1
EXHIBIT 10.8
REDACTED FOR CONFIDENTIALITY
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
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1. DEFINITIONS AND INTERPRETATION 1
2. FORMATION OF THE COMPANY 9
3. BUSINESS PLAN; SCOPE AND OBJECTIVE 10
4. COMPLETION 13
5. BOARD OF DIRECTORS 17
6. BUSINESS OF THE COMPANY 25
7. SHAREHOLDERS' OBLIGATIONS AND RIGHTS 26
8. MANAGEMENT OF THE COMPANY 30
9. GENERAL MEETINGS 31
10. TRANSFER OF SHARES 31
11. FINANCE 34
12. DIVIDEND POLICY 35
13. WARRANTIES AS TO AUTHORITY 35
14. DEFAULT 36
15. GENERAL OBLIGATIONS OF XXXXXXXXXXXX 00
00. PREVALENCE OF AGREEMENT 43
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17. DURATION AND TERMINATION 43
18. CONFIDENTIAL INFORMATION 47
19. NOTICES AND GENERAL 48
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 PRINCIPALS
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
APPENDIX I - FORM OF CSM CERTIFICATE AND CSM
IN-HOUSE OPINION
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T H I S JOINT VENTURE A G R E E M E N T (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 00, Xxxxxxxxx
Xxxxxxxxxx Xxxx X Xxxxxx 0, Xxxxxxxxx 000000; and
(2) LUCENT TECHNOLOGIES MICROELECTRONICS PTE. LTD. ("Lucent"), a company
incorporated in Singapore, with its principal place of business at 0,
Xxxxxxx Xxxxxx, Xxxxx Ayer Xxxxxxxxxx Xxxx, Xxxxxxxxx 000000.
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;
+
"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
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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 Xxxxxxxxx Xxxxxxxxxx Xxxx X, Xxxxxxxxx;
"Completion" means completion of the subscription for ordinary shares
in the capital of the Company by CSM and Lucent pursuant to Clause 4;
"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;
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"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;
(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
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(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.
(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
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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;
"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;
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"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;
"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
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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.
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;
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"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;
"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;
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(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
(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
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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
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
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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.
(D) Committed Capital Contribution
Each of the Shareholders agrees and undertakes that it shall, at such
times and in such amounts as are set forth in the Company Business Plan, make
capital contributions by way of subscription, in cash, for shares in the capital
of the Company of up to an aggregate of S$208,250,000 for CSM and S$216,750,000
for Lucent (the "Committed Capital Contribution").
(E) Share Capital on Completion Date
The parties agree that the issued and paid-up share capital of the
Company shall on incorporation be S$2 divided into two Class A Ordinary shares
of S$1 each. On the Completion Date and contemporaneously with the execution of
the Collateral Agreements, the issued and paid-up share capital of the Company
shall be increased, in accordance with Clause 4(D), from S$2 divided into two
Class A Ordinary shares of S$1 each to S$15,000,000 divided into 7,350,000 Class
A Ordinary shares of S$1 each and 7,650,000 Class B Ordinary shares of S$1 each
which issued and paid-up share capital shall be held by the parties in the
following Shareholding Percentages:
Percentage of
Total Issued Number and Type
Ordinary Shares Ordinary Shares Paid in Capital
--------------- --------------- ---------------
CSM : 49 per cent. 7,350,000 S$7,350,000
Class A Shares
Lucent : 51 per cent. 7,650,000 S$7,650,000
Class B Shares
(F) Calls for Capital Contributions
(i) Each of the Shareholders further severally agrees that, subject to
the aggregate Committed Capital Contribution and as set forth in the Company
Business Plan, it shall make such capital contributions required of it in
proportion to its Shareholding Percentage as at the date of the
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call for such capital contributions. If either Shareholder (the
"Non-Contributing Shareholder") fails to subscribe for its Shareholding
Percentage of the call, the other Shareholder who has so subscribed for its
Shareholding Percentage of such call shall, without prejudice to any other
rights and remedies such Shareholder may have, be entitled (but shall not be
obliged) to subscribe for the Non-Contributing Shareholder's Shareholding
Percentage at the applicable subscription price.
(ii) All calls for capital contributions in accordance with the Company
Business Plan shall be made upon 7 days' written notice to the Shareholders.
(G) Increases in Capital
Each of the Shareholders shall exercise its voting rights in the
Company and take such steps as lie within its powers to procure that (save for
the shares to be subscribed for pursuant to the provisions of this Agreement)
the issue of any unissued shares or of any new shares from time to time created
in the capital of the Company shall before issuance be offered for subscription
in the first instance to such Persons as at the date of the offer are registered
as shareholders of the Company in proportion as nearly as practicable to their
respective Shareholding Percentages.
(H) Additional Capital
The Shareholders agree that if the Board shall determine that
additional capital is required by the Company in excess of the Committed Capital
Contribution, each Shareholder shall have the right, but not the obligation, to
subscribe for additional shares in proportion (as nearly as practicable) to its
Shareholding Percentage at the relevant time. If a Shareholder fails to
subscribe for its proportion of the additional shares, its additional shares
will be offered to the other Shareholder at the applicable subscription price.
(I) Nominee Shares
The restrictions on the transfer of shares contained in Clause 10 and
in the Articles shall not apply to the shares to be subscribed for and
transferred to CSM pursuant to Clause 2(C) and as soon as practicable after the
allotment and issue of such shares, CSM shall cause the nominees appointed by
CSM to transfer their respective shares to CSM. Prior to the Completion, without
the prior consent of Lucent, CSM shall not, and shall not permit any of the
nominees to, incur any liabilities or obligations on behalf of the Company, and
shall not cause the Company to incur any liabilities or obligations.
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(J) Ordinary Shares
Unless otherwise unanimously agreed by the Shareholders from time to
time, the issued share capital of the Company shall comprise Class A and Class B
Ordinary shares only and no other classes of shares will be issued.
4. COMPLETION
(A) Completion
Completion shall take place at the registered office of the Company (or
at such other place as the parties may agree in writing) on the Completion Date.
(B) Conditions to Completion of CSM
The obligation of CSM to consummate the transactions contemplated
hereby are subject to and conditioned upon the fulfillment of each of the
following conditions, any or all of which may be waived in writing in whole or
in part by CSM:
(i) The representations and warranties of Lucent contained in
Clause 13 shall be true and correct at and as of the
Completion Date as though such representations and warranties
were made at and as of such Completion Date.
(ii) Lucent shall have performed and complied with all agreements,
covenants and conditions on its part required by this
Agreement to be performed or complied with prior to or at the
Completion Date.
(iii) On or prior to the Completion Date, neither Lucent nor any of
its Affiliates shall have received any notice of any
threatened litigation or regulatory proceeding being
instituted or contemplated, and no such litigation or
proceedings shall be pending, which challenge the legality of
this Agreement or the Collateral Agreements or the
transactions contemplated hereby or thereby or would have,
individually or in the aggregate, a material adverse effect on
the transactions contemplated hereby or thereby.
(iv) CSM, Lucent and the Company shall have received and/or
obtained an indicative letter of approval from the Singapore
Economic Development Board stating that the Company will
obtain Pioneer status.
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(v) (A) An indicative offer letter for a loan from the Singapore
Economic Development Board equal to or greater than
S$240,000,000 and (B) confirmatory letters from other lenders
of the availability of loan financing equal to or greater than
S$200,000,000 shall have been obtained, each in form and
substance reasonably satisfactory to CSM and its counsel.
(vi) The members of the Board of Directors, the General Manager,
and the Financial Controller shall have been selected in
accordance with the provisions of Clauses 5 and 8.
(vii) An employee staffing, recruitment, compensation, incentives
and benefits plan for the Company shall have been developed
and approved by CSM.
(viii) There shall have been delivered to CSM an officer's
certificate and a secretary's certificate of Lucent and an
opinion of counsel to Lucent in the forms attached hereto as
Appendix H.
(ix) Lucent shall have executed an acknowledgment letter in the
form attached hereto as Appendix F.
(x) The Company and CSM shall have entered into a sub-lease
agreement for CSM to sublease to the Company a portion of the
building and facility systems in Fab 3B (the "Sub-Lease
Agreement"), which Sub-Lease Agreement (a) shall be in form
and substance mutually satisfactory to Lucent, CSM and each of
their respective counsel and (b) shall have been approved by
the JTC, if such approval is required.
(C) Conditions to Completion of Lucent
The obligation of Lucent to consummate the transactions contemplated
hereby are subject to and conditioned upon the fulfillment of each of the
following conditions, any or all of which may be waived in writing in whole or
in part by Lucent:
(i) The representations and warranties of CSM contained in Clause
13 shall be true and correct at and as of the Completion Date
as though such representations and warranties were made at and
as of such Completion Date.
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(ii) CSM shall have performed and complied with all agreements,
covenants and conditions on its part required by this
Agreement to be performed or complied with prior to or at the
Completion Date.
(iii) On or prior to the Completion Date, neither CSM nor any of its
Affiliates shall have received any notice of any threatened
litigation or regulatory proceeding being instituted or
contemplated, and no such litigation or proceedings shall be
pending, which challenge the legality of this Agreement or the
Collateral Agreements or the transactions contemplated hereby
or thereby or would have, individually or in the aggregate, a
material adverse effect on the transactions contemplated
hereby.
(iv) Lucent, CSM and the Company shall have received and/or
obtained an indicative letter of approval from the Singapore
Economic Development Board stating that the Company will
obtain Pioneer status
(v) (A) An indicative offer letter for a loan from the Singapore
Economic Development Board equal to or greater than
S$240,000,000 and (B) confirmatory letters from other lenders
of the availability of loan financing equal to or greater than
S$200,000,000 shall have been obtained, each in form and
substance reasonably satisfactory to Lucent and its counsel.
(vi) The members of the Board of Directors, the General Manager,
and the Financial Controller shall have been selected in
accordance with Clauses 5 and 8.
(vii) An employee staffing, recruitment, compensation, incentives
and benefits plan for the Company shall have been developed
and approved by Lucent.
(viii) CSM shall have executed an acknowledgment letter in the form
attached hereto as Appendix F.
(ix) There shall have been delivered to Lucent (a) an officer's
certificate and a secretary's certificate of CSM and an
opinion of in-house counsel of CSM, in each case in the forms
attached hereto as Appendix I and (b) an opinion of Xxxxx &
Xxxxxxxx in form and substance satisfactory to Lucent.
(x) The Company and CSM shall have entered into the Sub-Lease
Agreement, which Sub-Lease Agreement (a) shall be in form and
substance mutually satisfactory to
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Lucent, CSM and each of their respective counsel and (b) shall
have been approved by the JTC, if such approval is required.
(D) Application for Shares; Collateral Agreements; Pre-Completion Covenants
(1) On the Completion Date:
(i) CSM shall make an unconditional application in writing to the
Company for the allotment to CSM for cash at par for 7,349,998
Class A Ordinary shares of S$1 each in the capital of the
Company and CSM shall pay the sum of S$7,349,998 to the
Company by way of a cashier's order, or bank draft drawn on a
licensed bank in Singapore and made out in favour of the
Company, or wire transfer, or such other means acceptable to
the parties;
(ii) Lucent shall make an unconditional application in writing to
the Company for the allotment to Lucent for cash at par for
7,650,000 Class B Ordinary shares of S$1 each in the capital
of the Company and Lucent shall pay the sum of S$7,650,000 to
the Company by way of a cashier's order, or bank draft drawn
on a licensed bank in Singapore and made out in favour of the
Company, or wire transfer, or such other means acceptable to
the parties;
(iii) each of the parties shall procure the entry by the Company
into, and CSM and Lucent shall enter into, the Assured Supply
and Demand Agreement;
(iv) each of the parties shall procure the entry by the Company
into, and CSM and Lucent shall enter into the License and
Technology Transfer Agreement; and
(v) each of the parties shall procure the entry by the Company
into, and CSM shall enter into, the CSM Service Support
Agreement.
(2) During the period from the date hereof and until the Completion
Date, (a) CSM covenants and agrees to use all commercially reasonable efforts
and take all commercially reasonable actions necessary to obtain the consents,
approvals and authorizations from any third parties, including, without
limitation, those consents, approvals and authorizations identified in Clause
4(B)(iv), required to be obtained or made in connection with the transactions
contemplated by this Agreement and (b) CSM and Lucent shall use commercially
reasonable efforts to (1) agree on a mutually acceptable Sub-Lease
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20
Agreement and (2) cause the JTC to approve such Sub-Lease Agreement to the
extent such approval is required. In addition, CSM agrees to notify and consult
with Lucent to jointly develop and prepare any submissions which may be made to
the Singapore Economic Development Board or any other Singapore governmental
agency or body in connection with this Agreement.
(E) Allotment of Shares
Each of the parties shall take such action as may be necessary to
ensure that the Company makes simultaneous allotments of the Class A and Class B
Ordinary shares so applied for pursuant to sub-Clause (D) above on the
Completion Date and, except as specifically contemplated in the Articles, each
of such Class A and Class B Ordinary shares so allotted shall on allotment rank
pari passu in all respects with each other and with the existing issued ordinary
shares of the Company.
