any
agency or political subdivision thereof or any other entity.

     “Registrable Securities” shall mean the Common Stock of Company owned by the Holders as of the
date hereof or at any time in the future; and, if as a result of any reclassification, stock
dividends or stock splits or in connection with a combination of shares, recapitalization, merger,
consolidation, sale of all or substantially all of the assets of Company or other reorganization or
other transaction or event, any capital stock, evidence of indebtedness, warrants, options, rights
or other securities (collectively “Other Securities”) are issued or transferred to a Holder in
respect of Registrable Securities held by the Holder, references herein to Registrable Securities
shall be deemed to include such Other Securities.

     “Securities Act” shall mean the Securities Act of 1933, as amended, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the same shall be in
effect from time to time.

     “Shelf Registration” means a registration effected pursuant to Section 2(a) hereof.

     “Shelf Registration Statement” means a “shelf” registration statement of Company relating to a
“shelf” offering in accordance with Rule 415 of the Securities Act, or any similar rule that may be
adopted by the Commission, pursuant to the provisions of Section 2(a) hereof which covers all of
the Registrable Securities held by the Holders, on an appropriate form under the Securities Act,
and all amendments and supplements to such registration statement, including post-effective
amendments, in each case including the prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.

     “Standby Purchase Agreement” shall have the meaning assigned to such term in the recitals.

     2. Required Registration.

          (a) Company shall use its reasonable best efforts to cause a Shelf Registration Statement to
be filed and declared effective by the Commission within 90 days after the Closing Date. Each Holder as to
which any Shelf Registration is being effected agrees to furnish to Company all information with
respect to such Holder necessary to make any information previously furnished to Company by such
Holder not misleading. Company agrees to use its reasonable best efforts to keep the Shelf
Registration Statement continuously effective for as long as any Holder holds Registrable
Securities. Company further agrees, if necessary, to promptly supplement or amend the Shelf
Registration Statement, if required by the rules, regulations or instructions applicable to the
registration form used by Company for such Shelf Registration Statement or by the Securities Act or
by any other rules and regulations thereunder for shelf registrations, and Company agrees to
furnish to the Holders of Registrable Securities copies of any such supplement or amendment
promptly after its being used or filed with the Commission.

          (b) At any time the Shelf Registration Statement covering all Registrable Securities is not
effective and after receipt of a written request from the Holders of Registrable Securities
requesting that Company effect a registration under the Securities Act covering at least 10% of the
Registrable Securities outstanding as of the Closing Date (a “Demand Registration”), and specifying
the intended method or methods of disposition thereof, Company shall promptly notify all Holders in
writing of the receipt of such request and each such Holder, in lieu of exercising its rights under
Section 3 may elect (by written notice sent to Company within 10 Business Days from

 

 

          the date of such Holder’s receipt of the aforementioned Company’s notice) to have Registrable
Securities included in such Demand Registration thereof pursuant to this Section 2. Thereupon
Company shall, as expeditiously as is possible, use its reasonable best efforts to effect the
registration under the Securities Act of all shares of Registrable Securities which Company has
been so requested to register by such Holders for sale, all to the extent required to permit the
disposition (in accordance with the intended method or methods thereof, as aforesaid) of the
Registrable Securities so registered; provided, however, that Company shall not be required to
effect more than two (2) registrations of any Registrable Securities pursuant to this Section 2,
unless Company shall be eligible at any time to file a registration statement on Form S-3 (or other
comparable short form) under the Securities Act, in which event there shall be no limit on the
number of such registrations pursuant to this Section 2.

          (c) A registration will not count as a Demand Registration until it has become effective
(unless the requesting Holders withdraw all their Registrable Securities and Company has performed
its obligations hereunder in all material respects, in which case such demand will count as a
Demand Registration unless the requesting Holders pay
all registration expense in connection with such withdrawn registration); provided, however,
that if, after it has become effective, an offering of Registrable Securities pursuant to a
registration is interfered with by any stop order, injunction or other order or requirement of the
Commission or other governmental agency or court or is withdrawn because of any development
affecting Company, such registration will be deemed not to have been effected and will not count as
a Demand Registration.

          (d) If the managing underwriter of a Demand Registration shall advise Company in writing that,
in its opinion, the distribution of the Registrable Securities requested to be included in the
Demand Registration would materially and adversely affect the distribution of such Registrable
Securities, then all selling Holders shall reduce the amount of Registrable Securities each
intended to distribute through such offering on a pro-rata basis.

     3. Incidental Registration. If Company at any time proposes to file on its behalf and/or on
behalf of any of its security holders (the “demanding security holders”) a registration statement
under the Securities Act on any form (other than a registration statement on Form S-4 or S-8 or any
successor form for securities to be offered in a transaction of the type referred to in Rule 145
under the Securities Act or to employees of Company pursuant to any employee benefit plan,
respectively) for the general registration of securities, it will give written notice to all
Holders at least 20 days before the initial filing with the Commission of such registration
statement, which notice shall set forth the intended method of disposition of the securities
proposed to be registered by Company. The notice shall offer to include in such filing the
aggregate number of shares of Registrable Securities as such Holders may request.

     Each Holder desiring to have Registrable Securities registered under this Section 3 shall
advise Company in writing within 10 Business Days after the date of receipt of such offer from
Company, setting forth the amount of such Registrable Securities for which registration is
requested. Company shall thereupon include in such filing the number of shares of Registrable
Securities for which registration is so requested, subject to the next sentence, and shall use its
reasonable best efforts to effect registration under the Securities Act of such shares. If the
managing underwriter of a proposed public offering shall advise Company in writing that, in its
opinion, the distribution of the Registrable Securities requested to be included in the
registration concurrently with the securities being registered by Company or such demanding
security holder would materially and adversely affect the distribution of such securities by
Company or such demanding security holder, then all selling security holders (including the
demanding security holder who initially requested such registration) shall reduce the amount of
securities each intended to distribute through such offering on a pro-rata basis. Except as
otherwise provided in Section 5, all expenses of such registration shall be borne by Company.

     4. Registration Procedures. If Company is required by the provisions of Section 2 or 3 to use
its reasonable best efforts to effect the registration of any of its securities under the
Securities Act, Company will, as expeditiously as possible:

          (a) prepare and file with the Commission a registration statement with respect to such
securities and use its reasonable best efforts to cause such registration statement to become and
remain effective for a period of time required for the disposition of such securities by the
holders thereof, but not to exceed 180 days (other than the Shelf Registration Statement which
shall be kept effective for such period as provided in Section 2(a));

 

 

          (b) prepare and file with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of all securities covered by such registration statement
until the earlier of such time as all of such securities have been disposed of in a public offering
or the expiration of 180 days (other than the Shelf Registration Statement which shall be kept
effective for such period as provided in Section 2(a));

          (c) furnish to such selling security holders such number of copies of a summary prospectus or
other prospectus, including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents, as such selling security holders may reasonably request;

          (d) use its reasonable best efforts to register or qualify the securities covered by such
registration statement under such other securities or blue sky laws of such jurisdictions within
the United States as each holder of such securities shall request (provided, however, that Company
shall not be obligated to qualify as a foreign corporation to do business under the laws of any
jurisdiction in which it is not then qualified or to file any general consent to service or
process), and do such other reasonable acts and things as may be required of it to enable such
holder to consummate the disposition in such jurisdiction of the securities covered by such
registration statement;

          (e) promptly notify each Holder whose Registrable Securities are intended to be covered by
such registration statement and each underwriter and, if requested by any such Person, confirm such
notice in writing (i) when a prospectus or any prospectus supplement or post-effective amendment
has been filed and, with respect to a registration statement or any post-effective amendment, when
the same has become effective, (ii) of the issuance by any state securities or other regulatory
authority of any order suspending the qualification or exemption from qualification of any of the
Registrable Securities under state securities or “blue sky” laws or the initiation of any
proceedings for that purpose, (iii) any request by the Commission for the amending or supplementing
of such registration statement or prospectus or for additional information; and (iv) of the
happening of any event which makes any statement made in a registration statement or related
prospectus untrue or which requires the making of any changes in such registration statement,
prospectus or documents so that they will not contain any 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, as promptly as practicable thereafter, prepare and file with the
Commission and furnish a supplement or
amendment to such prospectus so that, as thereafter deliverable to the purchasers of such
Registrable Securities, such prospectus will not contain any untrue statement of a material fact or
omit a material fact necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and the time period during which such registration statement
is required to remain effective shall be extended for the time period during which such prospectus
is so suspended;

          (f) furnish, at the request of any Holder requesting registration of Registrable Securities
pursuant to Section 2, on the date that such shares of Registrable Securities are delivered to the
underwriters for sale pursuant to such registration or, if such Registrable Securities are not
being sold through underwriters, on the date that the registration statement with respect to such
shares of Registrable Securities becomes effective, (1) an opinion, dated such date, of the
independent counsel representing Company for the purposes of such registration, addressed to the
underwriters, if any, and if such Registrable Securities are not being sold through underwriters,
then to the Holders making such request, in customary form and covering matters of the type
customarily covered in such legal opinions; and (2) a comfort letter dated such date, from the
independent certified public accountants of Company, addressed to the underwriters, if any, and if
such Registrable Securities are not being sold through underwriters, then to the Holder making such
request and, if such accountants refuse to deliver such letter to such Holder, then to Company, in
a customary form and covering matters of the type customarily covered by such comfort letters and
as the underwriters or such Holder shall reasonably request. Such opinion of counsel shall
additionally cover such other legal matters with respect to the registration in respect of which
such opinion is being given as such Holders may reasonably request. Such letter from the
independent certified public accountants shall additionally cover such other financial matters
(including information as to the period ending not more than five Business Days prior to the date
of such letter) with respect to the registration in respect of which such letter is being given as
the Holders of a majority of the Registrable Securities being so registered may reasonably request;

          (g) 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; and

          (h) otherwise use its reasonable best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, but not
later than 18 months after the effective date of the registration statement, an earnings statement covering
the period of at least 12 months beginning with the first full month after the effective date of
such registration statement, which earnings statement shall satisfy the provisions of Section 11(a)
of the Securities Act.

     It shall be a condition precedent to the obligation of Company to take any action
pursuant to this
Agreement in respect of the securities which are to be registered at the request of any Holder that
such Holder shall furnish to Company such information regarding the securities held by such Holder
and the intended method of disposition thereof as Company shall reasonably request and as shall be
required in connection with the action taken by Company.

     Each Holder agrees that, upon receipt of any notice from Company of the happening of any event
of the kind described in Section 4(e)(iv), such Holder shall immediately discontinue such Holder’s
disposition of Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such Holder’s receipt of the copies of the supplemented or amended
prospectus contemplated by Section 4(e)(iv).

     5. Expenses. All expenses incurred in complying with this Agreement, including, without
limitation, all registration and filing fees (including all expenses incident to filing with any
stock exchange or the National Association of Securities Dealers, Inc.), printing expenses, fees
and disbursements of counsel for Company, the reasonable fees and reasonable expenses of counsel
for the selling security holders (selected by those holding a majority of the shares being
registered), expenses of any special audits incident to or required by any such registration and
expenses of complying with the securities or blue sky laws of any jurisdiction pursuant to Section
4 (d), shall be paid by Company, except that:

          (a) all such expenses in connection with any amendment or supplement to the registration
statement or prospectus filed more than 180 days after the effective date of such registration
statement because any Holder has not effected the disposition of the securities requested to be
registered shall be paid by such Holder; and

          (b) Company shall not be liable for any fees, discounts or commissions to any underwriter or
any fees or disbursements of counsel for any underwriter in respect of the securities sold by such
Holder.

     6. Indemnification and Contribution.

          (a) In the event of any registration of any Registrable Securities under the Securities Act
pursuant to
this Agreement, Company shall indemnify and hold harmless to the fullest extent permitted by law
the Holder of such Registrable Securities, such Holder’s directors and officers, and each other
person (including each underwriter) who participated in the offering of such Registrable Securities
and each other person, if any, who controls such Holder or such participating person within the
meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such Holder or any such director or officer or participating person or
controlling person may become subject under the Securities Act or any other statute or at common
law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any
alleged untrue statement of any material fact contained, on the effective date thereof, in any
registration statement under which such securities were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or (ii) any alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and shall reimburse such Holder
or such director, officer or participating person or controlling person for any legal or any other
expenses reasonably incurred by such Holder or such director, officer or participating person or
controlling person in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based upon any actual or
alleged untrue statement or actual or alleged omission made in

 

 

such registration statement, preliminary prospectus, prospectus or amendment or supplement in
reliance upon and in conformity with written information furnished to Company by such Holder
specifically for use therein or (in the case of any registration pursuant to Section 2) so
furnished for such purposes by any underwriter. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Holder or such director,
officer or participating person or controlling person, and shall survive the transfer of such
securities by such Holder.

