Joint Venture Agreement

Dated December 19, 1997


CHARTERED SEMICONDUCTOR MANUFACTURING LTD


- and -


LUCENT TECHNOLOGIES MICROELECTRONICS PTE. LTD.


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JOINT VENTURE AGREEMENT


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C O N T E N T S


CLAUSE HEADING PAGE ------ ------- ---- 1. DEFINITIONS AND INTERPRETATION 1


2. FORMATION OF THE COMPANY 10


3. BUSINESS PLAN; SCOPE AND OBJECTIVE 11


4. COMPLETION 14


5. BOARD OF DIRECTORS 19


6. BUSINESS OF THE COMPANY 28


7. SHAREHOLDERS' OBLIGATIONS AND RIGHTS 29


8. MANAGEMENT OF THE COMPANY 34


9. GENERAL MEETINGS 19


10. TRANSFER OF SHARES 19


11. FINANCE 39


12. DIVIDEND POLICY 39


13. WARRANTIES AS TO AUTHORITY 39


14. DEFAULT 40


15. GENERAL OBLIGATIONS OF SHAREHOLDERS 49


16. PREVALENCE OF AGREEMENT 49


17. DURATION AND TERMINATION 49


The Company - CSM - Lucent Confidential 3 18. CONFIDENTIAL INFORMATION 53


19. NOTICES AND GENERAL 55


SCHEDULE A - COLLATERAL AGREEMENTS


SCHEDULE 5(L) - CERTAIN EMPLOYEES


SCHEDULE 7(B)(ii) - SCHEDULED COMPANIES


SCHEDULE 7(C) - PARTNERSHIP FEE ADJUSTMENTS


SCHEDULE 7(D) - INSURANCE PRINCIPLES


SCHEDULE 10(E)(ii) - RESTRICTED PURCHASERS


APPENDIX A - COMPANY BUSINESS PLAN


APPENDIX B - ASSURED SUPPLY AND
DEMAND AGREEMENT


APPENDIX C - LICENSE AND TECHNOLOGY
TRANSFER AGREEMENT


APPENDIX D - CSM SERVICE SUPPORT AGREEMENT


APPENDIX E - MEMORANDUM AND ARTICLES
OF ASSOCIATION


APPENDIX F - ACKNOWLEDGEMENT LETTER


APPENDIX G - TAX INDEMNITY AGREEMENT


APPENDIX H - FORM OF LUCENT CERTIFICATE AND OPINION


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The Company - CSM - Lucent Confidential 4
APPENDIX I - FORM OF CSM CERTIFICATE AND CSM IN-HOUSE
OPINION


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The Company - CSM - Lucent Confidential 5
THIS JOINT VENTURE AGREEMENT (this "Agreement") is made on DECEMBER 19, 1997 BETWEEN:


(1) CHARTERED SEMICONDUCTOR MANUFACTURING LTD ("CSM"), a company
incorporated in Singapore with its registered office at 60, Woodlands
Industrial Park D Street 2, Singapore 738406; and


(2) LUCENT TECHNOLOGIES MICROELECTRONICS PTE. LTD. ("Lucent"), a company
incorporated in Singapore, with its principal place of business at 3,
Kallang Sector, Kolam Ayer Industrial Park, Singapore 349278.


W H E R E A S:-


(A) CSM and Lucent are desirous of establishing and operating a joint venture company in Singapore for the purpose of undertaking and carrying on the Business (as defined below) with the goal of enabling the parties to develop and have manufactured technologically advanced wafers faster, more efficiently and at a low cost.


(B) To give effect to the intention of the parties as hereinbefore recited, and to regulate their relationship inter se as shareholders in the joint venture company in the conduct of the Business and affairs of the joint venture company the parties have agreed to enter into this Agreement on the terms and conditions hereinafter set out.


