Document:

exhibit4-10.htm

    Exhibit
4.10

     

    Execution Copy

     

    SETTLEMENT
AGREEMENT

     

         This SETTLEMENT AGREEMENT (together with all
Exhibits hereto, the “Settlement Agreement”) is made and entered into as of November 9,
2009 (the “Effective Date”) by and between Taiwan Semiconductor
Manufacturing Company, Ltd., a Taiwanese corporation, having a place of business
located at No.8 Li-Hsin Road 6, Hsin-Chu Science Park, Hsin-Chu, Taiwan,
Republic of China, on behalf of itself and all of its Related Companies (Taiwan
Semiconductor Manufacturing Company, Ltd. and its Related Companies,
collectively “TSMC”),
and Semiconductor Manufacturing International Corporation, an exempted company
incorporated under the laws of the Cayman Islands, having a place of business
located at No. 18 Zhang Jiang Road, Pudong New Area, Shanghai 201203,
People’s
Republic of China, on behalf of itself and all of its Related Companies,
including Semiconductor Manufacturing International (Beijing) Corporation,
Semiconductor Manufacturing International (Shanghai) Corporation, and SMIC
Americas (Semiconductor Manufacturing International Corporation and its Related
Companies, collectively “SMIC”).
As used herein, “Party”
refers to TSMC or SMIC, as the case may be, and “Parties”
refers to TSMC and SMIC collectively.

     

    W I T N E S S E T
H:

     

         WHEREAS, the Parties are adversaries in the
Pending Actions (as defined in Exhibit
A-1);

     

         WHEREAS, a verdict of liability has been
rendered against SMIC in the California State Court Action and, in light of the
potential for a verdict on damages against SMIC that could render SMIC
insolvent, TSMC desires to structure a settlement of the California State Court
Action that will insure the financial viability of SMIC and secure to TSMC a
strategic investment in SMIC, as contemplated hereunder; and

     

         WHEREAS, the Parties now desire to enter into
a full, final, complete and global settlement of the Pending Actions and the
underlying disputes upon the terms and conditions set forth in this Settlement
Agreement, which, upon execution, shall be legally binding and enforceable as of
the Effective Date.

     

         NOW, THEREFORE, in consideration of the
premises and the mutual covenants and promises contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the Parties, the Parties, intending to be legally bound, hereby
covenant and agree as follows:

     

    1. Definitions.

     

    
      	      	A.	      	All
      capitalized terms used herein that are not otherwise defined elsewhere
      herein shall have the meanings set forth in Exhibit A-1
      hereto.

    

     

    2. Payments.

     

    

     

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    Execution Copy

     

    
      	
            	A.	
            	SMIC shall pay an aggregate sum of two hundred million U.S. dollars
      (US$200,000,000.00) to TSMC in the following installments (each a “Settlement Payment”):
	      	 
	
            	 	
            	1.	 	Fifteen
      million U.S. dollars (US$15,000,000.00) upon execution of this Settlement
      Agreement;
	
            	 
	
            	 	
            	2.	 	Fifteen
      million U.S. dollars (US$15,000,000.00) by or before December 31,
      2009;
	
            	 
	
            	 	
            	3.	 	Twenty
      million U.S. dollars (US$20,000,000.00) by or before March 31,
    2010;
	
            	 
	
            	 	
            	4.	 	Twenty
      million U.S. dollars (US$20,000,000.00) by or before June 30,
    2010;
	
            	 
	
            	 	
            	5.	 	Twenty
      million U.S. dollars (US$20,000,000.00) by or before September 30,
      2010;
	
            	 
	
            	 	
            	6.	 	Twenty
      million U.S. dollars (US$20,000,000.00) by or before December 31,
      2010;
	
            	 
	
            	 	
            	7.	 	Fifteen
      million U.S. dollars (US$15,000,000.00) by or before June 30,
    2011;
	
            	 
	
            	 	
            	8.	 	Fifteen
      million U.S. dollars (US$15,000,000.00) by or before December 31,
      2011;
	
            	 
	
            	 	
            	9.	 	Fifteen
      million U.S. dollars (US$15,000,000.00) by or before June 30,
    2012;
	
            	 
	
            	 	
            	10.	 	Fifteen
      million U.S. dollars (US$15,000,000.00) by or before December 31,
      2012;
	
            	 
	
            	 	
            	11.	 	Fifteen
      million U.S. dollars (US$15,000,000.00) by or before June 30, 2013;
      and
	
            	 
	
            	 	
            	12.	      	Fifteen
      million U.S. dollars (US$15,000,000.00) by or before December 31,
      2013.
	
            	 
	
            	B.	      	Any Settlement Payment that is not paid when due shall bear
      interest until paid at the rate of 12% per annum. In the event any
      Settlement Payment is not paid within thirty (30) days of the date due,
      the maturity of all remaining Settlement Payments will accelerate and
      become due and payable in full within three (3) business
  days.

    

    

     

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      	      	C.	      	Except as
      provided in Section 2.E,
      SMIC’s obligation to make the payments due hereunder shall be irrevocable
      and will be secured by a series of promissory notes provided to TSMC in
      the form attached as Exhibit A-2 and
      letters of credit as provided in Section 2.F.
      All amounts due hereunder shall be paid to TSMC by electronic wire
      transfer of immediately available funds in accordance with the
      instructions of, and to such accounts specified by, TSMC without deduction
      for withholding tax obligations, if any, which obligations SMIC shall
      bear. The Parties shall reasonably cooperate to minimize such withholding
      and to seek a refund or release of any such withheld amounts.

	
            	 
	
            	D.	
            	Each Party may
      determine, in its sole discretion, how to allocate the payments made by
      SMIC to TSMC pursuant to this Settlement Agreement without any duty or
      obligation to consult or agree on any such allocation with the other
      Party. 
	
            	 
	
            	E.	
            	SMIC shall be
      relieved of its obligation to pay any remaining installments not yet due
      under Section
      2.A and shall not be held to be in breach hereof for any such
      failure to pay, in the event TSMC initiates any action or proceeding in
      breach of Section 6 other
      than in response to an action or proceeding initiated by SMIC in breach of
      such provisions and TSMC fails to dismiss such action or proceeding within
      five (5) business days following receipt of written notice from SMIC of
      such breach. 
	
            	 
	
            	F.	
            	SMIC shall use
      its commercially reasonable efforts to secure and deliver to TSMC letters
      of credit securing the payment of the promissory notes to be issued
      pursuant to this Section 2 by a
      financial institution and in a form reasonably acceptable to TSMC as soon
      as reasonably practicable. 

    

     

    3. Share Issuance. Concurrently
with the execution and delivery of this Settlement Agreement, TSMC and SMIC
shall execute and deliver the Share and Warrant Issuance Agreement in the form
of Exhibit B
(the “Share Issuance
Agreement”).

     

    4. Stipulated
Judgment.

     

    
      	      	A.	      	As soon as
      practicable following the execution of this Agreement, and in no event
      later than the end of the first business day in California following the
      execution of this Agreement, the Parties shall file with the Superior
      Court of the State of California, County of Alameda in connection with the
      California State Court Action, a Stipulated Judgment entering a final
      judgment in favor of the TSMC plaintiffs on all claims, cross-claims and
      supplemental claims filed by the parties in that action (the “Stipulated Judgment”). 
	
            	 
	
            	B.	
            	The Stipulated
      Judgment referenced in subsection A above shall be payable as follows:
      (i) Settlement Payments totaling two hundred
      million U.S. dollars (US$200,000,000.00) payable pursuant to Section 2; and
      (ii) securities issuable pursuant to the
      Share Issuance Agreement. 

    

     

    

     

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      	      	C.	      	As
      soon as practicable following the execution of this Agreement, and in no
      event later than the end of the first business day in Beijing, China
      following the execution of this Agreement, SMIC shall file a withdrawal of
      appeal with the Supreme Court in the Beijing Action.

    

     

    5. Mutual Release.

     

    
      	      	A.	      	Effective upon entry of the Stipulated Judgment and the dismissals
      of the Pending Actions pursuant to Section 4, each
      Party, on behalf of itself and its predecessors, successors, and permitted
      assigns, hereby fully and forever irrevocably and unconditionally releases
      and discharges the other Party and their respective predecessors,
      successors, and assigns, and each of their past and present employees,
      officers, directors, and agents from all claims, suits, demands, causes of
      action, judgments, losses, and liabilities of any nature, known or
      unknown, anywhere in the world, arising out of or related to (i) all
      claims and counterclaims that have been or could have been brought in the
      Pending Actions arising in whole or in any part prior to the Effective
      Date, and (ii) all claims and counterclaims based upon or relating to the
      appropriateness or basis of any claim or cause of action that either Party
      has asserted in the Pending Actions, including, without limitation, claims
      for malicious prosecution, sanctions, or abuse of process, provided, however, that
      this release expressly shall not apply to (a) the claims asserted by TSMC
      in the California State Court Action and addressed in the Stipulated
      Judgment, (b) any claims by a Party relating to any breach of this
      Settlement Agreement by the other Party or any breach by SMIC of the
      promissory notes issued hereunder, the Share Issuance Agreement, or the
      Stipulated Judgment and (c) the pending action against Katy Liu currently
      in the Hsinchu District Court, R.O.C. case number . 
	
            	 
	
            	B.	
            	Each
      Party acknowledges that it has consulted with legal counsel regarding the
      import of Section 1542 of the California Civil Code, which provides as
      follows: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
      DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
      THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
      SETTLEMENT WITH THE DEBTOR.” Each Party, for itself and for its legal
      successors and assigns, hereby expressly, knowingly, and intentionally
      waives any benefit or rights it may have under Section 1542 of the
      California Civil Code, as well as under any other statute or common law
      principles of similar effect. Each Party acknowledges that it has received
      independent legal advice from its attorneys with respect to the waiver of
      the provisions of Section 1542 of the California Civil Code, and any other
      statute or common law principles of similar effect, and each Party
      acknowledges that its waiver is a material inducement and consideration
      for the other Party’s execution of this Settlement Agreement. The Parties
      further agree that the releases set forth in this Settlement Agreement may
      not be terminated or rescinded because of any later discovery by either
      Party of different or additional facts or any unknown or unsuspected past
      claims. 

    
 

    

     

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      	      	C.	      	The Parties
      hereby expressly waive the benefits of and shall not assert the single
      claim doctrine discussed in Cadence Design
      Systems v. Avant!
      Corp., 29
      Cal. 4th 215 (2002), for purposes of defending against any claim based on
      unauthorized disclosure of the other Party’s trade secrets after the
      Effective Date in breach of this Settlement Agreement.
  

    

     

    6. Covenants Not to Sue.

     

    
      	      	A.	      	TSMC hereby
      covenants not to sue or bring any claim or action against SMIC based upon
      SMIC’s acquisition, use, disclosure or exploitation of any TSMC technology
      or information in connection with its processes, materials, process
      recipes or design rules or otherwise, or alleging that SMIC has
      misappropriated, infringed, or otherwise violated, or is misappropriating,
      infringing, or otherwise violating, any trade secret or other intellectual
      property right of TSMC anywhere in the world; provided, however, that
      this covenant expressly shall not apply to (1) any claim against SMIC for
      a breach of this Settlement Agreement or of the Stipulated Judgment
      (excluding Section 8), (2)
      any claim or cause of action against SMIC not related to the Pending
      Actions arising wholly after the Effective Date, (3) any claim to the
      extent based on an alleged infringement of TSMC’s Patent rights, and (4)
      any claim based on TSMC’s trademark rights, including, without limitation,
      those current actions excluded from the Pending Actions. 
	
            	 
	
            	B.	
            	SMIC hereby
      covenants not to sue or bring any claim or action against TSMC based upon
      TSMC’s acquisition, use, disclosure or exploitation of any SMIC technology
      or information in connection with its processes, materials, process
      recipes or design rules or otherwise, or any other SMIC information
      alleged to be in the possession of TSMC as of the Effective Date, or
      alleging that TSMC has misappropriated, infringed, or otherwise violated,
      or is misappropriating, infringing, or otherwise violating, any trade
      secret or other intellectual property right of SMIC anywhere in the world,
      provided,
      however,
      that this covenant expressly shall not apply to either (1) any claim
      against TSMC for a breach of this Settlement Agreement, (2) any claim or
      cause of action against TSMC not related to the Pending Actions arising
      wholly after the Effective Date, (3) any claim to the extent based on an
      alleged infringement of SMIC’s Patent rights, and (4) any claim based on
      SMIC’s trademark rights. 
	
            	 
	
            	C.	
            	Without
      derogation of the covenant not to sue pursuant to this Section 6, the
      Parties acknowledge and agree that this Settlement Agreement does not
      grant to any Party any license to, or any ownership right, title or
      interest whatsoever in, any technology, trade secrets or other
      confidential information or intellectual property of the other Party.
      

    

    

     

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    Execution Copy

     

    7. Termination of 2005
Settlement Agreement and 2005
Patent License Agreement. As of the Effective Date, the Parties acknowledge and agree that all
versions of the 2005 Settlement Agreement, the remaining payment obligations
thereunder, and the 2005 Patent License Agreement shall terminate and shall be
of no further force and effect, and all promissory notes of SMIC issued in
connection with the 2005 Settlement Agreement are hereby cancelled.

     

    8. Return or Destruction of Information.

     

    
      	
            	A.	
            	Mutual
      Obligation.
	
            	 
	      	 	      	1.	      	Promptly
      following the execution of this Settlement Agreement, each Party and/or
      its legal counsel shall return or destroy all Documents and files that
      were produced by the other Party (including any documents that were
      delivered to its outside litigation counsel) during the Pending Actions
      (except that each Party’s outside litigation counsel may retain one (1)
      copy thereof). If either Party at any time discovers any such Document
      described in Section 8.A.1
      in its possession, custody or control, such Party will promptly identify
      such Document to the other Party and will thereafter promptly destroy such
      Document or return such Document to the other Party. 
	
            	 
	
            	B.	
            	SMIC
      Obligation. 
	
            	 
	
            	 	
            	1.	
            	SMIC
      further covenants and agrees that promptly, but in any event no later than
      six (6) months from the Effective Date, SMIC shall: 
	
            	 
	
            	 	
            	 	
            	a.	 	use commercially
      reasonable good faith efforts to complete a search for all copies of all
      TSMC Documents in the possession, custody or control of SMIC or any of its
      employees and deliver to TSMC all TSMC Documents discovered during such
      search; 
	
            	 
	
            	 	
            	 	
            	b.	 	use commercially
      reasonable good faith efforts to complete a search of all current SMIC
      files (including all hard copies, hard files, electronic files, computers,
      servers and shared servers) for any and all Documents that currently
      reference or previously referenced “TSMC,” “BKM 1,” or “Wafertech” in
      their file path, properties, title or contents and deliver to TSMC all
      such Documents discovered during such search; 
	
            	 
	
            	 	
            	 	
            	c.	      	use commercially
      reasonable good faith efforts to complete a search of all current SMIC
      files (including all hard copies, hard files, electronic files, computers,
      servers and shared servers) for any and all copies of the Documents that
      were placed in escrow pursuant to Article V of the 2005 Settlement
      Agreement, as identified on Exhibit D (the
      “Escrowed Documents”), and deliver
      to TSMC all such Documents discovered during such search.
  

    

     

    

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            	2.	
            	The Escrowed
      Documents shall remain in escrow until the dismissal of the Pending
      Actions pursuant to Section 4. Upon
      such dismissal, the Parties shall instruct the escrow agent holding the
      Escrowed Documents to destroy the Escrowed Documents. Outside litigation
      counsel for each Party may retain one (1) copy of each of the Escrowed Documents.
      
	
            	 
	      	 	      	3.	      	Notwithstanding
      the foregoing, each Party’s outside litigation counsel may retain one (1)
      copy of such Documents delivered or destroyed pursuant to this Section 8 and
      shall keep such Documents confidential at all times and shall not disclose
      such Documents to any person; provided that a
      Party may use such Documents in a litigation or arbitration against it by
      the other Party, except to the extent such Documents are entitled to the
      protection of the attorney-client privilege. 
	
            	 
	
            	 	
            	4.	
            	All Documents or
      materials identified or produced by SMIC (or its counsel) under this Section 8.B
      shall be treated as delivered solely for the purpose of resolving existing
      disputes. TSMC agrees that it will not use any such Documents or materials
      delivered by SMIC to TSMC under this Section 8.B as
      evidence in any legal or administrative proceeding brought by TSMC against
      SMIC (except as provided in Section 8.B.3)
      nor will it contend that the delivery of such Documents or materials is
      evidence of liability of any kind. 
	
            	 
	
            	C.	
            	Notwithstanding anything to the contrary set forth herein, SMIC
      shall not be required to return or destroy any documentation of SMIC’s
      process recipes, process flows and design rules.

    

     

    9. Confidentiality.

     

    
      	
            	A.	
            	Mutual Confidentiality
      Obligations. 
	
            	 
	      	 	      	1.	
            	Each Party hereby
      covenants and agrees that it will treat any information, trade secrets or
      confidential technology of the other Party, including any information
      alleged to be trade secrets of a Party, in the same manner as it treats
      its own similar or like confidential information, but in no event with
      less than reasonable care, including through the use of valid and
      enforceable non-disclosure agreements and policies.
	
            	 
	
            	 	
            	2.	      	Each Party agrees
      that it will not, in any way, use, assign, license, sell, or transfer to a
      third party any trade secrets or confidential technology belonging to the
      other Party; provided that
      nothing will prohibit SMIC from using trade secrets and confidential
      technology of TSMC that is currently embedded in the processes, materials,
      process recipes, design rules or technologies of SMIC; provided that
      SMIC abides by the limitations on use and confidentiality obligations
      contained herein, including the use of valid and enforceable nondisclosure
      agreements and policies.

    

     

    

     

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      	      	B.	      	Third
      Parties. Each Party hereby
      covenants and agrees not to disclose, in whole or in part, any of the
      other Party’s alleged confidential information, trade secrets or
      confidential technology to any third party, except for such third parties
      with a need to know such information for business purposes and under the
      same terms and conditions that such Party discloses its own like or
      similar confidential information to third parties, including pursuant to
      valid and enforceable non-disclosure agreements and policies. It is understood that TSMC does not intend
      to restrict SMIC’s foundry business and therefore SMIC shall be permitted
      to disclose TSMC information to its bona fide customers (including
      potential customers), suppliers and vendors pursuant to this Section 9.B
      only if such information is embedded in its processes, materials, process
      recipes, or design rules or in any improvement or modification; provided that
      such information is disclosed pursuant to valid and enforceable
      nondisclosure agreements and does not, in any way, assign, license, sell,
      or transfer any such information to any third party. 
	
            	 
	
            	C.	
            	Nothing set forth
      in this Section
      9 shall limit TSMC from using or disclosing any Documents or
      materials that originated from TSMC or other TSMC Documents.
  

    

     

    10. Confidentiality of
Settlement.

    
    

     

    
      	      	A.	      	The Parties agree that all provisions, terms and conditions of this
      Settlement Agreement (including all Exhibits hereto) shall be deemed to be
      the confidential information of both Parties and are and shall remain
      strictly confidential except to the extent disclosed pursuant to Section 10.A.1,
      10.A.2,
      or 10.A.3. Neither
      Party shall disclose any such provisions, terms and conditions, in whole
      or in part, under any circumstances, to any person not a party hereto,
      except:
	
            	 
	
            	 	
            	1.	
            	With
      the prior written consent of the other Party;
	
            	
            	
            	
            	
            	  
	
            	
            	
            	2.	      	To the extent such disclosure may
      be required in judicial, administrative, or regulatory proceedings in
      response to a valid subpoena or as otherwise may be required by law, or
      rules of any applicable regulatory organization to whose jurisdiction any
      of the Parties is subject, but only subject to a protective order or other
      similar protections (as applicable);
	
            	
            	
            	
            	
            	 
	
            	
            	
            	3.	
            	For the purposes of disclosure in
      connection with the Securities Exchange Act of 1934, as amended, the
      Securities Act of 1933, as amended, and the Rules Governing the Listing of
      Securities on The Hong Kong Stock Exchange Limited (the “Hong
      Kong Stock Exchange”) and
      any other disclosures or reports filed with the U.S. Securities and
      Exchange Commission, the New York Stock Exchange (the “NYSE”), the Hong Kong Stock Exchange, the
      Securities and Futures Commission of Hong Kong, the Taiwan Stock Exchange,
      and comparable China, Taiwan R.O.C., and other securities authorities,
      where applicable, provided that
      each Party shall diligently seek confidential treatment for such portions
      of the terms of this Settlement Agreement as reasonably requested by the
      other Party;

    

     

    

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      	      	4.	      	By SMIC to
      Related Companies or their respective bona fide suppliers or customers
      pursuant to valid and enforceable non-disclosure agreements with respect
      to Sections
      6, and 9.B of this
      Settlement as is reasonably necessary to solely assure such parties of the
      scope of the covenants and agreements set forth in such sections as may be
      pertinent to them; or 
	
            	 
	
            	5.	
            	To either Party’s
      accountants, auditors, legal counsel, insurers, or bankers, but only
      subject to an obligation of confidentiality and/or privilege (as
      applicable); 

    

     

    provided, however, that prior
to any such disclosure pursuant to Sections 10.A.2 or
10.A.3, the
Party seeking to make such disclosure shall notify the other Party in advance
and consult with the other Party and otherwise take all reasonable actions to
minimize the nature and extent of such disclosure, and in the case of Section
10.A.3, the Parties will, to the extent permissible, agree on a form of summary
of terms of the Settlement Agreement and related exhibits for filing with the
Hong Kong Stock Exchange, Taiwan Stock Exchange, and NYSE, in lieu of filing the
Settlement Agreement and related exhibits with such authorities.

     

    11. No Attribution. SMIC covenants and agrees that it will not make any statements that will
suggest or imply to any third party (including but not limited to customers)
that SMIC’s manufacturing processes, including, without limitation, process
flows, process recipes or design rules, use or are derived from TSMC processes
or technology, or are “based on TSMC’s processes,” are “TSMC compatible,” are
“TSMC-like,” are “T-like,” or otherwise suggest a use of or a derivation from
TSMC, compatibility with TSMC’s processes or technology, or endorsement by TSMC.
However, SMIC may state that its operations are “foundry compatible” according
to generally accepted industry standards.