          (b) Each Holder, by acceptance hereof, agrees to indemnify and hold harmless to the fullest
extent permitted by law Company, its directors and officers and each other person, if any, who
controls Company within the meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which Company or any such director or officer or any such person
may become subject under the Securities Act or any other statute or at common law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based
upon information provided in writing to Company by such Holder specifically for use in the
following documents and contained, on the effective date thereof, in any registration statement
under which securities were registered under the Securities Act at the request of such Holder, any
preliminary prospectus or final prospectus contained therein, or any amendment or supplement
thereto. Notwithstanding the provisions of this paragraph (b) or paragraph (d) below, no Holder
shall be required to indemnify any person pursuant to this Section 6 or to contribute pursuant to
paragraph (d) below in an amount in excess of the amount of the aggregate net proceeds received by
such Holder in connection with any such registration under the Securities Act.

          (c) Any Person entitled to indemnification hereunder will (i) give prompt written notice to
the indemnifying party of any claim with respect to which it seeks
indemnification (provided that
the failure to give such notice shall not limit the rights of such Person, except to the extent the
indemnifying party is actually prejudiced thereby) and (ii) unless in such indemnified party’s
reasonable judgment a conflict of interest between such indemnified and indemnifying parties may
exist with respect to such claim, permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the indemnified party;
provided, however, that any
person entitled to indemnification hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of such counsel shall be at the
expense of such Person unless (A) the indemnifying party has agreed to pay such fees or expenses or
(B) the indemnifying party shall have failed to assume the defense of such claim and employ counsel
reasonably satisfactory to such Person. If such defense is not assumed by the indemnifying party as
permitted hereunder, the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent will not be unreasonably
withheld or delayed). If such defense is assumed by the indemnifying party pursuant to the
provisions hereof, such indemnifying party shall not settle or otherwise compromise the applicable
claim unless (i) such settlement or compromise contains a full and unconditional release of the
indemnified party or (ii) the indemnified party otherwise consents in writing, which consent shall
not be unreasonably withheld or delayed. An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more
than one counsel for all parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party, a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with respect to such
claim, in which event the indemnifying party shall be obligated to pay the reasonable fees and
disbursements of such additional counsel or counsels.

          (d) If the indemnification provided for in this Section 6 from the indemnifying party is
unavailable to an indemnified party hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the 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, liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and indemnified parties in
connection with the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified parties, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent such action. The
amount paid or payable by a party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to

 

 

include any legal or other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.

     The parties hereto agree that it would not be just and equitable if contribution pursuant to
this Section 6(d) were determined by pro-rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the immediately preceding
paragraph. 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.

     7. Certain
Limitations on Registration Rights. Notwithstanding the other provisions of this
Agreement:

          (a) Company shall not be obligated to register the Registrable Securities of any Holder if,
in the opinion of counsel to Company reasonably satisfactory to the Holder and its counsel (or, if the
Holder has engaged an investment banking firm, to such investment banking firm and its counsel),
the sale or other disposition of such Holder’s Registrable Securities, in the manner proposed by
such Holder (or by such investment banking firm), may be effected without registering such
Registrable Securities under the Securities Act; and

          (b) Company shall not be obligated to register the Registrable Securities of any Holder
pursuant to Section 2 if Company has had a registration statement, under which such Holder had a
right to have its Registrable Securities included pursuant to Section 2 or 3, declared effective
within six months prior to the date of the request pursuant to
Section 2; provided, however, that
if any Holder elected to have shares of its Registrable Securities included under such registration
statement but some or all of such shares were excluded pursuant to the penultimate sentence of
Section 3, then such six-month period shall be reduced to three months.

          (c) Company shall have the right to delay the filing or effectiveness of a registration
statement required pursuant to Section 2 hereof during one or more periods aggregating not more
than 90 days in any twelvemonth period in the event that (i) Company would, in accordance with the
advice of its counsel, be required to disclose in the prospectus information not otherwise then
required by law to be publicly disclosed and (ii) in the judgment of Company’s board of directors,
there is a reasonable likelihood that such disclosure, or any other action to be taken in
connection with the prospectus, would materially and adversely affect any existing or prospective
material business situation, transaction or negotiation or otherwise materially and adversely
affect Company.

     8. Selection
of Managing Underwriters. The managing underwriter or underwriters for any
offering of Registrable Securities to be registered pursuant to Section 2 shall be selected by the
holders of a majority of the Registrable Securities being so registered and shall be reasonably
acceptable to Company.

     9. Interpretive
Matters. Unless otherwise expressly provided or the context otherwise
requires, for purposes of this Agreement the following rules of interpretation apply:

          (a) When calculating the period of time before which, within which or following which any act
is to be done or step taken pursuant to this Agreement, the date that is the reference date in
calculating such period is excluded. If the last day of such period is a non-Business Day, the
period in question ends on the next succeeding Business Day.

          (b) Any reference in this Agreement to gender includes all genders, and words imparting the
singular number also include the plural and vice versa.

          (c) All references in this Agreement to any “Article,” or “Section,” are to the corresponding
Article or Section of this Agreement.

          (d) The words “herein,” “hereinafter,” “hereof,” and “hereunder” refer to this Agreement as a
whole and not merely to a subdivision in which such words appear unless the context otherwise
requires.

          (e) The word “including” or any variation thereof means “including, but not limited to,” and does

 

 

not limit any general statement that it follows to the specific or similar items or matters
immediately following it.

     10. Miscellaneous.

          (a) No
Inconsistent Agreements. Company will not hereafter enter into any agreement with
respect to its securities which is inconsistent with the rights granted to the Holders in this
Agreement.

          (b) Remedies. Each Holder, in addition to being entitled to exercise all rights granted by
law, including recovery of damages, will be entitled to specific performance of its rights under
this Agreement. Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to
waive the defense in any action for specific performance that a remedy at law would be adequate. In
any action or proceeding brought to enforce any provision of this Agreement or where any provision
hereof is validly asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys’ fees in addition to any other available remedy.

          (c) Amendments
and Waivers. Except as otherwise provided herein, the provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents to departure from
the provisions hereof may not be given unless Company has obtained the written consent of the
Majority Holders.

          (d) Notice
Generally. All notices, demands, communications and deliveries required or
permitted by this Agreement shall be made in writing signed by the party making the same, shall
specify the Section of this Agreement pursuant to which it is given or being made and shall be
deemed given or made (i) on the date delivered if delivered by telecopy or in person, (ii) on the
third (3rd) Business Day after it is mailed if mailed by registered or certified mail
(return receipt requested) (with postage and other fees prepaid) or (iii) on the day after it is
delivered, prepaid, to an overnight express delivery service that confirms to the sender delivery
on such day, as follows:

          (i) If to any Holder, at its last known address appearing on the books of Company maintained
for such purpose.

          (ii) If to Company, at:

Exide Technologies

13000 Deerfield Parkway, Building 200

Alpharetta, Georgia 30004

Attention: Gordon A. Ulsh

Telecopy No.: (678) 566-9171

With copies to:

Exide Technologies

13000 Deerfield Parkway, Building 200

Alpharetta, Georgia 30004

Attention: Law Department

Telecopy No.: (678) 566-9342

 

 

and

Kirkland & Ellis LLP

200 East Randolph Drive

Chicago, IL 60601

Attention: Carter W. Emerson, P.C.

Telecopy No.: (312) 660-0374

or at such other address as may be substituted by notice given as herein provided. The giving of
any notice required hereunder may be waived in writing by the party entitled to receive such
notice. Every notice, demand, request, consent, approval, declaration, delivery or other
communication hereunder shall be deemed to have been duly given or served on the date on which
personally delivered, with receipt acknowledged, telecopied and confirmed by telecopy answerback or
three Business Days after the same shall have been deposited in the United States mail.

          (e) Rule 144. So long as Company is subject to the reporting requirements under the Exchange
Act, it shall comply with such requirements so as to permit sales of
Registrable Securities by the holders thereof pursuant to Rule 144 under the Securities Act.

          (f) Successors
and Assigns. This Agreement shall inure to the benefit of and be binding upon
the successors and permitted assigns of each of the parties hereto including any person to whom
Registrable Securities are transferred and becomes an Additional Holder in accordance with this
Agreement.

          (g) Headings. The headings in this Agreement are for convenience of reference only and shall
not limit or otherwise affect the meaning hereof.

          (h) Governing
Law; Jurisdiction; Jury Waiver. This Agreement shall be governed by, construed
and enforced in accordance with the laws of the State of New York without giving effect to the
conflict of laws provisions thereof. Each of the parties hereby submits to personal jurisdiction
and waives any objection as to venue in the County of New York, State of New York. Service of
process on the parties in any action arising out of or relating to this Agreement shall be
effective if mailed to the parties in accordance with Section 10(d) hereof. The parties hereto
waive all right to trial by jury in any action or proceeding to enforce or defend any rights
hereunder.

          (i) Severability. Wherever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.

          (j) Entire
Agreement. This Agreement represents the complete agreement and understanding of
the parties hereto in respect of the subject matter contained herein and therein. This Agreement
supersedes all prior agreements and understandings between the parties with respect to the subject
matter hereof.

          (k) Counterparts. This Agreement may be executed in any number of counterparts and by the
parties hereto in separate counterparts (including by facsimile), each of which when so executed
shall be deemed to be an original and all of which taken together shall constitute one and the same
agreement.

          (l) Termination. Company’s obligations under this Agreement shall cease with respect to any
Person when such Person ceases to be a Holder. Notwithstanding the foregoing, Company’s obligations
under Section 5 and Section 6 shall survive in accordance with their terms.

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

	 	 	 	 	 	 	 	 	 
	 	 	EXIDE TECHNOLOGIES	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	Name:

Title:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	TONTINE CAPITAL PARTNERS, L.P.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	TONTINE CAPITAL MANAGEMENT, L.L.C.,	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	its general partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 	 	 	 	Name:

Title:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	LEGG MASON INVESTMENT TRUST, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	Name:

Title:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	ARKLOW CAPITAL, LLC	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	Name:

Title:	 	 

[PERMITTED ASSIGNEES UNDER STANDBY PURCHASE AGREEMENT]<PAGE>

                                                                    Exhibit 4.11

QUALCOMM/Techfaith                                                  CONFIDENTIAL
Series A Preferred Share Purchase and Sale Agreement           EXECUTION VERSION

                              DATED MARCH 22, 2006

              SERIES A PREFERRED SHARE PURCHASE AND SALE AGREEMENT

                                     AMONGST

                   TECHFAITH SOFTWARE (CHINA) HOLDING LIMITED

                                       AND

                              QUALCOMM INCORPORATED

                                       AND

            CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
1. DEFINITIONS...........................................................     1
   1.1  Certain Defined Terms............................................     1
   1.2  Exhibits and Schedules...........................................     5
   1.3  Interpretation...................................................     6

2. AGREEMENT TO PURCHASE AND SELL SERIES A PREFERRED SHARES..............     6
   2.1  Agreement to Purchase and Sell...................................     6
   2.2  Authorization....................................................     7
   2.3  Closings; Delivery...............................................     7

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................     8
   3.1  Organization, Good Standing, Corporate Power and Qualification...     9
   3.2  Capitalization...................................................     9
   3.3  Subsidiaries.....................................................    10
   3.4  WFOE Subsidiary..................................................    10
   3.5  Authorization....................................................    11
   3.6  Valid Issuance of Shares.........................................    12
   3.7  Governmental Consents and Filings................................    12
   3.8  Litigation.......................................................    12
   3.9  Intellectual Property............................................    13
   3.10 Compliance with Other Instruments................................    13
   3.11 Agreements; Actions..............................................    14
   3.12 Conflicts of Interest............................................    16
   3.13 Absence of Liens.................................................    17
   3.14 Financial Statements.............................................    17
   3.15 Changes..........................................................    18
   3.16 Employee Matters.................................................    19
   3.17 Tax Returns and Payments.........................................    21
   3.18 Permits..........................................................    22
   3.19 Corporate Documents..............................................    22
   3.20 Disclosure.......................................................    22
   3.21 Breach of Warranty...............................................    22

4. CONDITIONS TO THE INVESTORS' OBLIGATIONS AT CLOSING...................    22
   4.1  The Initial Closing..............................................    23
   4.2  The Subsequent Closing...........................................    25
   4.3  The Final Closing................................................    25
   4.4  No Closing Obligation............................................    26

5. MISCELLANEOUS.........................................................    26
   5.1  Survival of Warranties...........................................    26
   5.2  Transfer; Successors and Assigns.................................    26
   5.3  Governing Law....................................................    26
   5.4  Counterparts.....................................................    26
   5.5  Titles and Subtitles.............................................    27
   5.6  Notices..........................................................    27
   5.7  No Finder's Fees.................................................    27
</TABLE>

<PAGE>

                                       -2-

<TABLE>
<S>                                                                         <C>
   5.8  Confidentiality Obligations......................................    27
   5.9  Fees and Expenses................................................    29
   5.10 Attorney's Fees..................................................    29
   5.11 Amendments and Waivers...........................................    30
   5.12 Severability.....................................................    30
   5.13 Delays or Omissions..............................................    30
   5.14 Moratorium.......................................................    30
   5.15 Entire Agreement.................................................    31
   5.16 Dispute Resolution...............................................    31