5. BOARD OF DIRECTORS
(A) Number
Unless otherwise agreed by CSM and Lucent, the Board shall consist of
five Directors.
(B) Composition
(i) Subject to sub-Clauses (5)(B)(ii) and (iii) below, the Board shall
consist of:
(a) two persons appointed by CSM with the approval of Lucent, such
approval not to be unreasonably withheld (who shall be
designated as "CSM Directors"); and
(b) three persons appointed by Lucent with the approval of CSM,
such approval not to be unreasonably withheld (who shall be
designated as "Lucent Directors").
(ii) CSM shall be entitled to appoint as Director(s) 2 persons for so long
as CSM's Shareholding Percentage is equal to or exceeds 25 per cent.,
and one person for so long as CSM's Shareholding Percentage is equal to
or exceeds 10 per cent. Notwithstanding the foregoing, in the event
CSM's Shareholding Percentage is equal to or exceeds 51 per cent, CSM
shall be entitled to appoint 3 Directors.
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(iii) Lucent shall be entitled to appoint as Director(s) 3 persons for so
long as Lucent's Shareholding Percentage is equal to or exceeds 51 per
cent.; 2 persons for so long as Lucent's Shareholding Percentage is
equal to or exceeds 25 per cent, and one person for so long as Lucent's
Shareholding Percentage is equal to or exceeds 10 per cent.
(iv) Upon the written request of the other Shareholders, a Shareholder shall
forthwith remove the relevant number of Director(s) from office upon a
reduction in its Shareholding Percentage in the event that the number
of Director(s) it has appointed exceeds its entitlement under any of
the foregoing paragraphs of this sub-Clause (B).
(v) For so long as CSM has the power under this Agreement or otherwise as a
Shareholder of the Company to appoint at least two Directors, it shall
ensure that at least one Director appointed by it is ordinarily
resident in Singapore.
(C) Right of Appointment and Replacement
The right of appointment conferred on a Shareholder under sub-Clause
(B) above shall include the right of that Shareholder to remove at any time from
office such person appointed by that Shareholder as a Director.
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(D) Notice in Writing
Each appointment or removal of a Director pursuant to this Clause shall
be in writing and signed by or on behalf of the Shareholder appointing or
removing such Director and shall be delivered to the then current registered
office of the Company.
(E) Further Director
Subject to sub-Clauses 5(B)(i), (ii) and (iii), whenever for any reason
a person appointed by a Shareholder ceases to be a Director, that Shareholder
shall be entitled to appoint forthwith a Director in his stead.
(F) Alternate Director
Each Shareholder shall be entitled at any time and from time to time to
appoint a person to act as an alternate director for each Director nominated by
such Shareholder and to terminate the appointment of such alternate director in
compliance with the Articles. Such alternate director shall be appointed with
the consent of the other Shareholder, which consent shall not be unreasonably
withheld. Such alternate director shall be entitled while holding office as such
to receive all notices of meetings of the Board and to attend and vote as a
Director at any such meetings at which the Director for whom such alternate
director is acting as an alternate is not present and generally to exercise all
the powers, rights, duties and authorities and to perform all functions of his
appointment as could have been exercised by such absent Director. Further, such
alternate director shall be entitled to exercise the vote of any such Director
at any meetings of the Board and if such alternate director represents more than
one Director such alternate director shall be counted for quorum purposes by the
number of Directors he represents and shall be entitled to one vote for every
Director he represents. In addition, each Shareholder acknowledges and agrees
that any Director nominated by such Shareholder and approved by the other
Shareholder may be appointed as the alternate director of any one or more of the
other Director or Directors nominated by such Shareholder.
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(G) Chairman
For so long as CSM's Shareholding Percentage is at least 49 per cent.,
the Chairman of the Board shall be a Director nominated by CSM and approved by
Lucent. Subject to the Articles, the Chairman of the Board shall be responsible
for coordinating the activities of the Board of Directors, such as: (i)
introducing proposals to the Board of Directors on matters which require Board
of Directors' approval; (ii) with the advice and consent of the other Directors,
setting the agenda for the Board of Directors' meetings; (iii) convening and
presiding at the meetings of the Board of Directors; (iv) presiding at general
meetings of shareholders; and (v) circulating minutes for approval by the
Directors. The Chairman of the Board shall not have a second or casting vote and
shall not be empowered to bind the Company. The Board of Directors shall select
from among its members a Vice Chairman of the Board who shall act for the
Chairman of the Board in the event he is absent from or unable to act in any
meeting.
(H) Meetings of Directors
(i) Meetings of the Board shall be held at such times as the Board shall
determine. Unless otherwise agreed by the Shareholders, a meeting of the Board
shall be held at least once every month during the first year from the
Completion Date, at least once every three months for the next three years from
the Completion Date and thereafter, at least once every six months.
(ii) The quorum at a meeting of Directors (including any adjourned meetings)
necessary for the transaction of any business of the Company shall be three
Directors, including at least one CSM Director and at least one Lucent Director.
Not less than 30 days' notice (or such shorter period of notice in respect of
any particular meeting as may be agreed by all Directors) specifying the date,
place and time of the meeting and the business to be transacted thereat shall be
given to all Directors.
(iii) In the event that a meeting of Directors duly convened cannot be held
for lack of a quorum, the meeting shall be adjourned to the same time and day of
the following week and at the same place or such other agreed upon date (within
30 days of the adjourned meeting date), place and time, and notice specifying
the date, place and time of such adjourned meeting shall be given to all
Directors.
(iv) The Directors may participate in a meeting of the Directors by means of
a conference telephone or a video conference telephone or similar communications
equipment by which all persons participating in the meeting are able to hear and
be heard by all other participants without
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the need for a Director to be in the physical presence of another Director(s)
and participation in the meeting in this manner shall be deemed to constitute
presence in person at such meeting. The Directors participating in any such
meeting shall be counted in the quorum for such meeting and subject to there
being a requisite quorum under paragraphs (ii) or (iii) above (as the case may
be) at all times during such meeting, all resolutions agreed by the Directors in
such meeting shall be deemed to be as effective as a resolution passed at a
meeting in person of the Directors duly convened and held. A meeting conducted
by means of a conference telephone or a video conference telephone or similar
communications equipment as aforesaid is deemed to be held at the place agreed
upon by the Directors attending the meeting, provided that at least one of the
Directors present at the meeting was at that place for the duration of the
meeting.
(v) In the case of a meeting which is not held in person, the fact that a
Director is taking part in the meeting must be made known to all the other
Directors taking part, and no Director may intentionally disconnect or cease to
take part in the meeting unless he makes known to all other Directors taking
part that he is ceasing to take part in the meeting.
(vi) Save as provided in sub-Clause (I) below, all resolutions of the
Directors at a meeting or adjourned meeting of the Directors shall be adopted by
a simple majority vote of the Directors present. Save as provided in subClause
(F) above, each Director shall have one vote.
(vii) All resolutions to be passed by way of circulation among the Directors
(referred to as a "resolution in writing") shall be dispatched to each Director
contemporaneously. A resolution in writing of the Directors shall be as valid
and effectual as if it had been a resolution passed at a meeting of the Board
duly convened and held if the resolution in writing is approved and signed by at
least one CSM Director and at least one Lucent Director and may consist of
several documents in the like form each signed by one or more of the Directors.
The Company Secretary shall notify all the Directors in writing of the effective
date on which such resolution is passed.
(I) Important Matters Requiring Board's Special Approval
Subject to any requirements specified by law, by the Act or this
Agreement, none of the following actions shall be taken by the Company unless
such actions are unanimously approved by all of the CSM Directors and the Lucent
Directors duly represented at a meeting which is duly convened and where a
quorum is present:-
(a) all amendments to the Company Business Plan and to each Annual
Plan thereof ;
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25
(b) the disposal of the whole or substantially the whole of the
property or undertaking of the Company;
(c) execution of any agreement involving payments (i) in excess of
S$1,000,000 over its term or having a term longer than one
year if not approved as part of the Company Business Plan or
(ii) in excess of S$70,000,000 if approved as part of the
Company Business Plan;
(d) initiation or settlement of any claim or suit which is
material to the Company or outside the ordinary course of its
business;
(e) appointment or removal of the Auditors and the fixing of such
Auditor's fees;
(f) approval of limits of authority for the officers of the
Company and the Schedule of Authorizations;
(g) any proposal to change the capitalization of the Company or to
amend the Memorandum or Articles;
(h) the termination by the Company of any of the services
identified in Clause 10 (C) of the CSM Service Support
Agreement;
(i) granting of any loans to Directors or initiating or amending
any form of remuneration to Directors (including, without
limitation, golden parachute payments);
(j) initiation or amendment of any material employee compensation,
incentive or benefits plan or any material employee
recruitment, disciplinary (as it relates solely to the
individuals holding the positions identified on Schedule
5(L)), or training policy.
(k) participation by employees of the Company in CSM's employee
share ownership scheme or the establishment of an employee
share option/ownership scheme for the Company;
(l) the entry by the Company into new markets outside of the
Business unless explicitly set forth in the Company Business
Plan;
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26
(m) the termination or amendment of the Assured Supply and Demand
Agreement or the License and Technology Transfer Agreement;
(n) the exercise of any of the Company's borrowing powers unless
included in the Company Business Plan;
(o) the entry into any alliance unless explicitly set forth in the
Company Business Plan. For the purposes of this sub-paragraph
(o) the expression "alliance" means any transaction entered
into by the Company other than in the ordinary course of
business including, but not limited to, transactions (1)
pursuant to which the Company acquires, encumbers, transfers
or disposes of intellectual property or other technology
rights, (2) pursuant to which the Company is restricted as a
result of such transaction in the products or services which
it may provide to its customers, or (3) which create or grant
exclusive rights to another party or parties;
(p) the issue by the Company of any guarantee to secure the
Indebtedness of any person;
(q) approval of the audited annual accounts of the Company;
(r) a change in the Debt/Equity Ratio policy specified in Clause
11;
(s) the change in the authorised, issued or paid-up capital of the
Company (unless pursuant to Clauses 2(C), 3(D), 3(E) and 4(D))
or the grant of any option over the unissued share capital of
the Company;
(t) the listing or registration of the shares in the capital of
the Company on any stock exchange or with any securities
exchange commission;
(u) the winding-up, liquidation or dissolution of the Company or
the merger, consolidation or reorganisation of the Company
with any corporation, firm or other body;
(v) any transfer of shares held by a Shareholder in the capital of
the Company unless in accordance with Clause 10, Clause 14(B)
or Clause 17;
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27
(w) the subscription for, or acquisition or disposal of, any
shares or interests in any Person;
(x) the entry into any joint venture; and
(y) the declaration by the Company of any dividends other than in
accordance with the dividend policy set out in the Articles
and the determination of any reserves.
(J) Facilitating Shareholder Actions
In the event that any decision or action that is approved by the Board
of Directors in accordance with Clause 5(I) above (the "Important Matter
Decisions") requires the approval of the Shareholders under the Articles or
under the Act, the Shareholders shall take all necessary and appropriate actions
to procure such approval. In addition, the Shareholders shall take all necessary
and appropriate actions to implement and comply with any decision or action
approved by the Board which are not Important Matter Decisions to the extent
such decision or action does not require the approval of the Shareholders under
the Articles or the Act.
(K) Interested Party Transactions
(i) In this Agreement, an "interested party transaction" shall mean a
transaction or arrangement (other than transactions or arrangements
contemplated by this Agreement or any of the Collateral Agreements)
involving the Company or its assets in which one of the Shareholders or
any of its Affiliates has a direct or indirect interest (whether as
supplier, purchaser, provider or receiver of information, services,
goods or financing, employer or otherwise).
(ii) Notwithstanding the generality of Clause 5(I) or any other provision of
this Agreement:
(1) each Shareholder shall ensure that it shall promptly and
timely disclose to the other Shareholder any interested party
transaction in which the first Shareholder is or may be
involved, together with a reasonably detailed description of
its actual or proposed involvement; and
(2) the Shareholder to whom such disclosure is required to be made
shall have the right to consent to any interested party
transaction; provided, such consent shall not be unreasonably
withheld.
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(L) Dismissal of Certain Employees
In the event any Shareholder (the "Dismissing Shareholder") desires,
for any reason or no reason, that the Company dismiss or terminate the services
of any of the individuals holding the positions identified on Schedule 5(L) (the
"Affected Employee"), such Dismissing Shareholder must notify the other
Shareholder and the Company of its desire to dismiss such Affected Employee and
at such time the Dismissing Shareholder shall have a discussion with the other
Shareholder with respect to such proposed dismissal. In such event, the
Shareholders shall cause the Company to provide such Affected Employee with a
three month (six months in the event the Affected Employee is the General
Manager) probation period prior to such dismissal; provided, such three or six
month probation period may be waived if both Shareholders agree to do so. Within
10 days after the end of such three or six month probation period, as
applicable, the Dismissing Shareholder shall determine, in its sole discretion,
whether such Dismissing Shareholder still desires that the Company dismiss such
Affected Employee, and if so, shall notify the other Shareholder and the Company
of its decision. If the Dismissing Shareholder determines that it still desires
that the Company dismiss the Affected Employee, the Shareholders shall promptly
cause the Company to dismiss the Affected Employee. Notwithstanding any
provision contained herein, each Shareholder's right to exercise the dismissal
rights granted under this Clause 5(L) shall be limited to two individuals in any
given quarter.