I T I S A G R E E D as follows:-


1. DEFINITIONS AND INTERPRETATION.


(A) Definitions


In this Agreement and the Schedules, unless the subject or context otherwise requires, the following words and expressions shall have the following meanings respectively ascribed to them:-


"Act" means the Companies Act of Singapore, Chapter 50;


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The Company - CSM - Lucent Confidential 6
"Affiliate" means, with respect to any Person, any other Person, directly or indirectly controlled by, controlling or under common control with such Person. For purposes of this Agreement, the term "control" means the power to direct the management and policies of a Person, whether through the ownership of voting securities, by agreement or otherwise. An Affiliate shall remain an Affiliate only as long as such control exists;


"Articles" means the Articles of Association of the Company as such Articles may be amended from time to time. The Articles upon incorporation of the Company shall be in the form attached hereto as Appendix E;


"Assured Supply and Demand Agreement" has the meaning ascribed thereto in item 1 of Schedule A and shall be in the form attached hereto as Appendix B;


"Auditors" means the auditors of the Company selected by the Board of Directors as provided in Clause 5(I)(e);


"Board" means the Board of Directors of the Company, as such Board may be constituted from time to time;


"Business" has the meaning ascribed thereto in Clause 6(A);


"Collateral Agreements" means the agreements referred to in Schedule A, as each such agreement may be amended from time to time;


"Company" has the meaning ascribed thereto in Clause 2(A);


"Company Business Plan" has the meaning ascribed thereto in Clause 3(B);


"Company Fab" means the fab commonly referred to by the parties as "Fab 3B" at Woodlands Industrial Park D, Singapore;


"Completion" means completion of the subscription for ordinary shares in the capital of the Company by CSM and Lucent pursuant to Clause 4;


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The Company - CSM - Lucent Confidential 7
"Completion Date" means the date falling 30 days after the date of incorporation of the Company (or such other date as the parties may agree in writing);


"CSM Service Support Agreement" has the meaning ascribed thereto in item 3 of Schedule A and shall be in the form attached hereto as Appendix D;


"Debt/Equity Ratio" means the ratio of External Borrowings to Total Shareholder Funds;


"Director" means any member of the Board ;


"External Borrowings" means all and any liabilities of, or amounts due from, the Company to any third party (including, without limitation, banks, financial institutions or governmental agencies) for borrowed money, excluding loans from Shareholders;


"Fair Market Value" means, with respect to the shares in the capital of the Company held by the selling Shareholder (the "Selling Shareholder"), the fair market value of such shares that would be obtained in an arms' length negotiated transaction between an informed and willing purchaser under no compulsion to purchase and an informed and willing seller under no compulsion to sell. In determining fair market value, due consideration shall be given to (without limitation) the following :


(1) it shall be assumed that the Company is a going concern;


(2) net realizable value of the Company's assets and liabilities;


(3) value of the Company's intangible assets;


(4) it shall be assumed that the willing buyer is the non-selling
Shareholder (the "Buying Shareholder");


(5) the prevailing market conditions of the semiconductor industry in
general and the subcontract wafer manufacturing sector in
particular;


(6) effects which the sale will have on contracts/agreements before
and after the sale of shares held by the Selling Shareholder;


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The Company - CSM - Lucent Confidential 8
(7) the Company's existing technologies and customer base;


(8) the Company's accessibility to existing and future technologies
and customers of the Buying Shareholder and its subsidiaries, and
the associated true costs of access to such technologies and
customers;


(9) the level of the Buying Shareholder's ability to support the
Company after the sale of shares held by the Selling Shareholder;
and


(10) the duration and impact of the transition (i.e., the effect (if
any) which the withdrawal of technologies, services, guaranteed
loading levels, etc. will have on the Company).


Fair Market Value of the shares in the capital of the Company held by the Selling Shareholder shall be determined as follows:


(1) promptly upon delivery by the applicable Shareholder of a FMV
Determination Request pursuant to Clause 10, 14 or 17, the parties
shall consult with each other in good faith as to the appropriate
Fair Market Value. If the parties determine the Fair Market Value
by mutual consent within 21 days of the date of delivery of a FMV
Determination Request ("FMV Request Date") or within 21 days of the
Termination Date, as applicable, the value so determined shall be
Fair Market Value.