SCHEDULE 1 - PARTICULARS OF THE COMPANY..................................    33
PART A: PARTICULARS OF COMPANY PRE-CLOSING...............................    33
PART B: PARTICULARS OF THE WFOE SUBSIDIARY...............................    34
SCHEDULE 2 - CAPITALIZATION OF THE COMPANY POST-CLOSING..................    35
EXHIBIT A - FORM OF AMENDED MEMORANDUM AND ARTICLES OF ASSOCIATION.......    36
EXHIBIT B - FORM OF INVESTORS' RIGHTS AGREEMENT..........................    37
EXHIBIT C - DISCLOSURE SCHEDULE..........................................    38
EXHIBIT D - FORM OF SOFTWARE LICENSE AGREEMENT BETWEEN QUALCOMM AND WFOE
SUBSIDIARY...............................................................    39
EXHIBIT E - FORM OF SOFTWARE LICENSE AGREEMENT BETWEEN TECHFAITH AND WFOE
SUBSIDIARY...............................................................    40
EXHIBIT F - FORM OF DEVELOPMENT AND LICENSE AGREEMENT  AMONG WFOE
SUBSIDIARY, TECHFAITH AND QUALCOMM.......................................    41
</TABLE>
<PAGE>

                            SERIES A PREFERRED SHARE

                           PURCHASE AND SALE AGREEMENT

This SERIES A PREFERRED SHARE PURCHASE AND SALE AGREEMENT (this "AGREEMENT") is
made as of the 22nd day of March 2006 by and among:

(1)  TECHFAITH SOFTWARE (CHINA) HOLDING LIMITED, a company incorporated in the
     Cayman Islands, whose registered office is located at Century Yard, Cricket
     Square, Hutchins Drive, O.P. Box 2681GT, George Town, Grand Cayman, British
     West Indies (the "COMPANY"); and

(2)  QUALCOMM INCORPORATED, a Delaware limited partnership, whose main office is
     located at 5775 Morehouse Drive, San Diego, CA 92121 ("QUALCOMM"); and

(3)  CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED, a company
     incorporated in the Cayman Islands, whose registered office is located at
     Century Yard, Cricket Square, Hutchins Drive, O.P. Box 2681GT, George Town,
     Grand Cayman, British West Indies ("Techfaith"), and principal executive
     offices are located at 3/F M8 West, No. 1 Jiu Xian Qiao East Road, Chao
     Yang District, Beijing 100016, PRC ("TECHFAITH").

QUALCOMM and Techfaith are herein referred to as "INVESTORS" collectively and
individually as an "INVESTOR".

WHEREAS:

The Company proposes to allot and issue to the Investors the Series A Preferred
Shares (as defined below) marked against each such Investor's name in Schedule
2, and each of the Investors has agreed to purchase and subscribe for the Series
A Preferred Shares, on the terms and subject to the conditions of this
Agreement.

The parties hereby agree as follows:

1.   DEFINITIONS

1.1  Certain Defined Terms

     The following terms used in this Agreement shall be construed to have the
     meanings set forth or referenced below:

     "AFFILIATE" means any Person that directly or indirectly, through one or
     more intermediaries, controls such other Person, is controlled by, or is
     under common control with such other Person.

     "AMENDED ARTICLES" has the meaning given to such term in subsection 2.2(a).

     "APPLICABLE LAWS" means in relation to any Person, any relevant laws,
     regulations, administrative regulations, rules, notices, and other
     legislative, executive or judicial decisions or pronouncements which are
     publicly promulgated and in force for the time being.

     "APPROVAL" means any consent [CHINESE CHARACTERS], operating license
     [CHINESE CHARACTERS]), permit [CHINESE CHARACTERS],

<PAGE>

                                      -2-

     approval [CHINESE CHARACTERS], ratification [CHINESE CHARACTERS],
     registration [CHINESE CHARACTERS] or other form of permission to engage in
     a specific activity issued by any PRC regulatory or government body or
     agency.

     "BOARD" means the Company's Board of Directors, as constituted from time to
     time.

     "BUSINESS PLAN" has the meaning given to such term in Section 3.20.

     "COMPANY INTELLECTUAL PROPERTY" has the meaning given to such term in
     Section 3.9.

     "COMPANY SECRETARY" means the secretary of the Company for the time being.

     "CONFIDENTIAL INFORMATION" means all confidential and/or proprietary
     business or technical information, in whatever form recorded, that a Party
     does not wish to disclose without restriction.

     "CONTROL" or its cognate terms in relation to any Person means either of
     the following:

     (i)  the power or right to set or determine the management of the affairs
          of that Person or to select, appoint or determine the composition of a
          majority of the directors of the board or members of any management
          committee or similar body, or to otherwise direct the management of
          that Person; or

     (ii) the ownership of not less than fifty percent (50%) of the total issued
          equity interests, voting shares or stock in that Person.

     "CONVERSION SHARES" has the meaning given to such term in subsection
     2.2(b).

     "ENCUMBRANCE" means any charge, pledge, claim, mortgage, security, lien,
     option, equity, power of sale, hypothecation, retention of title, right of
     pre-emption, other third party rights or security interest of any kind.

     "ESOP" has the meaning given to such term in the Investors' Rights
     Agreement.

     "ESOP SHARES" means the Ordinary Shares reserved for issuance under the
     ESOP.

     "FINAL CLOSING" has the meaning given to such term in subsection 2.3(c).

     "FINANCING TERMS" has the meaning given to such term in subsection 5.8(e).

     "HONG KONG" means the Hong Kong Special Administrative Region of the
     People's Republic of China.

     "INITIAL CLOSING" has meaning given to such term in subsection 2.3(a).

     "INTELLECTUAL PROPERTY RIGHTS" or "IPR" means any and all rights in any
     invention, discovery, improvement, utility, model, copyrightable work,
     industrial design or mask work, algorithm, data structure, trade secrets or
     know-how, patents, Confidential Information, or any idea having commercial
     value, any trademark, trade dress, trade name, domain name, or other marks
     that serve to identify and distinguish goods or services as coming from, or
     falling under the control of, a single source, all rights of whatsoever
     nature in computer software

<PAGE>

                                      -3-

     and data, all intangible rights or privileges of a nature similar to any of
     the foregoing in every case in any part of the world and whether or not
     registered, and all rights in any applications and granted registrations
     for any of the foregoing rights.

     "INVESTORS' RIGHTS AGREEMENT" has the meaning given to such term in Section
     4.7.

     "IPO" means the Company's first public offering of Ordinary Shares, which
     is a firm commitment underwritten public offering of Ordinary Shares on a
     recognized stock exchange, registered under the relevant securities laws
     and managed and/or underwritten by a lead underwriter of reputable
     international standing.

     "KEY EMPLOYEES" means any member of the Company's or the WFOE Subsidiary's
     senior management and any employee of the Company or the WFOE Subsidiary
     who either alone, or in concert with others, develops, invents, programs or
     designs any Company Intellectual Property, and "KEY EMPLOYEE" means any of
     them.

     "LICENSE AGREEMENTS" means (i) the Software License Agreement between
     QUALCOMM and the WFOE Subsidiary, (ii) the Software License Agreement
     between Techfaith and the WFOE Subsidiary, (iii) the Development and
     License Agreement among the WFOE Subsidiary, Techfaith and QUALCOMM (the
     "DEVELOPMENT AND LICENSE AGREEMENT"), in substantially the form set out in
     Exhibits D, E and F, respectively.

     "LOSSES" means losses, damages, costs, expenses, liabilities or claims,
     including reasonable legal costs.

     "LOVELLS BEIJING OFFICE" means the offices of Lovells International Law
     Firm Office in Beijing, China, located at Level 2, Office Tower C2, The
     Towers, Oriental Plaza, No.1 East Chang An Avenue, Beijing 100738, China.

     "MATERIAL ADVERSE EFFECT" means in respect of any Person, a material
     adverse effect on the business, assets (including intangible assets),
     liabilities, financial condition, property, prospects or results of
     operations of that Person.

     "MATERIAL CONTRACT" means a contract with a total value over its lifetime
     in excess of US$25,000 or which involves an aggregate liability of over
     US$25,000 on the part of the Company.

     "MILESTONE #1" means the successful delivery by the WFOE Subsidiary and
     acceptance in writing by QUALCOMM of the Feature Complete Versions, as such
     term is defined in the Development and License Agreement, of the MSM
     Software Applications by August 31, 2006.

     "MILESTONE #2" means the successful delivery by the WFOE Subsidiary and
     acceptance in writing by QUALCOMM of the Production Ready Versions, as such
     term is defined in the Development and License Agreement, of the MSM
     Software Applications by the date occurring six months following the date
     on which Milestone #1 was achieved.

     "MILESTONES" means Milestone #1 and Milestone #2 collectively and
     "MILESTONE" means either of them.

     "MSM" means mobile station modem.

<PAGE>

                                      -4-

     "MSM SOFTWARE APPLICATIONS" has the meaning giving to such term in the
     Development and License Agreement.

     "MOFCOM" means [CHINESE CHARACTERS], the PRC Ministry of Commerce and the
     approval authority for most foreign invested enterprises in China.

     "ORDINARY SHARES" means ordinary shares in the Company with a par value of
     US$0.001 per share.

     "PARTY" means any party to this Agreement for the time being, and "PARTIES"
     means all the parties to this Agreement for the time being, and shall
     include a reference to their successors in title and permitted assigns.

     "PERSON" means any natural person, corporation, joint venture, partnership,
     association, company, or other legal entity (whether incorporated or
     unincorporated and whether or not having separate legal personality).

     "PRC" or "CHINA" means the People's Republic of China, which for the
     purposes of this Agreement excludes Hong Kong, the Macau Special
     Administrative Region of the People's Republic of China and Taiwan.

     "PREFERRED SHARES" means shares of any class or series in the Company other
     than Ordinary Shares.

     "PURCHASE PRICE" has the meaning given to such term in Section 2.1.

     "QUALCOMM DIRECTOR" has the meaning given to such term in the Investors'
     Rights Agreement

     "QUALIFIED IPO" means an IPO reasonably acceptable to holders of at least
     fifty percent (50%) of the Series A Preferred Shares, with aggregate
     proceeds (net of underwriters discounts and commissions) to the Company in
     excess of US$20 million and at a listing price which implies a total market
     capitalization in excess of US$50 million.

     "RMB" means Renminbi [CHINESE CHARACTERS] or the lawful currency of the PRC
     for the time being.

     "SAFE" means [CHINESE CHARACTERS], the PRC State Administration of Foreign
     Exchange or its local branches as the context may require.

     "SAFE CIRCULAR" means [CHINESE CHARACTERS] [[CHINESE CHARACTERS] (2005) 75
     [CHINESE CHARACTERS]] the SAFE Circular on Issues relating to the
     Administration of Foreign Exchange of Company Financing through Offshore
     Special Purpose Vehicles and Round-Tripping Investment by PRC Resident
     issued by SAFE with effect from 1 November 2005 and any Applicable Laws of
     the PRC in force from time to time which operate to restate, amend or
     repeal the aforesaid circular or any part thereof.

     "SERIES A PREFERRED SHARES" means the Series A Preference Shares in the
     Company with a par value of US$0.001 per share.

<PAGE>

                                      -5-

     "SHARES" means all shares issued in the capital of the Company, including,
     but not limited to Ordinary Shares and Series A Preferred Shares.

     "SUBSIDIARY" means a company or corporation in which more than fifty
     percent (50%) of the equity interests, shares, voting stock (or equivalent)
     (including without limitation, by ownership or control of any exercisable
     option to obtain a controlling stake in,) is owned or controlled, directly
     or indirectly, by the relevant Person, and the term "SUBSIDIARIES" shall be
     construed accordingly.

     "SUBSEQUENT CLOSING" has the meaning given to such term in subsection
     2.3(b).

     "TAXATION" means all forms of taxation whether direct or indirect and
     whether levied by reference to income, profits, gains, net wealth, asset
     values, turnover, added value or other reference and statutory, state,
     provincial, local governmental or municipal impositions, duties,
     contributions, rates and levies (including without limitation social
     security contributions and any other payroll taxes), whenever imposed
     (whether imposed by way of a withholding or deduction for or on account of
     tax or otherwise) and in respect of any Person and all penalties, charges,
     costs and interest relating thereto, and references to "TAXES" shall be
     construed accordingly.

     "TECHFAITH DIRECTORS" has the meaning given to such term in the Investors'
     Rights Agreement.

     "THREE CLOSINGS" means the Initial Closing, the Subsequent Closing and the
     Final Closing collectively and "CLOSING" refers to any one of them.

     "TRANSACTION DOCUMENTS" means this Agreement, the Investors' Rights
     Agreement, the Amended Articles and their respective schedules and
     exhibits.

     "US$" means the official currency of the United States of America for the
     time being.

     "WFOE" means a wholly foreign owned enterprise established pursuant to the
     PRC Wholly Foreign Owned Enterprise Law [CHINESE CHARACTERS] passed on 12
     April, 1986 by the National People's Congress of the PRC and the PRC Wholly
     Owned Enterprise Law Implementation Regulations [CHINESE CHARACTERS]
     approved by the PRC State Council on 28 October 1990 and other relevant PRC
     laws and regulations.

     "WFOE SUBSIDIARY" has the meaning given to such term in Section 3.4.