6. BUSINESS OF THE COMPANY
(A) Business
The Shareholders agree that the business of the Company shall be the
operation and management of the Company Fab as an independent dedicated foundry
(the "Business"). The initial financial and business plans for the Company Fab
provide for an installed wafer manufacturing capacity of up to 26,000 wafers per
month based on 21 mask layers of Lucent's digital 0.25 micron technology.
(B) Technology License and Development
(i) The parties agree that the processes which the Company will
run will include, without limitation, 0.25um and 0.18um
process flows.
(ii) Lucent and CSM shall each license certain intellectual
property rights related to the manufacture of semiconductor
wafers and integrated circuits to the Company on the terms and
conditions of the License and Technology Transfer Agreement.
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29
(iii) The Company shall assign certain intellectual property rights
related to the manufacture of semiconductor wafers and
integrated circuits to CSM and Lucent on the terms and
conditions of the License and Technology Transfer Agreement.
(C) Assured Supply and Demand
The Company shall make available to Lucent and CSM quantities of wafer
manufacturing capacity from the Company Fab on the terms and conditions of the
Assured Supply and Demand Agreement.
(D) Services
CSM shall provide such services to the Company as contemplated in the
CSM Service Support Agreement. Each Shareholder acknowledges that certain rights
and obligations of the parties under the CSM Service Support Agreement shall
survive the termination of the CSM Service Support Agreement.
(E) Sub-Lease of Company Fab Premises
The Company shall enter into the Sub-Lease Agreement. The Sub-Lease
Agreement shall be subject to the JTC's approval, if so required by the JTC.
7. SHAREHOLDERS' OBLIGATIONS AND RIGHTS
(A) Shareholders' Obligations
Except as the Shareholders may otherwise agree in writing or save as
otherwise provided or contemplated in this Agreement, each of the Shareholders
shall use commercially reasonable endeavours to exercise its powers in relation
to the Company so as to ensure that:
(i) the Company carries on its business and conducts its affairs
in a proper and efficient manner;
(ii) the Company, and the Directors appointed by that Shareholder,
will comply strictly and expeditiously with the provisions of
this Agreement and the Articles;
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30
(iii) the Business shall be carried on pursuant to the policies set
out herein or laid down from time to time by the Board, which
shall hold Board meetings in accordance with Clause 5(H) and
the Articles;
(iv) the Company shall cause to be kept full and proper accounting
records relating to the business, undertakings and affairs of
the Company, which records shall be made available at all
reasonable times for inspection by the Shareholders or their
representatives by prior appointment during office hours;
(v) for each financial year, the Company shall, at its expense,
prepare annual accounts, in each case in accordance with
Singapore GAAP and in compliance with all applicable
legislation in respect of such financial year and shall
procure that such accounts are audited as soon as practicable
and shall supply copies of the same, both in draft and final
form, to each of the Shareholders within 90 days (in the case
of the draft form) and 120 days (in the case of the final
form) after the end of the financial year of the Company;
(vi) the Company shall, at its expense, (a) prepare interim
accounts of the Company covering the period beginning on
January 1 and ending on September 30 of each calendar year,
(b) procure that such interim accounts are audited within 60
days after the end of the Lucent Fiscal Year in accordance
with Singapore GAAP and in compliance with all applicable
legislation in respect of such interim period and (c) supply
copies of such audited interim accounts in final form to
Lucent within 60 days after the end of the Lucent Fiscal Year;
(vii) for purposes of Lucent's financial reporting and tax reporting
purposes, the Company shall prepare financial statements
conforming to U.S. GAAP for use by Lucent for such financial
periods as may be requested by Lucent. All costs and expenses
of an external accounting firm who shall prepare such
financial statements to conform to U.S. GAAP for the sole
benefit of Lucent shall be borne by Lucent. In addition, the
Company shall prepare and timely deliver all financial
statements and reports reasonably requested by Lucent,
including without limitation, the Financial Accounting
Standard 109 package. The Company shall prepare and timely
deliver all tax forms and other information returns or reports
reasonably requested by Lucent or required by the laws of the
United States, including without limitation, U.S. Treasury
Form 5471 and supporting schedules. All out-of-pocket costs
and expenses incurred by the Company in complying with
Lucent's requests under this sub-Clause 7(A)(vii)
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31
and which are for the sole benefit of Lucent shall be borne by
Lucent; provided, that in the case of fees and expenses of any
tax or legal advisors or other professional consultants, such
fees and expenses shall be borne by Lucent only if the
retention of such advisors or consultants has been
pre-approved by Lucent. Lucent shall provide such assistance
as is reasonably requested by the Company in order for the
Company to comply with this sub-Clause 7(A)(vii).
(viii) the Company shall, at its expense, prepare and provide to each
of the Directors:-
(a) unaudited and estimated monthly profit and loss
statements, cashflow, balance sheet and elimination
statements covering such items as requested by Lucent
from time to time ("Elimination Statements") by the
first Wednesday of the first week after the end of
each Lucent Fiscal Month ; unaudited and actual
monthly profit and loss statements, cashflow, balance
sheet and Elimination Statements within seven
calendar days after the end of each calendar month;
(b) updated profit and loss, balance sheet and cashflow
forecast for the following 12 month period within
seven calendar days after the end of each calendar
month;
(c) unaudited and estimated quarterly profit and loss
statements, cashflow, balance sheet and Elimination
Statements by the first Wednesday of the first week
after the end of each Lucent Fiscal Quarter;
unaudited and actual quarterly profit and loss
statements, cashflow, balance sheet and Elimination
Statements within seven calendar days after the end
of each Lucent Fiscal Quarter;
(d) Unaudited annual profit and loss statements,
cashflow, balance sheet and Elimination Statements
covering the Lucent Fiscal Year within three calendar
days after the end of the Lucent Fiscal Year;
in each case in accordance with Singapore GAAP, and
(ix) the Company shall do all that the Auditors may reasonably
require by way of keeping records and accounts and provide the
Auditors with all such
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REDACTED CONFIDENTIAL TREATMENT REQUESTED
The asterisked portions of this document have been omitted and
are filed separately with the Securities and Exchange Commission
information and explanation as they may reasonably require and
otherwise assist the Auditors in all reasonable ways.
(B) Undertaking of Non-Competition
(i) Lucent agrees and undertakes that except as permitted under sub-Clauses
(B)(ii), (iii) and (iv) below, Lucent's loadings in the Company Fab
shall be solely for products with Lucent's brand name or for products
to be sold as a packaged labeled product.
(ii) Lucent shall first offer its Unutilised Wafer Capacity (as defined
below) to CSM at prices to be mutually agreed between Lucent and CSM.
If CSM declines to take all or some of such Unutilised Wafer Capacity
within 10 days of Lucent's offer, Lucent shall be entitled to sell all
of such Unutilised Wafer Capacity not purchased by CSM to any third
party, subject to the restrictions set forth in sub-Clauses (B)(iii)
and (iv) below. For purposes of this Agreement, the term "Unutilised
Wafer Capacity" shall mean wafer capacity from the Company Fab which is
not utilised by Lucent as required under the Assured Supply and Demand
Agreement. For the avoidance of doubt, the phrase "wafer capacity"
shall include the physical wafers produced by the Company Fab. Lucent
and CSM acknowledge and agree that there may be multiple Unutilised
Wafer Capacities Lucent may offer CSM pursuant to this sub-Clause
(B)(ii) and accordingly, there may be multiple 24 month periods running
concurrently for the multiple Unutilised Wafer Capacities offered as
contemplated under sub-Clause (B)(iv) below.
(iii) Lucent shall not sell, offer, transfer or otherwise dispose of such
Unutilised Wafer Capacity to any of the companies or entities set out
in Schedule 7(B)(ii) attached hereto (collectively, the "Scheduled
Companies"), as such Schedule 7(B)(ii) may be amended from time to time
upon mutual agreement between Lucent and CSM. Notwithstanding the
foregoing, Lucent shall be permitted to sell, offer, transfer or
otherwise dispose of any Unutilised Wafer Capacity under this Clause
7(B) to the extent any of the unutilised wafers are sold by the
Scheduled Companies as a packaged labeled product or to the extent such
offer, sale, transfers or other disposition involves products with
Lucent's brand name.
(iv) With respect to each Unutilised Wafer Capacity offered but not taken by
CSM under sub-Clause (B)(ii) above, Lucent may, subject to sub-Clause
(B)(iii) above, sell such Unutilised Wafer Capacity to any third party
for a period of ********* effective from the date on which CSM first
declined to take up
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33
REDACTED CONFIDENTIAL TREATMENT REQUESTED
The asterisked portions of this document have been omitted and
are filed separately with the Securities and Exchange Commission
such Unutilised Wafer Capacity. Upon the expiration of such ********
period, Lucent shall have the right to either take up such Unutilised
Wafer Capacity for Lucent's use in accordance with sub-Clause (B)(i)
above or re-offer such Unutilised Wafer Capacity to CSM in accordance
with sub-Clause (B)(ii) above.
(C) Partnership Fee
CSM shall be entitled to receive from Lucent a partnership fee
("Partnership Fee") equal to **** in respect of each wafer purchased by Lucent
from the Company which fee shall be adjusted pursuant to the formula set forth
on Schedule 7(C) attached hereto. The Partnership Fee shall accrue upon receipt
of the first accepted wafer by Lucent under the Assured Supply and Demand
Agreement.
(D) Insurance Coverage
On and after the Completion Date, Lucent and CSM shall negotiate in
good faith the appropriate type and level of insurance coverage for the Company
in accordance with the principles set forth on Schedule 7(D) attached hereto.
8. MANAGEMENT OF THE COMPANY
(A) General Manager; Financial Controller
The General Manager of the Company shall be appointed by CSM in
consultation with Lucent. The General Manager shall be responsible for the day
to day running and management of the business of the Company within the limits
imposed by the Board, this Agreement, the Company Business Plan and the Schedule
of Authorizations. The Financial Controller of the Company shall be appointed by
Lucent in consultation with CSM. The Financial Controller shall be responsible
for all financial matters of the Company within the limits imposed by the Board,
this Agreement and the Company Business Plan.
(B) Management Committee
The Shareholders shall cause the Company to establish a Management
Committee based in Singapore comprising three members with one nominee of CSM,
one nominee of Lucent and the General Manager (the "Management Committee"). The
Management Committee will review and make recommendations to the General
Manager, as appropriate, on capacity and mix of processes and other operational
issues relating to the Company. The Management Committee will also
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34
provide advice to the General Manager in connection with the preparation of the
Company Business Plan.
(C) Employees
(i) In addition to the employees of the Company, CSM and Lucent shall each
contribute such manpower resources, either on a contract or secondment basis, as
is contemplated by the Company Business Plan or as may be otherwise required by
the Company on such terms as may be agreed in writing with the Company.
(ii) The parties presently do not envisage that the Company will establish
an employee share option scheme. However, in the event that the Board approves
of the employees of the Company participating in CSM's employee share ownership
scheme, the Company shall pay to CSM the cost of acquisition, if any (such as,
where applicable, compensation charges pursuant to U.S. GAAP, charges on the
issuance of shares at a discount), of such shares in CSM as may be allocated to
such employees.
9. GENERAL MEETINGS
No business shall be transacted at any general meeting of the Company
unless a quorum of Shareholders is present throughout the meeting. The quorum
for all general meetings (including any adjourned meetings) of Shareholders
shall comprise two Shareholders present throughout the meeting, comprising the
proxies or representatives of CSM and Lucent. In the event that a general
meeting duly convened cannot be held for lack of a quorum, the meeting shall be
adjourned to the same time and day of the following week and at the same place
or such other agreed upon date (within 30 days of the adjourned meeting date),
place and time, and notice specifying the date, place and time of such adjourned
meeting shall be given to all Shareholders.
10. TRANSFER OF SHARES
(A) Meaning of "Transfer"
In this Agreement, unless the context otherwise requires, any reference
to a "transfer" of securities or other voting interests of a Person shall
include (i) any transfer or other disposition of such securities or voting
interests or any interest therein, including, without limitation, by operation
of law, by court order, by judicial process, or by foreclosure, levy or
attachment; (ii) any sale, assignment, gift, donation, redemption, conversion or
other disposition of such securities or any interest therein, pursuant to an
agreement, arrangement, instrument or
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understanding by which legal title to or beneficial ownership of such securities
or any interest therein passes from one Person to another Person or the same
Person in a different legal capacity, whether or not for value; and (iii) the
granting of any security, interest, lien, pledge, mortgage, hypothecation or
charge in or extending or attaching to such securities or interest therein.