     

    12. Reservation of Rights; Other Obligations.

     

    
      	      	A.	      	All rights not
      expressly granted by the Parties hereunder shall be expressly reserved.
      Without limiting the generality of the foregoing, the Parties expressly
      acknowledge and agree that this Settlement Agreement does not grant to any
      Party any express or implied licenses or, except as expressly set forth in
      Section
      6, any express or implied covenants not to sue, and nothing
      contained herein shall be construed or interpreted as a grant, by
      implication or otherwise, of any licenses or, except as noted, any
      covenants not to sue. 

    

     

    

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      	      	B.	      	Neither Party
      shall have any obligation to provide any technology (including, without
      limitation, any information or Documents), or any training or support, to
      the other Party in connection with any rights granted hereunder.
  

    

     

    13. Representations and Warranties. Each Party represents and warrants to the
other Party that:

     

    
      	
            	A.	
            	Such Party is a
      duly organized corporation and has the corporate power and authority to
      execute and deliver this Settlement Agreement and to perform its
      obligations hereunder; 
	
            	 
	
            	B.	
            	The execution,
      delivery and performance of this Settlement Agreement by such Party have
      been duly and validly authorized by all requisite corporation action. SMIC
      has delivered to TSMC a certificate, signed by the Board Secretary of
      SMIC, certifying the resolutions unanimously approved by the board of
      directors of SMIC authorizing the execution of this Settlement
      Agreement;
	
            	 
	
            	C.	
            	This Settlement
      Agreement has been duly executed and delivered by a duly authorized
      officer of such Party and constitutes the valid and binding agreement of
      such Party enforceable in accordance with its terms; 
	
            	 
	
            	D.	
            	Such Party has
      received all consents, approvals and permits necessary for such Party to
      enter into this Settlement Agreement and perform its obligations
      hereunder, subject to those approvals specifically contemplated under the
      Share Issuance Agreement; and 
	
            	 
	      	E.	      	Neither the
      execution, delivery nor performance of this Settlement Agreement by such
      Party will violate (i)
      the organizational
      documents of such Party, (ii) any material agreement under which such
      Party is bound or (iii) any law, ordinance, rule, regulation or any
      judgment, writ, injunction or order of any court, governmental,
      administrative or regulatory authority to which such Party or its assets
      is subject. 

    

     

    14. Disclaimer. Except
as expressly set forth herein, each Party hereby disclaims all other warranties,
express or implied, including without limitation, the warranties of
merchantability, non-infringement and fitness for a particular
purpose.

     

    15. Choice of Law. This Settlement
Agreement, its validity, interpretation, enforcement, performance and breach
shall exclusively be governed by and construed in accordance with the laws of
the State of California, U.S.A., without regard to principles of conflicts of
law, as if this Settlement Agreement were wholly executed and wholly performed
in the State of California, U.S.A., and the substantive laws of the State of
California, U.S.A. shall apply to any dispute arising out of, relating to or in
connection with this Settlement Agreement.

     

    

     

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    16. Dispute
Resolution.

     

    
      	      	A.	      	Mediation. Any actual or
      alleged breach of the provisions of Section 8 (other than Section
      8.B.4) shall be exclusively addressed through
      mediation in accordance with and subject to the provisions of this Section 16.A.
      Any actual or alleged breach of the provisions of Section 9 shall
      first be submitted to mediation in accordance with and subject to the
      provisions of this Section 16.A;
      in the event the Parties are unable to resolve such disputed matter
      through mediation, either Party may submit such matter to arbitration in
      accordance with and subject to the provisions of Section 16.B.
      
	
            	 
	
            	 	
            	1.	
            	The Party seeking
      the resolution of the matter in dispute (the
      “Claimant”) shall provide written notice (the
      “Dispute Notice”) to the other Party (the “Respondent”) identifying the matter in dispute (the
      “Disputed Matter”) and providing a statement in
      reasonable detail as to the basis for such dispute. 
	
            	 
	
            	 	
            	2.	
            	Within sixty (60)
      days of the date of receipt of the Dispute Notice by the Respondent,
      representatives of the Parties shall meet at a mutually agreed venue (the
      “First Meeting”). If the Parties cannot agree on the
      venue for the First Meeting, the venue shall be Hong Kong. At the First
      Meeting, the Parties shall attempt in good faith to resolve the Disputed
      Matter set forth in the Dispute Notice. 
	
            	 
	
            	 	
            	3.	      	In the event that
      the Parties are unable to resolve the Disputed Matter at the First
      Meeting, representatives of the Parties shall continue to meet at a
      mutually agreed venue on a regular basis in accordance with this Section 16.A
      (each, an “Additional Meeting”). Unless the Parties otherwise agree,
      in writing, the Additional Meetings shall be no more frequent than once
      every two (2) months and no less frequent than once every four (4) months
      and shall continue for up to one year from the date of the Dispute Notice.
      If the Parties cannot agree on the venue for any Additional Meeting(s),
      the venue shall be Hong Kong. At each Additional Meeting, the Parties
      shall continue to attempt in good faith to resolve the Disputed Matter set
      forth in the Dispute Notice. 
	
            	 
	
            	 	
            	4.	
            	In the event that
      the Parties are unable to resolve the Disputed Matter after the first two
      (2) Additional Meetings, upon written notice by one Party to the other
      Party, an independent, third party mediator that is mutually acceptable to
      the Parties (the “Dispute Mediator”) shall attend the next Additional
      Meetings at the shared expense of the Parties. The Parties agree that
      those mediators identified on Exhibit C are
      mutually acceptable to the Parties. The Dispute Mediator shall help the
      Parties to resolve the Disputed Matter. 

    

     

    

     

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            	B.	
            	Arbitration.
	
            	 
	      	 	      	1.	      	Except
      for the payment obligations set forth in the Stipulated Judgment and Section 4
      herein, and except as specifically stated otherwise in this Settlement
      Agreement (including Section 16.A),
      all disputes, controversies or claims arising out of, relating to or in
      connection with this Settlement Agreement, including any ancillary claims
      of any Party arising out of, relating to or in connection with the
      validity, negotiation, execution, interpretation, performance or
      non-performance of this Settlement Agreement (including the validity,
      scope and enforceability of this arbitration provision) shall be finally
      settled under the Rules of Arbitration of the International Chamber of
      Commerce (“ICC”). The place of the arbitration shall be
      Singapore and the language of the arbitration shall be English. The
      arbitral tribunal (the “Tribunal”) will be composed of three arbitrators.
      Each Party to the arbitration shall be entitled to appoint one arbitrator.
      The third arbitrator shall be chosen by the two arbitrators appointed by
      or on behalf of the Parties and shall act as the Chairman of the Tribunal.
      If the two arbitrators appointed by the Parties cannot agree on the
      selection of the third arbitrator within thirty (30) days of the date of
      confirmation by the ICC of the later of the two Party-appointed
      arbitrators to be confirmed, the third arbitrator shall be appointed by
      the ICC. The award of the Tribunal shall be final and binding upon the
      Parties hereto. Any challenge to the award of the Tribunal shall be
      brought in Singapore.
	
            	 
	
            	 	
            	2.	
            	Within
      thirty (30) days after being constituted, the Tribunal shall convene a
      meeting (the “Arbitration Meeting”) with the Parties or their counsel to
      (1) fix the time table for submissions and discovery agreed to by the
      Parties; (2) set the time and place for hearings; (3) determine any
      procedures to be followed in the arbitration that have not already been
      provided for in this Settlement Agreement; and (4) discuss any other
      preliminary issues the Tribunal or the Parties wish to raise.
	
            	 
	
            	 	
            	3.	
            	The
      Parties shall be entitled to discovery. Discovery shall consist of one or
      more exchange(s) of documents between the Parties and/or the taking of
      sworn, oral testimony, transcribed verbatim, by a court reporter prior to
      the final hearing (i.e., depositions). Each Party will be limited to ten
      (10) depositions of fact witnesses and any expert witnesses designated to
      testify at the hearing. No deposition shall exceed seven (7) hours. The
      rules governing the examination of witnesses at depositions shall be the
      International Bar Association Rules of Evidence. The Parties and the
      Tribunal shall be given written notice, at least twenty (20) days in
      advance, of the time and place of any deposition. In any exchange of
      documents, each Party shall produce all documents in its possession that
      are relevant to the factual issues in the case, including all documents
      that it intends to rely upon in the arbitration, within thirty (30) days
      of the receipt of a written request for such documents. Unless otherwise agreed in writing by the Parties or
      directed by the Tribunal, the Parties shall have one hundred eighty (180)
      days from the Arbitration Meeting to complete all discovery in the
      arbitration (the “Discovery Completion Date”). The Tribunal may, in its discretion,
      upon the request of a Party, extend the time for completion of discovery
      to remedy any abuse of discovery by a Party, including, for example, any
      failure to respond, or any untimely responses, to discovery requests. All
      discovery disputes not resolved by the Parties shall be resolved
      expeditiously by the Tribunal.

    

     

    

     

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      	      	4.	      	The Tribunal
      shall conduct a final hearing in the arbitration beginning thirty (30)
      days following the Discovery Completion Date. Each Party will be allowed
      twenty (20) hours to present its case at the final hearing. The final
      hearing may include opening and closing statements by each of the Parties,
      direct, redirect and cross-examination of fact and expert witnesses, and
      direct, cross-examination and re-direct examination of rebuttal witnesses.
      Unless the Parties otherwise agree in writing to extend this period, the
      Tribunal will render its award within forty-five (45) days of the final
      hearing. 
	
            	 
	
            	5.	
            	Notwithstanding
      the foregoing, the Parties acknowledge and agree that any dispute arising
      under the Share Issuance Agreement shall be governed by the terms of that
      agreement, including the arbitration provisions set forth in Section 7(a)
      thereof. 

    

     

    17. Ancillary Proceedings. Any Party may bring a suit, action or special proceeding for the purpose
of compelling a party to arbitrate, seeking temporary or preliminary injunctive
relief in aid of and pending arbitration hereunder, and/or enforcing an
arbitration award. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF COURTS LOCATED IN TAIWAN, R.O.C., THE PEOPLE’S REPUBLIC OF
CHINA, THE SPECIAL ADMINISTRATIVE REGION OF HONG KONG, SINGAPORE, AND THE STATE
OF CALIFORNIA, U.S.A. FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN
ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 17. The
Parties acknowledge that the forum(s) designated by this Section 17 have a
reasonable relation to this Settlement Agreement, and to the Parties’
relationship with one another. The Parties hereby waive, to the fullest extent
permitted by applicable law, any objection which they now or hereafter may have
to personal jurisdiction or to the laying of venue of any such ancillary suit,
action or proceeding brought in any court referred to in this Section 17 and such
Parties agree not to plead or claim the same.

     

    18. Stipulated Recovery. Notwithstanding
anything contained herein to the contrary, the Parties agree that in the event
of any material breach of this Settlement Agreement (excluding Section 8), the
promissory notes issued hereunder, the Share Issuance Agreement, or the
Stipulated Judgment that is not cured within thirty (30) days of SMIC’s receipt
of written notice of such breach, SMIC shall promptly pay to TSMC, in addition
to any damages arising from such breach, (i) money damages in the amount of
forty-four million U.S. dollars (US$44,000,000.00) in reimbursement of fees and
expenses incurred by TSMC in connection with the Pending Actions and (ii)
royalty payments equal to five percent (5%) of SMIC’s gross revenues derived
from foundry services in respect of SMIC’s 90nm and larger manufacturing
processes during the period commencing on the date of such breach and ending on
the date that is twenty (20) years from the date hereof. The Parties acknowledge
and agree that such awards constitute liquidated damages and not a
penalty.

     

    

     

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    19. Miscellaneous.

     

    
      	      	A.	      	Assignment. Neither
      Party shall assign or otherwise transfer this Settlement Agreement or any
      benefits or rights hereunder, in whole or in part, without the express
      prior written consent of the other Party in its sole discretion. A Change
      of Control of SMIC occurring at any time prior to the date that is ten
      (10) years from the date hereof shall be deemed an assignment of this
      Settlement Agreement by SMIC for purposes of the preceding sentence. Any
      attempted assignment or transfer in contravention of the foregoing shall
      be null and void ab initio. 
	
            	 
	
            	B.	
            	Binding Effect; No Intended
      Third Party Beneficiaries. This Settlement Agreement shall be
      binding upon, inure to the benefit of and be enforceable by the Parties
      and their permitted successors and permitted assigns. This Settlement
      Agreement is not intended to, and shall not, create any rights against any
      Party in favor of any person or entity other than a Party, except as
      otherwise expressly provided for herein. 
	
            	 
	
            	C.	
            	Costs. Each Party shall
      pay its own costs and expenses in connection with the preparation,
      negotiation, and execution of this Settlement Agreement. In the event of
      any dispute under this Settlement Agreement, the prevailing party in the
      arbitration or any ancillary proceeding in respect thereof shall be
      entitled to recover all costs and expenses, including reasonable attorneys
      fees, incurred in connection therewith. 
	
            	 
	
            	D.	
            	No Waiver. The failure
      of a Party to insist upon strict adherence to any term of this Settlement
      Agreement on any occasion shall not be considered a waiver that deprives
      that Party of the right thereafter to insist upon strict adherence to that
      term or any term of this Settlement Agreement. Any waiver must be in
      writing and specifically state the terms of this Settlement Agreement
      subject to such waiver. 
	
            	 
	
            	E.	
            	Construction and Voluntary
      Execution. Each Party represents, agrees and acknowledges as
      follows: (i) such Party and its counsel have participated fully in the
      review and negotiation of this Settlement Agreement, and such Party has
      been advised of and has discussed all aspects of this Settlement Agreement
      thoroughly with such counsel of such Party’s own choosing; (ii) such Party
      has had a reasonable amount of time in which to review and consider this
      Settlement Agreement and has read and understands all of the provisions
      herein; and (iii) such Party is competent to enter into this Settlement
      Agreement. All Parties have participated equally in the formation of this
      Settlement Agreement. The language of this Settlement Agreement shall not
      be presumptively construed against any Party, nor shall prior drafts
      exchanged in the course of negotiations or other parol evidence be
      considered in the interpretation of the Settlement Agreement. This
      Settlement Agreement is executed voluntarily by each of the Parties hereto
      without any duress or undue influence on the part of any of them. It is hereby stipulated and agreed that the
      Parties have, and shall be deemed to have, waived and relinquished, to the
      fullest extent permitted by law, any and all provisions, rights, and
      benefits conferred by any state, federal, or common law, or other legal
      doctrine that is similar, comparable, equivalent, or identical to, or
      which has the effect of, Section 1654 of the California Civil Code, which
      provides: “In cases of uncertainty not removed by the preceding rules, the
      language of a contract should be interpreted most strongly against the
      party who caused the uncertainty to
exist.”

    

     

    

     

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            	F.	
            	Compromise. This
      Settlement Agreement is a compromise of many complex issues and disputes
      between the Parties. The Parties may not, and each agrees that it will
      not, use this Settlement Agreement in any way as a measure of damages, or
      evidence therefor, of any claim between TSMC and SMIC or any valuation of
      rights granted hereunder. 
	
            	 
	
            	G.	
            	Entire Agreement. This
      Settlement Agreement (including, without limitation, all Exhibits hereto)
      represents the only agreements of the Parties with respect to the Pending
      Actions. 
	
            	 
	
            	H.	
            	Headings. The headings
      and captions are inserted for convenience of reference only and are not
      intended to be a part of or to affect the meaning or interpretation of
      this Settlement Agreement. 
	
            	 
	      	I.	      	Non-Agency. Nothing in
      this Settlement Agreement is intended or shall be deemed to constitute a
      partnership, agency, employer-employee, or joint venture relationship
      between the Parties. Neither Party shall incur any debts or make any
      commitments for the other. There is no fiduciary duty or special
      relationship of any kind between the Parties to this Settlement Agreement.
      Each Party expressly disclaims any reliance on any act, word, or deed of
      the other Party in entering into this Settlement Agreement. 
	
            	 
	
            	J.	
            	Severability. If any
      provision or portion of a provision of this Settlement Agreement is held
      by a court of competent jurisdiction or arbitrator to be invalid under any
      applicable statute or rule of law, such court or arbitrator is authorized
      to modify such provision to the minimum extent necessary to make it valid,
      and the remaining provisions or portions of provisions of this Settlement
      Agreement shall in no way be affected or impaired thereby. 
	
            	 
	
            	K.	
            	Equitable Remedies. Each
      Party hereby acknowledges and agrees that the other Party will suffer
      irreparable harm in the event of any material breach or threatened
      material breach of the provisions of this Settlement Agreement and
      therefore shall be entitled to injunctive and other equitable relief
      (including, without limitation, the issuance of a temporary restraining
      order and/or injunction) as an appropriate remedy for such material breach
      or threatened material breach of the provisions of this Settlement
      Agreement (other than the breach or threatened breach of Section 8, as
      to which mediation is the exclusive
remedy).

    

     

    

     

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            	L.	
            	Remedies Cumulative. The rights and remedies provided herein
      are cumulative and not exclusive of any rights or remedies provided by
      law. 
	
            	 
	      	M.	      	Notices. Any notice or other communication
      hereunder shall be sufficiently given to (1) SMIC when sent by overnight
      or certified mail addressed to “Chief Legal Officer, Semiconductor
      Manufacturing International Corporation, No. 18 Zhang Jiang Road, Pudong
      New Area, Shanghai 201203, People’s Republic of China”; and (2) TSMC when
      sent by overnight or certified mail addressed to “General Counsel, Taiwan
      Semiconductor Manufacturing Co., Ltd., No.8 Li-Hsin Road 6, Hsin-Chu
      Science Park, Hsin-Chu, Taiwan, Republic of China.” Changes to such
      addresses may be specified by written notice provided to the other Party.
      
	
            	 
	
            	N.	
            	Term. The term of this Settlement Agreement
      shall commence as of the Effective Date and be non-terminable and
      irrevocable thereafter and all rights and benefits granted by one Party to
      the other hereunder may not be terminated or revoked.

    

     

         IN WITNESS WHEREOF, the Parties have executed
and delivered this Settlement Agreement as of the date first set forth
above.

     

    
      	TAIWAN
      SEMICONDUCTOR 	SEMICONDUCTOR
      MANUFACTURING 
	MANUFACTURING COMPANY,
      LTD. 	INTERNATIONAL
      CORPORATION 
		
	
            	

    

    

     

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    Exhibit A-1

     

    Definitions (Section 1)

     

    
      	A.	      
      	“2005 Patent License Agreement” means the
      Patent License Agreement, effective January 31, 2005, by and between
      Taiwan Semiconductor Manufacturing Company, Ltd. and all of its
      Subsidiaries (as defined in the 2005 Patent License Agreement) and
      Semiconductor Manufacturing International Corporation and all of its
      Subsidiaries (as defined in the 2005 Patent License
  Agreement).
	 
	B.	
            	“2005 Settlement Agreement” means the
      Settlement Agreement, effective January 31, 2005, by and between Taiwan
      Semiconductor Manufacturing Company, Ltd. and all of its Related Companies
      (as defined in the 2005 Settlement Agreement) and Semiconductor
      Manufacturing International Corporation and all of its Related Companies
      (as defined in the 2005 Settlement Agreement).
	 
	C.	
            	“Additional
      Meeting” has the meaning set forth in Section 16.A.
	 
	D.	
            	“Arbitration
      Meeting”
      has the meaning set forth in Section 16.B.
	 
	E.	
            	“Change of Control” means the
      occurrence of any of the following events:
	 
	 	
            	       (a) any Competitor becomes the
      “beneficial owner” (as defined in Rule 13d-3
      under the Securities Exchange Act of 1934, as amended, except that the
      Competitor will be deemed to have “beneficial ownership” of all shares
      that the Competitor has the direct or indirect right to acquire, whether
      such right is exercisable immediately or only after the passage of time),
      directly or indirectly, of 50% or more of the total voting power of the
      common shares and/or other shares having the ordinary power to vote in the
      election of directors (“Voting
      Shares”) of Semiconductor Manufacturing International Corporation
      or its successor, whether such ownership is acquired through merger,
      consolidation, amalgamation, tender or exchange offer, open market
      purchases, privately negotiated purchases, or otherwise;
	 
	 	
            	       (b) any Competitor directly or
      indirectly acquires (in one or more transactions) all or substantially all
      of the assets of Semiconductor Manufacturing International Corporation (or
      any successor thereof) and its Subsidiaries taken as whole;
or
	 
	 	
            	       (c) the merger, consolidation,
      or amalgamation of any Competitor with or into Semiconductor Manufacturing
      International Corporation (or any successor thereof) or any of its
      Subsidiaries as a result of which the holders of the Voting Stock of
      Semiconductor Manufacturing International Corporation (or any successor
      thereof) immediately prior to such transaction own, directly or
      indirectly, less than a majority of the Voting Stock of Semiconductor
      Manufacturing International Corporation (or such successor) or the
      applicable surviving entity or any direct or indirect parent company
      thereof immediately after such transaction.
	  
	F.	
            	“Claimant” has the meaning set forth in
      Section
  16.A.

    

    

     

    A-1

    

    
    

    Execution Copy 

     

    
      	G.	      	“Competitor” shall mean any
      entity that provides or that has the capability to provide (as in the case
      of an integrated device manufacturer), directly or indirectly through any
      Subsidiary, semiconductor wafer fabrication foundry services to third
      parties, other than an entity that is organized or headquartered, or whose
      semiconductor wafer fabrication operations are predominantly located, in
      the People’s Republic of China.
	
            	
            	 
	H.	
            	“Discovery Completion
      Date” has
      the meaning set forth in Section
      16.B.
	
            	
            	 
	I.	
            	“Dispute Mediator” has the meaning
      set forth in Section
      16.A.
	
            	
            	 
	J.	
            	“Dispute Notice” has the meaning
      set forth in Section
      16.A.
	
            	
            	 
	K.	
            	“Disputed Matter” has the meaning
      set forth in Section
      16.A.
	
            	
            	 
	L.	
            	“Documents” means any
      documents, materials, information, whether in tangible or intangible form
      (including, without limitation, in print or in electronic form) and any
      and all notes, summaries, extrapolation or compilation thereof regardless
      of form that may contain or be based on any such documents.
	