1.2  Exhibits and Schedules

     The following schedules and exhibits are a part of this Agreement:

     Schedule 1 Particulars of the Company
        Part A    Particulars of Company Pre-Closing
        Part B    Particulars of Company's WFOE Subsidiary (to be completed
                  prior to the Initial Closing)

     Schedule 2 Capitalization of the Company Post-Closing

<PAGE>

                                      -6-

     Exhibit A Form of Amended Memorandum and Articles of Association

     Exhibit B Form of Investors' Rights Agreement

     Exhibit C Disclosure Schedule

     Exhibit D Form of Software License Agreement between QUALCOMM and WFOE
               Subsidiary

     Exhibit E Form of Software License Agreement between Techfaith and WFOE
               Subsidiary

     Exhibit F Form of Development and License Agreement among WFOE Subsidiary,
               Techfaith and QUALCOMM

1.3  Interpretation

     References to Applicable Laws in this Agreement shall include a reference
     to such Applicable Laws as amended, reissued or any replacement Applicable
     Laws. References to the word "including", "includes" or cognate terms shall
     be construed without limitation. References to any PRC Ministry or
     governmental regulatory body or government agency shall include a reference
     to any local branches or administrative sub-divisions under it, and to any
     successor body or bodies assuming responsibility for the administration of
     the power or function in question.

2.   AGREEMENT TO PURCHASE AND SELL SERIES A PREFERRED SHARES

2.1  Agreement to Purchase and Sell

     (a)  Subject to the terms and conditions of this Agreement, each of
          QUALCOMM and Techfaith agrees to purchase at the Initial Closing (as
          defined below), and the Company agrees to sell and issue to each of
          them, such number of Series A Preferred Shares as is set out against
          its name below, at a purchase price of US$1.00 per share (the
          "PURCHASE PRICE"):

<TABLE>
<CAPTION>

          Investor    No. of Subscription Shares   Investment Amount
          --------    --------------------------   -----------------
<S>                   <C>                          <C>
          QUALCOMM             3 million             US$ 3 million
          Techfaith            7 million             US$ 7 million
          Total               10 million             US$10 million
</TABLE>

     (b)  Upon the completion of Milestone #1 and subject to the terms and
          conditions of this Agreement, each of QUALCOMM and Techfaith agrees to
          purchase at the Subsequent Closing (as defined below), and the Company
          agrees to sell and issue to each of them such number of Series A
          Preferred Shares as is set out against its name below, at the Purchase
          Price:

<PAGE>

                                      -7-

<TABLE>
<CAPTION>
          Investor    No. of Subscription Shares   Investment Amount
          --------    --------------------------   -----------------
<S>                   <C>                          <C>
          QUALCOMM             3 million             US$ 3 million
          Techfaith            7 million             US$ 7 million
          Total               10 million             US$10 million
</TABLE>

     (c)  Upon the completion of Milestone #2 and subject to the terms and
          conditions of this Agreement, each of QUALCOMM and Techfaith agrees to
          purchase at the Final Closing (as defined below), and the Company
          agrees to sell and issue to each of them such number of Series A
          Preferred Shares as is set out against its name below, at the Purchase
          Price:

<TABLE>
<CAPTION>
          Investor    No. of Subscription Shares   Investment Amount
          --------    --------------------------   -----------------
<S>                   <C>                          <C>
          QUALCOMM            1.5 million            US$1.5 million
          Techfaith           3.5 million            US$3.5 million
          Total                 5 million            US$  5 million
</TABLE>

2.2  Authorization

     (a)  The Company shall adopt and file with the Registrar of Companies in
          the Cayman Islands on or before the Initial Closing (as defined below)
          the Amended Memorandum and Articles of Association of the Company in
          or substantially in the form attached as Exhibit A to this Agreement
          (the "AMENDED ARTICLES").

     (b)  On or prior to the Initial Closing, the Company shall have authorized
          (i) the sale and issuance to the Investors of the relevant number of
          Series A Preferred Shares required by the proposed Three Closings, and
          (ii) the issuance of the Ordinary Shares to be issued upon conversion
          of such Series A Preferred Shares (the "CONVERSION SHARES"). The
          Series A Preferred Shares and the Conversion Shares shall have the
          rights, preferences, privileges and restrictions set forth in the
          Investors' Rights Agreement and the Amended Articles.

2.3  Closings; Delivery

     (a)  Subject to the satisfaction of the conditions set out in Section 2.1
          and Section 4.1 respectively, the initial sale and purchase of the
          Series A Preferred Shares shall take place via the exchange of
          documents and signatures at Lovells Beijing Office, or at such other
          time and place and in such manner as the Company and the Investors
          mutually agree upon, orally or in writing (which time and place are
          designated as the "INITIAL CLOSING").

     (b)  Subject to the satisfaction of the conditions set out in Section 2.1
          and Section 4.2 respectively, the subsequent sale and purchase of the
          Series A Preferred Shares shall

<PAGE>

                                      -8-

          take place subject to:

          (i)  the exchange of a bring-down compliance certificate dated as of
               the Subsequent Closing (as defined below), provided that such
               date shall be on or before August 31, 2006;

          (ii) the issue of written certification by a director of each of the
               Investors that Milestone # 1 has been satisfied;

          (iii) the issue of written certification by a director of each of the
               Investors that the there has been no material breach to the
               Investment Documents, the WFOE Articles of Association or the
               License Agreements;

          at the law offices of Lovells Beijing Office, or at such other time
          and place and in such manner as the Company and the Investors mutually
          agree upon, orally or in writing (which time and place are designated
          as the "SUBSEQUENT CLOSING").

     (c)  Subject to the satisfaction of the conditions set out in Section 2.1
          and Section 4.3 respectively, the final sale and purchase of the
          Series A Preferred Shares shall take place subject to:

          (i)  the exchange of a bring-down compliance certificate dated as of
               the Final Closing (as defined below), provided that such date
               shall be within six months of the Subsequent Closing;

          (ii) the issue of written certification by a director of each of the
               Investors that Milestone # 2 has been satisfied;

          (iii) the issue of written certification by a director of each of the
               Investors that the there has been no material breach to the
               Investment Documents, the WFOE Articles of Association or the
               License Agreements;

          at the law offices of Lovells Beijing Office, or at such other time
          and place and in such manner as the Company and the Investors mutually
          agree upon, orally or in writing (which time and place are designated
          as the "FINAL CLOSING")

     (d)  At each Closing, the Company shall deliver to each of the Investors a
          share certificate representing the Series A Preferred Shares being
          purchased by such Investors at such Closing duly executed by the
          Company in accordance with the provisions of the Amended Articles
          against payment of the purchase price therefore by check payable to
          the Company, by wire transfer to a bank account designated by the
          Company, by cancellation or conversion of indebtedness of the Company
          to such Investor, or by any combination of such methods.

3.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company hereby represents and warrants to each Investor that the
     representations and warranties contained in this Section 3 are true,
     accurate and complete as of the date of each Closing (as the case may be),
     subject to the disclosures (if any) set out in the Disclosure

<PAGE>

                                      -9-

     Schedule in the form attached as Exhibit C to this Agreement (the
     "DISCLOSURE SCHEDULE").

     For the purposes of those representations and warranties, the phrase "TO
     THE COMPANY'S KNOWLEDGE" shall mean the actual knowledge, after making due
     inquiry, of its then duly appointed and elected officers. In addition, for
     the purposes of those representations and warranties contained in Section 3
     (other than those in Sections 3.1, 3.2, 3.4, 3.5 and 3.6), the term "the
     COMPANY" shall include a reference to any Subsidiaries, branches or other
     entities formed by the Company (whether or not having separate legal
     personality) and include a reference to the WFOE Subsidiary, unless the
     context otherwise requires, or otherwise noted herein.

3.1  Organization, Good Standing, Corporate Power and Qualification

     The Company is a corporation duly organized, validly existing and in good
     standing under the Applicable Laws of the Cayman Islands and has all
     requisite corporate power and authority to carry on its business as
     presently conducted and as proposed to be conducted. The Company is duly
     qualified to transact business and is in good standing in each jurisdiction
     in which the failure to so qualify would have a Material Adverse Effect.

3.2  Capitalization

     (a)  Immediately prior to the Initial Closing, the authorized capital of
          the Company, consists of:

          (i)  50,000,000 Ordinary Shares, 10 shares of which are issued and
               outstanding;

          (ii) 25,000,000 Preferred Shares, all of which have been designated as
               Series A Preferred Shares, and up to all of which will be sold
               pursuant to this Agreement. The rights, privileges and
               preferences of the Series A Preferred Shares are as stated in the
               Investors' Rights Agreement, the Amended Articles and as provided
               by the general corporation law of the Cayman Islands; and

          (iii) Options to acquire 2,777,778 Ordinary Shares, all of which are
               reserved for issuance under the ESOP.

     (b)  Except for:

          (i)  the conversion privileges of the Series A Preferred Shares to be
               issued under this Agreement; and

          (ii) the 2,777,778 Ordinary Shares reserved for issuance upon exercise
               of options issued pursuant to the ESOP,

          there are no outstanding options, pledges, guarantees, warrants,
          rights (including conversion or preemptive rights and rights of first
          refusal or similar rights) or agreements, orally or in writing, to
          purchase or acquire from the Company any shares of Ordinary Shares or
          Preferred Shares, or any securities convertible into or exchangeable
          for shares of Ordinary Shares or Preferred Shares.

<PAGE>

                                      -10-

3.3  Subsidiaries

     Except for the WFOE Subsidiary (as defined below), the Company does not
     presently own or control, directly or indirectly, any interest in any other
     Person.

3.4  WFOE Subsidiary

     (a)  The Company holds 100% of the registered capital of Techfaith Software
          (China) Limited [CHINESE CHARACTERS] (the "WFOE SUBSIDIARY"). The
          Company's interest in the WFOE Subsidiary is directly owned by it,
          free and clear of all Encumbrances, and no Person has any right to
          participate in, or receive any payment based on any amount relating
          to, the revenue, income, value or net worth of the WFOE Subsidiary or
          any component or portion thereof, or any increase or decrease in any
          of the foregoing.

     (b)  The amount of registered capital of the WFOE Subsidiary is 100% duly
          vested in the Company. There are no outstanding options, warrants,
          rights (including conversion or preemptive rights), agreements,
          commitments whatsoever for the purchase or acquisition from the WFOE
          Subsidiary of any registered capital or any securities convertible
          into or ultimately exchangeable or exercisable for any such registered
          capital.

     (c)  The WFOE Subsidiary has been duly established and validly exists under
          Applicable Laws of the PRC. The establishment documents relating to
          the WFOE Subsidiary are lawful and valid and have been duly approved
          or issued (as applicable) by the competent PRC authorities in
          accordance with Applicable Laws of the PRC.

     (d)  The WFOE Subsidiary does not have any Affiliates (other than the
          Company) subsidiaries or investee entities, and neither owns or
          controls, directly or indirectly, any interest in any other Person,
          nor does it have in place any joint venture, joint operation [CHINESE
          CHARACTERS] or similar arrangements with any other Person, nor does it
          maintain or operate any offices or branches or Subsidiaries, except
          for its office premises as set out in its PRC business license.

     (e)  The WFOE Subsidiary has full corporate power and authority to operate
          its properties and assets and to carry on its business as currently
          conducted and as presently proposed to be conducted, and all Approvals
          needed for the operations of its business as presently operated or
          contemplated to be operated have been duly obtained in accordance with
          Applicable Laws of the PRC from the relevant competent PRC authorities
          and are in full force and effect. No examination and approval
          authority in the PRC exceeded its power or otherwise acted unlawfully
          in approving the establishment or operations of the WFOE Subsidiary.

     (f)  All post-establishment filings and registrations with the PRC
          authorities required in respect of the WFOE Subsidiary and its
          operations, including the registration with the State Administration
          of Industry and Commerce, the SAFE, the State Administration of
          Taxation and local tax bureau, customs authorities, and social
          security and insurance authorities, have been duly completed in
          accordance with, and within the time limits stipulated under,
          Applicable Laws of the PRC.

<PAGE>

                                      -11-

     (g)  The WFOE Subsidiary has not received any letter or notice from any
          relevant PRC governmental or regulatory authority notifying it of the
          suspension, revocation, or threatened revocation, of any Approvals
          issued to it for non-compliance, or of the need for compliance or
          remedial actions to be taken in respect of the activities carried out
          directly or indirectly by the WFOE Subsidiary.

     (h)  With respect to the land use rights, building ownership rights or
          rights to use any of the foregoing (if any) held by the WFOE
          Subsidiary, the WFOE Subsidiary has exclusive, full and unimpaired
          legal ownership of such rights, building ownership rights or rights to
          use free from any Encumbrances, conditions, orders or other
          restrictions, and has obtained all necessary Approvals with government
          authorities with respect thereto, including effecting registration of
          its office lease with the relevant land resources administration
          authorities in accordance with Applicable Laws of the PRC.

     (i)  All requisite formalities and legal requirements in respect of the
          implementation of the machinery, equipment, parts, tools and materials
          by the WFOE Subsidiary have been and will be complied with in
          accordance with Applicable Laws of the PRC.