(B) Moratorium on Transfer
Neither CSM nor Lucent shall transfer all or any part of its shares in
the capital of the Company to any Person during the term of the joint venture as
set out in Clause 17, unless with the prior written consent of the other
Shareholder or as expressly permitted by this Agreement.
(C) Permitted Transfers
(i)(a) For the purpose of this paragraph (i), the term "Permitted Transferee"
in relation to CSM shall mean a wholly-owned subsidiary of CSM and in
the case of Lucent, a wholly-owned subsidiary of Lucent (a "Lucent
Sub") or a direct and/or indirect wholly-owned subsidiary of Lucent
Technologies Inc. (an "LTI Sub"). For purposes of this sub-Clause (C),
a Lucent Sub shall not be treated as an LTI Sub.
(b) Subject to sub-Clause (D) below, each Shareholder (the "Transferor
Corporation") shall be entitled to transfer all (and not some only) of
the shares held by it in the capital of the Company to a Permitted
Transferee; provided, in the event the net worth of a Permitted
Transferee at the time of the proposed transfer or anytime thereafter
is less than 95% of the net worth of the Transferor Corporation at the
time of the completion of the proposed transfer, then prior to the
completion of such proposed transfer or anytime thereafter, (x) CSM, in
the case where CSM is the Transferor Corporation, shall execute a
guarantee in favor of Lucent guaranteeing the payment obligations of
its Permitted Transferee and (y) Lucent, (i) in the case where Lucent
is the Transferor Corporation and Lucent Sub is the Permitted
Transferee, shall execute a guarantee in favor of CSM guaranteeing the
payment obligations of such Lucent Sub and (ii) in the case where
Lucent is the Transferor Corporation and an LTI Sub is the Permitted
Transferee, shall cause Lucent Technologies Inc. to execute a guarantee
in favor of CSM guaranteeing the payment obligations of such LTI Sub.
(c) If however at any time after a transfer of shares is effected by the
Transferor Corporation to a Permitted Transferee pursuant to
sub-paragraph (b) above, the Permitted Transferee ceases, in the case
of CSM, to be a wholly-owned subsidiary of CSM or, in the case of
Lucent, ceases to be a Lucent Sub or an LTI Sub, as applicable, , it
shall be the duty of the
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Transferor Corporation and the Permitted Transferee to notify the Board
in writing that such event has occurred and both the Transferor
Corporation and the Permitted Transferee shall jointly and severally
undertake to procure and ensure that all (and not some only) of the
shares held by the Permitted Transferee in the capital of the Company
are, subject to the proviso in sub-paragraph (b) above, forthwith
transferred to, in the case of CSM, a wholly-owned subsidiary of CSM
or, in the case of Lucent, a Lucent Sub or an LTI Sub, as applicable.
(D) Supplementary Provision
It shall be a condition precedent to the right of any Shareholder to
transfer shares in the capital of the Company that the purchaser or transferee
(if not already bound by the provisions of this Agreement) executes in such form
as may be reasonably required by and agreed by the other Shareholder a deed of
ratification and accession under which the transferee shall agree to be bound by
and shall be entitled to the benefit of this Agreement as if an original party
hereto in place of or in addition to the transferring Shareholder (as the case
may be).
(E) Change in Control of Shareholder
(i) Prior to the completion of a change in control of any Shareholder, such
Shareholder (the "Affected Shareholder") shall notify the Company and the other
Shareholder (the "Remaining Shareholder") in writing of such change in control.
In the event the Remaining Shareholder objects to such change in control, it
shall, within 30 days after notice from the Affected Shareholder, be entitled by
notice in writing to the Affected Shareholder (the "Objection Notice") to
require, (a) in the event the Affected Shareholder is CSM, CSM to purchase all
of the shares in the capital of the Company held by Lucent at Fair Market Value
and (b) in the event the Affected Shareholder is Lucent, Lucent to sell to CSM
all of the shares in the capital of the Company held by Lucent at Fair Market
Value. To exercise this right, the Remaining Shareholder shall first make a FMV
Determination Request to the Affected Shareholder (and shall provide a copy
thereof to the Company). Within 30 days of determination of Fair Market Value,
the Remaining Shareholder shall either provide notice to the Affected
Shareholder (and shall provide a copy thereof to the Company) that it has
elected to exercise its rights under this sub-Clause (E) or shall be deemed to
have waived such rights. The delivery of the Objection Notice shall for purposes
of determining Fair Market Value be deemed to be a FMV Determination Request. A
copy of the Objection Notice shall be promptly delivered to the Company. Subject
to any U.S., Singapore or other regulatory filings or notifications and/or the
receipt of any U.S., Singapore or other regulatory approvals or consents, if
any, the completion of the purchase and sale transaction contemplated under this
sub-Clause (E) shall occur simultaneously with or as soon as practicable after
the
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consummation of the change of control transaction of the Affected Shareholder.
Following the completion of the purchase and sale transaction contemplated under
this sub-Clause (E), Lucent and CSM shall be subject to the ramp down provisions
set forth in Clause 14(H) below.
(iii) At the completion of the purchase and sale transaction contemplated
under this sub-Clause (E), CSM shall pay the purchase price for the shares of
the Company held by Lucent in the form of cash in Singapore Dollars by wire
transfer of immediately available funds to an account designated in writing by
Lucent against delivery by Lucent of certificates representing all such shares,
free and clear of any liens, claims, charges or encumbrances. Stamp duties in
respect of the transfer of such shares shall be paid by the Affected
Shareholder.
The restriction on transfer of shares contained in sub-Clause (B) above
and in the Articles shall not apply to such disposal.
(ii) For the purpose of this sub-Clause (E), a change in control of any
Shareholder shall be deemed to have occurred if the voting control of, or more
than 50 percent. of the issued voting shares of, such Shareholder or of any
holding company of such Shareholder shall be acquired by any Person, or by any
two or more Persons acting in concert, other than by an Affiliate of such
Shareholder. However, a change in control of a Shareholder pursuant to or after
a listing on a stock exchange of the shares in the capital of such Shareholder
or of the holding company of such Shareholder or, in the case of Lucent, the
spin-off or sale of substantially all of Lucent Technologies Inc.'s
Microelectronics business ("ME"), shall not be deemed to be a change in control
of such Shareholder for the purposes of this sub-Clause (E); provided, in the
event substantially all of ME is sold to any of the Persons listed on Schedule
10(E)(ii), which Schedule may be amended from time to time as mutually agreed
upon by Lucent and CSM, such sale shall be deemed to be a change in control for
purposes of this sub-Clause (E). Each of the Shareholders undertakes to notify
the other Shareholders in writing of any change in control of such Shareholder
within ten days of it becoming aware of such a change in control or execution of
any agreement by any Person that would effect such change in control.
11. FINANCE
The Company shall be managed with a view toward maintenance by it of a
Debt/Equity Ratio of no greater than 1.5 to 1, that is, for every S$1 of Total
Shareholder Funds, there shall not be more than S$1.50 of External Borrowings.
In the event that the Debt/Equity Ratio exceeds 1.5 to 1, then the General
Manager shall immediately inform the Board of Directors and review his proposal
to re-establish such ratio at the next Board meeting.
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12. DIVIDEND POLICY
It is not the intent of the Shareholders for the Company to accumulate
excess retained earnings beyond what is required by the Company Business Plan.
Accordingly, and in furtherance of the foregoing, each Shareholder shall take
such action as may be necessary to procure that the Company shall distribute all
available cash to and among the Shareholders during such times and in such
amounts as contemplated in the Articles.
13. WARRANTIES AS TO AUTHORITY
Each of the parties hereby represents and warrants to as of the date
hereof and on the Completion Date, and undertakes with the other parties as
follows:-
(i) it is a corporation duly organised and validly existing under
the laws of its place of incorporation, and has full power and
authority to execute and deliver and perform all of its
obligations under this Agreement and any other agreements to
be executed by it hereunder;
(ii) all actions, conditions and things required to be taken,
fulfilled and done (including the obtaining of any necessary
consents) in order (a) to enable such party lawfully to enter
into, exercise its rights and perform and comply with its
obligations under, this Agreement and (b) to ensure that those
obligations are legally binding and enforceable have been
taken, fulfilled and done;
(iii) this Agreement is, and all other agreements and instruments of
such party contemplated hereby shall be, the legal, valid and
binding agreement of such party, enforceable against such
party in accordance with their terms subject as to enforcement
of remedies to applicable bankruptcy, insolvency,
reorganization and other laws affecting generally the
enforcement of the rights of creditors and subject to a
court's discretionary authority with respect to the granting
of a decree ordering specific performance or other equitable
remedies; and
(iv) the execution, delivery and performance of this Agreement and
all other agreements and instruments of such party
contemplated hereby by it will not conflict with any law,
order, judgement, decree, rule or regulation of any court,
arbitral tribunal or government agency, or any agreement,
instrument or
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39
indenture to which such party or any of its Affiliates is a
party or by which any thereof is bound.
(v) There are no actions, suits, investigations or other
proceedings pending or threatened, no order, judgment or
decree of any court or other governmental agency and no facts
or circumstances which could reasonably be expected to give
rise to a claim, action, suit or proceeding which could
materially and adversely affect the Company or the
transactions contemplated hereby and by the Collateral
Agreements.
14. DEFAULT
(A) Defaults
The following events shall constitute defaults ("Defaults") under this
Agreement:
(i) a Shareholder :
(1) is in breach of any of its representations or
warranties set forth in Clause 13 (which breach, if
under sub-Clause 13(iv) or (v), has a material
adverse effect on the Company or on the transactions
contemplated hereby or by the Collateral Documents)
or any of its covenants set forth in sub-Clauses
3(D), 3(F), 3(G), 4(D), 5(J), 7(B), 10(E), 14(D),
14(F) and 17(B);
(2) fails to pay the Company such amounts which such
Shareholder is required to pay under the Assured
Supply and Demand Agreement with respect to any of
its loadings;
(3) is in breach of Article 2.01(a) (Delivery of
Information)(in the case of Lucent) or Article
2.01(b) (Delivery of Information)(in the case of CSM)
of the License and Technology Transfer Agreement, or
Clause 10(C) or Clause 10(E) (in the case of CSM) of
the CSM Service Support Agreement;
(4) has intentionally breached Article 4.07 (Export) or
Article 8.04 (Confidentiality) of the License and
Technology Transfer Agreement, Section 28
(Confidentiality) of the Assured Supply and Demand
Agreement, Section 9 (Compliance with Laws) or Clause
16 (Confidentiality) of the CSM Services Support
Agreement and such
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40
intentional breach may cause injury (whether
financial or otherwise) or have a negative impact
(whether financial or otherwise) on the non-breaching
Shareholder. In addition, the inability of the
Company to occupy the Site for any reason (other than
as a result of CSM exercising its legal rights after
a material breach (which breach is not cured within
the applicable cure period) by the Company under the
Sub-Lease Agreement) shall also constitute a Default
(the "Lease Default"); provided, in the event CSM is
prohibited by law or regulation from (a) leasing or
subleasing all of the sites located on CSM's campus
(including, without limitation, the Company Fab, Fab
2, Fab 3A and Fab 4) to any Person, Lucent shall not
have the right to exercise the remedy set forth in
sub-Clause 14(D)(i)(4) and the purchase price set
forth in sub-Clause 14(D)(i)(3) shall be higher of
Fair Market Value and Net Book Value multiplied by
Lucent's then Shareholding Percentage and (b)
occupying all of the sites on CSM's campus
(including, without limitation, the Company Fab, Fab
2, Fab 3A and Fab 4), Lucent shall not have the right
to exercise any of the remedies set forth in
sub-Clause 14(D)(i)(2) and 14(D)(i)(3). For the
avoidance of doubt, subject to the foregoing
sentence, any Lease Default shall entitle Lucent to
exercise any of the remedies set forth in sub-Clause
14(D)(i)(1),(3),(4) and (5).
(ii) a Shareholder becomes bankrupt or insolvent;
(iii) a resolution is passed for the winding up of a Shareholder; or
(iv) a proceeding has been instituted seeking a declaration that a
Shareholder is bankrupt or insolvent or seeking bankruptcy,
arrangement or composition with creditors, liquidation or the
appointment of a trustee, receiver or liquidator or analogous
procedure under any applicable law and such proceedings stay
undismissed and unstayed for a period of 60 days or are
consented to by the Shareholder.
For purposes of this Agreement, the term "Defaulting Shareholder" shall
refer to the Shareholder who has caused the occurrence of any of the Defaults
identified in sub-Clause 14(A) and the term "Non-Defaulting Shareholder" shall
refer to the Shareholder who has not caused such Default.