            	
            	 
	M.	
            	“Effective Date” has the meaning
      set forth in the Introduction.
	
            	
            	 
	N.	
            	“Escrowed Documents” has the meaning
      set forth in Section
      8.B.
	
            	
            	 
	O.	
            	“First Meeting” has the meaning
      set forth in Section
      16.A.
	
            	
            	 
	P.	
            	“ICC” has the meaning
      set forth in Section
      16.B.
	
            	
            	 
	Q.	
            	“Managed
      Fabricators” means the wafer
      fabrication facilities currently managed by SMIC in Chengdu and Wuhan,
      China and any future managed wafer fabrication facility that is subject to
      the direct management and control of SMIC, but in each case, only for so
      long as under the direct management and control of SMIC.
	
            	
            	 
	R.	
            	“Party” and “Parties” have the
      meanings set forth in the Introduction.
	
            	
            	 
	S.	
            	“Patents” means all U.S.
      or foreign issued letters patent and statutory invention registrations,
      including all issued reissues, divisions, continuations, continuations in
      part, renewals, extensions and reexaminations thereof.
	
            	
            	 
	T.	
            	“Pending Actions” means (1) the
      California state court action pending in the Superior Court of California
      for the County of Alameda, TSMC North
      America v. Semiconductor Mfg Int’l Corp., Case No. RG 06-28611 (the
      “California State Court Action”);
      and (2) the Chinese court action in the Beijing High People’s Court of the People’s Republic
      of China, (2006) Gao Min Chu Zi No. 1575, currently on appeal to the PRC
      Supreme Court, 2009 Min San Chung Tse No.8 (the “Beijing Action”). The Pending Actions
      shall not include (i) the pending United States trademark action
      referenced as Taiwan Semiconductor Mfg.
      Co., Ltd., Opposer, v. Semiconductor Mfg. Int’l (Shanghai) Corp.,
      Applicant, Opposition No. 91171146 (Parent) and 91171147
      (Consolidated as of Feb. 4, 2008), Application Serial Nos. 78//377,294 and
      78/377,300, United States Patent and Trademark Office, Trademark Trial and
      Appeal Board (filed Mar. 2, 2004); (ii) the pending Hong Kong trademark
      action referenced as In the Matter of Opposition by Taiwan
      Semiconductor Mfg. Co., Ltd. to Trade Mark Application No. 300167643 in
      Classes 9 and 40 by Semiconductor Manufacturing International (Shanghai)
      Corporation (application filed March 1, 2004, opposition
      filed December 21, 2004); or (iii) the pending action against Katy Liu
      currently in the Hsinchu District Court, R.O.C. case number .

    

     

     

     

    A-2

     

    

     

    
    

    Execution Copy 

     

    
      	U.	       	“Related Companies” means, (1) with respect to TSMC, its
      existing Subsidiaries, and future subsidiaries under the Control of TSMC,
      including TSMC North America, Inc. and Wafertech, Inc.; and (2) with
      respect to SMIC, its existing Subsidiaries (including Semiconductor
      Manufacturing International (Shanghai) Corporation, Semiconductor
      Manufacturing International (Beijing) Corporation and SMIC Americas), SMIC
      Tianjin, and SMIC Shenzhen, and its Managed Fabricators, and future
      subsidiaries under the Control of SMIC.
	 
	V.	
            	“Settlement Agreement”
      has the meaning set
      forth in the Introduction.
	 
	W.	
            	“Settlement Payment” has the meaning set forth in Section 2.A.
	 
	X.	
            	“Share Issuance Agreement”
      has the meaning set
      forth in Section
      3.
	 
	Y.	
            	“SMIC” has the meaning set forth in the
      Introduction.
	 
	Z.	
            	“Subsidiaries” of a Party or of a third party, shall
      mean a corporation, company or other entity: (a) more than fifty percent
      (50%) of whose outstanding shares or securities (such shares or securities
      representing the right to vote for the election of directors or other
      managing authority) are, now or hereafter, owned or controlled, directly
      or indirectly, by a Party or third party, but such corporation, company or
      other entity shall be deemed to be a Subsidiary only so long as such
      ownership or control exists; or (b) which does not have outstanding shares
      or securities, as may be the case in a partnership, joint venture or
      unincorporated association or other entity, but more than fifty percent
      (50%) of whose ownership interest representing the right to (i) make the
      decisions for such corporation, company or other entity, or (ii) vote for,
      designate, or otherwise select members of the highest governing decision
      making body, managing body or authority for such partnership, joint
      venture, unincorporated association or other entity, is, now or hereafter,
      owned or controlled, directly or indirectly, by a Party or third party,
      but such corporation, company or other entity shall be deemed to be a
      Subsidiary only so long as such ownership or control exists.
	 
	AA.	
            	“Tribunal” has the meaning set forth in Section 16.B.
	 
	BB.	
            	“TSMC” has the meaning set forth in the
      Introduction.
	 
	CC.	
            	“TSMC Documents” shall mean any Document that contains
      alleged TSMC confidential information, trade secrets or confidential
      technology.
	 
	DD.	
            	“Voting Shares” has the meaning set forth in the
      definition of Change of Control.

    

     

     

     

    A-3 

     

    

    
    

    Execution Copy 

     

    [Remainder of Page Intentionally Left Blank] 

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    A-4

    
    

     

    

    
    

    Exhibit
B

     

    Share Issuance Agreement (Section
3) 

     

    [Please see
attached.] 

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    B-1

    
    

     

    

    
    

    Execution Copy 

     

    SHARE AND WARRANT ISSUANCE
AGREEMENT 

     

         This SHARE AND WARRANT ISSUANCE AGREEMENT (the
“Agreement”) is made and
entered into as of November 9, 2009 by and between Taiwan Semiconductor
Manufacturing Company, Ltd., a Taiwanese corporation, having a place of business
located at No. 8 Li-Hsin Road 6, Hsin-Chu Science Park, Hsin-Chu, Taiwan,
Republic of China (the “Acquiror”), and Semiconductor
Manufacturing International Corporation, an exempted company incorporated under
the laws of the Cayman Islands, having a place of business located at No. 18
Zhang Jiang Road, Pudong New Area, Shanghai 201203, People’s Republic of China
(the “Company”).

     

    W I T N E S S E T H

     

         WHEREAS, the Acquiror and the Company are
entering into that certain Settlement Agreement, dated as of even date herewith
(the “2009 Settlement Agreement”),
whereby the Company and the Acquiror are settling and resolving various
litigation and disputes, as specified therein; and 

     

         WHEREAS, contemporaneously with the execution
and delivery of, and as contemplated by, the 2009 Settlement Agreement, the
Company and the Acquiror are entering into this Agreement pursuant to which the
Company will issue and convey to the Acquiror, and the Acquiror will acquire,
upon the terms and conditions stated in this Agreement (i) an aggregate of
1,789,493,218 (as the same shall be appropriately adjusted in the case of any
share split, share consolidation, share dividend, recapitalization or similar
action effected in respect of the Common Shares prior to the Closing Date or, if
applicable, the consummation of the Share Placing or the Share Offering (each as
defined in Section 6 below)) Common Shares (the “New Common Shares”) and (ii)
a warrant exercisable for an aggregate of 695,914,030 (as the same shall be
appropriately adjusted in the case of any share split, share consolidation,
share dividend, recapitalization or similar action effected in respect of the
Common Shares prior to the Closing Date or, if applicable, the consummation of
the Warrant Placing or the Warrant Offering (as defined in Section 6 below)) Common Shares (the
“Warrant”). Unless the
context otherwise requires, “Common Shares” shall refer to
the Company’s common shares, par value US$0.0004 per share; “Warrant Shares” shall refer
to the Common Shares deliverable upon the exercise of the Warrant; and “Securities” shall refer to
the New Common Shares and the Warrant subscribed for herein, and the Warrant
Shares. 

     

    

     

    

    
    

    Execution Copy 

     

         NOW, THEREFORE, in consideration of the mutual
promises, agreements and covenants contained herein and in the 2009 Settlement
Agreement, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Acquiror hereby agree as
follows: 

     

    1. Issuance of the New Common Shares and
Warrant.

     

         (a) Issuance of New Common Shares and
Warrant. Subject to the satisfaction of the conditions set forth in Sections 5 below, in
consideration of the execution and delivery of the 2009 Settlement Agreement by
the Acquiror, and the benefits derived by the Company thereunder, the Company
shall issue and convey to the Acquiror, or its permitted assignees (as provided
in and subject to Section 7(k) below), and the Acquiror, or its permitted
assignee (as provided in and subject to Section 7(k) below), shall acquire from the Company, on the
Closing Date (as defined in Section 1(b)(i)
below) the New Common Shares and the Warrant. 

     

         (b) Closing. 

     

              (i) Date and Time. The
date and time of the issuance of the New Common Shares and the Warrant as
contemplated hereby (the “Closing”) shall be 10:00
a.m., Hong Kong time, on such date as is specified by the Company and the
Acquiror, which date shall be no later than the fifth Business Day after the
satisfaction or waiver of the conditions to the Closing set forth in Section 5 below, at the
offices of Weil, Gotshal &
Manges LLP, 15 Queen’s Road Central, 29/F Gloucester Tower, Central, Hong Kong or at
such other time, date and location as is mutually agreed in writing by the
Company and the Acquiror (with the date and time of the Closing referred to
herein as the “Closing
Date”). 

     

              (ii) Company Deliveries.
On the Closing Date, the Company shall deliver to the Acquiror: 

     

              (1) (A) certificates in respect of the New
Common Shares, duly executed on behalf of the Company and registered in the name
of the Acquiror, (B) the Warrant Agreement, dated the Closing Date,
duly executed on behalf of the Company, in the form attached hereto as Exhibit A
(the “Warrant
Agreement”) and (C) the Warrant, duly executed on behalf of the Company,
in the form attached to the Warrant Agreement as Annex A thereof; 

     

              (2) a certified extract of the register of
members of the Common Shares of the Company, reflecting Acquiror’s ownership of
the New Common Shares; 

     

              (3) copies of the resolutions of the board of
directors of the Company (the “Board”) approving the
entering into and execution of this Agreement, the issuance of the New Common
Shares, the Warrant and all transactions contemplated herein; 

     

              (4) a certificate, executed on behalf of the
Company by the Secretary of the Company and dated as of the Closing Date, as to
the resolutions delivered pursuant to Section 1(b)(ii)(3)
above; 

     

              (5) an opinion of Conyers Dill & Pearman, Cayman Islands counsel to the Company, in the form previously
agreed by counsel to the Company and counsel to the Acquiror, covering due
authorization and valid issuance of New Common Shares, Warrants and Warrant
Shares, capitalization, no governmental restrictions and no conflicts with law
or constitutional documents;

     

    

     

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              (6) an opinion of Slaughter and May, Hong Kong
counsel to the Company, in the form previously agreed by counsel to the Company
and counsel to the Acquiror, covering various matters, including the
enforceability of this Agreement and the Warrant Agreement and the HKSE’s
approval of listing of the New Common Shares and the Warrant Shares; and

     

              (7) an opinion of M & A Law Firm, PRC
counsel to the Company, in the form previously agreed by counsel to the Company
and counsel to the Acquiror, covering compliance with PRC laws. 

     

              (iii) Acquiror Deliveries. On the Closing
Date, the Acquiror shall deliver to the Company the Warrant Agreement, dated the
Closing Date, duly executed on behalf of the Acquiror. 

     

    2.
Acquiror’s Representations
and Warranties. The Acquiror hereby represents and warrants to the
Company, as of the date hereof and as of the Closing Date as if made at that
time, that: 

     

         (a) Regulation S.

     

              (i) The Acquiror (A) is domiciled and has its principal place of business outside the United
States, (B) certifies that it is not a U.S. Person as
defined under Rule 902
of Regulation S (“Regulation S”) as promulgated
by the United States Securities and Exchange Commission (the “SEC”) under the U.S.
Securities Act of 1933, as amended (the “1933
Act”), and is not acquiring
the Securities for the account or benefit of any U.S. Person, (C) at the time of
offering to the Acquiror and communication of the Acquiror’s order to purchase
the Securities and at the time of the Acquiror’s execution of this Agreement,
the Acquiror was located outside the United States, and (D) at the time of the Closing, the Acquiror, or persons acting on the
Acquiror’s behalf in connection therewith, will be located outside the United
States. 

     

              (ii) The Acquiror has been advised and
acknowledges that: (A) the Securities issued pursuant to this Agreement have not
been, and when issued, will not be registered under the 1933 Act or the
securities laws of any state of the United States, (B) in issuing and selling
the Securities to the Acquiror pursuant hereto, the Company is relying upon the
exemption from registration provided by Regulation S of the
1933 Act, and (C) it is a condition to the availability of the Regulation S safe
harbor that the Securities not be offered or sold in the United States or to a
U.S. Person until the expiration of a period of 40 days after the Closing Date (the “Distribution Compliance
Period”). 

     

              (iii) The Acquiror acknowledges and covenants
that until the expiration of the Distribution Compliance Period (A) it and its
agents or representatives have not solicited and will not solicit offers to buy,
offer for sale or sell any of the Securities or any beneficial interest therein
in the United States or to or for the account of a U.S. Person and (B)
notwithstanding the foregoing, prior to the expiration of the Distribution
Compliance Period, the Securities may be offered and sold by the holder thereof
only if such offer and sale is made in compliance with the terms of this
Agreement and either (X) the offer or sale is within the United States or to or
for the account of a U.S. Person and pursuant to an effective registration
statement, Rule 144 promulgated under the 1933 Act or an exemption from the
registration requirements of the 1933 Act or (Y) the offer and sale is outside
the United States and to other than a U.S. Person. The foregoing restrictions
are binding upon subsequent transferees of the Securities, except for
transferees pursuant to an effective registration statement. The Acquiror agrees
that after the Distribution Compliance Period, the Securities may be offered or
sold within the United States or to or for the account of a U.S. Person only in
accordance with this Agreement and pursuant to applicable securities
laws.

     

    

     

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              (iv) The Acquiror is not a “distributor” (as defined in Regulation S) or a
“dealer” (as defined in the 1933 Act).

     

              (v) The Acquiror hereby acknowledges that
during the Distribution Compliance Period, no deposit of the Securities issued
hereunder will be accepted into the Company’s American Depositary Shares (“ADS”) program, and no
Securities may be offered or sold in the United States or to U.S. Persons unless
such Securities are registered under the 1933 Act, or an exemption from the
registration requirements of the 1933 Act is available. The Acquiror further
acknowledges that, for so long as the Securities are held by affiliates of the
Company (it being understood that, as used herein, “affiliate” shall have the
meaning given to such term under Rule 144(a)(1) under the 1933 Act) or are
“restricted securities” within the meaning of Rule 144(a)(3)
under the 1933 Act, such Securities will not be eligible for deposit under any
unrestricted depositary receipt facility. 

     

         (b) No Public Sale or
Distribution. The Acquiror is acquiring the Securities for its own
account and not with a view towards, or for resale in connection with, the
public sale or distribution thereof, except pursuant to sales registered or
exempted under the 1933 Act or in transactions not subject thereto. The Acquiror
does not presently have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities. The Acquiror is not a
broker-dealer registered with the SEC under the U.S. Securities Exchange Act of
1934, as amended (the “1934 Act”), or an entity engaged in
a business that would require it to be so registered as a broker-dealer. “Person” means an individual,
a limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization or a government or any department or
agency thereof. 

     

         (c) Reliance on Exemptions.
The Acquiror understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Acquiror’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Acquiror set forth herein in order to determine the availability of such
exemptions and the eligibility of the Acquiror to acquire the Securities.

     

         (d) Information. Without prejudice
to the representations and warranties of the Company herein or its obligations
hereunder, Acquiror has had the opportunity to inquire of the Company and its
senior management regarding information the Acquiror believes is necessary for
it to make an informed decision in purchasing the Securities, and the Acquiror
has conducted its own investigation with respect to the Securities and the
Company. The Acquiror understands that its investment in the Securities involves
a high degree of risk and confirms that it is able to afford a complete loss of
such investment. The Acquiror has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of
prospective investment in the Securities.

     

     

     

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         (e) No Governmental Review. The Acquiror understands that no United States federal or state agency or
any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities or the fairness or suitability
of the investment in the Securities nor have such authorities passed upon or
endorsed the merits of the offering of the Securities. 

     

         (f) Transfer on Resale. The
Acquiror understands that: (i) the Securities have not been and are not being
registered under the 1933 Act or any United States state securities laws, and
may not be offered for sale, sold, assigned or transferred within the United
States or to or for the account or benefit of a U.S. Person unless (A)
subsequently registered thereunder, (B) the Acquiror shall have delivered to the
Company an opinion of counsel, in form, scope and substance reasonably
acceptable to the Company, to the effect that such Securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration, or (C) the Acquiror provides the Company with
reasonable assurance that such Securities can be sold, assigned or transferred
pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act, as amended,
(or a successor rule thereto) (collectively, “Rule 144”) or Regulation S;
(ii) any sale of the Securities made in reliance on Rule 144 or Regulation S may
be made only in accordance with the terms of Rule 144 or Regulation S, as
applicable and further, if Rule 144 or Regulation S are not applicable, any
resale of the Securities under circumstances in which the seller (or the Person
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the 1933 Act) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other Person is under any obligation to register the
Securities under the 1933 Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder. 

     

         (g) Legends. The Acquiror understands that the certificates
or other instruments representing the New Common Shares and the Warrant, until
such time as the resale of such Securities has been registered under the 1933
Act, or may be resold pursuant to an exemption therefrom or in a transaction not
subject thereto, shall bear any legend as required by the “blue sky” laws of any state
and a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such share certificates):

     

    “THE SECURITIES REPRESENTED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT
OF, U.S. PERSONS, EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE
HOLDER, IF NOT A U.S. PERSON: (1) REPRESENTS THAT IT IS NOT A U.S. PERSON AND IS
ACQUIRING THESE SHARES IN AN OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT
RESELL OR OTHERWISE TRANSFER THESE SHARES EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT, (C) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE ACT, (D) TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE COMPANY A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THESE SHARES (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE COMPANY), (E) OUTSIDE THE UNITED STATES,
IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULES 904 AND 905 UNDER THE ACT,
OR (F) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE ACT (IF AVAILABLE); AND (3) AGREES THAT IT WILL GIVE EACH PERSON TO WHOM
THESE SHARES ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THESE SHARES PURSUANT TO CLAUSES
(2)(C), (D) OR (F) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS, OR OTHER INFORMATION AS THE
COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION
REQUIREMENTS OF THE ACT. AS USED HEREIN, THE TERMS ‘OFFSHORE TRANSACTION’,
‘UNITED STATES’, AND ‘U.S. PERSON’ HAVE THE MEANING GIVEN TO THEM BY REGULATION
S UNDER THE ACT.” 

     

    The Acquiror understands that the Warrant shall bear the legends as set
forth in the Warrant Agreement.

     

    

     

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         (h) Organization; Authorization;
Enforcement; Validity. The Acquiror is duly organized, validly existing
and in good standing under the laws of its jurisdiction of formation and has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Warrant Agreement, and each other
agreement entered into by the parties hereto in connection with the transactions
contemplated by this Agreement to which it is party (collectively, the “Transaction Documents”). The
execution and delivery of the Transaction Documents by the Acquiror and the
consummation by the Acquiror of the transactions contemplated hereby have been
duly authorized by the board of directors of the Acquiror. The Transaction
Documents to which the Acquiror is a party constitute, or when duly executed and
delivered by the Acquiror, will constitute, the legal, valid and binding
obligations of the Acquiror, enforceable against the Acquiror in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies. 

     

    

     

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         (i) No Conflicts; Consents.
The execution, delivery and performance by the Acquiror of this Agreement and
the consummation by the Acquiror of the transactions contemplated hereby will
not (i) result in a violation of the organizational or constitutional documents
of the Acquiror, (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Acquiror is a party, or
(iii) assuming the receipt of all necessary consents, authorizations and
approvals, result in a violation of any law, rule, regulation, order, judgment
or decree (including federal and state securities laws) applicable to the
Acquiror, except in the case of clauses (ii) and (iii) above, for such
conflicts, defaults, rights or violations which would not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
ability of the Acquiror to perform its obligations hereunder; and no
authorization, approval, consent and license from any supranational, national,
state, municipal, local or foreign government, any instrumentality, subdivision,
court, administrative agency or commission or other governmental authority or
regulatory body or instrumentality, or any quasi-governmental or private body
exercising any regulatory, taxing, importing or other governmental or
quasi-governmental authority (a “Governmental Entity”) is
required for the entering into by Acquiror of this Agreement and the performance
by the Acquiror of its obligations under this Agreement, except for (i) such as
have already been obtained and are in full force and effect, (ii) those
approvals and authorizations specifically identified in Section
5 hereof, and (iii) any antitrust approvals, filings or notifications
that may be required in connection with the transactions contemplated hereby.

     

         (j) Prohibited Transactions. Since
the time when the Acquiror and the Company first initiated discussions related
to the transactions contemplated hereby, neither the Acquiror nor any affiliate
of the Acquiror nor any Person acting on behalf of or pursuant to any
understanding with the Acquiror (collectively, “Trading Affiliates”) has,
directly or indirectly, effected or agreed to effect any short sale, whether or
not against the box, established any “put equivalent position” (as defined in Rule 16a-1(h) under
the 1934 Act) with respect to the Common Shares, granted any other right
(including without limitation, any put or call option) with respect to the
Common Shares or with respect to any security that includes, relates to or
derived any significant part of its value from the Common Shares or otherwise
sought to hedge its position in the Common Shares (each, a “Prohibited Transaction”), and
neither the Acquiror nor its Trading Affiliates will enter into a Prohibited
Transaction after the date hereof until the transactions contemplated hereby are
publicly announced. 

     

         (k) Independence of the Acquiror from
Company. The Acquiror is independent of and is not connected or acting in
concert with the Company or the directors, chief executive, or other connected
persons (as such terms are defined under the Hong Kong Listing Rules) of the
Company. 