     (j)  The WFOE Subsidiary has been conducting and will conduct its business
          activities within the permitted scope of business and is otherwise
          operating its business in full compliance with all Applicable Laws of
          the PRC, including producing, processing and/or distributing products
          with all requisite Approvals granted by the relevant competent PRC
          governmental or regulatory authorities.

     (k)  All Applicable Laws of the PRC with respect to the opening and
          operation of foreign exchange accounts and foreign exchange activities
          of the WFOE Subsidiary, where applicable have been and will continue
          to be fully complied with, and all requisite Approvals including any
          from SAFE required under the SAFE Circular in relation thereto have
          been duly and lawfully obtained and are in full force and effect and
          there exist no grounds on which any such Approval may be cancelled or
          revoked or the WFOE Subsidiary or its legal representative may be
          subject to liability or penalties for material misrepresentation or
          failure to disclose material information to the issuing SAFE
          authority.

     (l)  With regard to employment and staff or labour management, the WFOE
          Subsidiary has complied with all Applicable Laws of the PRC, including
          Applicable Laws pertaining to contributions to local welfare funds,
          social benefits, medical benefits, insurance, retirement benefits,
          pension or the like.

3.5  Authorization

     All corporate action required to be taken by the Board and allot and in
     order to authorize the Company:

          (i)  to enter into the Transaction Documents;

          (ii) to allot and issue Preferred Shares and to designate any such
               Preferred Shares as Series A Preferred Shares at the Closing; and

<PAGE>

                                      -12-

          (iii) to allot and issue any Ordinary Shares including but not limited
               to any ESOP Shares or any Conversion Shares, has been taken or
               shall be taken prior to the Closing. All action on the part of
               the officers of the Company necessary for the execution and
               delivery of the Transaction Documents, the performance of all
               obligations of the Company under the Transaction Documents to be
               performed as of the Closing, and the issuance and delivery of the
               Series A Preferred Shares has been taken or shall be taken prior
               to the Closing. The Transaction Documents, when executed and
               delivered by the Company, shall constitute lawful, valid and
               legally binding obligations of the Company, enforceable against
               the Company in accordance with their respective terms except:

               (1)  as limited by Applicable Laws relating to bankruptcy,
                    insolvency, reorganization, moratorium, fraudulent
                    conveyance, or other laws of general application relating to
                    or affecting the enforcement of creditors' rights generally;
                    or

               (2)  as limited by Applicable Laws relating to the availability
                    of specific performance, injunctive relief, or other
                    equitable remedies.

3.6  Valid Issuance of Shares

     The Series A Preferred Shares, when issued, sold and delivered in
     accordance with the terms and for the consideration set forth in this
     Agreement, shall be validly issued, fully paid and non-assessable and free
     of restrictions on transfer other than restrictions on transfer under this
     Agreement, the Investors' Rights Agreement, Applicable Laws and
     Encumbrances created by or imposed by the Investors. Subject to the filings
     described in Section 3.7 below, the Series A Preferred Shares shall be
     issued in compliance with all Applicable Laws. The ESOP Shares and the
     Conversion Shares have been duly reserved for issuance, and upon issuance
     in accordance with the terms of the Amended Articles and the Investors'
     Rights Agreement, shall be validly issued, fully paid and non-assessable
     and free of restrictions on transfer other than restrictions on transfer
     under the Transaction Documents, Applicable Laws and Encumbrances created
     by or imposed by the Investors. Subject to Section 3.7 below, the ESOP
     Shares and the Conversion Shares shall be issued in compliance with all
     Applicable Laws.

3.7  Governmental Consents and Filings

     No consent, approval, order or authorization of, or registration,
     qualification, designation, declaration or filing with, any governmental
     authority in any jurisdiction is required on the part of the Company in
     connection with the consummation of the transactions contemplated by this
     Agreement, except for the filing of the Amended Articles, which shall have
     been filed in accordance with Applicable Laws at the time of or after
     Closing.

3.8  Litigation

     There is no claim, action, suit, proceeding, arbitration, complaint, charge
     or investigation pending or, to the Company's knowledge, currently
     threatened:

<PAGE>

                                      -13-

          (i)  against the Company or any of its officers or directors;

          (ii) questions the validity of any of the Transaction Documents or the
               right of the Company to enter into them, or to consummate the
               transactions contemplated by the Transaction Documents; or

          (iii) would reasonably be expected to have, either individually or in
               the aggregate, a Material Adverse Effect on the Company.

     Neither the Company nor, to the Company's knowledge, any of its officers or
     directors, is a party or is named as subject to the provisions of any
     order, writ, injunction, judgment or decree of any court or government
     agency or instrumentality. There is no action, suit, proceeding or
     investigation by the Company pending or which the Company intends to
     initiate.

3.9  Intellectual Property

     The Company owns or possesses sufficient legal rights to:

          (i)  all trademarks, service marks, trade names, copyrights, trade
               secrets, licenses, information and proprietary rights and
               processes; and

          (ii) to the Company's knowledge, all patents and patent rights (such
               rights are collectively referred to herein as the "COMPANY
               INTELLECTUAL PROPERTY") as are necessary to the conduct of the
               Company's business as now conducted and as presently proposed to
               be conducted, without any known conflict with, or infringement
               of, the rights of others.

     To the Company's knowledge, no product or service marketed or sold (or
     proposed to be marketed or sold) by the Company violates or shall violate
     any license or infringe any Intellectual Property Rights of any other
     Person. Save as expressly contemplated by any Transaction Document and
     other than with respect to commercially available software products under
     standard end-user object code license agreements, there are no outstanding
     options, licenses, agreements, claims, Encumbrances or shared ownership
     interests of any kind relating to the foregoing, nor is the Company bound
     by or a party to any options, licenses or agreements of any kind with
     respect to the Intellectual Property Rights of any other Person. The
     Company has not received any communications alleging that the Company has
     violated or, by conducting its business, would violate any of the
     Intellectual Property Rights of any other Person. Section 3.9 of the
     Disclosure Schedule lists all Intellectual Property Rights of the Company.
     The Company has not embedded any open source or community source code in
     any of its products generally available or in development, including but
     not limited to any libraries or codes licensed under any general public
     license or similar license arrangement. For the purposes of this Section
     3.9, the Company shall be deemed to have knowledge of a patent right if the
     Company has actual knowledge of the patent right or would be found to be on
     notice of such patent right as determined by reference to applicable patent
     laws.

3.10 Compliance with Other Instruments

<PAGE>

                                      -14-

     The Company is not in violation or default under:

          (i)  any provisions of the Amended Articles, the WFOE Subsidiary
               Articles of Association or the Investors' Rights Agreement;

          (ii) any applicable instrument, judgment, order, writ or decree;

          (iii) any note, indenture or mortgage; or

          (iv) any lease, agreement, contract or purchase order to which it is a
               party, or by which it is bound, or that is required to be listed
               on the Disclosure Schedule, or of any provision of any Applicable
               Law applicable to the Company, the violation of which would have
               a Material Adverse Effect on the Company.

     Neither the execution, delivery and performance of any of the Transaction
     Documents and the consummation of the transactions contemplated by the
     Transaction Documents, nor the conduct or carrying on of the Company's
     business as presently conducted or proposed to be conducted shall result in
     any such violation or be in conflict with or constitute, with or without
     the passage of time and giving of notice, either:

          (i)  a default under any such provision, instrument, judgment, order,
               writ, decree, contract or agreement or any Applicable Law in
               relation to the Company; or

          (ii) an event which results in the creation of any Encumbrance upon
               any assets of the Company, or the suspension, revocation,
               forfeiture, or non-renewal of any material Approval held by the
               Company.

3.11 Agreements; Actions

     (a)  Except for the Transaction Documents and matters arising in connection
          with this financing, there are no agreements, understandings,
          instruments, contracts or proposed transactions to which the Company
          is a party or by which it is bound that involve:

          (i)  obligations (contingent or otherwise) of, or payments to, the
               Company;

          (ii) the license of any Intellectual Property Rights to or from the
               Company;

          (iii) the grant of rights to manufacture, produce, assemble, license,
               market, or sell its products to any other Person, or which affect
               the Company's exclusive right to develop, manufacture, assemble,
               distribute, market or sell its products anywhere in the world; or

          (iv) indemnification by the Company with respect to infringements of
               proprietary rights.

     (b)  The Company has not:

          (i)  declared or paid any dividends, or authorized or made any
               distribution upon or with respect to any class or series of its
               share capital or capital stock;

<PAGE>

                                      -15-

          (ii) incurred any indebtedness for money borrowed or incurred any
               other liabilities;

          (iii) made any loans or advances to any Person, other than ordinary
               advances for travel expenses; or

          (iv) sold, exchanged or otherwise disposed of any of its assets or
               rights, other than the sale of its inventory in the ordinary
               course of business. For the purposes of subsections (b) and (c)
               of this Section 3.11, all indebtedness, liabilities, agreements,
               understandings, instruments, contracts and proposed transactions
               involving the same Person (including any Persons the Company has
               reason to believe are affiliated with each other) shall be
               aggregated for the purpose of meeting the individual minimum
               dollar amounts of such subsection.

     (c)  The Company is not a guarantor of or indemnitor of, the indebtedness
          of any other Person.

     (d)  The Company is not in breach of any contracts, agreements or
          arrangements to which it is a party, and has no knowledge of the
          invalidity of, or grounds for rescission, avoidance or repudiation of
          any such contract, agreement, arrangement or transaction to which the
          Company is a party, nor has it received notice of any intention to
          terminate any such contract, agreement or arrangements, or to
          repudiate or disclaim any such transaction.

     (e)  No party with whom the Company has entered into any contract,
          agreement or arrangement is in default thereunder, being a default
          which would have a Material Adverse Effect on the Company, and there
          are no circumstances likely to give rise to any such default.

     (f)  The Company is not a party to any agreement, contract or arrangement
          which, by reason of the sale of the Series A Preferred Shares, or by
          reason of any Party or any of its Affiliates entering into or
          performing any provision of this Agreement and/or of the Transaction
          Documents, gives any other contracting party the right to terminate
          such contract, agreement or arrangement, or to create or increase any
          obligation on the Company (whether to make payment or otherwise) to
          any Person.

     (g)  Save as expressly provided in or contemplated by the Transaction
          Documents, the Company has no material or long term agreements,
          contracts, arrangements or commitments binding upon it including but
          not limited to:

          (i)  any contract, agreement or arrangement entered into otherwise
               than in the ordinary course of business;

          (ii) any contract, agreement or arrangement otherwise than by way of
               bargain at arm's length;

          (iii) involving licensing or transfer of technology or IPR to or by
               the Company;

<PAGE>

                                      -16-

          (iv) any sale or purchase option or similar contract or arrangement
               affecting any assets owned or used by the Company or by which the
               Company is bound;

          (v)  any agreement, contract or arrangement which cannot readily be
               fulfilled or performed by the Company on time or without undue or
               unusual expenditure of money or effort;

          (vi) any agreement, contract or arrangement whereby the Company is, or
               has agreed to become, a member of any joint venture, consortium
               or partnership or other unincorporated association; and

          (vii) any agreement, contract or arrangement whereby the Company is,
               or has agreed to become, a party to any distributorship or agency
               agreement.

     (h)  There are no agreements in force restricting the freedom of the
          Company to provide and take goods and services or to manage its own
          business affairs by such means and from and to such Persons as it may
          from time to time think fit.

     (i)  Save for any condition or warranty implied by law or contained in its
          standard terms of business or otherwise given in the ordinary course
          of business, the Company has not given any guarantee condition or
          warranty or made any representation in respect of goods (including
          trading stock) or services supplied or contracted to be supplied by
          it, nor has it accepted any obligation that could give rise to any
          liability after any such goods or services has been supplied by it.

     (j)  Other than pursuant to or as expressly contemplated by any Transaction
          Document, the Company has not entered into any agreement, contract or
          arrangement with, or given any undertaking or assurance to, any of the
          existing shareholders of the Company or their Affiliates.

     (k)  Other than as required by or as expressly contemplated by any
          Transaction Document, there are no agreements, contracts or
          arrangements binding on the Company which prohibit or restrict the
          sale, disposal or transfer of any equity or debt securities (or any
          interests therein) owned by the Company.

3.12 Conflicts of Interest

     (a)  Other than:

          (i)  standard employee benefits generally made available to all
               employees;

          (ii) standard director and officer indemnification agreements approved
               by the Board; and

          (iii) the purchase of the Company's Ordinary Shares and the issuance
               of options to purchase the Company's Ordinary Shares pursuant to
               the ESOP, in each instance, approved by the Board,

          there are no agreements, understandings or proposed transactions
          between the
<PAGE>

                                      -17-

          Company and any of its officers, directors, employees or Key
          Employees, or any Affiliate thereof.

     (b)  The Company is not indebted, directly or indirectly, to any of its
          directors, officers or employees, or to their respective spouses or
          children, or to any Affiliate of any of the foregoing, other than in
          connection with expenses or advances of expenses incurred in the
          ordinary course of business. None of the Company's directors, officers
          or employees, or any members of their immediate families, or any
          Affiliate of the foregoing:

          (i)  are, directly or indirectly, indebted to the Company; or

          (ii) to the Company's knowledge, have any direct or indirect ownership
               interest in any Person which is an Affiliate of the Company, or
               with which the Company has a business relationship, or any Person
               which competes with the Company. To the Company's knowledge, none
               of the Company's directors, officers or employees or any members
               of their immediate families or any Affiliate of any of the
               foregoing are, directly or indirectly, interested in any contract
               with the Company. None of the directors or officers, or any
               members of their immediate families, has any material commercial,
               industrial, banking, consulting, legal, accounting, charitable or
               familial relationship with any of the Company's major business
               relationship partners, service providers, joint venture partners,
               licensees and competitors.