(B) Defaults with Opportunity to Remedy
Upon the occurrence of a Default under paragraph (i) of sub-Clause 14(A)
above, the Non-Defaulting Shareholder may give notice to the Defaulting
Shareholder specifying the
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Default and, in the case of a Default that is capable of remedy, stipulating a
period of not less than 60 days (or to the extent the Non-Defaulting Shareholder
elects to exercise the liquidation remedy set forth in sub-Clause 14(D)(i)(4) or
sub-Clause 14(D)(ii)(3), as applicable, not less than 90 days; provided, any
cure periods to which such Default may already be subject under the Collateral
Agreements shall be counted towards, and included in, the 90 day period set
forth in this sub-Clause 14(B)) during which such Default shall be remedied or
steps taken in pursuance thereof. For purposes of this sub-Clause 14(B), a
Default shall be considered capable of remedy if the Defaulting Shareholder can
comply with the term or condition in question in all respects other than as to
the time of performance. In the case of any genuine disagreement between the
Shareholders as to the facts giving rise to the Default, the provisions of
Clause 19(F) shall apply.
(C) Events of Default
An event of Default ("Event of Default") shall be deemed to occur (1)
upon issuance of any notice pursuant to sub-clause (B) above and, if applicable,
the passage of any remedial period provided pursuant to sub-clause (B) above,
and (2) upon occurrence of any Default referred to in paragraph (ii), (iii) or
(iv) of sub-clause (A) above.
(D) Remedies
(i) Lucent Remedies
Upon the occurrence and during the continuation of any Event of Default
caused by CSM, Lucent, as the Non-Defaulting Shareholder, shall,
subject to the provisions of this Clause 14, have the following
remedies, rights and options:
(1) Lucent may bring an action at a court of law for the specific
performance by CSM of the terms of this Agreement or other
applicable Collateral Agreement, as the case may be.
(2) Only upon the occurrence and during the continuation of any
Event of Default referred to in paragraph (ii), (iii) or (iv)
of sub-Clause (A) above, Lucent shall have the right and
option (the "Default Call Option") to purchase all, but not
less than all, the shares in the capital of the Company held
by CSM in accordance with the provisions of sub-Clause (F).
The purchase price for such shares in respect of this Default
Call Option shall be Fair Market Value.
(3) Lucent shall have the right and option (the "Default Put
Option") to require CSM to purchase all, but not less than
all, the shares in the capital of the Company held by
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42
Lucent in accordance with the provisions of sub-Clause (F).
The purchase price for such shares in respect of the Default
Put Option shall be the higher of (i) 110% of Fair Market
Value and (ii) Net Book Value multiplied by Lucent's then
Shareholding Percentage; provided, in the event Lucent
exercises (subject as to the enforcement of remedies to
applicable bankruptcy, insolvency, reorganization and other
similar laws affecting generally the rights of creditors) the
Default Put Option as a result of any Event of Default
referred to in paragraph (ii), (iii) or (iv) of sub-Clause (A)
above, the purchase price for such shares shall be Fair Market
Value.
(4) Lucent shall have the right and option to cause the Company to
sell its assets and properties and effect an orderly
liquidation pursuant to sub-Clause (G).
(5) Subject to the provisions of Clause 19(F), Lucent shall have
such other rights and remedies that are available to it under
applicable law or under the Collateral Agreements.
For the avoidance of doubt, upon the completion of the purchase and
sale transaction as contemplated under sub-Clause 14(D)(i)(3) above,
Lucent shall not be entitled to exercise the remedy set forth in
sub-Clause 14(D)(i)(4) above.
(ii) CSM Remedies
Upon the occurrence and during the continuation of any Event of Default
caused by Lucent, CSM, as the Non-Defaulting Shareholder, shall,
subject to the provisions of this Clause 14, have the following
remedies, rights and options:
(1) CSM may bring an action at a court of law for the specific
performance by Lucent of the terms of this Agreement or other
applicable Collateral Agreement, as the case may be.
(2) CSM shall have the right and option (the "Default Call
Option") to purchase all, but not less than all, the shares in
the capital of the Company held by Lucent in accordance with
the provisions of sub-Clause (F). The purchase price for such
shares in respect of this Default Call Option shall be 90% of
Fair Market Value; provided, in the event CSM exercises the
Default Call Option as a result of the occurrence and during
the continuation of any Event of Default referred to in
paragraph (ii), (iii) or (iv) of sub-Clause (A) above, the
purchase price for such shares shall be Fair Market Value.
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(3) CSM shall have the right and option to cause the Company to
sell its assets and properties and effect an orderly
liquidation pursuant to sub-Clause (G).
(4) Subject to the provisions of Clause 19(F), CSM shall have such
other rights and remedies that are available to it under
applicable law or under the Collateral Agreements.
(E) Waiver of Remedies
The failure of any party hereof to enforce at any time any provision of
this Agreement shall not be construed to be a waiver of such provision, nor in
any way to affect the validity of this Agreement or any part hereof or the right
of any party thereafter to enforce each and every such provision. No waiver of
any Default or Event of Default shall be held to constitute a waiver of any
other or subsequent Default or Event of Default.
(F) Put and Call Options
(i) In order to exercise its Default Call Option or Default Put Option the
Non-Defaulting Shareholder shall deliver to the Defaulting Shareholder,
a FMV Determination Request and, if applicable, a Net Book Value
Determination Request. Upon issuance of such request or requests, the
parties shall determine Fair Market Value and, if applicable, Net Book
Value in accordance with the provisions of the respective definitions
thereof. To the extent applicable, the Non-Defaulting Shareholder may
require a concurrent determination of Fair Market Value and Net Book
Value for purposes of both the Default Call Option and Default Put
Option.
(ii) Within 30 days of determination of both Fair Market Value and Net Book
Value, the Non-Defaulting Shareholder shall issue a notice to the
Defaulting Shareholder specifying whether or not it plans to exercise
the Default Call Option (to the extent applicable) or Default Put
Option. In the event that the Non-Defaulting Shareholder provides
notice of exercise of either option, subject to any U.S., Singapore or
other regulatory filings or notifications and/or the receipt of any
U.S., Singapore or other regulatory approvals or consents, if any, the
completion for the purchase and sale of the shares shall take place 30
days after the date of provision of such election notice. Failure by
the Non-Defaulting Shareholder to exercise its Default Call Option or
Default Put Option shall not prejudice its right to make subsequent FMV
Determination Requests or Net Book Value Determination Requests or
subsequently exercise its Default Call Option or Default Put Option so
long as an Event of Default has occurred and is continuing.
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(iii) At the completion of the purchase and sale transaction contemplated
under this sub-Clause (F), the Defaulting Shareholder shall pay the
purchase price for the shares of the Company held by the Non-Defaulting
Shareholder in the form of cash in Singapore Dollars by wire transfer
of immediately available funds to an account designated in writing by
the Non-Defaulting Shareholder against delivery by the Non-Defaulting
Shareholder of certificates representing all such shares, free and
clear of any liens, claims, charges or encumbrances. Stamp duties in
respect of the transfer of such shares shall be paid by the Defaulting
Shareholder.
(iv) If Lucent is the Non-Defaulting Shareholder and it elects to exercise
the Default Call Option, CSM shall, if requested by Lucent and subject
as to the enforcement of remedies to applicable bankruptcy, insolvency,
reorganization and other similar laws affecting generally the rights of
creditors, extend for a period not exceeding 3 years (the "Extended
Period") the CSM Service Support Agreement on terms and conditions in
effect under the then current CSM Service Support Agreement. In
addition, CSM covenants and agrees that it will use its best efforts to
extend the Sub-Lease Agreement for the Extended Period; provided, in
the event CSM is unable to do so, CSM agrees, subject as to the
enforcement of remedies to applicable bankruptcy, insolvency,
reorganization and other similar laws affecting generally the rights of
creditors, to take all actions as requested by Lucent in order to
provide Lucent the benefit of having 100% ownership of the Company
during the Extended Period, which requests may include, without
limitation, having supply of 100% of the wafer output Lucent would have
been entitled to from the Company had the Sub-Lease Agreement been
extended for the Extended Period.
(v) In the event CSM elects to exercise the Default Call Option as a result
of the occurrence of an Event of Default referred to paragraph (ii),
(iii) or (iv) of sub-Clause (A) above, Lucent shall, if requested by
CSM and subject as to the enforcement of remedies to applicable
bankruptcy, insolvency, reorganization and other similar laws affecting
generally the rights of creditors, extend for a period not exceeding 3
years the Assured Supply and Demand Agreement.
(G) Sale of Assets and Liquidation of the Company
Promptly upon notice by the Non-Defaulting Shareholder of its option
under sub-Clause (D)(i)(4) or (D)(ii)(3), as applicable, the parties shall take
and cause the Company to take all such actions as may be appropriate or
necessary to conduct an orderly sale of the Company's assets and properties in a
single transaction or series of related transactions. In connection with any
such sale, the parties and their respective Affiliates may not, directly or
indirectly, bid to purchase or otherwise acquire any of the assets and
properties of the Company. The proceeds of such sale shall
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REDACTED CONFIDENTIAL TREATMENT REQUESTED
The asterisked portions of this document have been omitted and
are filed separately with the Securities and Exchange Commission
be used to satisfy the liabilities of the Company (including any liabilities to
employees) and, after making appropriate provisions as may be required under
applicable law, shall be distributed to the parties as liquidating distributions
under the Articles and applicable law. Thereafter, the parties shall take and
cause the Company to take all such actions as may be appropriate or necessary
for the winding up and dissolution of the Company.
(H) Ramp Down Upon Change of Control, Default and Termination
In the event CSM purchases all of the shares in the capital of the
Company held by Lucent pursuant to Clause 10(E) (Change of Control), Clause
14(D) (Defaults) or Clause 17(A)(ii) (Early Termination), Lucent shall deliver
to CSM a "Ramp Down Notice" (as defined) on or within 45 days prior to the
"Change of Control Closing," the "Default Closing" or the "Termination Closing"
(as defined). For purposes of this Agreement, the terms:
(a) "Ramp Down Notice" shall mean a written notice setting forth Lucent's
request to purchase wafers from the Company or CSM over any period
following the Change of Control Closing, the Default Closing or the
Termination Closing, as applicable, and the terms and conditions under
which such wafers shall be purchased; provided, (1) the ramp down may
be linear (progressive) or non-linear (non-progressive); provided, if
CSM and Lucent cannot mutually agree, then the ramp down must be
linear, (2) the number of wafers requested may be any amount; provided,
if CSM and Lucent cannot mutually agree, the number of wafers requested
shall be the average loadings of Lucent during the financial quarter
immediately prior to the occurrence of the change of control, the Event
of Default or the termination, as applicable, and (3) CSM shall have
the right to require the ramp down period to be for (x) a minimum of
******* from the Change of Control Closing, the Default Closing or the
Termination Closing in the event the ramp down period selected by
Lucent is for less than *******, (y) a maximum of ********* from the
Change of Control Closing or the Default Closing, as applicable, in the
event the ramp down period selected by Lucent is in excess of *******
and (z) a maximum of ******** from the Termination Closing in the event
the ramp down period selected by Lucent is in excess of ********;
(b) "Change of Control Completion" shall mean the completion of the
purchase and sale of the shares in the capital of the Company held by
Lucent pursuant to Clause 10(E) which completion shall take as
contemplated under Clause 10(E);
(c) "Default Completion" shall mean the completion of the purchase sale of
the shares in the capital of the Company held by Lucent pursuant to
Clause 14(D) which completion shall take place as contemplated under
Clause 14(F); and
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(d) "Termination Completion" shall mean the completion of the purchase sale
of the shares in the capital of the Company held by Lucent pursuant to
Clause 17(B) which completion shall take place as contemplated under
Clause 17(B).
Within 15 days after receipt of the Ramp Down Notice, CSM shall notify Lucent as
to whether CSM accepts all of the terms and conditions set out in the Ramp Down
Notice or respond in writing as to any of its objections. If CSM raises any such
objections, the parties shall negotiate in good faith to either (a) make the
ramp down wafer purchases be subject to, if still effective, the Manufacturing
Agreement, dated as of January 1, 1995, as amended to date between Lucent
Technologies Inc. and CSM (the "Manufacturing Agreement") or (b) agree on a new
mutually acceptable wafer purchase agreement (the "New Purchase Agreement")
which shall be substantially similar to the Manufacturing Agreement and within
the parameters set forth in this Clause 14(H) prior to the Change of Control
Completion, the Default Completion or the Termination Completion; provided, the
parties acknowledge that neither the Change of Control Completion, the Default
Completion nor the Termination Completion may occur without the ramp down wafer
purchases becoming either subject to the Manufacturing Agreement or the parties
entering into a New Purchase Agreement.
15. GENERAL OBLIGATIONS OF SHAREHOLDERS
Each Shareholder shall take all commercially reasonable steps necessary
on its part to give full effect to the provisions of this Agreement and to
procure (so far as it is able by the exercise of voting rights or otherwise so
to do) that the Company and the Directors shall perform and observe the
provisions of this Agreement.
16. PREVALENCE OF AGREEMENT
In the event of any inconsistency or conflict between the provisions of
this Agreement and the provisions of the Articles, the provisions of this
Agreement shall as between the Shareholders prevail.