(2) If the parties fail to determine Fair Market Value by mutual
consent within 21 days of the FMV Request Date or within 21 days of
the Termination Date, as applicable, each Shareholder shall within
30 days of the FMV Request Date or within 30 days of the
Termination Date, as applicable, appoint an appraiser. If one
Shareholder appoints an appraiser within such 30 day period and the
other Shareholder fails to appoint an appraiser within such 30 day
period, the sole appraiser so appointed shall in good faith
determine Fair Market Value within 45 days of the FMV Request Date
or within 45 days of the Termination Date, as applicable, and the
value so determined shall be Fair Market Value.


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The Company - CSM - Lucent Confidential 9
(3) If each Shareholder appoints an appraiser within such 30 day
period, such two appraisers shall consult with each other in good
faith as to Fair Market Value. If the appraisers determine Fair
Market Value by mutual consent within 45 days of the FMV Request
Date or within 45 days of the Termination Date, as applicable, the
value so determined shall be Fair Market Value.


(4) If the two appraisers fail to determine Fair Market Value by mutual
consent within 45 days of the FMV Request Date or within 45 days of
the Termination Date, as applicable, the appraisers shall within 55
days of the FMV Request Date or within 55 days of the Termination
Date, as applicable, appoint a third appraiser. If, within such 55
day period, the two appraisers fail to appoint a third appraiser,
either Shareholder may, on behalf of other Shareholder, apply to
the International Chamber of Commerce (London Office) for
appointment of a third appraiser.


(5) The third appraiser shall in good faith make a determination of
Fair Market Value within 20 days of its appointment. As soon as the
third appraiser has delivered its appraisal (the "Third
Appraisal"), such Third Appraisal shall be compared with the
appraisals given by the other two appraisers and if such Third
Appraisal is between the appraisals given by the other two
appraisers, such Third Appraisal shall be Fair Market Value. In the
event the Third Appraisal is higher than (or the same as) the
higher of the first two appraisals, Fair Market Value shall be the
higher of the first two appraisals and if the Third Appraisal is
lower than (or the same as) the lower of the first two appraisals,
Fair Market Value shall be the lower of the first two appraisals.


Subject to Clause 17, Fair Market Value of the shares of the Company held by Lucent or CSM shall be determined for the value of such shares as of the FMV Request Date or the Termination Date, as applicable. If Fair Market Value is determined pursuant to Clause 10, all costs of determination of Fair Market Value shall be borne by the Affected Shareholder. If Fair Market Value is determined pursuant to Clause 14, all costs of determination of Fair Market Value shall be borne by the Defaulting Shareholder. If the Fair Market Value is determined pursuant to Clause 17, all costs of determination of Fair Market Value shall be borne by Lucent or CSM, as specified in Clause 17;


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The Company - CSM - Lucent Confidential 10
"FMV Determination Request" means a written request by one of the Shareholders to determine Fair Market Value for purposes of Clause 10, 14 or 17, as the case may be;


"Indebtedness" means, as to any Person, any obligation to pay money to another Person in the future (except for current accounts payable in exchange for the receipt of goods or services) which obligations shall become due with the passage of time and without the performance of any actions by a third party, including without limitation: (i) indebtedness created, issued or incurred by any such Person for borrowed money; (ii) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments; (iii) all indebtedness arising or created under any conditional sale or other title retention agreement with respect to property acquired by such Person; (iv) all obligations of such Person as lessee under leases that have been or should be, in accordance with Singapore GAAP, recorded as capital leases; (v) all obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities and (vi) any guarantees of any financial obligations of any other Person;


"JTC" means Jurong Town Corporation, a body corporate established under the Jurong Town Corporation Act of Singapore, Chapter 150;


"License and Technology Transfer Agreement" has the meaning ascribed thereto in item 2 of Schedule A and shall be in the form attached hereto as Appendix C;


"Lucent Fiscal Month" means the 12 fiscal monthly periods of Lucent Technologies Inc. as such monthly periods may be determined by Lucent Technologies Inc. from time to time for each Lucent Fiscal Year which monthly periods, once determined, shall be conveyed in writing to CSM by Lucent prior to the commencement of each Lucent Fiscal Year;


"Lucent Fiscal Quarter" means the four fiscal quarterly periods of Lucent Technologies Inc. as such quarterly periods may be determined by Lucent Technologies Inc. from time to time for each Lucent Fiscal Year;