3.13 Absence of Liens

     The property and assets that the Company owns are free and clear of all
     loans and Encumbrances, except for statutory liens for the payment of
     current Taxation obligations that are not yet delinquent and Encumbrances
     that arise in the ordinary course of business and do not materially impair
     the Company's ownership or use of such property or assets. With respect to
     the property and assets it leases, the Company is in compliance with the
     terms of such leases and, to its knowledge, holds a valid leasehold
     interest free of any Encumbrances other than those of the lessors of such
     property or assets.

3.14 Financial Statements

     (a)  Financial Statements

          The Company has been incorporated for less than a full fiscal year and
          has not prepared any financial statements. The Company maintains and
          will continue to maintain a standard system of accounting established
          and administered in accordance with generally accepted accounting
          principles. The Company shall prepare and deliver to each Investor a
          copy of its audited and unaudited financial statements as they become
          available in accordance with Section 5.3 of the Investors' Rights
          Agreement.

     (b)  Management Accounts

          The management accounts of the Company have been prepared in
          accordance with

<PAGE>

                                      -18-

          International Accounting Standards, and on a consistent basis as those
          used in the audited accounts of the Company and show a true and fair
          view of the assets and liabilities, profits and losses of the Company
          and its subsidiaries as a group as of the management accounts date.

     (c)  Books and Financial Records

          All the accounts, books, registers, ledgers and financial and other
          material records of whatsoever kind of the Company have been fully
          properly and accurately kept and completed; there are no inaccuracies
          or discrepancies of any kind contained or reflected therein; and they
          give and reflect a true and fair view of the financial, contractual
          and trading position of the Company and of its plant and machinery,
          fixed and current assets and liabilities (actual and contingent),
          debtors, creditors and works-in-progress.

3.15 Changes

     Since the Company's establishment, there has not been:

     (a)  any change in the business assets, liabilities, financial condition,
          trading prospects or operating results of the Company, except changes
          in the ordinary course of business that have not caused singly, or in
          the aggregate, a Material Adverse Effect on the Company, and the
          business of the Company has been carried on so as to maintain the same
          as a going concern;

     (b)  any damage, destruction or loss, whether or not covered by insurance,
          that would have a Material Adverse Effect on the Company;

     (c)  any waiver or compromise by the Company of a valuable right or of a
          material debt owed to it;

     (d)  any satisfaction or discharge of any claim, or Encumbrance or payment
          of any obligation by the Company, except in the ordinary course of
          business and the satisfaction or discharge of which would not have a
          Material Adverse Effect on the Company;

     (e)  any material change to a Material Contract or agreement or arrangement
          by which the Company or any of its assets is bound or subject;

     (f)  any material change in any compensation agreement or arrangement with
          any employee, officer, director or shareholder;

     (g)  any resignation or termination of employment of any officer or Key
          Employee of the Company;

     (h)  any Encumbrance created by the Company, with respect to any of its
          material properties or assets, except liens for taxes not yet due or
          payable and liens that arise in the ordinary course of business and do
          not materially impair the Company's ownership or use of such property
          or assets;

<PAGE>

                                      -19-

     (i)  any loans or guarantees made by the Company to, or for the benefit of,
          its employees, officers or directors, or any members of their
          immediate families, other than travel advances and other advances made
          in the ordinary course of its business;

     (j)  any declaration, setting aside or payment or other distribution in
          respect of any of the Company's share capital, or any direct or
          indirect redemption, purchase, or other acquisition of any of such
          shares by the Company;

     (k)  any sale, assignment or transfer of any Company Intellectual Property
          Rights;

     (l)  receipt of notice that there has been a loss of, or material order
          cancellation by, any major customer of the Company, or loss of source
          of supply to or by any abnormal factor, not affecting similar
          businesses to a like extent;

     (m)  to the Company's knowledge, any other event or condition of any
          character, other than events affecting the economy or the Company's
          industry sector generally, that could reasonably be expected to result
          in a Material Adverse Effect on the Company;

     (n)  the Company has not disposed of any asset (including trading stock) or
          supply of any service or business facility of any kind (including a
          loan of money or the letting, hiring or licensing of any property
          whether tangible or intangible) in circumstances where the
          consideration actually received, or receivable for such disposal or
          supply was less than the consideration which would be deemed to have
          been received for tax purposes;

     (o)  save as otherwise expressly provided for in the Transaction Documents,
          the Company has not assumed or incurred any liabilities (actual or
          contingent) or expenditure otherwise than in the ordinary course of
          carrying on its business, or entered into any transaction which is not
          in its ordinary course of business;

     (p)  any payment made by the Company which shall not be deductible for tax
          purposes either in computing the profits of the Company or in
          computing the tax chargeable on the Company and its subsidiaries as a
          group;

     (q)  any change to the Company's financial year end;

     (r)  save for resolutions, copies of which have been delivered to each
          Investor prior to the date hereof, or which are required to be passed
          by the Company prior to any Closing in order to satisfy the conditions
          set out in previous or following sections, any board or shareholders'
          resolutions passed by the Company; or

     (s)  any arrangement or commitment by the Company to do any of the things
          described in this Section 3.15, and the Company is not aware of any
          facts which shall likely give rise to the occurrence of any of the
          foregoing.

3.16 Employee Matters

     (a)  To the Company's knowledge, none of its employees is obligated under
          any contract (including licenses, covenants or commitments of any
          nature) or other agreement, or

<PAGE>

                                      -20-

          subject to any judgment, decree or order of any court or
          administrative agency, that would materially interfere with such
          employee's ability to perform its obligations under its contract of
          employment with the Company, to promote the interest of the Company,
          or that would conflict with the Company's business. Neither the
          execution or delivery of the Transaction Documents, nor the carrying
          on of the Company's business by the employees of the Company, nor the
          conduct of the Company's business as now conducted and as presently
          proposed to be conducted, shall, to the Company's knowledge, conflict
          with or result in a breach of the terms, conditions, or provisions of,
          or constitute a default under, any contract, covenant or instrument
          under which any such employee is now obligated.

     (b)  Without prejudice to the generality of subsection (a) above, to the
          Company's knowledge, none of the current or former officers, employees
          or consultants of the Company (including the Key Employees) are in
          violation of any term of any written employment contract, patent
          disclosure agreement, proprietary information agreement,
          non-competition agreement, non-solicitation agreement, confidentiality
          agreement, or any other similar contract or agreement or any
          restrictive covenants relating to the right of that officer, employee
          or consultant to be employed or engaged by the Company, or relating to
          the use of trade secrets or proprietary information of others, and no
          former employer of any such Person has any rights in respect of the
          Company Intellectual Property.

     (c)  The Company is not delinquent in payments to any of its employees,
          consultants, or independent contractors for any wages, salaries,
          commissions, bonuses, or other direct compensation for any service
          performed for it to the date hereof or amounts required to be
          reimbursed to such employees, consultants, or independent contractors.
          The Company has complied with all applicable equal employment
          opportunity laws and with other laws related to employment, including
          those related to wages, hours, worker classification, collective
          bargaining, and the payment and withholding of Taxes and other sums as
          required by law except where non-compliance with any Applicable Laws
          would not result in a Material Adverse Effect on the Company. The
          Company has withheld and paid to the appropriate governmental entity
          or is holding for payment not yet due to such governmental entity all
          amounts required to be withheld from employees of the Company by way
          of Taxation and is not liable for any arrears of Taxation or other
          sums for failure to comply with any of the foregoing. The WFOE
          Subsidiary has withheld all amounts required to be withheld by it, as
          a withholding agent, by way of Taxation, and has contributed to all
          stationary welfare and social security funds as required under
          Applicable Laws of the PRC in respect of all employees of the WFOE
          Subsidiary.

     (d)  To the Company's knowledge, no Key Employee has terminated or intends
          to terminate employment with the Company or is otherwise likely to
          become unavailable to continue as a Key Employee, nor does the Company
          have a present intention to terminate the employment of any of the
          foregoing. Except for statutory compensation as required under
          Applicable Laws, upon termination of the employment of any such
          employees, no severance or other payments shall become due. Except as
          disclosed in the Disclosure Schedule, the Company has no policy,
          practice, plan, or program of

<PAGE>

                                      -21-

          paying severance pay or any form of severance compensation to any of
          its employees in connection with the termination of their employment
          services.

     (e)  The Company has not made any representations regarding equity
          incentives to any officer, employees, director or consultant that are
          inconsistent with the share amounts and terms set forth in the Board
          minutes or which are inconsistent with provisions of any Transaction
          Document.

     (f)  There are no claims against the Company arising out of the termination
          of employment of any former Key Employee.

     (g)  The Company does not maintain, and has not established, sponsored, or
          participated in or contributed to, any employee benefit plan other
          than the ESOP.

     (h)  To the Company's knowledge, none of the officers or directors of the
          Company is disqualified from holding office under any Applicable Laws,
          nor has any such Person, during the previous five (5) years, been:

          (i)  subject to voluntary or involuntary petition under applicable
               bankruptcy or insolvency laws or the appointment of a receiver,
               fiscal agent or similar officer by a court for his business or
               property;

          (ii) convicted in a criminal proceeding or named as a subject of a
               pending criminal proceeding (excluding traffic violations and
               other minor offences);

          (iii) subject to any order, judgment, or decree (not subsequently
               reversed, suspended, or vacated) of any court of competent
               jurisdiction permanently or temporarily enjoining him from
               engaging, or otherwise imposing limits or conditions on his
               engagement in any securities, investment advisory, banking,
               insurance, or other type of business or acting as an officer or
               director of a company;

          (iv) found by a court of competent jurisdiction in a civil action or
               by the Securities and Exchange Commission or the Commodity
               Futures Trading Commission to have violated any United States
               federal or state securities, commodities, or unfair trade
               practices law, which such judgment or finding has not
               subsequently been reversed, suspended, or vacated, or

          (v)  found by a court of competent jurisdiction to have violated any
               other Applicable Laws which such judgment or finding has not
               subsequently been reversed, suspended or vacated.

3.17 Tax Returns and Payments

     There are no Taxes due and payable by the Company which have not been paid
     in a timely fashion. There are no accrued and unpaid Taxes of the Company
     which are due, whether or not assessed or disputed. There have been no
     examinations or audits of any tax returns or reports by any applicable
     governmental agency. The Company has duly and in a timely fashion filed all
     federal, state, county, local and foreign tax returns required to have been
     filed

<PAGE>

                                      -22-

     by it and there are in effect no waivers of applicable statutes of
     limitations with respect to Taxes for any year.

3.18 Permits

     The Company has all Approvals necessary for the conduct of its business,
     the lack of which could reasonably be expected to have a Material Adverse
     Effect. The Company is not in default in any material respect under any of
     such Approvals and has not received notice of default in respect of any of
     the foregoing from any Person.

3.19 Corporate Documents

     The copy of the minute books of the Company provided to the Investors
     contains minutes of all meetings of directors and stockholders and all
     actions by written consent without a meeting by the directors and
     stockholders since the date of incorporation and accurately reflects in all
     material respects all actions by the directors (and any committee of
     directors) and shareholders with respect to all transactions referred to in
     such minutes.

     The Amended Articles are in the form provided to the Investors.

3.20 Disclosure

     The Company has made available to the Investors all the material
     information reasonably available to the Company that the Investors have
     requested or which would reasonably be required by the Investors for
     deciding whether to acquire the Series A Preferred Shares and any Ordinary
     Shares, including certain of the Company's projections describing the
     proposed business plan for the WFOE Subsidiary (the "BUSINESS PLAN"). The
     Company has not withheld, deleted, modified or otherwise altered any
     material information relating to the Company, and none of the information
     provided to the Investors is false, untrue or misleading. To the Company's
     knowledge, no representation or warranty of the Company contained in this
     Agreement, as qualified by the Disclosure Schedule, and no certificate
     furnished or to be furnished to the Investors at any Closing contains any
     untrue statement of a material fact or omits to state a material fact
     necessary in order to make the statements contained herein or therein not
     misleading in light of the circumstances under which they were made. The
     Business Plan was prepared in good faith; however, the Company does not
     warrant that it shall achieve any results projected in the Business Plan.
     It is understood that this representation is qualified by the fact that the
     Company has not delivered to the Investor, and has not been requested to
     deliver, a private placement or similar memorandum or any written
     disclosure of the types of information customarily furnished to purchasers
     of securities.

3.21 Breach of Warranty

     The Company agrees that in the event that any of the warranties or
     representations set out in this Agreement proves to be misleading or untrue
     as at Closing, then it shall indemnify and hold harmless the Investors
     against any Losses that each such Investor may suffer as a result of the
     breach of such warranties or representations.