17. DURATION AND TERMINATION
(A) Duration
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This Agreement shall take effect from the date hereof and, unless
otherwise agreed to by the parties, shall not terminate until the earliest of
(i) September 1, 1998 only if the Completion Date has not occurred prior to such
date; and (ii) two years from the date specified in a written termination notice
(the "Termination Notice") from either Shareholder to the Company and to the
other Shareholder provided that such notice shall not be delivered prior to the
eighth anniversary of the Completion Date (the effective date of such
termination shall be referred to as the "Termination Date"). In addition, this
Agreement shall also be deemed terminated upon the completion of the purchase
and sale transactions contemplated under Clause 10(E) and Clause 14(D).
(B) Rights in Connection With Expiration of the Term
(i) Within 60 days after receipt by Lucent of the Termination Notice from
CSM or within 45 days after delivery by Lucent of the Termination Notice to CSM,
Lucent shall notify CSM in writing whether Lucent elects to (i) relinquish all
of Lucent's rights set forth in Clause 5(B) and 5(I) and reduce its rights as
shareholder of the Company to the effect that it may elect only a minority of
the members of the Board (notice of such election shall be referred to as a
"Relinquishment Notice"), in which event the parties shall execute an amendment
to this Agreement to effect the foregoing within one week of the Relinquishment
Notice and the parties shall take all commercially reasonable actions to
effectuate such amendment, or (ii) continue to exercise its rights set forth in
Clause 5(B) and 5(I) and all of its rights as shareholder of the Company (notice
of such election shall be referred to as a "Non-Relinquishment Notice"). For
purposes of this Clause 17 and for purposes of determining Fair Market Value and
Net Book Value as of the FMV Request Date or Net Book Value Request Date, the
delivery of the Termination Notice shall be deemed to be the delivery of a FMV
Determination Request and a Net Book Value Determination Request and, for
purposes of determining Fair Market Value and Net Book Value as of the
Termination Date, a FMV Determination Request or Net Book Value Determination
Request, as applicable, shall be deemed to have been issued as of the
Termination Date. Upon delivery of the Termination Notice, the following shall
apply :
(a) In the event CSM has delivered the Termination Notice and
Lucent has delivered a Relinquishment Notice, CSM shall
purchase from Lucent, and Lucent shall sell to CSM, all, but
not less than all, of the shares in the capital of the Company
held by Lucent at a purchase price equal to the higher of:
(i) Fair Market Value as of the FMV Request Date;
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(ii) Net Book Value as of the Net Book Value Request Date
multiplied by Lucent's then Shareholding Percentage;
and
(iii) Fair Market Value as of the FMV Request Date plus 33%
of the increase, if any, in Fair Market Value of all
of the shares in the capital of the Company as of the
Termination Date from Fair Market Value of all of the
shares in the capital of the Company as of the FMV
Request Date
All costs in determining Fair Market Value and Net Book Value
pursuant to this sub-Clause 17(B)(i)(a) shall be borne by CSM.
Subject to any U.S., Singapore, or other regulatory filings or
notifications and/or the receipt of any U.S., Singapore or
other regulatory approvals or consents, if any, the completion
of the purchase and sale of such shares shall take place 30
days after final determination of Fair Market Value and Net
Book Value as of the Termination Date.
(b) In the event CSM has delivered the Termination Notice and
Lucent has delivered to CSM a Non-Relinquishment Notice, CSM
shall purchase from Lucent, and Lucent shall sell to CSM, all,
but not less than all, of the shares in the capital of the
Company held by Lucent at a purchase price equal to the higher
of;
(i) Fair Market Value as of the Termination Date; and
(ii) Net Book Value as of the Termination Date multiplied
by Lucent's then Shareholding Percentage.
All costs in determining Fair Market Value and Net Book Value
pursuant to this sub-Clause 17(B)(ii)(b) shall be borne by
CSM. Subject to any U.S., Singapore or other regulatory
filings or notifications and/or the receipt of any U.S.,
Singapore or other regulatory approvals or consents, if any,
the completion of the purchase and sale of such shares shall
take place 30 days after final determination of Fair Market
Value and Net Book Value as of the Termination Date.
(c) In the event Lucent has delivered the Termination Notice and
Lucent has also delivered a Relinquishment Notice, CSM shall
purchase from Lucent, and Lucent shall sell to CSM, all, but
not less than all, of the shares in the capital of the Company
held by Lucent at a purchase price equal to the higher of:
(i) Fair Market Value as of the FMV Request Date; and
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(ii) Fair Market Value as of the FMV Request Date plus 33%
of the increase, if any, in Fair Market Value of all
of the shares in the capital of the Company as of the
Termination Date from Fair Market Value of all of the
shares in the capital of the Company as of the FMV
Request Date.
All costs in determining Fair Market Value pursuant to this sub-Clause
17(B)(ii)(c) shall be borne by Lucent. Subject to any U.S., Singapore
or other regulatory filings or notifications and/or the receipt of any
U.S., Singapore or other regulatory approvals or consents, if any, the
completion of the purchase and sale of such shares shall take place 30
days after final determination of Fair Market Value as of the
Termination Date.
(d) In the event Lucent has delivered the Termination Notice and
Lucent has also delivered a Non-Relinquishment Notice, CSM
shall purchase from Lucent, and Lucent shall sell to CSM, all,
but not less than all, of the shares in the capital of the
Company held by Lucent at Fair Market Value as of the
Termination Date. All costs in determining Fair Market Value
pursuant to this sub-Clause 17(B)(ii)(d) shall be borne by
Lucent. Subject to any U.S., Singapore or other regulatory
filings or notifications and/or the receipt of any U.S.,
Singapore or other regulatory approvals or consents, if any,
the completion of the purchase and sale of such shares shall
take place 30 days after final determination of Fair Market
Value as of the Termination Date.
(ii) At any of the applicable completions contemplated under Sub-Clause
17(B)(i) above, CSM shall pay the purchase price for the shares of the Company
held by Lucent in the form of cash in Singapore Dollars by wire transfer of
immediately available funds to an account designated in writing by Lucent
against delivery by Lucent of certificates representing all such shares, free
and clear of any liens, claims, charges or encumbrances. Stamp duties in respect
of the transfer of such shares shall be paid by the Shareholder who bears the
costs of determining Fair Market Value and Net Book Value (as applicable) as set
out above.
(iii) Following the Termination Date, the parties shall be subject to the
ramp down provisions set forth in Clause 14(H) above.
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(C) Effect of Expiration or Termination of Term
Upon the expiration or earlier termination of this Agreement, the
parties shall have no further obligations under this Agreement.
Notwithstanding the generality of the foregoing, (1) the parties shall
continue to have the liability and the obligation to fulfill their
obligations under this Agreement that have matured on or prior to the
date of expiration or termination of this Agreement and (2) the
provisions of Clauses 6(D), 7(A)(vi), 14(D), 14(F), 14(G), 14(H),
17(B), 17(C), 18, 19(A), 19(B), 19(F) and 19(G) shall survive any such
expiration or termination of this Agreement.
18. CONFIDENTIAL INFORMATION
(A) Communications Confidential
All communications between the Company and the Shareholders or any of
them and all information and other material supplied to or received by any of
them from any one or more of the others in connection with the performance of
this Agreement or the Collateral Agreements which is either marked
"confidential" or is by its nature intended to be exclusively for the knowledge
of the recipient alone in connection with this Agreement or the Collateral
Agreements, or to be used by the recipient only for the benefit of the Company,
any information concerning the business transactions or the financial
arrangements, including without limitation, trade secrets, customer lists,
know-how, designs, processes, drawings and specifications, ("Confidential
Information") of the Company or of the Shareholders or any of them, or of any
person with whom any of them is in a confidential relationship with regard to
the matter in question coming to the knowledge of the recipient shall be kept
confidential by the recipient (including to the exclusion of the non-disclosing
party) and shall be used by the recipient solely and exclusively for achieving
the purposes of this Agreement during the terms of this Agreement, and for a
period of five (5) years following the termination thereof. Neither Shareholder
shall disclose to the other competitively sensitive information concerning
either sales, transfer or use of wafers (i.e., pricing, cost, volume, capacity
and customer information) except as reasonably required under this Agreement
relating to any wafer fabrication facility operated, managed or controlled by
such Shareholder or in which such Shareholder has a non-controlling interest or
role. At the expiration or termination of this Agreement, written Confidential
Information will be returned to the party supplying such information or
destroyed immediately upon the request of such party and no copies, extracts or
other reproductions shall be retained by recipient. All documents, memoranda,
notes and other writings whatsoever prepared by recipient which contain the
Confidential Information shall be returned to such party or destroyed at such
party's request. Notwithstanding the foregoing, information shall not be deemed
confidential and the recipient shall have no obligation with respect to any such
information which was in the recipient's possession before receipt from the
discloser; which are rightfully received by the recipient without restriction
from a third party
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51
without a duty of confidentiality on the third party; which are independently
developed by recipient; or which are in the public domain through no act or
default on the part of the recipient, its Affiliates its servants and/or agents,
whereupon, to the extent that it is public, this obligation shall cease. In
addition, in the event a recipient becomes compelled by law or regulatory
authority to disclose any of the Confidential Information, the recipient shall
provide the discloser with prompt written notice so that the discloser may seek
protective order or other appropriate remedy or waive compliance with the
provisions of this Clause 18. In the event that such protective order or other
remedy is not obtained, or that the discloser waives compliance with the
provisions of this Clause 18, the recipient shall furnish only that portion of
the Confidential Information which it is required by law or regulatory authority
to disclose and will exercise its commercially reasonable efforts to assure that
confidential treatment will be accorded the Confidential Information.
(B) Shareholders' Obligations
The Shareholders shall procure the observance of the abovementioned
restrictions by the Company and shall take all reasonable steps to minimise the
risk of disclosure of Confidential Information, by ensuring that only their
respective employees with a need to know, and directors and those of the Company
whose duties will require them to possess any of such information shall have
access thereto, and that they shall be instructed to treat the same as
confidential. The Shareholders shall in addition procure that such employees of
the Company whose duties will require them to possess, or have access to,
confidential information, shall sign confidentiality agreements with the Company
respecting the confidentiality of such information.
19. NOTICES AND GENERAL
(A) Notices
All notices, demands or other communications required or permitted to
be given or made hereunder shall be in writing and delivered personally or sent
by prepaid registered post (by air-mail if to or from an address outside
Singapore) with recorded delivery, or by facsimile transmission (provided that
the receipt of such facsimile transmission is confirmed by the dispatch of a
hard copy of the facsimile sent immediately thereafter by prepaid registered
post) addressed to the intended recipient thereof at its address or at its
facsimile number set out in this Agreement (or to such other address or
facsimile number as a party to this Agreement may from time to time duly notify
the others in writing). Any such notice, demand or communication shall be deemed
to have been duly served, if given or made by facsimile, immediately at the time
of dispatch (provided that the receipt of such facsimile transmission is
confirmed by the dispatch of a hard copy of the facsimile sent immediately
thereafter by prepaid registered post) or, if given or made by letter,
immediately if
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52
delivered personally or 48 hours after posting or, if given or made by air-mail,
ten days after posting and in proving the same it shall be sufficient to show
that personal delivery was made or that the envelope containing such notice was
duly addressed, stamped and posted. The address and facsimile numbers of the
parties for the purpose of this Agreement are:-
CSM : CHARTERED SEMICONDUCTOR MANUFACTURING LTD
00, Xxxxxxxxx Xxxxxxxxxx Xxxx X Xxxxxx 0
Xxxxxxxxx 000000
Facsimile No. : (00) 000 0000
Attention : Legal Department
Lucent : LUCENT TECHNOLOGIES MICROELECTRONICS PTE. LTD
0, Xxxxxxx Xxxxxx, Xxxxx Xxxx Xxxxxxxxxx Xxxx
Xxxxxxxxx 000000
Facsimile No. : (00) 000-0000
Attention : Managing Director
with a copy to: LUCENT TECHNOLOGIES INC.
Microelectronics Division
Xxx Xxx Xxx
Xxxxxxxx Xxxxxxx, XX 00000-0000
Facsimile No. 000 000 000-0000
Attention: Legal Department
The Company: SILICON MANUFACTURING PARTNERS PTE LTD
c/o Singapore Technologies Pte Ltd
00, Xxxxxxx Xxxx Xxxxx
#02-09/12
The Xxxxxxxxxx
Xxxxxxxxx Xxxxxxx Xxxx
Xxxxxxxxx 000000
Facsimile No. : (00) 000-0000
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Attention : The Company Secretary
Corporate Secretariat Department
(B) Remedies
No remedy conferred by any of the provisions of this Agreement is
intended to be exclusive of any other remedy which is otherwise available at
law, in equity, by statute or otherwise, and each and every other remedy shall
be cumulative and shall be in addition to every other remedy given hereunder or
now or hereafter existing at law, in equity, by statute or otherwise. The
election of any one or more of such remedies by any of the Shareholders shall
not constitute a waiver by such Shareholder of the right to pursue any other
available remedies. No failure on the part of any Shareholder to exercise and no
delay on the part of any Shareholder in exercising any right hereunder will
operate as a release or waiver thereof, nor will any single or partial exercise
of any right under this Agreement preclude any other or further exercise of it.