     

         (l) Acknowledgement. The Acquiror
acknowledges and agrees that the foregoing representations, warranties,
covenants and acknowledgments are made by it with the intention that they may be
relied upon by the Company. 

     

     

     

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    3. Representations and
Warranties of the Company. The Company represents and warrants to the Acquiror, as of the date
hereof, that, except as set forth in its Public Documents (as defined in Section 3(h) below)
(excluding disclosures of non-specific risks faced by the Company or its
subsidiaries included in any forward-looking statement, disclaimer, risk factor
disclosure or other similarly non-specific statements that are similarly
predictive or forward-looking in nature; provided, however, that (i) any
historical facts related to the Company or its subsidiaries and (ii) any
specific exposure or effect faced by the Company or its subsidiaries emanating
from specifically disclosed facts contained within any such disclosure shall be
deemed disclosed for purposes of the representations and warranties set forth in
this Article 3) that: 

     

         (a) Organization and Qualification. The Company is a corporation duly incorporated
and validly existing in good standing under the laws of the jurisdiction in
which it is incorporated, and has the requisite corporate power and
authorization to own its properties and to carry on its business as now being
conducted. The Company is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which its ownership of property
or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not reasonably be expected to have a Material Adverse
Effect. As used in this Agreement, “Material Adverse Effect” means any material adverse effect on (i) the business, properties,
assets, liabilities, operations, results of operations or financial condition of
the Company and its subsidiaries, taken as a whole, or (ii) the authority or
ability of the Company to perform its obligations under the Transaction
Documents; provided, however, that for purposes of clause (i) above, in no event
shall any of the following exceptions, alone or in combination with the other
enumerated exceptions below, be deemed to constitute, nor shall be taken into
account in determining whether there has been or will be, a Material Adverse
Effect: (A) any effect resulting from compliance with the terms and conditions
of, or from the announcement of the transactions contemplated by this Agreement,
(B) any effect that results from changes affecting
any of the industries in which the Company operates generally or the economy
generally, (C) any effect that results from changes affecting general worldwide
economic or capital market conditions, provided that any such changes in (B) and
(C) do not substantially disproportionately affect
the Company in any material respect, or (D) any change in the
Company’s share price or trading volume, in and of itself, primarily resulting
from any of the effects or changes described in the foregoing clauses (A), (B)
or (C). Each subsidiary of the Company that is a “significant subsidiary” within the meaning of Rule 1-01(w)
of Regulation S-X under the 1933 Act (individually a “Significant Subsidiary” and collectively the “Significant Subsidiaries”) has been duly organized and is validly
existing in good standing under the laws of its jurisdiction of organization
except to the extent that the failure to be in good standing would not
reasonably be expected to have a Material Adverse Effect. 

     

         (b) Authorization; Enforcement; Validity. The Company has the requisite corporate power
and authority to enter into and perform its obligations under the Transaction
Documents and to issue the Securities in accordance with the terms hereof and
thereof. The issuance of the Securities is within the scope of the general
mandate granted to the Board by the Company’s shareholders at the Company’s
annual general meeting held on June 23, 2009, to allot, issue, grant, distribute
and otherwise deal with additional securities in the Company, not exceeding
twenty percent of the issued share capital of the Company at the date of such
resolution. The execution and delivery of the Transaction Documents by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby, including, without limitation, the issuance of the
Securities, has been duly authorized by the Board. The Transaction Documents to
which the Company is a party constitute, or when duly executed and delivered by
the Company, will constitute, the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of applicable creditors’ rights and remedies.

     

     

     

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         (c) Equity Capitalization. As
at October 31, 2009, the authorized share capital of the Company consisted of
(A) 50,000,000,000 Common Shares, of which as of such date 22,368,665,231 shares
were issued and outstanding and (B) 5,000,000,000 Preferred Shares, of which
none are issued. As of October 31, 2009, 3,020,347,823 shares were reserved for
issuance pursuant to the Company’s employee incentive plan and other options and
warrants outstanding. There are no other agreements or commitments outstanding
which call for the allotment or issue, or accords to any person the right to
call for the allotment or issue, of any shares (including shares issued pursuant
to securities exercisable or exchangeable for, or convertible into, or
agreements relating to the issuance of Common Shares), other than the preemptive
rights provisions of the Datang Agreement. With the possible exception of
issuances in connection with exercises of the outstanding options and warrants
referenced above and employee or consultant equity awards, there have been no
further issuances of shares by the Company subsequent to October 31, 2009 and
through the date hereof. All of the issued and outstanding share capital of the
Company is duly authorized, validly issued and fully paid. 

     

         (d) Issuance of
Securities. 

     

              (i) The New Common Shares are duly authorized
and, when issued in accordance with the terms hereof, will be validly issued and
fully paid, free of all preemptive or similar rights, taxes, liens and charges
(whether arising under Cayman Islands law, the Memorandum and the Articles of
Association of the Company (the “Articles”), any agreement or
instrument to which the Company is a party or is subject, or otherwise), and
restrictions on transfer other than as expressly contemplated by the Transaction
Documents and under applicable securities laws, with the holders being entitled
to all rights accorded to a holder of the Common Shares. 

     

              (ii) The Warrant Shares are duly authorized
and, when issued in accordance with the terms of the Warrant Agreement, shall be
validly issued and fully paid, free of all preemptive or similar rights, taxes,
liens and charges (whether arising under Cayman Islands Law, the Articles, any
agreement or instrument to which the Company is a party or is subject, or
otherwise), and restrictions on transfer other than as expressly contemplated by
the Transaction Documents and under applicable securities laws, with the holders
being entitled to all rights accorded to a holder of the Common Shares. The
Company has sufficient authorized capital to issue the Warrant Shares.

     

     

     

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              (iii) Prior to the execution and delivery of
the 2009 Settlement Agreement, Datang Telecom Technology & Industry
Holdings Limited (“Datang”) executed and
delivered to the Company an irrevocable waiver of the application of the
pre-emptive rights granted under Section 4(m) of that certain Share Purchase
Agreement dated as of November 6, 2008,
between Datang and the Company (the “Datang Agreement”) to the
issuance of the Securities hereunder, which waiver is in full force and effect
as of the date hereof. 

     

              (iv) Assuming the accuracy of each of the representations and warranties
of the Acquiror set forth in Section 2 of this
Agreement, the offer and issuance by the Company of the Securities is exempt
from registration under the 1933 Act. 

     

         (e) No Conflicts. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Securities) will not
(i) result in a violation of the Articles, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any Significant Subsidiary is a party, or (iii) assuming the
receipt of all necessary consents, authorizations and approvals, result in a
violation of any law, rule, regulation, order, judgment or decree (including the
Hong Kong Code on Takeovers and Mergers, foreign, U.S. federal and state
securities laws and regulations and the rules and regulations of The Stock
Exchange of Hong Kong Limited (the “HKSE”) or of the New York
Stock Exchange (the “NYSE”) applicable to the
Company), except in the case of clauses (ii) and (iii) above, for such
conflicts, defaults, rights or violations which would not reasonably be expected
to result in a Material Adverse Effect. 

     

         (f) Consents. The Company is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, (i) any court, Governmental Entity or any regulatory or
self-regulatory agency or (ii) any third party pursuant to any agreement,
indenture or instrument to which the Company or any Significant Subsidiary is a
party in order for it to execute, deliver or perform any of its obligations
under or contemplated by the Transaction Documents, except for (i) such as have
already been obtained and are full force and effect, (ii) those approvals and
authorizations specifically referenced in Section 5 hereof,
(iii) any required filings or notifications regarding the issuance or listing of
additional securities with the HKSE or the NYSE and (iv) any antitrust
approvals, filings or notifications that may be required in connection with the
transactions contemplated hereby. The Company is not in violation of the listing
requirements of the HKSE or the NYSE and has no knowledge of any facts that
would reasonably lead to delisting or suspension of its Common Shares from the
HKSE or of its American depository receipts from the NYSE in the foreseeable
future. As used herein, “knowledge” shall mean actual knowledge of the
executive officers (as defined in Rule 405 under the 1933 Act) of the Company
after due inquiry. 

     

         (g) No Integrated Offering.
Assuming the accuracy of the Acquiror’s representations and warranties set forth
in Section 2
hereof, none of the Company, any of its affiliates, or any Person acting on
their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would require registration of the issuance of any of the Securities under the
1933 Act, whether through integration with prior offerings or otherwise, or
cause the offering of Securities hereunder to require approval of shareholders
of the Company for purposes of any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of the HKSE and
the NYSE. None of the Company, their affiliates and any Person acting on their
behalf will take any action or steps referred to in the preceding sentence that
would require registration of the issuance of any of the Securities under the
1933 Act or cause the offering of the Securities to be integrated with other
offerings for purposes of any such applicable shareholder approval
provisions.

     

     

     

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         (h) Public Documents. The Company
has timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the 1934 Act or with the HKSE and has timely issued all announcements and
circulars required to be issued by it by the HKSE or the NYSE (all of the
foregoing filed or announced prior to the date of this Agreement and all
exhibits included therein and financial statements, notes and schedules thereto
and documents and incorporated by reference therein being hereinafter referred
to as the “Public
Documents”). As of their respective filing or issuance dates, the Public
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder and the
rules and regulations of the HKSE and the NYSE, as applicable to the respective
Public Documents, and, other than as corrected or clarified in a subsequent
Public Document, none of the Public Documents, at the time they were filed or
issued, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. 

     

         (i) Financial Statements. The
consolidated financial statements (including any related notes thereto) included
or incorporated by reference in the Public Documents fairly presented in all
material respects the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates indicated therein and the consolidated
results of their operations for the periods specified therein, other than as
corrected or clarified in a subsequent Public Document. Such financial
statements were prepared in material conformity with accounting principles
generally accepted in the United States of America (“GAAP”) applied on a
materially consistent basis (except as may be noted therein). The Company and
its subsidiaries do not have any liabilities or obligations required under GAAP
to be set forth on a consolidated balance sheet (accrued, absolute, contingent
or otherwise), other than (i) liabilities or obligations reflected on, reserved
against, or disclosed in the Company’s balance sheet as of June 30, 2009, (ii)
liabilities or obligations that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, and (iii) liabilities
incurred since June 30, 2009 in the ordinary course of business consistent with
past practices and any liabilities incurred pursuant to this Agreement.

     

         (j) Acknowledgement. The Company
acknowledges and agrees that the foregoing representations and warranties are
made by it with the intention that they may be relied upon by the Acquiror and
that the representations of the Acquiror set forth in Section 2(d) hereof
(Information) shall in no way limit such reliance or the benefits
thereof.

     

    

     

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    4. Covenants.

     

         (a) Commercially Reasonable
Efforts. Each party shall use its commercially
reasonable efforts to satisfy each of the conditions to Closing set forth in
Section
5 below as soon as practicable. 

     

         (b) Regulatory Filings.
Without limiting the generality of Section 4(a) above,
the Company and the Acquiror shall use their respective commercially reasonable
efforts to obtain all governmental approvals required to complete the
transactions contemplated by this Agreement and, as promptly as practicable
after the date hereof, the Company and the Acquiror shall make all filings,
notices, petitions, statements, registrations, submissions of information,
application or submission of other documents required by any Governmental Entity
in connection with this Agreement and the transactions contemplated hereby. The
Company and the Acquiror will notify one another promptly upon the receipt of
(i) any comments from any officials of any Governmental Entity in connection
with any filings made pursuant hereto and (ii) any requests by any officials of
any Governmental Entity for amendments or supplements to, or additional
information in connection with, any filings made pursuant hereto. In addition,
the Company and the Acquiror shall each use their commercially reasonable
efforts to furnish such information, supply such documents, give such
undertakings and do all such acts and things as may reasonably be required by
any Governmental Entity in relation to or arising out of the transactions
contemplated hereby. 

     

         (c) Listing.
The Company shall use its commercially reasonable
efforts to promptly secure the listing of, and permission to deal in, the New
Common Shares and the Warrant Shares on the HKSE as promptly as practicable
after the date hereof and shall use commercially reasonable efforts to maintain
such listing of and permission to deal in such Common Shares, so long as any
Common Shares shall be so listed. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 4(c).

     

         (d) Fees.
Each party shall bear its own expenses in connection
with the transactions contemplated hereby. 

     

         (e) Standstill. At any time following the date of this Agreement: 

     

              (i) Except with the prior approval of the Board, for so long as the
Acquiror holds any of the Securities, the Acquiror shall not, and shall cause
its controlled affiliates not to, directly or indirectly, acquire or agree to
acquire any Voting Securities, except: 

     

              (1) Voting Securities acquired by way of share splits, share dividends or
other distributions or offerings made available to holders of Voting Securities
generally; 

     

              (2)
the Securities purchased by Acquiror pursuant to this
Agreement; 

     

     

     

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              (3)
the Warrant Shares issuable upon
exercise of the Warrant; and

     

              (4)
Voting Securities acquired in compliance with Section 4(g) hereof.

     

    “Voting Securities” shall mean the
Common Shares of the Company, and any other security carrying voting rights in
the Company and any outstanding convertible securities, options, warrants or
other rights which are convertible into or exchangeable or exercisable for, or
carrying rights of subscription for, securities carrying voting rights in the
Company. 

     

              (ii) Except with the prior approval of the
Board or as specifically permitted by Section 4(e)(i) above, for so long as
the Acquiror holds any of the Securities, the Acquiror shall not, and shall
cause its controlled affiliates not to: 

     

              (1) make, effect, initiate, cause or in any way participate directly or
indirectly in (i) any acquisition of beneficial ownership of any Voting
Securities of the Company or any Voting Securities of any subsidiary or other
affiliate of the Company, (ii) any acquisition of any assets of the Company or
any assets of any subsidiary or other affiliate of the Company, or (iii) any
tender offer, exchange offer, merger, business combination, recapitalization,
restructuring, liquidation, dissolution or extraordinary transaction involving
the Company or any subsidiary or other affiliate of the Company, or involving
any securities or assets of the Company or any securities or assets of any
subsidiary or other affiliate of the Company;

     

              (2) make, effect, initiate, cause or in any
way participate directly or indirectly in any “solicitation” of “proxies” (as
such terms are used in the rules of the SEC) to vote any Voting Securities of
the Company or any subsidiary thereof, or seek to advise or influence any Person
with respect to the voting of any Voting Securities of the Company or any
subsidiary thereof;

     

              (3) make any public announcement with respect
to, or submit a proposal for or offer of (with or without conditions) any
merger, recapitalization, reorganization, business combination or other
extraordinary transaction involving the Company or any subsidiary thereof or any
of their securities or assets;

     

              (4) enter into any discussions, negotiations,
arrangements or understandings with any third party with respect to any of the
foregoing, or otherwise form, join or in any way engage in discussions relating
to the formation of, or participate in, any “group”, as such term is interpreted
under Rule 13d-5(b)(1) under the 1934 Act in connection with any of the
foregoing;

     

              (5) take any action that might require the
Company to make a public announcement regarding any of the types of matters set
forth in clause “(1)”, clause “(2)” or clause “(3)” of this
sentence;

     

    

     

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              (6) agree or offer to take, or encourage or propose (publicly or otherwise)
the taking of, any action referred to in clause “(1)”, clause “(2)”, clause “(3)”, clause “(4)”, or clause “(5)” of
this sentence;

     

              (7)
assist, induce or encourage any other Person to take any action of the type
referred to in clause “(1)”, clause “(2)”,
clause “(3)”, clause
“(4)”, clause “(5)” or clause “(6)”
of this
sentence;

     

              (8) deposit any Voting Securities in a voting
trust or subject them to a voting agreement or other arrangement of similar
effect;

     

              (9) enter into any discussions, negotiations,
arrangement or agreement with any other Person related to any of the foregoing;
or

     

              (10) request the Company or any of its
representatives, directly or indirectly, to amend or waive any provision of this
Section 4(e).

     

              (iii) The restrictions imposed by this Section 4(e) shall
terminate on the earlier of such time as (A) a tender offer is made by another
Person for not less than 50% of the Voting Securities where such tender offer is
not subject to financing conditions and is evidenced by applicable filings with
appropriate regulatory agencies and tender offer materials have been
disseminated to security holders (provided that if such tender offer is not
completed within six months of its commencement, the restrictions imposed by
this Section
4(e) shall resume at that time and continue in full force and effect in
accordance with their terms), (B)
another Person acquires 50% or
more of the Voting Securities, or (C) the Company enters into a definitive
agreement with a Person other than a subsidiary of the Company providing for:
(1) a merger, share exchange, business combination or similar extraordinary
transaction as a result of which the Persons possessing, immediately prior to
the consummation of such transaction, beneficial ownership of the voting
securities of the Company entitled to vote generally in elections of directors
of the Company, would cease to possess, immediately after consummation of such
transaction, beneficial ownership of voting securities entitling them to
exercise at least 50% of the total voting power of all outstanding securities
entitled to vote generally in elections of directors of the Company (or, if not
the Company, the surviving Person resulting from such transaction); (2) a sale, exchange or lease of all or substantially all of the assets of
the Company and its subsidiaries (determined on a consolidated basis); or (3)
the acquisition (by purchase, merger or otherwise) by any Person (including any
syndicate or group deemed to be a “person” under Section 13(d)(3) of the 1934
Act and the rules promulgated thereunder) of beneficial ownership of voting
securities of the Company entitling that Person to exercise 50% or more of the
total voting power of all outstanding securities entitled to vote generally in
elections of directors of the Company (provided that if such agreement is
terminated, the restrictions imposed by this Section 4(e) shall resume at that time
and continue in full force and effect in accordance with their terms).

     

    

     

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         (f) Permitted Methods of
Disposition.Until such time following the Closing as the Acquiror no
longer beneficially owns (as such term is used under Rule 13d-3 under the 1934
Act) any of the Securities, the Acquiror shall not offer, pledge, sell, contract
to sell, sell any option or contract to purchase, enter into any option or
contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any of the Securities,
or enter into any swap, hedging or other arrangement that transfers to another,
in whole or in part, any of the economic consequences of ownership of any of
such Securities without the prior approval of the Board, except that the
Acquiror may sell the New Common Shares and the Warrant Shares:

     

              (i) through open market transactions through
the facilities of the HKSE, provided that the amount sold through such market
transactions during any three month period do not exceed (1) 1% of the total
outstanding Common Shares or (2) if greater, the average weekly reported volume
of trading in the Common Shares on the HKSE during the four calendar weeks
preceding the last sale; or 

     

              (ii) through one or more block trades or
privately arranged sales, provided that in the reasonable determination of the
Acquiror (1) none of the buyers is a competitor of the Company and (2) none of
the buyers would beneficially own more than 5% of the outstanding Common Shares
following its purchase. 

     

         (g) Pre-emptive Rights. If the
Company proposes, following the date hereof, to issue any new Common Shares, any
securities convertible or exchangeable into Common Shares, or any warrants or
other rights to subscribe for Common Shares (“Relevant Securities”), the Company shall notify Acquiror in
writing of such proposal (an “Issue Notice”). The Issue Notice shall specify the number
and type of Relevant Securities to be offered by the Company and the material
terms of the proposed offer (including the proposed price per Relevant Security
to be paid by the proposed third party purchaser(s)). 

     

              (i) Subject to Section 4(g)(vi)
below, the Acquiror shall have the right to purchase such number of the Relevant
Securities which are the subject of the Issue Notice so as to enable the
Acquiror to hold, after the issue of the Relevant Securities, a pro rata portion
of the Relevant Securities equal to the percentage of the issued share capital
of the Company then beneficially owned by the Acquiror prior to the issuance of
the Relevant Securities, provided that the Acquiror maintains an ownership
interest equal to at least half of the New Common Shares acquired hereunder (as
appropriately adjusted for share splits, share consolidation, share dividends,
recapitalizations and the like), in each case upon the same terms and conditions
set forth in the Issue Notice, by giving written notice to the Company of the
exercise of this right within ten (10) Business Days (as defined below) of the
giving of the Issue Notice. If such notice is not given by the Acquiror within
such ten (10) Business Days (as defined below), the Acquiror shall be deemed to
have elected not to exercise its rights under this Section 4(g) with
respect to the issuance described in that specific Issue Notice. The parties
acknowledge that any rights of the Acquiror to purchase the Relevant Securities
pursuant to this Section 4(g) will
lapse if completion thereof does not occur simultaneously with the Acquiror’s completion of
the offering of Relevant Securities (or such later date as specified in Section 4(g)(vi)
below) or at such other time and place as shall be mutually agreed by the
Company and the Acquiror, provided that if the reason for the Acquiror’s failure
to complete by the time specified above is solely due to a delay of the
Governmental Entity in granting the relevant authorizations, approvals, permits,
qualifications or exemptions, the Acquiror shall notify the Company in writing
at least seven (7) days prior to the completion of the offering of the Relevant
Securities to extend the completion date for Acquiror to a date within three (3)
months or such other reasonable period as may be mutually agreed between the
parties following the completion of the issue of the Relevant Securities, after
such period the right of the Acquiror to purchase the Relevant Securities
pursuant to this Section 4(g) shall
lapse. A notice given by the Acquiror pursuant to this Section 4(g) shall be
irrevocable.

     

    

     

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              (ii) Subject to Section 4(g)(i)
above, the completion of the Acquiror’s purchase of Relevant Securities pursuant
to this Section 4(g) shall occur
simultaneously with the completion of the offering of Relevant Securities. For
the avoidance of doubt, the completion by the Company of the offering of the
Relevant Securities shall not be affected by the timing of the completion of any
issue of the Relevant Securities to the Acquiror. The Acquiror shall execute and
deliver to the Company all transaction documents related to Acquiror’s purchase
of Relevant Securities as may be reasonably requested by the Company prior to
the completion of the Acquiror’s purchase of Relevant Securities. At such
completion, the Acquiror shall deliver the aggregate purchase price for the
Relevant Securities to be purchased by the Acquiror pursuant to this Section 4(g).

     

              (iii) Any Common Shares issued to the Acquiror
pursuant to this Section 4(g) shall be
issued on the same terms and subject to the same conditions as the Relevant
Securities are issued to any proposed third party purchaser(s), such terms and
conditions being set out in the Issue Notice. 