"Lucent Fiscal Year" means the fiscal year of Lucent Technologies Inc. which currently ends on September 30 of each calendar year;


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The Company - CSM - Lucent Confidential 11
"Memorandum" means the Memorandum of Association of the Company, as such Memorandum may be amended from time to time. The Memorandum upon incorporation of the Company shall be in the form attached hereto as Appendix E;


"Net Book Value" means the net worth (assets less liabilities) of the Company as of the most recently audited balance sheet date as updated to the Net Book Value Request Date or the Termination Date, as applicable. The net worth of the Company is derived by adding the original cost value of the Company's assets less normal charges for depreciation and other adjustments as prescribed by Singapore GAAP, and subtracting the liabilities of the Company.


Net Book Value shall be determined as of the Net Book Value Request Date or the Termination Date, as applicable. Net Book Value shall be determined as follows:


(1)Promptly upon delivery by the applicable Shareholder of a Net
Book Value Determination Request pursuant to Clause 14 or 17, the
parties shall consult with each other in good faith as to the
appropriate Net Book Value. Net Book Value shall be determined as
of the most recent audited balance sheet as updated to the Net
Book Value Request Date or the Termination Date, as applicable.
If the parties determine Net Book Value by mutual consent within
21 days of the Net Book Value Request Date or within 21 days of
the Termination Date, as applicable, the value so determined
shall be the Net Book Value.


(2)If the parties fail to determine Net Book Value by mutual consent
within 21 days of the Net Book Value Request Date or within 21
days of the Termination Date, as applicable, the Auditors shall
in good faith determine the Net Book Value within 35 days of the
Net Book Value Request Date or within 35 days of the Termination
Date, as applicable, and the value so determined shall be the Net
Book Value.


If the Net Book Value is determined pursuant to Clause 14, all costs of determination of the Net Book Value shall be borne by the Defaulting Shareholder. If the Net Book Value is determined pursuant to Clause 17, all costs of determination of the Net Book Value shall be borne by Lucent or CSM, as specified in Clause 17.


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The Company - CSM - Lucent Confidential 12
For purposes of Clauses 14 and 17, once Net Book Value is determined, the parties agree that such Net Book Value shall be multiplied by Lucent's then Shareholding Percentage in determining the applicable purchase price for the shares in the capital of the Company then held by Lucent.


"Net Book Value Determination Request" means a written request by one of the Shareholders to determine the Net Book Value for purposes of Clause 14 or 17, as the case may be;


"Net Book Value Request Date" means the date a Net Book Value Determination Request is delivered by one of the Shareholders for purposes of Clause 14 or 17, as the case may be;


"Partnership Fee" means the amount payable by Lucent to CSM in accordance with Clause 7(C);


"Person" means any individual, partnership, association, joint venture, corporation, trust, unincorporated organization or government, or agency or political subdivision thereof;


"Schedule of Authorizations" means the schedule of authorizations enumerating the powers of the General Manager, which may be amended from time to time. The initial Schedule of Authorizations shall be determined by the Board in its first Board meeting;


"Shareholders" means CSM, Lucent and any other Person holding shares in the capital of the Company who shall have executed a deed of ratification and accession pursuant to Clause 10(D);


"Shareholding Percentage" means the percentage of all Ordinary shares beneficially owned by the relevant Shareholder in the total issued share capital (comprising Class A and Class B Ordinary shares) of the Company as of an applicable date;


"Singapore Dollars" and the sign "S$" mean the lawful currency of Singapore;


"Singapore GAAP" means generally accepted accounting principles in Singapore;


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The Company - CSM - Lucent Confidential 13
"Site" means a site in Woodlands, Singapore, designated as private lot number A12787(a) and (b) as further described in the Sub-Lease Agreement;


"Sub-Lease Agreement" has the meaning ascribed thereto in Clause 4(B)(x);


"STPL" means Singapore Technologies Pte Ltd, a company incorporated in Singapore and the holding company of CSM;


"Tax Indemnity Agreement" has the meaning ascribed thereto in item 5 of Schedule A and shall be in the form attached hereto as Appendix G;


"Termination Date" has the meaning ascribed thereto in Clause 17(A);


"Total Shareholder Funds" means the share capital of the Company plus capital reserves and retained earnings of the Company as of an applicable date; and


"U.S. GAAP" means generally accepted accounting principles in the United States of America.


