OPTION AGREEMENT REGARDING THE ISSUANCE AND
             SUBSCRIPTION OF PREFERENCE SHARES IN THE SHARE CAPITAL
                           OF ST MICROELECTRONICS N.V.


THE UNDERSIGNED:

1.       ST Microelectronics N.V., a limited liability company organised under
         the laws of the Netherlands, established in Amsterdam, the Netherlands,
         hereinafter: "STM";

and

2.       ST Microelectronics Holding II B.V., a private company organised under
         the laws of the Netherlands, established in Amsterdam, the Netherlands,
         hereinafter "HSBV".

WHEREAS:

a.       STM and H2BV have held discussions in respect of protecting STM from a
         hostile take over or similar actions in order to protect the interest
         of STM and of all the shareholders of STM;

b.       STM and H2BV hereby wish to enter into an agreement whereby -- subject
         to the provisions of this agreement -- an option is granted to H2BV to
         acquire shares in the share capital of STM;

c.       on May 31, 1999 the supervisory board of STM has been designated by the
         general meeting of shareholders of STM as the corporate body authorised
         to resolve upon issuance of any number of ordinary shares and/or
         preference shares as well as upon granting of rights to subscribe for
         any number of ordinary shares and/or preference shares;

d.       the supervisory board of STM, upon consultation and in agreement with
         the managing board of STM, has resolved on May 31, 1999 to grant to
         H2BV the right to subscribe for up to 180,000,000 preference shares in
         the share capital of STM (which preference shares were created in the
         authorised share capital of STM following the resolutions of the
         general meeting of shareholders of STM which were adopted on May 31,
         1999), copy of which resolution of the supervisory board of STM on May
         31, 1999 is attached to this agreement;

e.       the managing board of H2BV has resolved on May 31, 1999, after having
         obtained the approval of the supervisory board of ST Microelectronics
         Holding N.V. and the approval of the general meeting of shareholders of
         H2BV, to enter into this agreement;



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HEREBY AGREE AS FOLLOWS:

1.       STM hereby grants H2BV the right to acquire such a number of preference
         shares in the share capital of STM as H2BV shall desire, with the
         understanding that such number shall not exceed 180,000,000, being the
         number of preference shares that is presently comprised in the
         authorised share capital of STM.

2.       H2BV's right to acquire preference shares shall be subject to the prior
         approval of the supervisory board of STM as further set out in article
         6 of this agreement.

3.       Without the prior written consent of H2BV STM shall neither issue
         preference shares not grant rights to subscribe for preference shares
         to any other party than H2BV.

4.       Without the prior written consent of STM H2BV shall not sell or
         otherwise dispose of any preference shares and/or the voting rights
         attached thereon.

5.       If H2BV wishes to make use of its right to acquire preference shares in
         any share capital of STM it shall notify the President of the
         supervisory board of STM thereof in writing. Such notice, of which a
         copy must be sent by H2BV to the managing board of STM, shall specify
         the number of preference shares H2BV wishes to acquire and the date as
         per which H2BV wishes to acquire those preference shares, such date not
         being a date which is earlier than twenty days after the date of the
         notice. Upon receipt of the notice the President of the supervisory
         board of STM shall procure that three days prior to the date referred
         to in the notice of H2BV a resolution shall be adopted by the
         supervisory board of STM. If the supervisory board of STM resolves not
         to give its consent to the exercise of the option, no preference shares
         shall be issued to H2BV and STM shall immediately notify H2BV thereof.
         If the supervisory board of STM resolves to give its consent to the
         exercise of the option, STM, by the mere fact of such consent, hereby
         issues to H2BV the number of preference shares H2BV wishes to acquire
         on the date referred to in the notice of H2BV, provided that STM has
         received as per such date the amount to be paid upon the issue of the
         preference shares.

6.       An issue of preference shares pursuant to this agreement shall take
         place at a rate of 100% against payment of an amount equal to 25% of
         the aggregate par value of the preference shares to be issued. Such
         payment will be made in cash.

7.       The exercise by H2BV of its right to acquire a certain number of
         preference shares which is less than 180,000,000 shall not prevent H2BV
         from exercising its right to acquire further preference shares in the
         share capital of STM.



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                                        3

8.       The exercise by H2BV of its right to acquire preference shares shall
         not, after that the consequences thereof have been totally or partially
         remedied, prevent H2BV from again exercising such right.

9.       If and as soon as H2BV notifies STM in writing of its request thereto,
         STM shall take all possible action -- including but not limited to the
         convening of a general meeting of shareholders in accordance with the
         procedures laid down by its articles of association -- in order to
         repurchase or to cancel with repayment the preference shares held by
         H2BV, in such a way that such a repurchase or cancellation is effected
         as soon as possible but in any event within 6 months after the date of
         the request. In the event of a repurchase, the purchase price shall be
         equal to the total amount that has been paid on the shares since their
         issue.

10.      This agreement shall terminate as soon as H2BV shall no longer own at
         least 33% of the issued capital of STM. It may also be terminated by
         STM and H2BV through the execution of an agreement to that effect by
         both parties.

11.      This agreement shall be governed by and construed in accordance with
         the laws of the Netherlands.

12.      Any and all disputes arising in connection with this agreement shall be
         finally settled by arbitration in accordance with the rules of the
         Netherlands Arbitration Institute (Nederlands Arbitrage Instituut). The
         arbitration proceedings shall take place in the English language and
         the place of arbitration shall be Amsterdam. The arbitration tribunal
         shall consist of three arbitrators and shall decide in accordance with
         the rules of law.

Signed in twofold in [       ] on [      ], 1999.



__________________________________        ______________________________________
ST Microelectronics N.V.                  ST Microelectronics Holding II B.V.
By:  P. Pistorio                          by:  ST Microelectronics Holding N.V.
                                          which company is hereby represented by
                                          its managing directors B. Loubert and
                                          L. Acciari