     

              (iv)
The provisions of Section 4(g)(i) to
(iii) shall not apply to: 

     

              (1) the grant of any options, or the issue of
any Relevant Securities pursuant to the exercise of share options granted
(whether prior to or after the date of this Agreement), pursuant to any share
purchase or share option plans of the Company in effect from time to
time; 

     

              (2) the issue of any Relevant Securities
pursuant to any share incentive scheme operated by the Company from time to
time;

     

              (3) the issue of any Common Shares or other
securities pursuant to the conversion, exchange or exercise of any securities
that were previously offered and/or issued to the Acquiror as Relevant
Securities;

     

              (4) any offer of the Relevant Securities open
for a period fixed by the Board to holders of Common Shares on the register of
members on a fixed record date in proportion to their then holdings of Common
Shares; provided that such offer of Relevant Securities is also made to the
Acquiror;

     

              (5) an issue of Common Shares as fully paid to
holders of Common Shares (including without limitation, Common Shares paid up
out of distributable profits or reserves and/or share premium account issued in
lieu of the whole or any part of any cash dividend and free distributions or
bonus issue of Common Shares); provided that such issuance of Common Shares is
also made to the Acquiror;

     

    

     

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              (6) an issue of the Relevant Securities pursuant to the acquisition of
another corporation by the Company by merger, purchase of substantially all of
the assets or other reorganization or to a joint venture agreement; provided
that such issuance is approved by the Board;

     

              (7) an issue of the Relevant Securities to banks,
equipment lessors or other financial institutions pursuant to a commercial
leasing or commercial loan transaction approved by the Board;

     

              (8) an issue of Relevant Securities in connection
with sponsored research, collaboration, technology license, development, OEM,
marketing or other similar agreements or strategic partnerships approved by the
Board; or

     

              (9) an issue of Relevant Securities to
suppliers or third party service providers in connection with the provisions of
goods or services pursuant to transactions approved by the Board.

     

              (v) The rights set forth in this Section 4(g) shall not apply with respect to and shall
expire immediately prior to a transaction that would result in a change of
control (as such term is defined under the Hong Kong Takeovers
Code).

     

              (vi) The Company and Acquiror acknowledge and
agree that the Acquiror’s exercise of the rights in this Section 4(g)
shall in all cases be subject to
compliance with the rules, regulations, laws and requirements of applicable
government and regulatory bodies, including the Hong Kong Listing Rules, the
Hong Kong Takeovers Code, the Stock Exchange of Hong Kong Limited and the
Securities and Futures Commission of Hong Kong (including, where applicable, any
requirements to obtain the approval of the shareholders of the Company) (“Applicable Law”), and shall take such steps reasonably
necessary to give effect to the rights contained in this Section 4(g) in compliance with Applicable Law, provided
that all costs and expenses (including, without limitation, reasonable legal
fees and expenses) incurred by the Company shall be resolved in a manner
consistent with any terms agreed to by the Company and the other potential
investor(s) with respect to the issuance described in the relevant Issue Notice.
In the case of any issuance of Relevant Securities prior to the consummation of
the Closing, the issuance of the Relevant Securities to be acquired by the
Acquiror pursuant to this Section 4(g) shall be deferred until, and shall be
conditioned upon, the consummation of the Closing. 

     

         (h) Voting Rights. The Acquiror
agrees to vote all Common Shares held by the Acquiror or any controlled
affiliate of the Acquiror to be voted on all matters submitted to a vote of the
Company shareholders in such manner as recommended by the Board, other than in
the case of any matter related to proposed Change of Control (as defined in the
2009 Settlement Agreement) of the Company, with respect to which the Acquiror
and its controlled affiliates shall be free to vote in any manner they determine
in their sole discretion.

     

    

     

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         (i) Waiver of Information. The
Acquiror agrees that the Company shall not be obligated to provide the Acquiror
with any information that is not otherwise publicly available, and the Acquiror
waives any right to any such information. 

     

         (j) Board Seats. The Acquiror
acknowledges that the Acquiror is not entitled to designate any member to the
Board in connection with the transactions contemplated hereby. 

     

    5. Conditions to Closing.
The consummation of the Closing shall be subject to the satisfaction of the
following conditions: 

     

         (a) Governmental Approvals.
The Acquiror and the Company shall have obtained each of the governmental
authorizations and approvals identified in Schedule 5(a) hereto.

     

         (b) HKSE Listing. The Company
shall have obtained approval for the listing of, and permission to deal in, the
New Common Shares and the Warrant Shares, and for the issue of the Warrants,
from the HKSE and such approvals shall not have subsequently been revoked prior
to Closing. 

     

         (c) Absence of Prohibition. No
legislative body, court, administrative agency or commission or other
governmental authority, instrumentality, agency or commission shall have
enacted, issued, promulgated, enforced or entered any law or governmental
regulation or order which has the effect of prohibiting the sale and issuance of
the Securities. 

     

    6. Alternative
Transaction. In the event the conditions to Closing set forth in
Section 5 above
have not been satisfied prior to June 30, 2010, at any time after such date, but
in any event not later than the third anniversary of the date of this Agreement
(such period, the “Election Period”), the Acquiror may elect, in its discretion,
to direct the Company to effect the following transactions (the “Alternative
Transaction”) in lieu of the issuance of the Securities to the
Acquiror as contemplated hereby: 

     

         (a) Election. The Acquiror
will provide to the Company written notice of its election to cause the Company
to effect the Alternative Transaction no later than the expiration of the
Election Period. 

     

    

     

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         (b) Share Placing or
Share Offering. Within 60 days of receipt of such written notice pursuant
to Section
6(a), subject to reasonable deferral if, in the good faith judgment of
the Board, the filing of a registration statement or the making of an
application for the approval for the listing of, and permission to deal in, the
Common Shares would be materially detrimental to the Company and the Board
concludes, as a result, that it is in the best interests of the Company to defer
the Share Placing or the Share Offering, the Company shall use all reasonable
efforts to initiate, at its option, a primary, firm commitment placing involving
the obtaining of subscriptions by or on behalf of the Company from institutional
investors identified by the placing agent (the “Share Placing”) or a primary, firm commitment, fully
underwritten public offering (the “Share Offering”), in either case, of a number of Common
Shares equal to the New Common Shares and shall complete the Share Placing or
the Share Offering as soon as reasonably practicable thereafter. The placing
agent (in the case of a Share Placing) or the managing underwriter (in
the case of a Share Offering) will be an internationally recognized investment
banking firm reasonably acceptable to the Acquiror. The price at which the
Common Shares will be sold to the institutional investors (in the case of a
Share Placing) or the public (in the case of a Share Offering) will be such
price as is recommended to the Company and the Acquiror by such investment
banking firm in its professional judgment. All material terms of the Share
Placing or the Share Offering, including the compensation arrangement of the
placing agent or underwriters, will be subject to the approval of the Acquiror,
which approval shall not be unreasonably withheld. The cash proceeds of the
Share Placing or the Share Offering, net of commissions of the placing agent (in
the case of a Share Placing) or the underwriters’ discounts (in the case of a
Share Offering), shall be transmitted to the Acquiror by wire transfer to the
account specified by the Acquiror immediately upon the consummation of the Share
Placing or the Share Offering. All other expenses of the Share Placing or the
Share Offering, including counsel fees and agent expenses, shall (i) in the
event the Closing fails to occur due to the inability of the Acquiror to secure
required approvals of the Republic of Taiwan Investment Commission of MOEA
(Ministry of Economic Affairs), as contemplated by Section 5(a), be borne by the
Acquiror, up to a maximum of US$100,000, with any excess to be borne by the
Company, and (ii) in all other cases, be borne entirely by the Company.

     

         (c) Warrant Placing or Warrant
Offering. Additionally, at any time following receipt of such written
notice and prior to the expiration of the Election Period, provided that the
average closing price of the Common Shares on the HKSE during the immediately
preceding thirty (30) trading days (the “Average Price”) exceeds the per share exercise price that
would then be payable under the terms of the Warrant had the Warrant been issued
hereunder on the date of this Agreement (the “Exercise Price”), the Acquiror may deliver to the Company a
written notice directing the Company to initiate, at the option of the Company,
a further primary, firm commitment placing involving the obtaining of
subscriptions from institutional investors identified by the placing agent (the
“Warrant Placing”) or primary, firm commitment, fully
underwritten public offering (the “Warrant Offering”), in either case, with respect to a number of
Common Shares equal to the Warrant Shares that would have been issuable on
exercise of the Warrant on such date had the Warrant been issued on the date of
this Agreement. Within 60 days of receipt of such notice, the Company shall
either: 

     

              (i) use all reasonable efforts to initiate, at
the option of the Company, a Warrant Placing or a Warrant Offering, provided
that the Warrant Offering may be reasonably deferred if, in the good faith
judgment of the Board, the filing of the registration statement or the making of
an application for the approval for the listing of, and permission to deal in,
the Common Shares would be materially detrimental to the Company and the Board
concludes, as a result, that it is in the best interests of the Company to defer
the Warrant Placing or the Warrant Offering, and shall complete the Warrant
Placing or the Warrant Offering as soon as reasonably practicable thereafter.
The placing agent (in the case of a Warrant Placing) or the managing underwriter
(in the case of a Warrant Offering) will be an internationally recognized
investment banking firm reasonably acceptable to the Acquiror. The price at
which the Common Shares will be sold to the institutional investors (in the case
of a Warrant Placing) or the public (in the case of a Warrant Offering) will be
such price as is recommended to the Company and the Acquiror by such investment
banking firm in its professional judgment. All material terms of the Warrant
Placing or the Warrant Offering, including the compensation arrangement of
placing agent or underwriters, will be subject to the approval of the Acquiror,
which approval shall not be unreasonably withheld. The cash proceeds of the
Warrant Offering, net of commissions of the placing agent (in the case of a
Warrant Placing) or the underwriters’ discounts (in the case of Warrant
Offering) and the aggregate Exercise Price attributable to the Common Shares
sold in the offering (which Exercise Price shall be payable to the Company),
shall be transmitted to the Acquiror by wire transfer to the account specified
by the Acqurior immediately upon the consummation of the Warrant Placing or the
Warrant Offering. All other expenses of the Warrant Placing or the Warrant
Offering, including counsel fees and agent expenses, shall (A) in the event the
Closing fails to occur due to the inability of the Acquiror to secure required
approvals of the Republic of Taiwan Investment Commission of MOEA (Ministry of
Economic Affairs), as contemplated by Section 5(a), be
borne by the Acquiror, up to a maximum of US$100,000, with any excess to be
borne by the Company, and (B)
in all other cases, be borne
entirely by the Company; or

     

    

     

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              (ii) transmit to the Acquiror, by wire
transfer, a cash sum equal to the product of (A) the positive difference between
the Average Price and the Exercise Price and (B) the number of Common Shares that would have been issuable on exercise of
the Warrant on such date if the Warrant had been issued on the date of this
Agreement.

     

         (d) Satisfaction of Obligations.
Upon remittance of all proceeds due and owing to the Acquiror upon consummation
of the Share Placing or the Share Offering, the Company’s obligations to issue
the New Common Shares hereunder shall terminate and be of no further force and
effect. Upon remittance of all proceeds due and owing to the Acquiror upon
consummation of the Warrant Placing or the Warrant Offering or the payment to
the Acquiror of the amount provided in Section 6(c)(ii)
above, the Company’s obligations to issue the Warrant or the Warrant Shares
hereunder shall terminate and be of no further force and effect. In addition,
the obligations of the Company to issue the New Common Shares or the Warrant
hereunder, to the extent that such obligations have not been previously
satisfied as a result of the failure of one or more conditions to the Closing
hereunder, shall terminate upon the delivery of written notice of an election by
the Acquiror to have the Company complete the Alternative Transactions or the
expiration of the Election Period. 

     

    7. Miscellaneous.

     

         (a) Governing Law;
Arbitration. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed in accordance with the laws of Hong Kong. Any dispute, controversy or
claim arising out of or relating to this Agreement, or the interpretation,
breach, termination or validity hereof, shall be submitted to arbitration upon
the request of any party with notice to the other parties. The arbitration shall
be conducted in Hong Kong under the auspices of the Hong Kong International
Arbitration Centre (the “HKIAC”) in accordance with the UNCITRAL Arbitration
Rules (“UNCITRAL Rules”) in effect, which rules are deemed to be
incorporated by reference into this Section 7(a). There
shall be three (3)
arbitrators. The
complainant and the respondent to such dispute shall each select one arbitrator
within thirty (30) days after giving or receiving the demand for arbitration.
The Chairman of the HKIAC shall select the third arbitrator, who shall be
qualified to practice law in Hong Kong. If either party to the arbitration does
not appoint an arbitrator who has consented to participate within thirty (30) days after selection of the first arbitrator, the relevant appointment
shall be made by the Chairman of the HKIAC. The arbitration proceedings shall be
conducted in English. Each party hereto shall cooperate with any party to the
dispute in making full disclosure of and providing complete access to all
information and documents requested by such party in connection with such
arbitration proceedings, subject only to any confidentiality obligations binding
on the party receiving the request. Each party irrevocably waives, to the
fullest extent it may effectively do so, any objection which it may now or
hereafter have to the laying of venue of any such arbitration in Hong Kong and
the HKIAC, and hereby submits to the exclusive jurisdiction of HKIAC in any such
arbitration. The award of the arbitration tribunal shall be conclusive and
binding upon the disputing parties, and any party to the dispute may apply to a
court of competent jurisdiction for enforcement of such award. Any party to the
dispute shall be entitled to seek preliminary injunctive relief, if possible,
from any court of competent jurisdiction pending the constitution of the
arbitral tribunal.

     

    

     

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         (b) Effect of Completion. Without prejudice to other provisions of this
Agreement, the representation, warranty, covenant or undertaking (the
“Warranties”) contained in this Agreement shall remain in
full force and effect notwithstanding Closing or the consummation of the
Alternative Transaction and shall remain operative and in full force and effect
until the expiration of the applicable statute of limitations, regardless of (i)
any investigation, or statement as to the results thereof, made by or on behalf
of the Acquiror and (ii) acceptance of the New Common Shares, Warrant, or
Warrant Shares or the proceeds of the Share Placing, the Share Offering, the
Warrant Placing or the Warrant Offering, except as waived or released by the
party entitled to enforce such Warranties. For the avoidance of doubt, the
agreements and covenants set forth in Section 4 and this Section 7 shall
survive in accordance with their terms. 

     

         (c) Waivers. No
delay or omission by any party to this Agreement in exercising any right, power
or remedy provided by law or under this Agreement or any other documents
referred to in it shall: (i) affect that right, power or remedy; or (ii) operate
as a waiver thereof. The single or partial exercise of any right, power or
remedy provided by law or under this Agreement shall not preclude any other or
further exercise or any other right, power or remedy. 

     

         (d) Remedies. Except as otherwise expressly provided in this Agreement, the rights,
powers and remedies provided in this Agreement are cumulative and not exclusive
of any rights, powers and remedies provided by law. 

     

         (e) Specific Enforcement. The parties agree that irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any court of competent jurisdiction, without bond or other
security being required, this being in addition to any other remedy to which
they are entitled at law or in equity. 

     

         (f)
Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. A facsimile signature shall be considered due
execution and shall be binding upon the signatory thereto with the same force
and effect as if the signature were an original, not a facsimile
signature.

     

    

     

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         (g) Headings. The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement. “Business Day” shall mean a day that is not a Saturday, Sunday or a public holiday in
Taiwan, Hong Kong or the People’s Republic of China. “$” or “dollar” refers to United States dollars. 

     

         (h) Severability. If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction. 

     

         (i) Entire Agreement; Amendments. This Agreement and the other Transaction
Documents supersede all other prior oral or written agreements between the
Acquiror, the Company, their affiliates and Persons acting on their behalf with
respect to the matters addressed herein. This Agreement and the other
Transaction Documents and the instruments referenced herein and therein contain
the entire understanding of and agreement between the parties with respect to
the matters covered herein and, except as specifically set forth herein, neither
the Company nor the Acquiror makes any representation, warranty, covenant or
undertaking with respect to such matters. In entering into this Agreement and
the other Transaction Documents, each party to such agreements acknowledges that
it is not relying upon any pre-contractual statement which is not expressly set
out in them. No provision of this Agreement may be amended other than by an
instrument in writing signed by the Company and the Acquiror. No provision
hereof may be waived other than by an instrument in writing signed by the party
against whom enforcement is sought. For the purposes of this section,
“pre-contractual statement”
means any draft,
agreement, undertaking, representation, warranty, promise, assurance or
arrangement of any nature whatsoever, whether or not in writing, relating to the
matters covered in this Agreement and/or the other Transaction Documents made or
given by any person at any time prior to the date of this Agreement or the other
Transaction Documents. 

     

    

     

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           (j) Notices. Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one Business Day after deposit with an overnight courier service, in
each case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be: 

       

           If to the
Company:

    

     

    
      	Semiconductor Manufacturing
      International Corporation
	Address:	
            	Suite 3003, 30th Floor
	
            	
            	No. 9 Queen’s Road
    Central
	
            	
            	Hong Kong
	Telephone:	 	(+852) 2537-8588
	Facsimile:	 	(+852) 2537 8206
	Attention:	
            	Anne Chen/Blondie Poon
	 
	with a copy (for informational purposes
      only) to:
	 
	Wilson Sonsini Goodrich & Rosati, P.C.
	Address:	
            	Jin Mao Tower, 38F
	
            	
            	88 Century Boulevard
	
            	       	Pudong New Area, Shanghai 200121
	
            	 	People’s Republic of China
	Telephone:	 	(+86-21) 6165-1700
	Facsimile:	 	(+86-21) 6165-1799
	Attention:	
            	Carmen Chang, Esq.
	 
	If to the Acquiror:
	 
	Taiwan Semiconductor Manufacturing
      Company, Ltd.
	Address:	
            	No. 8 Li-Hsin Road 6, Hsin-Chu Science Park
	
            	
            	Hsin-Chu, Taiwan, Republic of China
	Telephone:	 	(+886) 3-5682002
	Facsimile:	 	(+886) 3-5678689
	Attention:	
            	General Counsel
	 
	with a copy (for informational purposes
      only) to:
	 
	Weil, Gotshal & Manges LLP
	Address:	
            	200 Crescent Court, Suite 300
	
            	
            	Dallas, Texas 75201
	
            	
            	United States of America
	Telephone:	 	+1 (214) 746 7700
	Facsimile:	 	+1 (214) 746 7777
	Attention:	
            	R. Scott Cohen

    

         (k) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns.
Neither party hereto shall assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other party hereto; provided,
however, that the Acquiror may assign the right to acquire the Securities
hereunder to any affiliate so long as such assignment would not reasonably be
expected to impose any material delay in the consummation of the transactions
contemplated hereunder. If such assignment is made, then all references herein
to the Acquiror shall be deemed references to such other entity, except that all
representations and warranties made herein with respect to the Acquiror as of
the date of this Agreement shall be deemed representations and warranties made
with respect to such other entity as of the date of such
assignment.

     

    

     

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         (1) No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person. 

     

         (m) Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby. 

     

    [Remainder of Page Intentionally Left Blank]

     

    

     

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         IN WITNESS WHEREOF, the
Acquiror and the Company have caused its respective signature page to this Share
and Warrant Issuance Agreement to be duly executed as of the date first written
above.

     

    
      	SEMICONDUCTOR
    MANUFACTURING
	INTERNATIONAL CORP.
	  
	  
	By:  	 	 
	Name: Jiang Shang Zhou
	Title: Chairman of the
Board
	 
	 
	By:	 	 
	Name: Richard Ru-Gin Chang
	Title: Chief Executive
  Officer
	 
	 
	TAIWAN SEMICONDUCTOR
	MANUFACTURING COMPANY,
    LTD.
	 
	 
	By:	 	 
	Name: F. C. Tseng
	Title: Vice
Chairman

    

    

     

    [Signature Page to
Share and Warrant Issuance Agreement] 

     

    

    
    

    Execution Copy 

     

    Schedule 5(a) –
Approvals

     

    Republic of Taiwan
Investment Commission of MOEA (Ministry of Economic Affairs) 

     

    Any required
antitrust approvals, filings or notifications. 

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    

    
    

    Exhibit
A

     

    Warrant Agreement

     

    [Please see attached.]

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    

    
    

    Final Form 

     

    WARRANT
AGREEMENT 

     

         This WARRANT AGREEMENT, dated as of
[_______  __, 20__] (the “Agreement”), is made by and
between Taiwan Semiconductor Manufacturing Company, Ltd., a Taiwanese
corporation having a place of business located at No. 8 Li-Hsin Road 6,
Hsin-Chu Science Park, Hsin-Chu,
Taiwan, Republic of China (the “Initial Holder”), and
Semiconductor Manufacturing International Corporation, an exempted company
incorporated under the laws of the Cayman Islands having a place of business
located at No. 18 Zhang Jiang Road, Pudong New Area, Shanghai
201203, People’s Republic of China (the “Company”).

     

    W I T N E S S E T H

     

         WHEREAS, the Initial Holder and the Company
entered into that certain Settlement Agreement, dated November 9, 2009 (the
“2009 Settlement Agreement”),
whereby the Initial Holder and the Company settled and resolved various
litigation and disputes as specified therein; 

     

         WHEREAS, in connection with the execution of
the 2009 Settlement Agreement, the Initial Holder and the Company entered into
that certain Share and Warrant Issuance Agreement dated November 9, 2009 (the
“Share and Warrant Issuance
Agreement”); and 

     

         WHEREAS, pursuant to the Share and Warrant
Issuance Agreement, the Company proposes to issue warrants (each a “Warrant” and collectively,
the “Warrants”) to
initially purchase [695,914,030] validly issued and fully paid common shares,
par value US$.0004 of the Company (the “Common Shares, with the
Common Shares deliverable upon exercise of the Warrants being referred to herein
as the “Warrant
Shares”).

     

         NOW, THEREFORE, in consideration of the mutual
promises, agreements and covenants contained herein, and for other valuable
consideration, receipt of which is hereby acknowledged, the Company and the
Initial Holder hereby agree as follows: 

     

    ARTICLE I 
DEFINITIONS 

     

    1.1 Definitions.

     

         (a) Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Share and Warrant
Issuance Agreement. 