(B) Interpretation


(i) Any reference in this Agreement to:-


(a) "Clauses", "Schedules" or "Appendices" are to the clauses of,
and the schedules and the appendices to, this Agreement;


(b) "financial year" means the period beginning on 1 January and
ending on 31 December of a given year, except that the first
financial year of the Company shall begin on the date of
incorporation of the Company and end on 31 December 1998;


(c) "fab" means wafer fabrication facility;


(d) "loadings" means orders for the supply of wafers;


(e) "wafers" means semiconductor wafers; and


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The Company - CSM - Lucent Confidential 14
(f) the headings are for convenience only and shall not affect the
interpretation of this Agreement.


(ii) Unless the context otherwise requires or permits, references to the singular number shall include references to the plural number and vice versa; references to natural persons shall include bodies corporate and vice versa; and words denoting any gender shall include all genders.


(iii) The expression "holding company" shall bear the meaning ascribed thereto in Section 5 of the Act.


2. FORMATION OF THE COMPANY


(A) Formation


Prior to the Completion Date, CSM shall procure the formation and incorporation in Singapore of a private company limited by shares (the "Company") under the Act and the Company shall be called SILICON MANUFACTURING PARTNERS PTE LTD.


(B) Memorandum and Articles


The Memorandum and the Articles upon incorporation of the Company shall be in the form attached hereto in Appendix E.


(C) Initial Subscribers


The Memorandum shall initially be subscribed by two persons and CSM shall appoint two persons to act as its nominees for such purpose. Such nominees will each agree in the Memorandum to subscribe for one share of S$1 each in the capital of the Company. The shares to be so subscribed for and to be issued by the Company to the two nominees shall be transferred to CSM in the manner provided in Clause 3(I).


3. BUSINESS PLAN; SCOPE AND OBJECTIVES


(A) Purpose


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The Company - CSM - Lucent Confidential 15
Each of CSM and Lucent expressly acknowledges that the Company is being formed solely for the limited purpose set forth in Clause 6(A). Subject to the provisions of Clause 7(B), each of CSM and Lucent further agrees that neither party has any obligation to the other or to the Company to bring business opportunities to the Company or to the other Shareholder and each is free to take advantage of such opportunities on its own or with third parties.


(B) Business Plan


The business plan of the Company (the "Company Business Plan") which has been approved by the parties is for a period of five years and is attached hereto as Appendix A. The Board of Directors shall review and update the Company Business Plan at least annually, not later than November 1 of each financial year of the Company commencing November 1, 1998, to ratify or amend plan information and objectives for the next financial year (the "Annual Plan") and include plan information and objectives for the financial year next succeeding the last year then covered by the Company Business Plan so that the Company Business Plan shall at all times during the term of this Agreement consist of a rolling five-year plan for the Company. In the event that the Board of Directors is unable to agree by any such November 1 on the Annual Plan for the financial year next succeeding the last year then covered by the Company Business Plan, then the plan information and objectives for the last year then shown in the Company Business Plan shall be controlling for the next succeeding financial year. In the case of any inconsistency between this Agreement and the Company Business Plan, this Agreement, insofar as it is applicable, shall control. The Shareholders shall take all appropriate actions to cause the Company to implement and comply with the terms of the Company Business Plan as such Company Business Plan may be modified or amended by the Board from time to time.


(C) Authorized Capital


The parties agree that the authorised share capital of the Company shall on incorporation be S$1,000,000,000 divided into 490,000,000 Class A Ordinary shares of S$1 each and 510,000,000 Class B Ordinary shares of S$1 each. The rights, preferences and privileges of the Class A Ordinary shares and the Class B Ordinary shares shall be set forth in the Articles.


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The Company - CSM - Lucent Confidential 16 (D) Committed Capital Contribution


Each of the Shareholders agrees ...