(C) Severance
If any provision of this Agreement or part thereof is rendered void,
illegal or unenforceable by any legislation to which it is subject, it shall be
rendered void, illegal or unenforceable to that extent and it shall in no way
affect or prejudice the enforceability of the remainder of such provision or the
other provisions of this Agreement.
(D) Entire Agreement
This Agreement embodies all the terms and conditions agreed upon
between the Shareholders as to the subject matter of this Agreement and
supersedes and cancels in all respects all previous agreements and undertakings,
if any, between the Shareholders with respect to the subject matter hereof,
whether such be written or oral. Any amendment to or variation of this Agreement
shall be effective only if it is in writing and duly signed and confirmed in
writing by the authorised representative of each Shareholder.
(E) Governing Law
This Agreement shall be governed by, and construed in accordance with,
the laws of Singapore.
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(F) Dispute Resolution and Arbitration
(i) In case any dispute or difference shall arise among the Shareholders as
to the construction of this Agreement or as to any matter or thing of whatsoever
nature arising hereunder or in connection herewith, including any question
regarding its existence, validity or termination, such dispute or difference
shall promptly be submitted to a committee comprised of one Board member from
each of the Shareholders. If such committee is unable to resolve such dispute
within 21 days of such submission, it shall submit the dispute to a committee
comprised of one senior manager from each Shareholder, being in the case of:-
CSM : the President
Lucent : the Customer Satisfaction and Business Development
Vice President of Lucent Technologies Inc.
If such senior managers are unable to resolve such dispute within 14 days of
such submission, it shall be submitted to a committee comprised of one senior
officer from each Shareholder being in the case of:-
CSM : the Chairman of the Board of CSM
Lucent : Vice President, Integrated Circuits Division of
Lucent Technologies Inc.
(ii) If such senior officers are unable to resolve the dispute within 14
days of such submission, it shall be submitted to a single arbitrator to be
appointed by the Shareholders (the "Arbitrator"). If the Shareholders fail to
agree on an Arbitrator within 14 days after one Shareholder has given to the
other Shareholder a written request to concur in the appointment of an
Arbitrator, a single arbitrator (the "ICC Arbitrator") shall be appointed on the
request of any Shareholder within 10 days after the 14 day period by the
International Chamber of Commerce and such submission shall be a submission to
arbitration in accordance with the Rules of Conciliation and Arbitration of the
International Chamber of Commerce as presently in force by which the
Shareholders agree to be so bound. The Arbitrator or the ICC Arbitrator, as
applicable, shall have 14 days after his appointment to request and receive all
information (whether written or oral) relating to the dispute from Lucent, CSM
and the Company. Each of Lucent and CSM shall use its commercially reasonable
efforts to comply with all of such requests for information. Lucent and CSM
shall jointly cause the Company to comply with all of the Arbitrator's and the
ICC Arbitrator's requests for information. The place of arbitration shall be
London, England and the arbitration shall be conducted wholly in the English
language. The Arbitrator or the ICC Arbitrator, as applicable, shall render his
decision within 30 days after his appointment or, in the event the Arbitrator or
the ICC Arbitrator, as applicable,
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requires any hearings or proceedings with respect to such arbitration, within 15
days after the completion of such hearings or proceedings.
(G) Announcements
None of the parties shall divulge to any third party (except to their
respective professional advisers) any specific terms of this Agreement, or any
other agreement referred to in, or executed in connection with, this Agreement,
without the prior agreement of the other parties in writing except as and to the
extent that any such party shall be so obligated by law or pursuant to the
regulations of a stock exchange or other regulatory body in which case the other
party shall be so advised and the parties shall use their best efforts to cause
a mutually agreeable release or statement to be made. In the event that this
Agreement or any of the Collateral Agreements are proposed to be disclosed to
any such body in whole or in part the parties agree to fully cooperate to limit
the scope of any such disclosure and to obtain an appropriate protective order
if reasonably practicable.
(H) No Right To Bind Other Shareholders
No Shareholder has the power or the right to bind, commit or pledge the
credit of the other Shareholders or the Company.
(I) Costs
Each Shareholder shall bear its own legal and other professional costs
and expenses incurred by it in the negotiation and preparation of this
Agreement.
(J) Assignment
Except to the extent permitted under Clause 10 hereof, the rights and
obligations under this Agreement may not be assigned by any party to any Person.
(K) No Third Party Beneficiaries
Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any Person other than the parties hereto, the Company and
their respective successors and permitted assigns any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision herein
contained.
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(L) US Tax Election
CSM acknowledges that Lucent may, but shall not be required to, treat
the Company as a partnership for United States income tax purposes. If requested
by Lucent, the parties shall cause the Company to execute Treasury Form 8832 (or
any subsequent form(s) designated by the United States government) to classify
the Company as a partnership for U.S. tax purposes. In no event shall CSM or the
Company be required to take any action or execute any such form(s) if such
action will increase the tax liability of CSM or the Company. CSM and the
Company shall consult with Lucent prior to taking any position or making any
filing which relate to the Company with any United States federal or state
taxing authority. All out of pocket costs and expenses incurred by CSM or the
Company in complying with Lucent's requests under this Clause shall be borne by
Lucent; provided, that in the case of fees and expenses of any tax or legal
advisors or other professional consultants, such fees and expenses shall be
borne by Lucent only if the retention of such advisors or consultants has been
pre-approved by Lucent. In the event Lucent elects to treat the Company as a
partnership for U.S. income tax purposes, Lucent hereby agrees to enter into the
Tax Indemnity Agreement prior to the Company executing Treasury Form 8832 (or
any subsequent form(s) designated by the United States government) .
(M) Securities Filing by CSM
In the event that, in connection with a registration or listing of its
securities with any securities commission, exchange or other securities
regulatory or monitoring body, CSM is required under any applicable securities
laws or listing rules to provide to or to file with any securities commission,
exchange or other securities regulatory or monitoring body, any information with
respect to the Company, its business, this Agreement or any of the Collateral
Agreements, CSM shall provide prior notice of the same to Lucent. If requested
by Lucent, CSM shall file with the applicable securities authorities a request
for non-disclosure to the public of sensitive information with respect to the
Company or its business or contained in this Agreement or any of the Collateral
Agreements and shall take such steps as may reasonably be requested by Lucent to
obtain such confidential treatment; provided, that if such authorities refuse to
grant such confidential treatment or fail to respond which will delay the
registration statement or the offering document from going effective, CSM shall
be permitted to provide or file only that portion of such information that is
required under applicable securities laws or listing rules.
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(N) Waiver of Immunity
Each of CSM, Lucent and the Company hereby irrevocably agrees not to
claim and irrevocably waives any claim or right which it has or may hereafter
acquire under any law, regulation, treaty or international agreement to immunity
for itself, or any of its revenues, assets or properties or those of any of its
agencies or instrumentalities from the jurisdiction of any court (including but
not limited to any court of the United States of America or the State of New
Jersey) with respect to the enforcement of an arbitral award rendered pursuant
to Clause 19(F).
(O) Assignment of Purchase Orders
Each Shareholder acknowledges and agrees that on or prior to the
Completion Date, such Shareholder shall be required to assign to the Company all
purchase orders placed in support of the Company and contemplated under the
Company Business Plan which are in the name of such Shareholder or any of its
Affiliates.
(P) Counterparts
This Agreement may be entered into in any number of counterparts, all
of which taken together shall constitute one and the same instrument. Any party
may enter into this Agreement by signing any such counterpart.
(O) Settlements
Notwithstanding any provision contained in this Agreement, prior to the
effectiveness of any termination of this Agreement or the completion of any of
the purchase and sale transactions contemplated in this Agreement, the
Shareholders, in its individual capacity and collectively, shall cause the
Company to take into account the final settlement of all accrued dividends and
loans from the Company to the Shareholders. The amount of loans, if any, from
the Company to a Shareholder and any accrued dividends allocated to such
Shareholder shall be determined and the amount so determined shall be netted
against each other. Any net settlement balance shall be payable by the Company
to a Shareholder or by a Shareholder to the Company, as applicable, to the
extent such amounts (as well as any retained earnings as determined pursuant to
the dividend policy set forth in the Articles) are not already taken into
account in any Fair Market Value or Net Book Value calculation, as applicable,
in connection with such termination or purchase and sale transaction.
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S C H E D U L E A
COLLATERAL AGREEMENTS
1. Agreement to be made between CSM, Lucent and the Company relating to
the Company's capacity and loading arrangements in the form of Appendix
B (the "Assured Supply and Demand Agreement").
2. Agreement to be made between CSM, Lucent and the Company relating to
the license of certain intellectual property rights related to the
manufacture of semiconductor wafers and integrated circuits in the form
of Appendix C (the "License and Technology Transfer Agreement").
3. Agreement to be made between CSM and the Company relating to the
provision of certain services by CSM to the Company in the form of
Appendix D (the "CSM Service Support Agreement").
4. Agreement to be made between CSM and the Company relating to the
sub-lease of a portion of the building and facility systems located on
the Site (the "Sub-Lease Agreement").
5. Agreement which may be made between CSM and Lucent relating to certain
tax indemnities in the form of Appendix G (the "Tax Indemnity
Agreement").
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X X X X X X X X 0(X)
Xxxxxxx Employees
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REDACTED CONFIDENTIAL TREATMENT REQUESTED
The asterisked portions of this document have been omitted and
are filed separately with the Securities and Exchange Commission
S C H E D U L E 7(B)(ii)
SCHEDULED COMPANIES
****
THE ABOVE LIST MAY FROM TIME TO TIME BE AMENDED UPON THE MUTUAL AGREEMENT OF CSM
AND LUCENT.
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REDACTED CONFIDENTIAL TREATMENT REQUESTED
The asterisked portions of this document have been omitted and
are filed separately with the Securities and Exchange Commission
S C H E D U L E 7(C)
PARTNERSHIP FEE ADJUSTMENTS
A) Cost Reductions/Increases: The Partnership Fee will be increased by ***
for every *** percent reduction of the cost per wafer relative to the latest
approved Company Business Plan. The Partnership Fee will be reduced by *** for
each *** percent that the cost per wafer is higher than the latest approved
Company Business Plan unless the cost per wafer is higher by more than ***
percent in which case the Partnership Fee will be reduced by **** plus an
additional *** for each *** percent beyond the *** percent. These adjustments
will be made for each calendar quarter beginning with the first calendar quarter
whose output is above *** of the planned maximum capacity of the Company. The
costs per wafers will be calculated based on the costs of Lucent wafers as set
out in the latest approved Company Business Plan.
B) Yield Variations: The Partnership Fee will also be increased (or
reduced, as applicable) by variations in sort yield relative to plan for Lucent
wafers. The cost benefit (or penalty, as applicable) will be calculated by
*******************************************************************************
***************************************************************************. If
the actual weighted average sort yield falls within the range of *********** of
the yield specified in the latest approved Company Business Plan for a given
quarter, there will be no adjustment to the Partnership Fee. If the actual
weighted average sort yield exceeds **** of the yield specified in the latest
approved Company Business Plan for a given quarter, the Partnership Fee will be
increased by *** for each ** increase in the actual weighted average sort yield
exceeding *****. If the actual weighted average sort yield is less than **** of
the yield specified in the latest approved Company Business Plan for a given
quarter, the Partnership Fee will be reduced by *** for each ** decrease in the
actual average sort yield less than ***. These adjustments will be done
quarterly and will begin ***********************************************.
C) Cycle Time: The Partnership Fee will also be adjusted to reflect cycle
time performance. The Partnership Fee will be increased (decreased) by *** for
each *** day per mask level reduction (increase) weighted average cycle time for
Lucent wafers relative to the latest approved Company Business Plan. This
adjustment will be made quarterly and begin ***********************************
************. The increase due to this adjustment, however, will be limited to a
maximum of **** unless the output in that quarter is greater than *** of the
planned maximum capacity of the Company and also greater than *** of the planned
capacity for that quarter (as per the latest approved Company Business Plan) in
which case the Partnership Fee will not be limited to ****.
D) Computation of Cost: The cost per wafer shall be calculated by dividing
the total cost incurred by the Company in that quarter in manufacturing the
wafers shipped by the aggregate number of wafers shipped for that quarter
adjusted to take into account deviations in cycle time relative to the latest
approved Company Business Plan irrespective of the technologies used. The
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REDACTED CONFIDENTIAL TREATMENT REQUESTED
The asterisked portions of this document have been omitted and
are filed separately with the Securities and Exchange Commission
total cost incurred by the Company in manufacturing the wafers shipped shall
include overheads and costs payable by the Company to CSM under the CSM Service
Support Agreement and any costs payable to any other party, and shall exclude
any currency exchange gain/loss.