     

         (b) The following terms shall have
the meanings set forth below. 

     

         “Affiliate” means “affiliate” within the meaning of Rule
144(a)(1) under the Securities Act. 

     

     

     

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    Final Form

     

         “Agreement” shall mean this
Warrant Agreement, together with all annexes attached hereto, as amended,
restated, supplemented or otherwise modified from time to time in accordance with the terms hereof. 

     

         “Applicable Law” means any
statute, rule, regulation, law or ordinance, or any judgment, decree or order.

     

         “Assignment Form” means the
assignment form attached as Annex
C to a Warrant. 

     

         “Board” means the board of
directors of the Company. 

     

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

     

         “Capital Stock” means the
Common Shares, and any other shares of the Company. 

     

         “Cash” means money, currency
or a credit balance in a demand deposit account. 

     

         “Common Share Equivalents”
means any Capital Stock, evidence of indebtedness, Options or other securities
or rights exercisable for, convertible into or exchangeable for Common Shares
(including the Warrants). 

     

         “Common Shares” has the
meaning set forth in the preamble. 

     

         “Company” has the meaning set
forth in the preamble. 

     

         “Delivery Date” has the
meaning given to such term in Section
4.3(a). 

     

         “Distribution” means, in
respect of any Person, (a) the payment or making of any dividend or other
distribution of Property in respect of capital stock of such Person or (b) the
redemption or other acquisition of any capital stock of such Person.

     

         “Exchange Form” means the
exchange form attached as Annex
B to a Warrant. 

     

         “Exchange Number” has the
meaning given to such term in Section
4.2. 

     

         “Exercise Form” means the
exercise form attached as Annex
A to a Warrant. 

     

         “Exercise Price” means HK$1.30
per Warrant Share, subject to change from time to time in the manner provided in
Article V. 

     

         “Expiration Time” means 11:59
p.m., Hong Kong Time, on the date that is three (3) years after the date hereof.
If such day is not a Business Day, the Expiration Time shall be extended until
11:59 p.m., Hong Kong Time on the next Business Day. 

     

     

     

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         “Extraordinary
Event” means the occurrence of any sale, transfer, assignment, lease,
conveyance or other disposition, directly or indirectly, of all or substantially
all of the property of the
Company and its subsidiaries, considered as a whole, or the Company merges,
consolidates or amalgamates with or into any other Person pursuant to a
transaction other than a transaction in which the holders of the outstanding
Capital Stock of the Company immediately prior to such transaction own, directly
or indirectly, not less than a majority of the Capital Stock of the surviving
person immediately after such transaction and in substantially the same
proportion as before the transaction.

     

         “Fair Market Value” means, with respect to Property, the fair market value of such Property
as determined by the Board in good faith as of the date of determination,
without discount for lack of liquidity or minority position; provided, however,
that if the holder of this Warrant disputes such determination, the fair market
value of such Property will be determined, at the expense of the Company, by an
internationally recognized investment bank, selected by the Board, with
experience in making valuations of such type. Notwithstanding the foregoing, if
the Property is then Publicly Traded (or if the Property is not Publicly Traded
but a derivative form thereof is Publicly Traded in the form of depositary
shares or depositary receipts), then the value shall be deemed to be the average
of the closing prices of such Property on such exchange (as reported by
Bloomberg) or system over the five (5) trading days immediately prior to the
date of determination, which shall be the Delivery Date in the case of exercise
of the Warrants. 

     

         “Fully Diluted Basis” means the number of Common Shares that would be issued and outstanding at
such time, assuming full conversion, exercise or exchange of all issued and
outstanding Common Share Equivalents and Options that shall be (or may become)
exchangeable for, or exercisable for or convertible into, Common Shares,
including the exercise of the Warrant for the Warrant Shares. 

     

         “Governing Documents” means as to any Person, its memorandum and articles of association and/or
other applicable constitutional, organizational or governing documents of such
Person. 

     

         “Holder” means with
respect to any Warrant, the holder of such Warrant as set forth in the Warrant
Register, which as of the date hereof is the Initial Holder. 

     

         “Initial Holder” has the meaning set forth in the preamble.

     

         “Lien” means, with
respect to any Property of any Person, any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, security interest, lien, charge,
easement (other than any easement not materially impairing usefulness or
marketability), encumbrance, preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever on or with respect to
such Property (including any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).

     

         “Options” means any
warrants, options or other rights to subscribe for or to purchase (a) Capital
Stock or (b) Common Share Equivalents. 

     

     

     

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         “Other Equity Securities”
means any capital stock, other than the Common Shares, Common Share Equivalents
or Options.

     

         “Other Transaction Documents”
means the (a) the Warrant, (b) the Share and Warrant Issuance Agreement and (c)
the 2009 Settlement Agreement, as the same may be amended, restated,
supplemented or otherwise modified from time to time. 

     

         “Person” means an individual,
sole proprietorship, partnership, limited liability company, joint venture,
trust, incorporated organization, association, corporation, institution, public
benefit corporation, entity or government (whether federal, state, county, city,
municipal or otherwise, including any instrumentality, division, agency, body or
department thereof). 

     

         “Property” means any interest
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible.

     

         “Publicly Traded” means, with
respect to any security, that such security is (a) listed on the Hong Kong Stock
Exchange or (b) listed (either directly or indirectly
represented by American Depositary Receipts) on the New York Stock Exchange or a
similar successor organization. 

     

         “Requisite Holders” means, as
of any date of determination, Holders holding Warrants representing a majority
of the Warrant Shares that are either (a) previously issued and are then
outstanding or (b) issuable upon exercise of Warrants then
outstanding; provided that any
Warrants or Warrant Shares held by the Company or its Affiliates shall not be
counted in either the numerator or the denominator of the calculation of
Requisite Holders. For the purpose of any matter applicable only to Warrants and
not Warrant Shares, “Requisite Holders”
will be Holders holding a majority of Warrants without regard to Warrant
Shares.

     

         “Responsible Officer” means
the Chief Executive Officer, the President, the Chief Financial Officer or any
executive officer of such Person.

     

         “Securities Act” means the
Securities Act of 1933, as amended, of the United States, or any similar United
States federal statute, and the rules and regulations of the United States
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time.

     

         “Share and Warrant Issuance
Agreement” has the meaning given to such term in the
preamble.

     

         “Transfer” means any sale,
transfer, assignment, or other disposition of any interest in, with or without
consideration, any security, including any disposition of any security or of any
interest therein which would constitute a sale thereof within the meaning of the
Securities Act. 

     

         “Warrant” has the meaning set
forth in the preamble.

     

         “Warrant Register” has the
meaning given to such term in Section
3.1(b).

     

         “Warrant Shares” has the meaning set forth in the
preamble.

     

     

     

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    Final Form 

     

    1.2 Rules of
Construction. 

     

         The definitions in Section 1.1 shall apply equally to the singular and plural
forms of the terms defined. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase
“without limitation”. The words “herein,” “hereof,” “hereunder” and other words of similar import refer to
this Agreement as a whole, including the annexes hereto, as the same may from
time to time be amended, restated, supplemented or otherwise modified, and not
to any particular section, subsection, paragraph, subparagraph or clause
contained in this Agreement. All references to sections, schedules and exhibits
mean the sections of this Agreement and the schedules and exhibits attached to
this Agreement, except where otherwise stated. The title of and the section and
paragraph headings in this Agreement are for convenience of reference only and
shall not govern or affect the interpretation of any of the terms or provisions
of this Agreement. The use herein of the masculine, feminine or neuter forms
shall also denote the other forms, as in each case the context may require.
Where specific language is used to clarify by example a general statement
contained herein, such specific language shall not be deemed to modify, limit or
restrict in any manner the construction of the general statement to which it
relates. Any reference to any term contained in any other agreement or other
document shall be deemed to be a reference to such term in the applicable
agreement or document as in effect as of the date hereof, unless the Requisite
Holders have consented to any amendment of such applicable agreement since the
date hereof, in which case such reference shall be deemed to be a reference to
such term in the applicable agreement or document, as amended through the date
of the most recent consent by the Requisite Holders. The language used in this
Agreement has been chosen by the parties to express their mutual intent, and no
rule of strict construction shall be applied against any party. “HK$” shall mean
Hong Kong dollars and “US$” shall mean United States dollars.

     

    ARTICLE II 
ISSUANCE OF WARRANTS AND AUTHORIZATION OF WARRANT
SHARES

     

    2.1 Issuance of Warrants to
Initial Holder Warrant Agreement.

     

         The Company shall issue and deliver Warrants,
dated as of the date hereof, to the Holder in accordance with this Agreement and
the Share and Warrant Issuance Agreement on the Closing Date (as defined in the
Share and Warrant Issuance Agreement). The provisions of this Agreement shall
apply to all Warrants (and, to the extent applicable, Warrant Shares), and each
Holder that is not a party to this Agreement, by its acceptance of a Warrant or
a Warrant Share, agrees to be bound by the applicable provisions hereof.

     

    
    

     

    

     

    
    

     

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    Final Form

     

    2.2 Authorization of Warrant
Shares.

     

         From
and after the date hereof, the Company shall at all times have authorized,
and keep available, free
from preemptive or similar rights, taxes, and Liens and charges with the respect to the issue thereof (arising under Cayman Islands law, the
Governing Documents or any agreement or instrument to which the Company is a
party or subject) for the purpose of enabling it to satisfy any obligation to
issue Warrant Shares, upon the exercise or exchange of the Warrants, the number
of authorized but unissued Warrant Shares issuable upon exercise or exchange of
all outstanding Warrants. The Company shall promptly take all actions necessary
to ensure that Warrant Shares shall be duly and validly authorized and, when
issued upon exercise or exchange of any Warrant in accordance with the terms
hereof, shall be duly and validly issued and fully paid, free and clear of all
taxes, Liens (except to the extent of any applicable provisions of this
Agreement) and all preemptive or similar rights, and free of restrictions on
transfer other than as expressly contemplated by the Other Transaction
Documents. If any securities to be authorized for the purpose of exercise of
this Warrant require approvals or registrations under applicable securities
laws, the Company will use its reasonable best efforts to obtain such approvals
or registrations as may be appropriate.

     

    2.3 No impairment.

     

         The Company shall not by any action, including
amending its Governing Documents or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such actions as may
be necessary or appropriate to protect the rights of the Holder against
impairment. Without limiting the generality of the foregoing, the Company will
use its best efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant. Upon
request of the Holder, the Company will at all times during the period this
Warrant is outstanding acknowledge in writing, in form satisfactory to the
Holder, the continuing validity of this Warrant and the obligations of the
Company hereunder. 

     

    ARTICLE III
CERTAIN ADMINISTRATIVE PROVISIONS

     

    3.1 Form of Warrant;
Register. 

     

         (a) Each Warrant issued hereunder shall be in
the form of Exhibit
A attached hereto (each, a “Warrant”) and shall be
executed on behalf of the Company by a Responsible Officer of the Company. Each
Warrant shall bear the legend(s) appearing on the first page of such form,
except that the Company shall promptly remove any such legend from a Warrant
from and after such time as all the restrictions to which such legend relates no
longer apply. Upon initial issuance, each Warrant shall be dated as of the date
of signature thereof by the Company. Irrespective of any adjustments in the
Exercise Price or the number or kind of Common Shares or other Property issuable
upon the exercise of the Warrants, any Warrants theretofore or thereafter issued
may, as a matter of form, continue to express the same Exercise Price and the
same number of Warrant Shares issuable upon the exercise of such Warrants as
were stated in the Warrants initially issued pursuant the Share and Warrant
Issuance Agreement, however such adjustments that have theretofore been made
shall nevertheless be binding and effective. 

     

     

     

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    Final Form 

     

         (b) Each Warrant issued, exchanged or
Transferred hereunder shall be registered in a warrant register (the “Warrant Register”) maintained
at the principal office of the Company, in which register the Company shall
record the name and address of the Person in whose name this Warrant has been
issued, as well as the name and address of each successor and prior owner of
such Warrant. The Warrant Register shall set forth (i) the number of each
Warrant, (ii) the name and address of the Holder thereof, (iii) the original
number of Warrant Shares purchasable upon the exercise thereof, (iv) the number
of Warrant Shares purchasable upon the exercise thereof, as adjusted from time
to time in accordance with this Agreement, and (v) the Exercise Price for each
Warrant Share, as adjusted from time to time in accordance with this Agreement.
The Warrant Register will be maintained by the Company and will be available for
inspection by any Holder at the principal office of the Company or such other
location as the Company may designate to the Holders in the manner set forth in
Section 7.1.
The Company shall be entitled to treat the Holder of any Warrant as the owner in
fact thereof for all purposes and shall not be bound to recognize any equitable
or other claim to or interest in such Warrant on the part of any other Person.
The Company may, with the written consent of the Holder (such consent not to be
unreasonably withheld), appoint a transfer agent or other agency with an office
in Hong Kong to be the transfer agent and registrar for the Common Shares as the
Company’s agent for the purpose of (a) maintaining the register described
herein, (ii) issuing Common Shares on the exercise of this Warrant pursuant to
Section 4.1,
(iii) exchanging this Warrant pursuant to Section 3.2, and (iv)
replacing this Warrant pursuant to Section 3.2.

     

    3.2 Exchange of Warrants for
Warrants. 

     

         (a) The Holder may exchange any Warrant issued
hereunder for another Warrant of like kind and tenor representing in the
aggregate the right to purchase the same number and class or series of Warrant
Shares that could be purchased pursuant to the Warrant being so exchanged. In
order to effect an exchange permitted by this Section 3.2, the
Holder shall deliver to the Company such Warrant accompanied by a written
request signed by the Holder thereof specifying the number and denominations of
Warrants to be issued in such exchange and, subject to the transfer restrictions
contained in the Other Transaction Documents, the names in which such Warrants
are to be issued. As promptly as practicable but in any event within two (2)
Business Days of receipt of such a request, the Company shall, without charge,
issue, register and deliver to the Holder thereof each Warrant to be issued in
such exchange and make any necessary changes to the Warrant Register.

     

         (b) Upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of the Holder being satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any Warrant, and
in the case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Company (if the Holder is a financial institution
or other institutional investor, its own indemnity agreement
being satisfactory) or, in the case of any such mutilation, upon surrender of
such Warrant, the Company shall, without charge, issue, register and deliver in
lieu of such Warrant a new Warrant of like kind representing the same rights
represented by, and dated the date of, such lost, stolen, destroyed or mutilated
Warrant. Any such new Warrant shall constitute an original contractual
obligation of the Company, whether or not the allegedly lost, stolen, mutilated
or destroyed Warrant shall be at any time enforceable by any Person.

     

     

    7

     

    

    
    

    Final Form 

     

    3.3 Mechanics of
Transfer of Warrants. 

     

         (a) Subject to the further provisions of this
Agreement, the Other Transaction Documents and applicable securities laws, each
Warrant may be Transferred, in whole or in part, by the Holder thereof by
delivering to the Company such Warrant accompanied by a properly completed, duly
executed, Assignment Form. As promptly as practicable but in any event within
two (2) Business Days of receipt of such Assignment Form, the Company shall,
without charge, issue, register and deliver to the Holder thereof a new Warrant
of like kind and tenor representing in the aggregate the right to purchase the
same number of Warrant Shares that could be purchased pursuant to the Warrant
being Transferred. Any Warrant, if properly assigned in compliance with the
provisions hereof, may be exercised by a new holder for the purchase of Warrant
Shares without having a new Warrant issued. 

     

         (b) At the request of the Company, any Person to whom a Warrant is
Transferred in accordance with this Article III shall execute and deliver to the Company the
assignment form in the form of Annex C to the
Warrant pursuant to which such Person agrees to become a party to, and to be
bound by the terms of and entitled to the benefits under this
Agreement.

     

    ARTICLE IV 
EXERCISE OF WARRANT; EXCHANGE FOR WARRANT SHARES 

     

    4.1 Exercise of
Warrants; Expiration. 

     

         (a) On any Business Day on or prior to the
Expiration Time, a Holder may exercise a Warrant, in whole or in part, by
delivering to the Company such Warrant accompanied by a properly completed
Exercise Form and consideration in the form set forth in Section 4.1(b) in an
aggregate amount equal to the product of (x) the Exercise Price and (y) the
number of Warrant Shares being purchased. Any partial exercise of a Warrant
shall be for a whole number of Warrant Shares only. 

     

         (b) Upon exercise of a Warrant, in whole or in
part, the Holder thereof shall deliver to the Company the aggregate Exercise
Price: 

     

              (i) by wire transfer of immediately available
funds to a bank account designated by the Company or a certified check payable
to the Company; 

     

              (ii) by surrender of a number Warrant Shares
having a Fair Market Value equal to the aggregate Exercise Price; or

     

              (iii)
a combination of the methods set forth in clauses (i) and (ii). 

     

         (c) A Warrant shall terminate and become void
as of the earlier of (x) the Expiration Time and (y) the date such Warrant is exercised in full. 

     

    

     

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    Final Form

     

    4.2 Exchange for Warrant
Shares. 

     

         On any Business Day on or prior to the
Expiration Time, a Holder may exchange a Warrant, in whole or in part, for
Warrant Shares by delivering to the Company such Warrant accompanied by a
properly completed Exchange Form. The number of Warrant Shares to be received by
a Holder upon such exchange shall be equal to the number of Warrant Shares
allocable to the portion of the Warrant being exchanged (the “Exchange Number”),
as specified by such Holder in the Exchange Form, minus a number of
Warrant Shares equal to the quotient obtained by dividing (i) the product of (x)
the Exercise Price and (y) the Exchange Number by (ii) the Fair Market Value of one Warrant
Share as of the Delivery Date.

     

    4.3 Issuance of Warrant
Shares. 

     

         (a) Issuance of Warrant Shares. As promptly as practicable but in any event
within two (2) Business Days following the first date on which each of the
following items has been delivered to the Company (the “Delivery Date”):
(i) an Exercise Form or
Exchange Form in accordance with Section 4.1 or 4.2, (ii) the related
Warrant and (iii) any required payment of the Exercise Price, the Company shall,
without charge, upon compliance with the applicable provisions of this
Agreement, issue to such Holder one or more stock certificates or other
appropriate evidence of ownership of the aggregate number of Warrant Shares to
which the Holder of such Warrant is entitled and the other securities or
Property (including any Cash) to which such Holder is entitled, in such
denominations, and registered or otherwise placed in, or payable to the order
of, such name as may be directed in writing by such Holder. The Company shall
deliver such stock certificates or evidence of ownership and any other
securities or Property (including any Cash) to the Person entitled to receive
the same, together with an amount in Cash in lieu of any fraction of a Warrant
Share (or fractional interest in any other security), as hereinafter provided.
If any securities included in the Warrant Shares are Publicly Traded, then at
the request of such Holder, the Company shall use commercially reasonable
efforts to cause its transfer agent to electronically transmit such securities
to such Holder through the Depository Trust Company’s Deposit/Withdrawal at
Custodian system or the Central Clearing and Settlement System of the Hong Kong
Exchanges and Clearing Limited market system, or similar organization, as
applicable. 

     

         (b) Partial Exercise or Exchange. If a Holder shall exercise or exchange a
Warrant for less than all of the Warrant Shares that could be purchased or
received thereunder, the Company shall issue, register and deliver to the
Holder, as promptly as practicable but in any event within two (2) Business Days
following the Delivery Date, a new Warrant evidencing the right to purchase the
remaining Warrant Shares represented by such Warrants. In the case of an exchange pursuant to Section 4.2, the number of remaining
Warrant Shares represented by such Warrant shall be the original number of
Warrant Shares subject to the Warrant so exchanged reduced by the Exchange
Number. Each Warrant surrendered pursuant to Section 4.1 or 4.2 shall be cancelled.

     

         (c) Fractional Shares. The Company shall not be required to issue fractional Warrant Shares or
fractional units of any other security upon the exercise or exchange of a
Warrant. If any fraction of a Warrant Share or fractional unit of any other
security would be issuable on the exercise or exchange of any Warrant, the
Company may, in lieu of issuing such fraction of a Warrant Share or fractional
unit, pay to such Holder for any such fraction an amount in Cash equal to the
product of (x) such fraction and (y) the Fair Market Value for one Warrant Share
or for a unit of such other security, as the case may be, as of the Delivery
Date.

     

     

     

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    Final Form 

     

         (d) Record Ownership. To the extent permitted by Applicable Laws, the Person in whose name any
certificate for Warrant Shares or other evidence of ownership of any other
security is issued upon exercise or exchange of a Warrant shall for all purposes
be deemed to have become the holder of record of such Warrant Shares or other
security on the Delivery Date, irrespective of the date of delivery of such
certificate or other evidence of ownership (subject, in the case of any exercise
to which Section 4.3(f) applies,
to the consummation of a transaction upon which such exercise is conditioned, in
which case the date of fulfillment of all conditions shall be deemed to be the
date that such Holder shall for all purposes be deemed to have become a holder
of record of such Warrant Shares), notwithstanding that the transfer books of
the Company shall then be closed or that such certificates or other evidence of
ownership shall not then actually have been delivered to such
Person.

     

         (e) Listings. The
Company shall promptly take all action that may be necessary so that any such
securities, immediately upon their issuance upon exercise or exchange of
Warrants, will be listed on the Hong Kong Stock Exchange, if any other
securities of the Company of the same class or type are then so listed or
quoted.

     

         (f) Conditional Exercise or Exchange. Any Exercise Form or Exchange Form delivered
under Section
4.1 or 4.2 a may condition
the exercise or exchange of any Warrant on the consummation of a transaction
being undertaken by the Company or the Holder of such Warrant, and such exercise
or exchange shall not be deemed to have occurred except concurrently with the
consummation of such transaction, except that, for purposes of determining
whether such exercise or exchange is timely, it shall be deemed to have occurred
on the Delivery Date. If any exercise of a Warrant is so conditioned, then,
subject to delivery of the items required by Section 4.3(a) and compliance with
the other terms hereof, the Company shall deliver the certificates and other
evidence of ownership of other securities or other Property in such manner as
such Holder shall direct as required in connection with the consummation of such
transaction upon which the exercise or exchange is conditioned. If, at any time
prior to the consummation of a conditional exercise or exchange, such Holder
shall give notice to the Company that such transaction has been abandoned or
such Holder has withdrawn from participation in such transaction, the Company
shall return the items delivered pursuant to Section 4.3(a), and such Holder’s
election to exercise such Warrant shall be deemed rescinded.