4.   CONDITIONS TO THE INVESTORS' OBLIGATIONS AT CLOSING

<PAGE>

                                      -23-

4.1  The Initial Closing

     The rights and obligations of each of the Investors to purchase any shares
     of the Series A Preferred Shares at the Initial Closing are subject to the
     fulfilment, on or before such Closing, of each of the following conditions
     precedent, unless otherwise waived by each of the Investors:

     (a)  Representations and Warranties

          Save as disclosed in the Disclosure Schedule, the representations and
          warranties of the Company contained in Section 3 shall be true and
          correct in all material respects as of the Closing, except that any
          such representations and warranties shall be true and correct in all
          respects where such representation and warranty is qualified with
          respect to materiality in Section 3, as the case may be in writing.

     (b)  Performance

          The Company shall have performed and complied with all covenants,
          agreements, obligations and conditions contained in this Agreement
          that are required to be performed or complied with by it on or before
          the Closing.

     (c)  Compliance Certificate

          Each of the President or Chief Executive of the Company and the Legal
          Representative of the WFOE Subsidiary shall have delivered to each of
          the Investors at the Closing a certificate signed by themselves on
          behalf of their respective entities in a form satisfactory to the
          Investors certifying that the conditions specified in Sections 4.1(a)
          and (b) have been fulfilled.

     (d)  Opinion of Cayman Islands Counsel

          Each of the Investors shall have received from Conyers Dill & Pearman,
          Cayman Islands counsel for the Company, an opinion, dated as of the
          Closing, in a form satisfactory to the Investors in their sole
          discretion.

     (e)  Opinion of PRC Counsel

          Each of the Investors shall have received from PRC counsel for the
          Company, an opinion, dated as of the Closing, in a form satisfactory
          to the Investors in their sole discretion.

     (f)  Board of Directors of the Company and the WFOE Subsidiary

          As of the Closing, the authorized size of the Board shall be three (3)
          members, consisting of one (1) representative from QUALCOMM and two
          (2) representatives from Techfaith.

          The authorized size of the board of directors of the WFOE Subsidiary
          shall also be three (3) members, consisting of one (1) representative
          from QUALCOMM and two

<PAGE>

                                      -24-

          (2) representatives from Techfaith.

     (g)  Investors' Rights Agreement

          At the Initial Closing, the Investors' Rights Agreement (and/or any
          relevant document documenting and confirming the relevant party's
          accession to the Investors' Rights Agreement) shall have been executed
          and delivered by QUALCOMM and Techfaith and the Company.

     (h)  Amended Articles

          At the Initial Closing, the Company shall have filed the Amended
          Articles with the relevant government body in compliance with
          Applicable Laws of the Cayman Islands on or prior to the Closing, and
          the Amended Articles shall continue to be in full force and effect as
          of the Closing.

     (i)  License Agreements

          At the Initial Closing, each of the License Agreements shall have been
          executed and delivered by QUALCOMM, Techfaith, and/or the WFOE
          Subsidiary, as required by such agreements.

     (j)  Establishment of WFOE Subsidiary

          At or prior to the Initial Closing, the WFOE Subsidiary shall have
          been duly established and all post-establishment filings and
          registrations with the PRC authorities required with respect to the
          WFOE Subsidiary and its operation as contemplated by the Business Plan
          have been duly completed in accordance with, and within the time
          limits stipulated under, Applicable Laws of the PRC.

     (k)  Secretary's Certificate

          The Company Secretary shall have delivered to each Investor at the
          Closing a certificate certifying as true copies of originals:

          (i)  the Amended Articles;

          (ii) resolutions of the Board approving the Transaction Documents and
               the transactions contemplated under the Transaction Documents;
               and

          (iii) resolutions of the shareholders in the Company approving the
               Amended Articles and, where so required, pursuant to the Amended
               Articles, the Transaction Documents and the transactions
               contemplated by the Transaction Documents.

     (l)  Proceedings and Documents

          All corporate and other proceedings and approvals in connection with
          the transactions contemplated hereby at the Closing and all documents
          incident thereto, including but not limited to board and shareholder
          approvals and registration

<PAGE>

                                      -25-

          approvals, shall have been obtained in form and substance reasonably
          satisfactory to the Investors, and each of such Investors (or its
          counsel) shall have received all such counterpart original and
          certified or other copies of such documents as it may reasonably have
          requested. Such documents may include good standing certificates.

     (m)  Compliance with Laws

          Each Investor warrants and represents to the other Investors that as
          of the date of Closing, it has fully and duly complied with, and is
          not, and neither it, nor any Affiliates of such Investor, the Company,
          and/or the Subsidiary shall become, in connection with, or as a result
          of its execution or performance of this Agreement and/or its entering
          into or performing any of its obligations under the Transaction
          Documents or the transactions contemplated thereby, in contravention
          of any Applicable Laws. In this Section 4.1(m), Applicable Laws
          includes, without limitation, a reference to the SAFE Circular as well
          as a reference all other Applicable Laws of the PRC as may be issued
          or promulgated by from time to time.

4.2  The Subsequent Closing

     The rights and obligations of each of the Investors to purchase any shares
     of the Series A Preferred Shares at the Subsequent Closing are subject to
     the fulfilment, on or before such Closing, of each of the following
     conditions precedent, in addition to the conditions precedent set forth in
     Section 4.1 (except for Sections 4.1(g), (h), (i) and (j)), unless
     otherwise waived by each of the Investors:

     (a)  a written certification by a director of each of the Investors that
          Milestone #1 has been satisfied;

     (b)  a written certification by a director of each of the Investors that
          there has not been any material breach by the Company, the WFOE
          Subsidiary, QUALCOMM or Techfaith, as the case may be, to any of the
          Transaction Documents and/or the WFOE Articles of Association; and

     (c)  a written certification by a director of each of the Investors that
          there has not been any material breach by the Company, the WFOE
          Subsidiary, QUALCOMM or Techfaith, as the case may be, to any of the
          License Agreements.

4.3  The Final Closing

     The rights and obligations of each of the Investors to purchase any shares
     of the Series A Preferred Shares at the Final Closing are subject to the
     fulfilment, on or before such Closing, of each of the following conditions
     precedent, in addition to the conditions precedent set forth in Section 4.1
     (except for Sections 4.1(g), (h), (i) and (j)), unless otherwise waived by
     each of the Investors:

     (a)  a written certification by a director of each of the Investors that
          Milestone #2 has been satisfied;

<PAGE>

                                      -26-

     (b)  a written certification by a director of each of the Investors that
          there has not been any material breach by the Company, the WFOE
          Subsidiary, QUALCOMM or Techfaith, as the case may be, to any of the
          Transaction Documents and/or the WFOE Articles of Association; and

     (c)  a written certification by a director of each of the Investors that
          there has not been any material breach by the Company, the WFOE
          Subsidiary, QUALCOMM or Techfaith, as the case may be, to any of the
          License Agreements.

4.4  No Closing Obligation

     In the event that there has been material breach by the Company, the WFOE
     Subsidiary, QUALCOMM or Techfaith, as the case may be, to any of the
     Transaction Documents or License Agreements, and such breach has not been
     remedied during the applicable cure period, then any non-breaching party
     may immediately terminate this Agreement. Any termination of this Agreement
     shall not prejudice any cause of action or claim of a Party on account of
     any breach or default by another Party.

5.   MISCELLANEOUS

5.1  Survival of Warranties

     Unless otherwise set forth in this Agreement, the representations and
     warranties of the Company contained in or made pursuant to this Agreement
     shall survive the execution and delivery of this Agreement and the Closing
     and shall in no way be affected by any investigation of the subject matter
     thereof made by or on behalf of any of the Investors.

5.2  Transfer; Successors and Assigns

     The terms and conditions of this Agreement shall inure to the benefit of
     and be binding upon the respective successors and assigns of the Parties.
     Nothing in this Agreement, express or implied, is intended to confer upon
     any party other than the Parties or their respective successors and assigns
     any rights, remedies, obligations, or liabilities under or by reason of
     this Agreement, except as expressly provided in this Agreement.

5.3  Governing Law

     This Agreement shall be governed by, and construed in accordance with, the
     laws of the Hong Kong as to matters within the scope thereof, without
     regard to its principles of conflicts of laws.

5.4  Counterparts

     This Agreement may be executed in any number of counterparts, each of which
     shall be deemed an original, but all of which together shall constitute one
     and the same instrument. This Agreement may also be executed and delivered
     by facsimile signature and any number of counterparts, each of which shall
     be deemed an original, but all of which together shall constitute one and
     the same instrument.

<PAGE>

                                      -27-

5.5  Titles and Subtitles

     The titles and subtitles used in this Agreement are used for convenience
     only and are not to be considered in construing or interpreting this
     Agreement.

5.6  Notices

     All notices and other communications given or made pursuant to this
     Agreement shall be in writing and shall be deemed effectively given:

          (i)  upon personal delivery to the Party to be notified;

          (ii) when sent by "read" receipt confirmed electronic mail or
               facsimile (subject to confirmation of completed uninterrupted
               transmission) if sent during normal business hours of the
               recipient, and if not so confirmed, then on the next business
               day;

          (iii) five (5) days after having been sent by registered or certified
               mail, return receipt requested, postage prepaid; or

          (iv) one (1) day after deposit with a nationally recognized overnight
               courier, specifying next day delivery, with written verification
               of receipt.

     All communications shall be sent to the respective Parties at their address
     as set forth above or on the signature page, or to such e-mail address,
     facsimile number or address as subsequently modified by written notice
     given in accordance with this Section 5.6. If notice is given to the
     Company, a copy shall also be sent to the registered address of the Company
     and if notice is given to any Investors, a copy shall also be given to
     Lovells Beijing Office.

5.7  No Finder's Fees

     Each Party represents that it neither is, nor shall it be obligated for any
     finder's fee or commission in connection with this transaction nor has it
     procured that the Company shall be liable for any such finder's fee. The
     Company agrees to indemnify and hold harmless each Investor from any
     liability for any commission or compensation in the nature of a finder's or
     broker's fee arising out of this transaction (and the costs and expenses of
     defending against such liability or asserted liability) for which the
     Company or any of its officers, directors or representatives is
     responsible.

5.8  Confidentiality Obligations

     (a)  All Confidential Information shall remain the property of the
          furnishing Party. The furnishing Party grants the receiving Party or
          Parties the right to use such Confidential Information only as
          follows. Such Confidential Information (i) shall not be reproduced or
          copied, in whole or part, except for use as expressly authorized in
          this Agreement; (ii) shall, together with any full or partial copies
          thereof, be returned or destroyed when no longer needed or upon any
          termination of this Agreement; and (iii) shall only be disclosed to
          employees of the receiving Party or Parties who have a need to know
          (and such Party or Parties shall advise such employees of the
          obligations assumed

<PAGE>

                                      -28-

          herein and shall ensure their compliance herewith). Moreover, such
          Confidential Information shall be used by the receiving Party or
          Parties only for the purpose of performing under this Agreement.
          Unless the furnishing Party consents in writing, such Confidential
          Information shall be held in confidence by the receiving Party or
          Parties. These restrictions shall not apply to any Confidential
          Information (i) which can be proven to be or have been independently
          developed by the receiving Party or Parties or lawfully received free
          of restriction from another source having the right to so furnish such
          Confidential Information; (ii) after it has become generally available
          to the public without breach of this Agreement by the receiving Party
          or Parties or its/their Affiliates; (iii) which at the time of
          disclosure to the receiving Party or Parties was known to such Party
          or Parties free of restriction and evidenced by documentation in such
          Party's or Parties' possession; or (iv) which the disclosing Party
          agrees in writing is free of such restrictions.

     (b)  Confidential Information is subject to this Section 5.8 whether
          delivered orally or in tangible form and without regard to whether it
          has been identified or marked as confidential or proprietary. Each
          Party agrees to use its best efforts to mark or otherwise identify as
          confidential or proprietary all Confidential Information that it
          desires to be subject to the terms of this clause before furnishing it
          to the other Party or Parties. Upon request, a Party shall promptly
          identify whether specified information must be held by the receiving
          Party or Parties subject to this Section 5.8.

     (c)  Each Party agrees that the QUALCOMM Director and Techfaith Directors
          shall be entitled to report all matters concerning the Company or the
          WFOE Subsidiary, including but not limited to matters discussed at any
          meeting of the Board and of any committee of the Board, to his/her
          appointer, and that such QUALCOMM Director or any Techfaith Directors
          may take advice and obtain instructions from his/her appointer,
          without prejudice to the QUALCOMM Director's or Techfaith Directors'
          obligation (as the case may be) to act at all times in the best
          interests of the Company or the WFOE Subsidiary.

     (d)  Each Party acknowledges that the terms and conditions of this
          Agreement, other Transaction Documents, and all exhibits, restatements
          and amendments hereto and thereto (collectively, the "Financing
          Terms"), including their existence, shall be considered Confidential
          Information and shall not be disclosed by it to any third party except
          in accordance with the provisions set forth in this Section 5.8.

     (e)  Notwithstanding anything in the foregoing to the contrary, the Company
          may disclose any of the Financing Terms to its current or bona fide
          directors, officers, employees, investment bankers, lenders,
          accountants, auditors, insurers and attorneys, in each case only where
          such Persons have a need to know and are under non-disclosure
          obligations imposed by contract, professional ethics, law or otherwise
          that are at least as restrictive as this Section 5.8.