E) The Partnership Fee adjustment set out in sub-Clauses (A), (B) and (C)
above shall not be made (i.e., the Partnership Fee shall remain at ****) where
the deviation of the cost, sort yield or cycle time performance from plan are
due to:
(i) circumstances beyond the commercially reasonable control of
the Company as determined by the Board (such as, without
limitation, there is a fire or accident in the Company Fab);
(ii) the occurrence of any Force Majeure Condition (as described in
the Assured Supply and Demand Agreement);
(iii) approved deviations from the latest approved Company Business
Plan made by the parties during the quarter (such as, without
limitation, change of technology mix outside of the agreed
levels, purchase of additional equipment, etc.).
F) All references to a "quarter" and "quarterly" above shall mean a
calendar quarter (i.e., a period of three months commencing with January, April,
July and October of each calendar year). CSM shall at the end of each quarter
send an invoice to Lucent for such Partnership Fee for that quarter and Lucent
shall effect payment of such invoice within 30 days of the date of the invoice
to an account designated by CSM.
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S C H E D U L E 7(D)
INSURANCE PRINCIPLES
1. It is the current intention of Lucent and/or any of its affiliates
(collectively, "Lucent") to be responsible for covering under its
insurance policies the contents (equipment) and all operations
(including business interruption, transit and general liability) of the
Company. It is the current intention of CSM to be responsible for
covering under its insurance policies the "real property" of the
building and clean room (including the boiler and machinery) to be
leased to the Company. Notwithstanding the foregoing, the ultimate
responsibilities of the parties shall be subject to mutual agreement
between Lucent and CSM.
2. Until such time when the "real property" and the clean room are leased
to the Company, CSM shall, at its own cost, insure such "real property"
and clean room (including the boiler and machinery).
3. Lucent and CSM shall discuss further defining the division of
responsibility on the areas of coverage under property and general
liability policies with respect to common areas.
4. On and after the Completion Date, Lucent shall, if requested by CSM,
permit the Company to participate in Lucent's insurance programs.
Lucent premium allocations will be made based upon the exposed values
reported as they are added or phased into operation.
5. Lucent and CSM shall use commercially reasonable efforts to have each
of their respective insurers waive any "subrogation" rights against
each other's insurers.
6. Lucent and CSM shall use commercially reasonable efforts to have each
of their respective insurers be subject to "binding arbitration" in the
event of any dispute between each other's insurers.
7. All premium allocations under CSM's insurance policies and Lucent's
insurance policies covering the Company shall be mutually agreed.
8. Lucent and CSM shall mutually agree how employees of the Company will
be covered for Workers' Compensation.
9. Lucent and CSM shall require the Company to obtain Automobile Liability
insurance on any vehicles leased or purchased on and after the
Completion Date.
10. Lucent and CSM agree that (a) all insurance policies shall be
consistent with all applicable insurance laws in Singapore, and (b) the
CSM Service Support Agreement shall be consistent with and reflect
Lucent's and CSM's agreements with respect to insurance coverages,
premium allocations and reimbursement obligations of the Company.
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S C H E D U L E 10(E)(ii)
RESTRICTED PURCHASERS
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THE ABOVE LIST MAY FROM TIME TO TIME BE AMENDED UPON THE MUTUAL AGREEMENT OF CSM
AND LUCENT.
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JOINT VENTURE BUSINESS PLAN
1. EXECUTIVE SUMMARY
LUCENT TECHNOLOGIES MICROELECTRONICS PTE. LTD. a Singapore Corporation
("LUCENT") and Charter Semiconductor Manufacturing Ltd, a Singapore
Corporation ("CSM") are forming a Joint Venture private company limited by
shares (the "Company") to conduct manufacturing operations. The production
facilities will be in Singapore and will consist of an existing building,
support facilities and clean room ("FAB 3B") owned by CSM, and
manufacturing equipment owned by the Company. The output of the Company
will be untested silicon, semiconductor wafers to be distributed between
LUCENT and CSM in proportion to their ownership interest. Manufacturing
operations will be conducted using both LUCENT and CSM existing and
successor process technologies.
2. STRUCTURE OF THE JOINT VENTURE
The Company will be structured as a private company limited by shares with
LUCENT holding 51% of the issued share capital and CSM holding 49% of the
issued share capital. The Company will manage and operate a semiconductor
wafer production facility ("FAB 3B") located in Xxxxxxxxx Xxxxxxxxxx Xxxx,
Xxxxxxxxx. Lucent will invest approximately $217 million Sing in the
Company and CSM will invest approximately $208 million Sing in the Company
to purchase new CMOS semiconductor manufacturing equipment for the
Company. Additional funding for equipment purchases will be funded by
commercial debt to the Company and reimbursed with Company cash flow
resulting from wafer sales. The operating costs and output of the Company
will be in proportion to the shareholding percentage of the shareholders as
outlined in the Assured Supply and Demand Agreement (the "ASADA").
3. STRATEGY
3.1 Background and History
LUCENT and CSM want to expand manufacturing capacity and take
advantage of their world class process and manufacturing know-how,
maximize the use of existing and future manufacturing assets and gain
the benefits of a high volume semiconductor operation.
3.2 Mission Statement
The Partnership will manufacture silicon, semiconductor wafers for the
benefit of LUCENT and CSM at the lowest possible manufacturing costs,
utilizing industry competitive process and manufacturing logistics
technology.
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3.3 Short Term Strategy
CSM will complete construction of FAB 3B, and hire a qualified
management and operations team. The team will manage the
installation and qualification of the equipment and process
technologies. The management team will also hire and train a
qualified work force and establish an entrepreneurial work
environment to produce low cost wafers for the benefit of the
shareholders.
3.4 Long Term Strategy
The Company will introduce more advanced process technologies
developed by LUCENT and CSM, on a timely basis, to meet the
shareholders' market needs. All elements of spending,
manufacturing, quality, reliability and process flow within each
process technology will constantly be examined to achieve
improvements toward maintaining a world class cost structure.
4. PRODUCTS
4.1 Description
The Company will produce semiconductor wafers utilizing LUCENT and
CSM CMOS Intellectual Property and process technology as specified
in the License and Technology Transfer Agreement with LUCENT and
CSM. The planned technology introduction schedule is:
****
4.2 Migration Plan
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The Company planned capacity will be 26,000 wafer outs per month
(WPM), of 0.25u LUCENT digital logic equivalent process (21 mask
levels). Additional equipment may be purchased by the Company to
increase the capacity of the Company.
4.3 Dependencies
LUCENT and CSM will transfer to the Company and install specified
CMOS process technologies as provided in the License and Technology
Transfer Agreement Assistance from LUCENT and CSM will be defined in
the Annual Business Plan.
As a tenant at CSM's Woodlands Industrial Park: Singapore location,
the Company may depend on CSM for certain services required for wafer
manufacture. These services are defined in the Services Agreements,
and will be negotiated and agreed annually by Company and CSM. The
Company will depend on both shareholders for production demand as
defined in the ASADA. Each shareholder is responsible for using its
capacity allocation as defined in the ASADA or for compensating the
Company for failing to fulfill its loading obligations as set out in
the ASADA.
4.5 Logistics
The Company will install manufacturing logistics systems compatible
with those of the shareholders' systems to meet the shareholders'
needs to deliver product seamlessly with the output from their other
sources.
4.4 Product Support
The Company will be staffed with sufficient technical and engineering
resources to qualify each new process technology and to maintain
manufacturing operations. Additional support may be available from
the shareholders. These items are included as expense line items in
the Company spending plan in Attachment F-5.
5. MARKETING AND SALES
Sales by the Company will be to CSM or CSM's customers and LUCENT or
LUCENT's customers only. No marketing or sales force will be put in place.
6. HUMAN RESOURCE PLAN
6.1. The Company will have persons (being employees of the Company as well
as personnel from CSM rendering services pursuant to the CSM Service
Support Agreement and License and Technology Agreement, as well as
personnel from Lucent rendering services pursuant to the License and
Technology Transfer Agreement) working in the following
areas/capacities:
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Production and Training
Technicians
Engineering and Technology
Finance and Administration
Programming and Management Information Systems
Logistics and Production Control
Equipment Maintenance
General Management
Human Resources
Quality Assurance and Statistical Process Control
Purchasing
Medical
6.2 Management Structure
The management structure will be evolutionary, with the expected
organization on the first date of operations shown on Attachment F-1. All
functions within the Company report to the General Manager. The targeted
production costs in Attachment F-7 will be an element for determining the
General Manager's performance pursuant to the Joint Venture Agreement.
The General Manager will report to the Board of Directors of the Company,
which has specific authority as defined in the Joint Venture Agreement.
6.3 Staffing Plan
The staffing plan is shown in Attachment F-2.
6.4 Training
A training program will be established to certify operators to run one or
multiple types of equipment. Details of the training program will be
similar to those employed by CSM in CSM's other sub-micron clean rooms
In Singapore.
6.5 Personnel Practices
To be in compliance with CSM's personnel practices and procedures, some
key focus items include, but are not limited to:
6.5.1 All aspects of employment will be carried out free of
discrimination or harassment based on race, color, religion, sex,
national origin, age, handicap or military status.
6.5.2 The Company will be sensitive to the needs of all employees and to
the community in which it operates.
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6.5.3 Hiring and advancement will be based on job-related
requirements and each individual's qualifications to
perform the job.
6.5.4 The Company will be a nonsmoking workplace.
6.5.5 Existing CSM personnel policies will remain in effect
unless they are modified per Section 10.
6.6 Compensation
The Company will maintain base salaries that are competitively
based compared with other semiconductor and technology companies
in Singapore.*****************************************************
******************************************************************
******************************************************************
Approved salary increases will take into account each employee's
pay grade, his/her current salary position, his/her performance
and relevant salary market factors.
Further details of compensation plans are listed in Attachment
F-3.**************************************************************
******************************************************************
******************************************************************
******************************************************************
6.7 Benefits
The benefits for CSM employees assigned to the Company are
equivalent to the current CSM-benefit plan as outlined in
Attachment F-4:
The CSM payroll system will be used for all payroll deductions and
check distribution to CSM employees.
The Board of Directors may establish those personnel policies that
differ from CSM's policies at a later time as provided for in
Section 10.
7. OPERATIONS
7.1 Physical Location
The Company will operate the clean room facility currently known
as CSM FAB 3B.
7.2 Capital Plan
The Company may add capacity by leasing, buying or by the
Shareholders' leasing or buying additional manufacturing equipment
and facilities. After
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ramp-up and during the first five years of full capacity
manufacturing, up to $350M US in additional capital for manufacturing
equipment and facilities is expected to be funded by the Company. More
detail is available on the ramp plan in Attachment F-6 and in
successive Company Business Plans.
7.3. Intellectual Property
The Company will be licensed for know-how pursuant to the License and
Technology Transfer Agreement and patent coverage will be provided by
the Shareholders on an as needed basis, to the extent that they have
the right to do so.
7.4. Production
7.4.1. The Company is planned to operate 7 days a week using the
Alternate Work Schedule (AWS) (12 hours per shift).
Personnel on AWS will include resident maintenance and
production employees.
7.4.2. Contract workers may staff some of the available jobs.
7.4.4. Vendor maintenance and additional support will be contracted
for by the Company on an as needed basis.
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2/17/98 6
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9. ENVIRONMENTAL PRACTICES
CSM and LUCENT have reviewed the LUCENT Microelectronics (ME) Environmental
Management System (EMS) and agreed that the CSM EMS currently under
development substantially meets the intent of the LUCENT Microelectronics
EMS Protocol and Platform processes. Furthermore, CSM agrees to amend its
EMS procedures and therefore gain active membership in the LUCENT
Environmental Action Team (the ENACT Team). Within 18 months of the
adoption of this Business Plan, CSM agrees to obtain and maintain IS0 14001
certification for the company Fab under the auspices of the
Microelectronics umbrella certification issued by a third party certifier
as designated by LUCENT ME. LUCENT Microelectronics agrees to support this
certification effort and to assist CSM in obtaining an overall site
certification for the Woodlands site.
The shareholders have reviewed the policies, programs, practices and
controls (Environmental Practices) applied at LUCENT Microelectronics
manufacturing locations under the Environmental Management System of
LUCENT, and agree that the Environmental Practices will be used by the
Company in its operations, subject to appropriate review from time to time
by the Board of Directors of the Company.
10. HUMAN RESOURCE PRACTICES
The Partners have reviewed the policies, programs, practices and controls
("Human Resource Practices") applied at CSM under the Human Resource
Management System of CSM, and agree that the Human Resource Practices will
be used by the Company in its operations, subject to appropriate review
from time to time by the Board of Directors of the Company.
****
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12. MANAGEMENT TEAM
12.1. Governing Board
Xxxxxx X. Xxxx
Xxxxxxx X. Xxxxx
Xxxx X. Xxxxxx
Tan Xxxx Song
Chia Song Kwee
12.2. Officers and Senior Managers
See organization chart, Attachment F-1
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Attachment F-5: Spending Summary
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Attachment F-6: Quarterly Factory
Loading & Output
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Attachment F-6: Annual Factory
Loading & Output
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Attachment F-7: Price Per Wafer
(Without Test)
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Attachment F-8: Profit and Loss
Statement
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Attachment F-9: Balance Sheet
Statement
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Attachment F-10: Funds Flow Statement
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