     

    ARTICLE V 
ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES 

     

    5.1 General.

     

         The Exercise Price and the number and kind of
Warrant Shares issuable upon exercise of each Warrant shall be subject to
adjustment from time to time in accordance with this Article V. 

     

     

     

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    Final Form 

     

    5.2 Distributions, Subdivisions
and Combinations. 

     

         If, at any time after the Closing
Date, the Company shall: 

     

              (i)
make a Distribution in Common Shares; 

     

              (ii) subdivide, split or reclassify its
outstanding Common Shares into a larger number of Common Shares; or

     

              (iii) combine its outstanding Common Shares
into a smaller number of Common Shares; 

     

    then (A) the number
of Warrant Shares issuable upon exercise of each Warrant shall be adjusted so as
to equal the number of Warrant Shares that the Holder of such Warrant would have
held immediately after the occurrence of such event if the Holder had exercised
such Warrant for Common Shares immediately prior to the occurrence of such event
(or, in the case of clause (i), the record date therefor) and (B) the Exercise
Price shall be adjusted to be equal to the product of (x) the Exercise Price
immediately prior to the occurrence of such event and (y) a fraction (1) the
numerator of which is the number of Warrant Shares issuable upon exercise of
such Warrant immediately prior to the adjustment in clause (A) and (2) the
denominator of which is the number of Warrant Shares issuable upon exercise of
such Warrant immediately after the adjustment in clause (A); provided, that in
no event shall such adjustment result in an Exercise Price per share which is
less than the par value per Warrant Share. An adjustment made pursuant to this Section 5.2 shall become effective immediately after the
occurrence of such event retroactive to the record date, if any, for such event.
Additionally, the Exercise Price shall be adjusted in the manner contemplated by
clause (B).

     

    5.3 Reorganizations, Mergers and
Consolidations. 

     

         If any Extraordinary Event shall be effected,
then, as a condition of such Extraordinary Event, the Company shall cause lawful
and adequate provision to be made whereby the registered holder of this Warrant
shall thereafter have the right to purchase and receive, upon exercise hereof
and the payment of the exercise price, in lieu of the Common Shares of the
Company immediately theretofore purchasable and receivable upon the exercise of
this Warrant, such shares of stock, securities or Property (including Cash) as
may be issued or payable with respect to or in exchange for a number of Common
Shares of the Company immediately theretofore purchasable and receivable upon
the exercise of this Warrant had such Extraordinary Event not taken place, and
in any such case appropriate provision shall be
made with respect to the rights and interests of the holder of this Warrant to
the end that the provisions hereof (including, without limitation, provisions
for adjustments of the number of shares purchasable upon the exercise of this
Warrant) shall thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or Property thereafter deliverable upon the exercise
hereof. The foregoing provisions shall similarly apply to successive
Extraordinary Events. The Company shall not effect any consolidation, merger or
sale that constitutes an Extraordinary Event unless, prior to the consummation
thereof, the successor company (if other than the Company) resulting from such
consolidation or merger or the company purchasing assets in an Extraordinary
Event shall assume by written instrument executed and mailed to the registered
Holder at the last address of such registered Holder appearing on the books of
the Company, the obligation to deliver to such registered Holder such shares of
stock, securities or Property as, in accordance with the foregoing provisions,
such registered Holder may be entitled to purchase or receive. 

     

     

     

    11

     

    

    
    

    Final Form

     

    5.4 Adjustment upon
Issuance of Common Shares or Common Share Equivalents.

     

         If at any time or from time to time after
November 9, 2009 the Company issues or sells, or is deemed to have issued or
sold (including, without limitation, pursuant to any “equity
appreciation right,” “phantom equity”
or otherwise), any Common Shares (or Common Share Equivalents, as described in
Section 5.5(a)) for a
consideration per share less than the Exercise Price per Common Share at the
time of such issuance or sale, then forthwith upon such issue or sale, the
number of Warrant Shares shall be increased by multiplying such number by a
fraction (A) the numerator of which is the Exercise Price and (B) the denominator of which is determined by dividing (i) the sum of (x) the
Exercise Price multiplied by the
number of Common Shares outstanding immediately prior to such issue or sale
plus (y) the aggregate
consideration, if any, received by the Company upon such issue or sale by (ii) the number of Common Shares
outstanding immediately after such issue or sale. 

     

    5.5 Effect on
Warrant Shares of Certain Events. 

     

         For purposes of determining the adjusted
number of Warrant Shares under Section
5.4 above, the following shall be applicable: 

     

         (a) Issuance of Common Share Equivalents. If the Company in any manner grants or issues
any Common Share Equivalents and the lowest price per Common Share for which any
one Common Share or analogous economic right is issuable upon the exercise of
any such Common Share Equivalent is less than the Exercise Price at the time of
the granting or issuing of such Common Share Equivalent, then such Common Share
will be deemed to have been issued and sold by the Company for such price per
Common Share. For purposes of this paragraph, the "lowest price per share" will
be equal to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one Common Share or analogous
economic right upon the exercise of the Common Share Equivalent (whether by
conversion, exchange or otherwise) or other similar indication of the price per
Common Share as of the time of granting (such as the floor value for stock
appreciation rights). No further adjustment of the Warrant Shares will be made
upon the actual issue of such Common Shares or upon the exercise of any rights
under such Common Share Equivalents. 

     

         (b) Change in Option Price or Conversion Rate. If the purchase price provided for in any
Common Share Equivalent, the additional consideration (if any) payable upon the
issue, conversion or exchange of any Common Share Equivalent or the rate at
which any Common Share Equivalent is convertible into or exercisable or
exchangeable for Common Shares changes at any time, the number of Warrant Shares
issuable at the time of such change will be readjusted to the number of Warrant
Shares that would have been issuable at such time had such Common Share
Equivalents provided for such changed purchase price, additional consideration
or changed conversion rate, as the case may be, at the time initially granted,
issued or sold; provided that if such
adjustment would result in a decrease in the number of Warrant Shares then
issuable, such adjustment will not be effective until 30 days after written
notice thereof has been given by the Company to the Holders of the
Warrants. 

     

    

     

    12

     

    

    
    

    Final Form 

     

         (c) Treatment of Expired and Unexercised Common Share Equivalents.
Upon the expiration of any
Common Share Equivalents or the termination of any right to convert or exchange
any Common Share Equivalents without the exercise of such Common Share
Equivalents, the number of Warrant Shares then issuable will be adjusted to the
number of Warrant Shares that would have been issuable at the time of such
expiration or termination had such Common Share Equivalents to the extent
outstanding immediately prior to such expiration or termination, never been
issued. 

     

    5.6 Other Actions Affecting
Equity Securities. 

     

         If at any time or from time to time the
Company shall take any action affecting its capital stock (including, without
limitation, the creation of equity appreciation rights or phantom equity), other
than any action of a type otherwise described in this Article V, then the number of Warrant
Shares issuable upon exercise of each Warrant shall be adjusted (with a
corresponding adjustment to the Exercise Price) to such extent, if any, and in
such manner and at such time, as the Board shall, in the good faith exercise of
its reasonable business judgment, determine to be equitable in the
circumstances; provided that no such adjustment shall decrease the number of
Warrant Shares issuable upon exercise of such Warrant or increase the Exercise
Price. 

     

    5.7 Miscellaneous.

     

         (a) Calculation of Consideration Received. If any Common Shares, Common Share Equivalents
or Other Equity Securities are issued or sold or deemed to have been issued or
sold for Cash, then the consideration received therefor shall be deemed to be
the net amount received or to be received by the Company therefor. If any Common
Shares, Common Share Equivalents or Other Equity Securities are issued or sold
for consideration other than Cash (including in connection with any merger in
which the Company issues such securities), then the amount of the consideration
other than Cash received by the Company shall be the Fair Market Value of such
consideration, as of the date of receipt. 

     

         (b) Treasury Shares. The number of Common Shares outstanding at any given time does not
include Common Shares owned or held by or for the account of the Company or any
Affiliate of the Company, and the disposition of any Common Shares so owned or
held shall be considered an issuance of Common Shares. 

     

         (c) Notice; Adjustment Rules. Whenever the Exercise Price or the number of issuable Warrant Shares
shall be adjusted as provided in this Article V, the
Company shall provide to each Holder a statement, signed by a Responsible
Officer of the Company, describing in detail the facts
requiring such adjustment and setting forth a calculation of the Exercise Price
and the number of issuable Warrant Shares applicable to each Warrant after
giving effect to such adjustment. All calculations under this Article V shall be
made to the nearest one thousandth of a cent ($.00001) or to the nearest
one-thousandth of a share, as the case may be. Adjustments pursuant to this
Article V shall apply to
successive events or transactions of the types covered thereby. Notwithstanding
any other provision of this Article
V, no adjustment shall be made to the number of issuable Warrant Shares
or to the Exercise Price if such adjustment represents less than .5% of the
number of issuable Warrant Shares previously required to be so issued, but any
lesser adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which together with any adjustments
so carried forward shall amount to .5% or more of the number of Warrant Shares
to be so issued. 

     

    

     

    13

     

    

    
    

    Final Form 

     

    5.8 Excluded
Issuances. 

     

         Notwithstanding any other provision
of this Article V, no adjustment
shall be made pursuant to this Article
V in respect of (i) the issuance of Common Shares pursuant to any
adjustment provided for in this Article
V or (ii) securities issued upon the exercise of Warrants. 

     

    ARTICLE VI 
COVENANTS OF THE COMPANY 

     

    6.1 No Avoidance;
Further Assurances. 

     

         The Company will not, by amendment of its
Governing Documents or through any Extraordinary Event, reorganization, Transfer
of Properties, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the
Company. The Company shall at all times in good faith assist in the carrying out
of all the provisions of this Agreement and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the Holders
hereunder against impairment. Each party hereto shall, without further
consideration, make, execute, acknowledge and deliver such other instruments and
documents, and take or cause to be taken all actions as may be necessary or
appropriate in order to effect the purposes of this Warrant. 

     

    6.2 Preemptive
Rights. 

     

         Except as otherwise provided herein or in the
Other Transaction Documents, no Warrant shall entitle the holder thereof to any preemptive rights or any other rights as a
shareholder of the Company, as such except for those rights as a stockholder of
the Company that attach to the Warrant Shares following their issuance upon the
exercise of any Warrant. 

     

    6.3 Sale of
Warrants. 

     

         In any merger, consolidation, reorganization, repurchase or reclassification
or similar transaction, in which holders of Capital Stock sell or otherwise
Transfer Capital Stock held by them, the Company will use commercially
reasonable efforts to cause the transaction to be structured to permit the
Holders to deliver Warrants in connection with any such transaction without
requirement for exercise thereof as a condition to participation and for
consideration not less than the consideration such Holders would have received
had such Holders exercised their Warrants immediately prior thereto, less any
applicable Exercise Price, unless such arrangement would result in a material
legal, tax or similar detriment to the Company, a significant counterparty to
the transaction or their respective securityholders. 

     

     

     

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    Final Form 

     

    ARTICLE VII 
MISCELLANEOUS 

     

    7.1 Notices.

     

         All notices and other communications provided
for or permitted hereunder shall be made by hand-delivery, telecopier or
overnight air courier guaranteeing next day delivery: 

     

     

    
      	
            	
            	
            	
            	(i)	
            	if to the Company, to:
	
            	 
	     	Semiconductor Manufacturing
      International Corporation
	 	Address:	
            	 	Suite 3003, 30th Floor
	 	 	
            	 	No. 9 Queen’s Road Central
	 	 	
            	 	Hong Kong
	
            	Telephone:	 	       	(+852) 2537 8588
	
            	Facsimile:	
            	
            	(+852) 2537 8206
	
            	Attention:	
            	
            	Anne Chen/Blondie Poon
	
            	 
	
            	
            	
            	
            	
            	       	with a copy to:
	
            	 
	
            	Wilson Sonsini Goodrich &
      Rosati, P.C.
	
            	Address:	
            	
            	Jin Mao Tower, 38F
	
            	
            	
            	
            	88 Century Boulevard
	
            	
            	
            	
            	Pudong New Area, Shanghai
    200121
	
            	 	People’s Republic of
      China
	
            	Telephone:	
            	
            	(+86-21) 6165-1700
	
            	Facsimile:	
            	
            	(+86-21) 6165-1799
	
            	Attention:	
            	
            	Carmen Chang, Esq.
	
            	 
	
            	
            	
            	
            	(ii)	
            	if to the Holder, to
	
            	 
	
            	Taiwan Semiconductor Manufacturing Co.,
      Ltd.
	
            	Address:	
            	
            	No. 8 Li-Hsin Road 6, Hsin-Chu Science
      Park
	
            	
            	
            	
            	Hsin-Chu, Taiwan, Republic of
      China
	
            	Telephone:	
            	
            	(+886) 3-5682002
	
            	Facsimile:	
            	
            	(+886) 3-5678689
	
            	Attention:	
            	
            	General Counsel
	
            	 
	
            	 	 	 	with a copy to:
	
            	 
	
            	Weil, Gotshal & Manges LLP
	
            	Address:	 	200 Crescent
      Court, Suite 300
	
            	
            	
            	Dallas, Texas
      75201
	
            	
            	
            	United States of
      America
	
            	Telephone:	
            	+1 (214)
      746 7700
	
            	Facsimile:	
            	+1 (214)
      746 7777
	
            	Attention:	
            	R. Scott
      Cohen

    

     

    

     

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         Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Business Day
after deposit with an overnight courier service, in each case properly addressed
to the party to receive the same. The parties may change the addresses to which
notices are to be given by giving five days' prior notice of such change in
accordance herewith. 

     

    7.2 No Voting Rights; Limitation
of Liability. 

     

         Except as otherwise provided herein, no
Warrant shall entitle the holder thereof to any voting rights or any other
rights as a stockholder of the Company, as such. No provision hereof, in the
absence of affirmative action by the Holder to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder shall give rise to
any liability of such Holder for the Exercise Price of Warrant Shares acquirable
by exercise hereof or as an equity holder of the Company. 

     

    7.3 Amendments and
Waivers. 

     

         (a) Written Document. Any provision of this Agreement may be amended or waived, but only
pursuant to a written agreement signed by the Company and the Requisite Holders;
provided that no such amendment or modification shall without the written
consent of each Holder affected thereby (i) shorten the Expiration Time of any
Warrant, (ii) increase the Exercise Price of any Warrant, (iii) change any of
the provisions of this Section
7.3(a) or the definition of “Requisite
Holders” or
any other provision hereof specifying the number or percentage of Holders
required to waive, amend, or modify any rights hereunder or required to make any
determination or grant any consent hereunder or otherwise to act with respect to
this Agreement or any Warrants, (iv) change any of the provisions of Article V or (v) increase the obligations of any Holder.

     

         (b) No Waiver. No
failure on the part of any Holder to exercise and no delay in exercising, and no
course of dealing with respect to, any right, power or privilege under this
Agreement or the Warrants shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege under this Agreement
or the Warrant preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. 

     

     

     

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    Final Form 

     

    7.4 Remedies.

     

         Each Holder shall have all rights and remedies
reserved for such Holder pursuant to this Agreement, all rights and remedies
which such Holder has been granted at any time under any other agreement or
instrument and all of the rights and remedies such Holder may have at law or in
equity. The remedies provided herein are cumulative and not exclusive. Any
Person having any rights under any provision of this Agreement will be entitled
to enforce such rights specifically, to recover damages by reason of any breach
of any provision of this Agreement and to exercise all other rights granted by
law or equity. The Company acknowledges and agrees that irreparable damage would
occur to the holder of this Warrant and that such Holder will not have an
adequate remedy at law in the event that any of the provisions of this Warrant
to be performed by the Company were not performed in accordance with their
specific terms or were otherwise breached. Therefore, the Holder of this Warrant
is entitled to an injunction or injunctions to prevent breaches of this Warrant
by the Company and to specifically enforce the terms and provisions of this
Warrant against the Company in any court of competent jurisdiction, without bond
or other security being required, and appropriate injunctive relief may be
applied for by such Holder and granted in connection therewith. 

     

    7.5 Binding Effect.

     

         Subject to the limitations set forth in this
Agreement and the Other Transaction Documents, each Holder has the right to
assign or otherwise Transfer its rights under this Agreement or any Warrants or
Warrant Shares held by it. The Company shall not assign its rights or
obligations hereunder except in the context of an Extraordinary Transaction, as
contemplated herein. This Agreement shall be binding upon and inure to the
benefit of the Company, each Holder and their successors and permitted assigns.

     

    7.6 Counterparts.

     

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

     

    7.7 Governing Law; Jurisdiction
and Venue. 

     

         All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed in accordance with the laws of Hong Kong. Any dispute, controversy
or claim arising out of or relating to this Agreement, or the interpretation,
breach, termination or validity hereof, shall be submitted to arbitration upon
the request of any party with notice to the other party. The arbitration shall
be conducted in Hong Kong under the auspices of the Hong Kong International
Arbitration Centre (the “HKIAC”) in
accordance with the UNCITRAL Arbitration Rules (“UNCITRAL Rules”) in effect, which rules are deemed to be incorporated by reference into
this Section
7.7. There shall be three (3) arbitrators. The complainant and the respondent to such dispute shall
each select one arbitrator within thirty (30) days after giving or
receiving the demand for arbitration. The Chairman of the HKIAC shall select the
third arbitrator, who shall be qualified to practice law in Hong Kong. If either
party to the arbitration does not appoint an arbitrator who has consented to
participate within thirty (30) days after selection of the first arbitrator, the
relevant appointment shall be made by the Chairman of the HKIAC. The arbitration
proceedings shall be conducted in English. Each party hereto shall cooperate
with any party to the dispute in making full disclosure of and providing
complete access to all information and documents requested by such party in
connection with such arbitration proceedings, subject only to any
confidentiality obligations binding on the party receiving the request. Each
party irrevocably waives, to the fullest extent it may effectively do so, any
objection which it may now or hereafter have to the laying of venue of any such
arbitration in Hong Kong and the HKIAC, and hereby submits to the exclusive
jurisdiction of HKIAC in any such arbitration. The award of the arbitration
tribunal shall be conclusive and binding upon the disputing parties, and any
party to the dispute may apply to a court of competent jurisdiction for
enforcement of such award. Any party to the dispute shall be entitled to seek
preliminary injunctive relief, if possible, from any court of competent
jurisdiction pending the constitution of the arbitral
tribunal. 

     

     

     

    17

     

    

    
    

    Final Form 

     

    7.8 Benefits of this
Agreement. 

     

         Nothing in this Agreement shall be construed
to give to any Person other than the Company and each Holder of a Warrant or a
Warrant Share any legal or equitable right, remedy or claim hereunder.

     

    7.9 Headings.

     

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

     

    7.10 Aggregation of
Warrants and Warrant Shares. 

     

         All Warrants and Warrant Shares held or
acquired by any Person and its Affiliates shall be aggregated together for
purposes of measuring any numerical thresholds used in determining the
availability to such Person and its Affiliates, taken collectively, of rights
under this Agreement and the applicability of obligations and restrictions under
this Agreement. 

     

    7.11 Operative
Date. 

     

         This Agreement shall become
operative on the date hereof. 

     

    [Remainder of Page Intentionally Left Blank]

     

    

     

    18

     

    

    
    

    Final Form 

     

         IN WITNESS WHEREOF, each party hereto has caused this Warrant
Agreement to be duly executed and delivered by its authorized signatory, all as
of the date and year first above written. 

     

    
      	SEMICONDUCTOR
    MANUFACTURING
	INTERNATIONAL
    CORPORATION
	
            	 
	
            	 
	By:  	 	 
	
            	Name: Jiang Shang Zhou
	
            	Title:   Chairman of the Board
	
            	 
	
            	 
	By:	 	 
	
            	Name: Richard Ru-Gin Chang
	
            	Title:   Chief Executive Officer
	
            	 
	
            	 
	TAIWAN SEMICONDUCTOR
    MANUFACTURING
	COMPANY, LTD.
	
            	 
	
            	 
	By:	 	
            
	
            	Name: F.C. Tseng
	
            	Title:   Vice
Chairman

    

     

    

     

    [Signature Page to
Warrant Agreement] 

     

    

    
    

    Final Form 

     

    Exhibit A to the Warrant
Agreement 

     

         THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR BLUE SKY
LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS.

     

         ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE
CONDITIONS SPECIFIED IN THE SHARE AND WARRANT ISSUANCE AGREEMENT, DATED AS OF
NOVEMBER 9, 2009, AND THE WARRANT AGREEMENT, DATED AS OF [________ __, 20
__], AMONG THE ISSUER HEREOF AND CERTAIN OTHER
SIGNATORIES THERETO. UPON THE FULFILLMENT OF CERTAIN CONDITIONS, THE ISSUER
HEREOF HAS AGREED TO DELIVER TO THE HOLDER HEREOF A NEW CERTIFICATE, NOT BEARING
THIS LEGEND, FOR THE SECURITIES
REPRESENTED HEREBY REGISTERED IN THE NAME OF THE HOLDER HEREOF. COPIES OF SUCH
AGREEMENTS MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF
RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE ISSUER
HEREOF.

     

    Semiconductor Manufacturing
International Corporation

    
    

     

    
      	
              No. W -
      l

            	[________, __, 20
  __]

    

     

    Common Share Purchase
Warrant

     

         THIS CERTIFIES that, for value received,
Taiwan Semiconductor Manufacturing Company, Ltd., a Taiwanese corporation (the
“Holder”), or its
assigns, is entitled to purchase from Semiconductor Manufacturing International
Corporation, an exempted company incorporated under the laws of the Cayman
Islands (the “Company”),
[695,914,030] common shares, US$.0004 par value (the “Common Shares”), of the
Company (the “Warrant
Shares”), at the price (the “Exercise Price”) of HK$1.30
per share, at any time or from time to time during the period commencing on the
date hereof and ending at 11:59 P.M. Hong Kong Time on the Expiration Time (as
defined in the Warrant Agreement).