     (f)  The obligations contained in this Section 5.8 shall endure, even after
          the termination of this Agreement, without limit in point of time
          except to the extent that and until any Confidential Information
          enters the public domain as set out above.

<PAGE>

                                      -29-

5.9  Fees and Expenses

     (a)  Subject to the provisions of subsection (b) below:

          (i)  the Company shall bear, and shall reimburse and pay each of the
               Investors all costs and expenses (including all legal, accounting
               and out of pocket costs and expenses) incurred in relation to the
               proposed investment by the Investors, including for the
               restructuring of the Company and preparation of the Company for
               offshore investors, and the negotiation, preparation and
               execution of the definitive documentation relating thereto, up to
               the maximum amount of US$200,000. In the event that such
               aggregate costs and expenses of the Investors exceed US$200,000,
               each Investor shall be reimbursed such amount as shall be
               determined as follows:

               R = US$200,000 x I/T

               Where

               R is the amount in US$ that such Investor shall receive as
               reimbursement for its costs and expenses hereunder,

               I is the total amount of costs and expenses incurred by such
               Investor, and

               T is the total amount of costs and expenses incurred by all the
               Investors; and

          (ii) such amount referred to in subsection (a)(i) above shall be
               deducted from and set-off against the total investment amount
               payable by each of the Investors for the Series A Preferred
               Shares under this Agreement.

     (b)  In the event that the sale and purchase of shares under this Agreement
          is not completed, and the Parties agree in writing to terminate this
          Agreement for reasons attributable to:

          (i)  the Company, the provisions of subsection (a) above shall
               continue to apply, and the Company shall continue to be bound by
               its obligations therein, save that the amount to be reimbursed
               and paid to the Investors under subsection (a) above shall be
               paid to each of the Investors, in such form as may be acceptable
               to such Investor within thirty (30) days of the termination of
               this Agreement.

          (ii) the Investors, the provisions of subsection (a) above shall not
               apply, and each Party shall bear its own professional and other
               costs and expenses incurred by it in relation to the investment
               contemplated hereunder.

5.10 Attorney's Fees

     Without prejudice to the provisions of Section 5.9, if any action at law or
     in equity (including arbitration) is necessary to enforce or interpret the
     terms of any of the Transaction

<PAGE>

                                      -30-

     Documents, the prevailing Party shall be entitled to reasonable attorney's
     fees, costs and necessary disbursements in addition to any other relief to
     which such Party may be entitled.

5.11 Amendments and Waivers

     Any term of this Agreement may be amended, terminated or waived with the
     written consent of each Party. Any amendment or waiver effected in
     accordance with this Section 5.11 shall be binding upon each Investor and
     each transferee of the Series A Preferred Shares (or of the Ordinary Shares
     issuable upon conversion thereof), each future holder of all such
     securities, and the Company.

5.12 Severability

     The invalidity of unenforceability of any provision hereof shall in no way
     affect the validity or enforceability of any other provision.

5.13 Delays or Omissions

     No delay or omission to exercise any right, power or remedy accruing to any
     Party under this Agreement, upon any breach or default of any other Party
     under this Agreement, shall impair any such right, power or remedy of such
     non-breaching or non-defaulting Party nor shall it be construed to be a
     waiver of any such breach or default, or an acquiescence therein, or of or
     in any similar breach or default thereafter occurring; nor shall any waiver
     of any single breach or default be deemed a waiver of any other breach or
     default theretofore or thereafter occurring. Any waiver, permit, consent or
     approval of any kind or character on the part of any Party of any breach or
     default under this Agreement, or any waiver on the part of any Party of any
     provisions or conditions of this Agreement, must be in writing and shall be
     effective only to the extent specifically set forth in such writing. All
     remedies, either under this Agreement or under Applicable Law or otherwise
     afforded to any Party, shall be cumulative and not alternative.

5.14 Moratorium

     (a)  In the event that the Initial Closing does not take place on the date
          of this Agreement:

          (i)  each of the Parties shall use its best efforts to complete the
               due diligence, restructuring and all other work contemplated
               under and in connection with this Agreement, including the
               fulfilment of the conditions precedent, so as to facilitate
               effecting Closing as soon as possible; and

          (ii) the Company shall not, unless otherwise agreed to in writing by
               each Investor, solicit for or engage with other outside parties
               on any fund raising efforts until the date of the Closing.

     (b)  For the avoidance of doubt, each Investor reserves the right, and the
          Company acknowledges that such Investor being in the business of
          making venture investments have the right to receive information of,
          meet with employees of, and discuss or invest in any company whether
          or not such company has products or services which compete with those
          of the Company, and without informing the

<PAGE>

                                      -31-

          Company.

5.15 Entire Agreement

     This Agreement (including the Schedules and Exhibits hereto, if any),
     together with the other Transaction Documents constitute the full and
     entire understanding and agreement between the Parties with respect to the
     subject matter hereof, and any other written or oral agreement relating to
     the subject matter hereof existing between the Parties are expressly
     cancelled.

5.16 Dispute Resolution

     (a)  Any dispute arising out of or in connection with this Agreement,
          including any question regarding its existence, validity or
          termination, shall be referred to representatives of the Parties for
          settlement through friendly consultations between the Parties hereto.
          In case no agreement can be reached through consultation within thirty
          (30) days from either Party's written notice to the other for
          commencement of such consultations, the dispute may be submitted to
          arbitration for settlement by either Party. Any and all such disputes
          shall be finally resolved by arbitration in accordance with the
          Arbitration Rules of the United Nations Commission on International
          Trade Law (UNCITRAL) in force at the relevant time and as may be
          amended by the rest of this section. The place of arbitration shall be
          the Hong Kong International Arbitration Centre ("HKIAC"). The official
          language of the arbitration shall be English and the tribunal shall
          consist of one arbitrator to be appointed by HKIAC. The sole
          arbitrator appointed by HKIAC shall have experience in handling China
          cross-border financing disputes.

     (b)  In the course of arbitration, all the Parties shall continue to
          implement the terms of this Agreement except for those matters subject
          to arbitration.

     (c)  Notwithstanding the above, the Parties hereby consent to and agree
          that, in addition to any recourse to arbitration as set out above, any
          Party may seek a temporary or permanent injunction from a court or
          other authority with competent jurisdiction and, notwithstanding that
          this Agreement is governed by the laws of the Hong Kong, a court or
          authority hearing an application for injunctive relief may apply the
          law of the jurisdiction where the court or other authority is located
          in determining whether to grant the injunction.

                  [Remainder of Page Left Blank Intentionally]
<PAGE>

                                      -32-

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.

          TECHFAITH SOFTWARE (CHINA) HOLDING LIMITED

          By: /s/ Frank Meng
              ---------------------------------
          Name: Frank Meng
          Title: Director
          Address: Century Yard, Cricket Square, Hutchins Drive,
                   O.P. Box 2681GT, George Town, Grand Cayman,
                   British Indies West

          QUALCOMM INCORPORATED

          By: /s/ William E. Keitel
              ---------------------------------
          Name: William E. Keitel
          Title: EVP and CFO
          Address: 5775 Morehouse Drive, San Diego, CA 92121 USA

          CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED

          By: /s/ Junhon Huang
              ---------------------------------
          Name: Junhon Huang
          Title: Vice President
          Address: 3/F M8 West, No. 1 Jiu Xian Qiao East Road,
                   Chao Yang District, Beijing 100016, PRC

          SIGNATURE PAGE TO SERIES A SHARE PURCHASE AND SALE AGREEMENT

<PAGE>

                                      -33-

                     SCHEDULE 1 - PARTICULARS OF THE COMPANY

                   PART A: PARTICULARS OF COMPANY PRE-CLOSING

<TABLE>
<S>                                     <C>
AUTHORISED SHARE CAPITAL:               75,000,000
   ORDINARY SHARES:                     50,000,000
   SERIES A PREFERRED SHARES:           25,000,000
NUMBER OF ORDINARY SHARES IN ISSUE:     10
PAR VALUE OF ORDINARY SHARES IN
   ISSUE:                               US$0.001 PER ORDINARY SHARE

NUMBER OF SERIES A PREFERRED SHARES
   IN ISSUE:                            0
PAR VALUE OF SERIES A PREFERRED
   SHARES IN ISSUE:                     US$0.001 PER SERIES A PREFERRED SHARE

DIRECTORS:                              JUNHOU HUANG AND FRANK MENG

REGISTERED OFFICE OF COMPANY:           CENTURY YARD, CRICKET SQUARE,
                                        HUTCHINS DRIVE, O.P. BOX 2681GT,
                                        GEORGE TOWN, GRAND CAYMAN,
                                        BRITISH WEST INDIES
</TABLE>

<PAGE>

                                      -34-

                   PART B: PARTICULARS OF THE WFOE SUBSIDIARY

                 [to be completed prior to the Initial Closing]

<TABLE>
<S>                              <C>
NAME: English and Chinese
REGISTERED CAPITAL:              US$10,000,000
TOTAL INVESTMENT AMOUNT:         US$25,000,000
PAID-UP REGISTERED CAPITAL:
BUSINESS LICENCE NO. AND DATE:
MOFCOM APPROVAL NO:
DATE OF APPROVAL CERTIFICATE:
SHAREHOLDERS:
DIRECTORS: [__________]
LEGAL ADDRESS: [____________]
</TABLE>
<PAGE>

                                      -35-

             SCHEDULE 2 - CAPITALIZATION OF THE COMPANY POST-CLOSING

PART A: AT INITIAL CLOSING

AUTHORISED CAPITAL: 50,000,000 ORDINARY SHARES AND 25,000,000 SERIES A PREFERRED
SHARES

<TABLE>
<CAPTION>
                                                     PAR VALUE OF
                                    SERIES A       SHARES IN ISSUE     PERCENTAGE
SHAREHOLDER   ORDINARY SHARES   PREFERRED SHARES       (IN US$)      SHAREHOLDING*
-----------   ---------------   ----------------   ---------------   -------------
<S>           <C>               <C>                <C>               <C>
QUALCOMM              3             3 million           0.001             30%
Techfaith             7             7 million           0.001             70%
                    ---            ----------                            ---
Total                10            10 million                            100%
                    ===            ==========                            ===
</TABLE>

*    OF TOTAL NUMBER OF SHARES ISSUED IN THE CAPITAL OF THE COMPANY (ON A
     FULLY-CONVERTED BASIS)

PART B: AT SUBSEQUENT CLOSING

<TABLE>
<CAPTION>
                                                     PAR VALUE OF
                                    SERIES A       SHARES IN ISSUE     PERCENTAGE
SHAREHOLDER   ORDINARY SHARES   PREFERRED SHARES       (IN US$)      SHAREHOLDING*
-----------   ---------------   ----------------   ---------------   -------------
<S>           <C>               <C>                <C>               <C>
QUALCOMM              3             6 million           0.001             30%
Techfaith             7            14 million           0.001             70%
                    ---            ----------                            ---
Total                10            20 million                            100%
                    ===            ==========                            ===
</TABLE>

PART C: AT FINAL CLOSING

<TABLE>
<CAPTION>
                                                     PAR VALUE OF
                                    SERIES A       SHARES IN ISSUE     PERCENTAGE
SHAREHOLDER   ORDINARY SHARES   PREFERRED SHARES       (IN US$)      SHAREHOLDING*
-----------   ---------------   ----------------   ---------------   -------------
<S>           <C>               <C>                <C>               <C>
QUALCOMM              3            7.5 million          0.001              30%
Techfaith             7           17.5 million          0.001              70%
                    ---           ------------                            ---
Total                10             25 million                            100%
                    ===           ============                            ===
</TABLE>

<PAGE>

                                      -36-

       EXHIBIT A - FORM OF AMENDED MEMORANDUM AND ARTICLES OF ASSOCIATION

                            [INTENTIONALLY OMITTED.]

<PAGE>

                                      -37-

                 EXHIBIT B - FORM OF INVESTORS' RIGHTS AGREEMENT

                            [INTENTIONALLY OMITTED.]
<PAGE>

                                      -38-

                         EXHIBIT C - DISCLOSURE SCHEDULE

                 [TO BE UPDATED AT EACH OF THE INITIAL CLOSING,
                     SUBSEQUENT CLOSING AND FINAL CLOSING.]

<PAGE>

                                      -39-

             EXHIBIT D - FORM OF SOFTWARE LICENSE AGREEMENT BETWEEN
                          QUALCOMM AND WFOE SUBSIDIARY

                            [INTENTIONALLY OMITTED.]

<PAGE>

                                      -40-

             EXHIBIT E - FORM OF SOFTWARE LICENSE AGREEMENT BETWEEN
                         TECHFAITH AND WFOE SUBSIDIARY

                            [INTENTIONALLY OMITTED.]

<PAGE>

                                      -41-

              EXHIBIT F - FORM OF DEVELOPMENT AND LICENSE AGREEMENT
                  AMONG WFOE SUBSIDIARY, TECHFAITH AND QUALCOMM

                            [INTENTIONALLY OMITTED.]

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