     

         The Holder may exercise all or any part of
such rights at any time or from time to time prior to the Expiration
Time.

     

         This Warrant has been issued
pursuant to the Warrant Agreement dated as of [________ __, 20 __] (as amended, restated,
supplemented or otherwise modified from time to time, the “Warrant Agreement”) between
the Company and the Holder named therein, and is subject to the terms and
conditions, and the Holder is entitled to the benefits, thereof. A copy of the
Warrant Agreement is on file and may be inspected at the principal executive
office of the Company. The Holder of this certificate, by acceptance of this
certificate, agrees to be bound by the
provisions of the Warrant Agreement. Capitalized terms used but not defined
herein shall have the respective meanings given to such terms in the Warrant
Agreement. 

     

    
      

       

    

    A-1

    

    
    

         SECTION 1. Exercise of Warrant. On any day on or prior to the Expiration Time, the Holder may exercise
this Warrant, in whole or in part, in the manner set forth in Article IV of the Warrant Agreement.

     

         SECTION 2. Exercise Price and Number of Warrant Shares. The Exercise Price and the number of Warrant
Shares is subject to adjustment from time to time as set forth in the Warrant
Agreement. 

     

         SECTION 3. Exchange of Warrant. On any day on or prior to the Expiration Time,
the Holder may exchange this Warrant, in whole or in part, for Warrant Shares by
delivering to the Company this Warrant accompanied by a properly completed
Exchange Form in the form of Annex
B attached hereto. The number of Common Shares
to be received by the Holder upon such exchange shall be determined as set forth
in the Warrant Agreement. 

     

         SECTION 4. Transfer. Subject
to the limitations set forth or referred to in the Warrant Agreement, this
Warrant may be Transferred by the Holder by delivery to the Company of this
Warrant accompanied by a properly completed Assignment Form in the form of Annex C attached hereto. 

     

         SECTION 5. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is lost, stolen, mutilated or
destroyed, the Company will issue a new Warrant of like denomination and tenor
upon compliance with the provisions set forth in the Warrant Agreement.

     

         SECTION 7. Successors. All of
the provisions of this Warrant by or for the benefit of the Company or the
Holder shall bind and inure to the benefit of their respective successors and
permitted assigns. 

     

         SECTION 8. Headings. Section
headings in this Warrant have been inserted for convenience of reference only
and shall not affect the construction of, or be taken into consideration in
interpreting, this Warrant. 

     

         SECTION 9. Governing Law. All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed in accordance with the laws
of Hong Kong. Any dispute, controversy or claim arising out of or relating to
this Agreement, or the interpretation, breach, termination or validity hereof,
shall be submitted to arbitration upon the request of any party with notice to
the other party. The arbitration shall be conducted in Hong Kong under the
auspices of the HKIAC in accordance with the UNCITRAL Rules in effect, which
rules are deemed to be incorporated by reference into this section. There shall
be three (3) arbitrators. The complainant and the respondent to such dispute
shall each select one arbitrator within thirty (30) days after giving or
receiving the demand for arbitration. The Chairman of the HKIAC shall select the
third arbitrator, who shall be qualified to practice law in Hong Kong. If either party to the arbitration does not appoint an
arbitrator who has consented to participate within thirty (30) days after
selection of the first arbitrator, the relevant appointment shall be made by the
Chairman of the HKIAC. The arbitration proceedings shall be conducted in
English. Each party hereto shall cooperate with any party to the dispute in
making full disclosure of and providing complete access to all information and
documents requested by such party in connection with such arbitration
proceedings, subject only to any confidentiality obligations binding on the
party receiving the request. Each party irrevocably waives, to the fullest
extent it may effectively do so, any objection which it may now or hereafter
have to the laying of venue of any such arbitration in Hong Kong and the HKIAC,
and hereby submits to the exclusive jurisdiction of HKIAC in any such
arbitration. The award of the arbitration tribunal shall be conclusive and
binding upon the disputing parties, and any party to the dispute may apply to a
court of competent jurisdiction for enforcement of such award. Any party to the
dispute shall be entitled to seek preliminary injunctive relief, if possible,
from any court of competent jurisdiction pending the constitution of the
arbitral tribunal. 

     

     

     

    A-2

     

    
    

     

    

    
    

     

    
    

         IN WITNESS
WHEREOF, the undersigned has caused this Warrant to be executed by its
duly authorized officers and this Warrant to be dated as of the date first set
forth above. 

     

    
      	SEMICONDUCTOR
    MANUFACTURING
	INTERNATIONAL
    CORPORATION
	 
	 
	By:  	
            	 
	Name: Jiang Shang Zhou
	Title:   Chairman of the Board
	 
	 
	By:	
            	 
	Name: Richard Ru-Gin Chang
	Title:   Chief Executive
  Officer

    

     

    

     

    A-3

     

    

    
    

    Annex A to the
Warrant 

     

    EXERCISE FORM 

     

    [To
be signed
upon
exercise of a Warrant]

     

    TO SEMICONDUCTOR MANUFACTURING INTERNATIONAL
CORPORATION:    

     

         The undersigned, being the Holder of the
attached Warrant, hereby elects to exercise the purchase right represented by
such Warrant for, and to purchase thereunder _____ Common Shares of
Semiconductor Manufacturing International Corporation, an exempted company
incorporated under the laws of the Cayman Islands (the “Company”), and requests that
the certificates or other evidence of ownership for such shares be issued in the
name of, and be delivered to, _______________, whose address is
_____________________________________________.

     

         The foregoing exercise is (check
one):

     

    
      	 	
            	Irrevocable     
                
	
            	
            	 
	 	
            	Conditioned upon the consummation of the transaction described briefly below:
	
            	
            	 
	
            	
            	 
	
            	
            	 
	
            	
            	 
	             	          
	 

    
      	Dated:  	 	
            	 
	
            	 	Name:
	
            	                              
    	Title:

      

       

      

    

    
    

    Annex B to the Warrant

     

    EXCHANGE FORM 

     

    [To be signed upon exchange of a Warrant]

     

    TO SEMICONDUCTOR MANUFACTURING
INTERNATIONAL CORPORATION: 

     

         The undersigned, being the Holder of the
within Warrant, hereby elects to exchange, pursuant to Section 4.2
of the Warrant Agreement referred
to in such Warrant, the portion of such Warrant representing the right to
purchase _________ Common Shares of Semiconductor Manufacturing
International Corporation, an exempted company incorporated under the laws of
the Cayman Islands (the “Company”). The undersigned
hereby requests that the certificates or evidence of ownership for the number of
shares issuable in such exchange pursuant to such Section 4.2 be issued
in the name of, and be delivered to, __________________, whose address is
_____________________________.

     

         The foregoing exchange is (check
one):

     

    
      	 	
            	Irrevocable     
                
	
            	
            	 
	 	
            	Conditioned upon the consummation of the transaction described briefly below:
	
            	
            	 
	
            	
            	 
	
            	
            	 
	
            	
            	 
	             	          
	 

 

    
      	Dated:  	 	
            	 
	
            	 	Name:
	
            	                              
    	Title:

      

       

      

    

    
    

    Annex C to the
Warrant

     

    ASSIGNMENT FORM

     

    [To be signed only upon transfer of a
Warrant]

     

         For value received, the undersigned hereby
sells, assigns and transfers unto ______________________, all of the rights
represented by the within Warrant to purchase _________ Common Shares of
Semiconductor Manufacturing International Corporation, an exempted company
incorporated under the laws of the Cayman Islands (the “Company”), to which such
Warrant relates, and appoints ______________________ attorney to transfer such
Warrant on the books of the Company, with full power of substitution in the
premises.

     

    
      	Dated:  	 

    

    
      	By:  	 	
            
	Name:
	Title:

    

         By executing and delivering this Assignment
Form to the Company, the undersigned hereby agrees to become a party to, to be
bound by, and to comply with the provisions of the Warrant Agreement dated as of
[________ __, 20__] (as amended, restated, supplemented or otherwise modified
from time to time, the “Warrant
Agreement”),
among the Company and the Holders, in the same manner as if the undersigned were
an original signatory to the Warrant Agreement.

     

         The undersigned agrees that he, she or it
shall be a “Holder”, as such term is
defined in the Warrant Agreement.

     

    
      	Dated:  	 

    

    
      	 	
            
	Signature of transferee	 
	 	
            
	Print Name of
transferee	
            
	 	
            
	 	
            
	Address	
            
	 	
            
	Facsimile	
            
	 	
            
	Telephone	
            

    

     

     

    

    
    

    Execution Copy

     

    SHARE AND WARRANT ISSUANCE
AGREEMENT

     

         This SHARE AND WARRANT ISSUANCE AGREEMENT (the
“Agreement”) is made and
entered into as of November 9, 2009 by and between Taiwan Semiconductor
Manufacturing Company, Ltd., a Taiwanese corporation, having a place of business
located at No. 8 Li-Hsin Road 6, Hsin-Chu Science Park, Hsin-Chu, Taiwan,
Republic of China (the “Acquiror”), and Semiconductor
Manufacturing International Corporation, an exempted company incorporated under
the laws of the Cayman Islands, having a place of business located at No. 18
Zhang Jiang Road, Pudong New Area, Shanghai 201203, People’s Republic of China
(the “Company”).

     

    W I T N E S S E T
H

     

         WHEREAS, the Acquiror and the Company are
entering into that certain Settlement Agreement, dated as of even date herewith
(the “2009 Settlement
Agreement”), whereby the Company and the Acquiror are settling and
resolving various litigation and disputes, as specified therein;
and

     

         WHEREAS, contemporaneously with the execution
and delivery of, and as contemplated by, the 2009 Settlement Agreement, the
Company and the Acquiror are entering into this Agreement pursuant to which the
Company will issue and convey to the Acquiror, and the Acquiror will acquire,
upon the terms and conditions stated in this Agreement (i) an aggregate of
1,789,493,218 (as the same shall be appropriately adjusted in the case of any
share split, share consolidation, share dividend, recapitalization or similar
action effected in respect of the Common Shares prior to the Closing Date or, if
applicable, the consummation of the Share Placing or the Share Offering (each as
defined in Section 6 below)) Common Shares (the “New Common Shares”) and (ii)
a warrant exercisable for an aggregate of 695,914,030 (as the same shall be
appropriately adjusted in the case of any share split, share consolidation,
share dividend, recapitalization or similar action effected in respect of the
Common Shares prior to the Closing Date or, if applicable, the consummation of
the Warrant Placing or the Warrant Offering (as defined in Section 6 below))
Common Shares (the “Warrant”). Unless the context
otherwise requires, “Common
Shares” shall refer to the Company’s common shares, par value US$0.0004
per share; “Warrant
Shares” shall refer to the Common Shares deliverable upon the exercise of
the Warrant; and “Securities” shall refer to
the New Common Shares and the Warrant subscribed for herein, and the Warrant
Shares.

     

     

     

    

    
    

    Execution Copy

     

         NOW, THEREFORE, in consideration of the mutual
promises, agreements and covenants contained herein and in the 2009 Settlement
Agreement, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Acquiror hereby agree as
follows:

     

    1. Issuance of the New Common Shares and Warrant.

     

         (a)
Issuance of New Common Shares and
Warrant. Subject to the satisfaction of the conditions set forth in Sections 5 below, in consideration of
the execution and delivery of the 2009 Settlement Agreement by the Acquiror, and
the benefits derived by the Company thereunder, the Company shall issue and
convey to the Acquiror, or its permitted assignees (as provided in and subject
to Section 7(k) below), and the
Acquiror, or its permitted assignee (as provided in and subject to Section 7(k) below), shall acquire
from the Company, on the Closing Date (as defined in Section l(b)(i) below) the New Common
Shares and the Warrant.

     

         (b) Closing.

     

              (i) Date and Time. The date and time of
the issuance of the New Common Shares and the Warrant as contemplated hereby
(the “Closing”) shall be 10:00 a.m., Hong
Kong time, on such date as is specified by the Company and the Acquiror, which
date shall be no later than the fifth Business Day after the satisfaction or
waiver of the conditions to the Closing set forth in Section 5 below, at the offices of
Weil, Gotshal & Manges LLP, 15 Queen’s Road Central, 29/F
Gloucester Tower, Central, Hong Kong or at such other time, date and location as
is mutually agreed in writing by the Company and the Acquiror (with the date and
time of the Closing referred to herein as the “Closing Date”).

     

              (ii) Company Deliveries. On the Closing
Date, the Company shall deliver to the Acquiror:

     

              (1) (A) certificates in respect of the New Common Shares, duly executed on
behalf of the Company and registered in the name of the Acquiror, (B) the
Warrant Agreement, dated the Closing Date, duly executed on behalf of the
Company, in the form attached hereto as Exhibit A (the “Warrant Agreement”) and (C) the Warrant, duly
executed on behalf of the Company, in the form attached to the Warrant Agreement
as Annex A thereof;

     

              (2) a certified extract of the register of
members of the Common Shares of the Company, reflecting Acquiror’s ownership of
the New Common Shares;

     

              (3) copies of the resolutions of the board of
directors of the Company (the “Board”)
approving the entering into and execution of this Agreement, the issuance of the
New Common Shares, the Warrant and all transactions contemplated
herein;

     

              (4) a certificate, executed on behalf of the
Company by the Secretary of the Company and dated as of the Closing Date, as to
the resolutions delivered pursuant to Section 1(b)(ii)(3)
above;

     

              (5) an opinion of Conyers Dill & Pearman, Cayman Islands counsel to the Company, in the form previously
agreed by counsel to the Company and counsel to the Acquiror, covering due
authorization and valid issuance of New Common Shares, Warrants and Warrant
Shares, capitalization, no governmental restrictions and no conflicts with law
or constitutional documents;

     

    

     

    2

     

    

    
    

    Execution Copy

     

              (6) an opinion of Slaughter and May, Hong Kong
counsel to the Company, in the form previously agreed by counsel to the Company
and counsel to the Acquiror, covering various matters, including the
enforceability of this Agreement and the Warrant Agreement and the HKSE’s
approval of listing of the New Common Shares and the Warrant Shares;
and

     

              (7) an opinion of M &
A Law Firm, PRC counsel to the
Company, in the form previously agreed by counsel to the Company and counsel to
the Acquiror, covering compliance with PRC laws.

     

              (iii) Acquiror Deliveries. On the Closing
Date, the Acquiror shall deliver to the Company the Warrant Agreement, dated the
Closing Date, duly executed on behalf of the Acquiror.

     

    2.
Acquiror’s Representations and
Warranties. The Acquiror hereby represents and warrants to the
Company, as of the date hereof and as of the Closing Date as if made at that
time, that:

     

         (a)
Regulation S.

     

              (i) The Acquiror (A) is domiciled and has its
principal place of business outside the United States, (B) certifies that it is
not a U.S. Person as defined under Rule 902 of Regulation S (“Regulation S”) as promulgated by the United
States Securities and Exchange Commission (the “SEC”) under the U.S. Securities Act of 1933,
as amended (the “1933 Act”), and is not
acquiring the Securities for the account or benefit of any U.S. Person,
(C) at the time of offering to the Acquiror and
communication of the Acquiror’s order to purchase the Securities and at the time
of the Acquiror’s execution of this Agreement, the Acquiror was located outside
the United States, and (D) at the time of the Closing, the Acquiror, or persons
acting on the Acquiror’s behalf in connection therewith, will be located outside
the United States.

     

              (ii) The Acquiror has been advised and
acknowledges that: (A) the Securities issued pursuant to this Agreement have not
been, and when issued, will not be registered under the 1933 Act or the
securities laws of any state of the United States, (B) in issuing and selling
the Securities to the Acquiror pursuant hereto, the Company is relying upon the
exemption from registration provided by Regulation S of the 1933 Act, and (C) it
is a condition to the availability of the Regulation S safe harbor that the
Securities not be offered or sold in the United States or to a U.S. Person until
the expiration of a period of 40 days after the Closing Date (the “Distribution Compliance Period”).

     

    

     

    3

     

    

    
    

    Execution Copy

     

              (iii) The Acquiror acknowledges and covenants
that until the expiration of the Distribution Compliance Period (A) it and its
agents or representatives have not solicited and will not solicit offers to buy,
offer for sale or sell any of the Securities or any beneficial interest therein
in the United States or to or for the account of a U.S. Person and (B)
notwithstanding the foregoing, prior to the expiration of the Distribution Compliance Period,
the Securities may be offered and sold by the holder thereof only if such offer
and sale is made in compliance with the terms of this Agreement and either (X)
the offer or sale is within the United States or to or for the account of a U.S.
Person and pursuant to an effective registration statement, Rule 144 promulgated
under the 1933 Act or an exemption from the registration requirements of the
1933 Act or (Y) the offer and sale is outside the United States and to other
than a U.S. Person. The foregoing restrictions are binding upon subsequent
transferees of the Securities, except for transferees pursuant to an effective
registration statement. The Acquiror agrees that after the Distribution
Compliance Period, the Securities may be offered or sold within the United
States or to or for the account of a U.S. Person only in accordance with this
Agreement and pursuant to applicable securities laws.

     

              (iv) The Acquiror is not a “distributor” (as
defined in Regulation S) or
a “dealer” (as defmed in the 1933 Act).

     

              (v) The Acquiror hereby acknowledges that
during the Distribution Compliance Period, no deposit of the Securities issued
hereunder will be accepted into the Company’s American Depositary Shares (“ADS”) program, and no Securities may be
offered or sold in the United States or to U.S. Persons unless such Securities
are registered under the 1933 Act, or an exemption from the registration
requirements of the 1933 Act is available. The Acquiror further acknowledges
that, for so long as the Securities are held by affiliates of the Company (it
being understood that, as used herein, “affiliate” shall
have the meaning given to such term under Rule 144(a)(1) under the 1933 Act) or
are “restricted securities” within the meaning of Rule 144(a)(3) under the 1933
Act, such Securities will not be eligible for deposit under any unrestricted
depositary receipt facility.

     

         (b) No Public Sale or Distribution. The Acquiror is acquiring the Securities for
its own account and not with a view towards, or for resale in connection with,
the public sale or distribution thereof, except pursuant to sales registered or
exempted under the 1933 Act or in transactions not subject thereto. The Acquiror
does not presently have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities. The Acquiror is not a
broker-dealer registered with the SEC under the U.S. Securities Exchange Act of
1934, as amended (the “1934 Act”), or an entity engaged in a business that
would require it to be so registered as a broker-dealer. “Person” means an
individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization or a government or any
department or agency thereof.

     

         (c) Reliance on Exemptions. The Acquiror understands that the Securities
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Acquiror’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Acquiror set forth herein in order to determine the
availability of such exemptions and the eligibility of the Acquiror to acquire
the Securities.

     

     

     

    4

     

    

    
    

    Execution Copy

     

         (d) Information. Without prejudice to the representations and warranties of the Company
herein or its obligations hereunder, Acquiror has had the opportunity to inquire
of the Company and its
senior management regarding information the Acquiror believes is necessary for
it to make an informed decision in purchasing the Securities, and the Acquiror
has conducted its own investigation with respect to the Securities and the
Company. The Acquiror understands that its investment in the Securities involves
a high degree of risk and confirms that it is able to afford a complete loss of
such investment. The Acquiror has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of
prospective investment in the Securities.

     

         (e) No
Governmental Review. The Acquiror understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the
merits of the offering of the Securities.

     

         (f) Transfer on
Resale. The Acquiror understands that: (i) the Securities have not been
and are not being registered under the 1933 Act or any United States state
securities laws, and may not be offered for sale, sold, assigned or transferred
within the United States or to or for the account or benefit of a U.S. Person
unless (A) subsequently registered thereunder, (B) the Acquiror shall have
delivered to the Company an opinion of counsel, in form, scope and substance
reasonably acceptable to the Company, to the effect that such Securities to be
sold, assigned or transferred may be sold, assigned or transferred pursuant to
an exemption from such registration, or (C) the Acquiror provides
the Company with reasonable assurance that such Securities can be sold, assigned
or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act,
as amended, (or a successor rule thereto) (collectively, “Rule 144”) or Regulation S; (ii) any sale of
the Securities made in reliance on Rule 144 or Regulation S may be made only in
accordance with the terms of Rule 144 or Regulation S, as applicable and
further, if Rule 144 or Regulation S are not applicable, any resale of the
Securities under circumstances in which the seller (or the Person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 1933 Act) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other Person is under any obligation to register the Securities
under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.

     

     

     

    5

     

    

    
    

    Execution Copy

     

         (g)
Legends. The Acquiror understands that the certificates or other
instruments representing the New Common Shares and the Warrant, until such time
as the resale of such Securities has been registered under the 1933 Act, or may
be resold pursuant to an exemption therefrom or in a transaction not subject
thereto, shall bear any legend as required by the “blue sky” laws of any state
and a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such share
certificates):

     

    “THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT
OF, U.S. PERSONS, EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE
HOLDER, IF NOT A U.S. PERSON:
(1) REPRESENTS THAT IT IS NOT A U.S. PERSON AND IS
ACQUIRING THESE SHARES IN AN OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT
RESELL OR OTHERWISE TRANSFER THESE SHARES EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT, (C) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE ACT, (D) TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE COMPANY A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THESE SHARES (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE COMPANY), (E) OUTSIDE THE UNITED STATES,
IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULES 904 AND 905 UNDER THE ACT,
OR (F) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE ACT (IF AVAILABLE); AND (3) AGREES THAT IT WILL GIVE EACH PERSON TO WHOM
THESE SHARES ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THESE SHARES PURSUANT TO CLAUSES
(2)(C), (D) OR (F) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS, OR OTHER INFORMATION AS THE
COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION
REQUIREMENTS OF THE ACT. AS USED HEREIN, THE TERMS ‘OFFSHORE
TRANSACTION’, ‘UNITED STATES’, AND ‘U.S. PERSON’ HAVE THE MEANING GIVEN TO THEM
BY REGULATION S UNDER THE ACT.”

     

         The Acquiror understands that the
Warrant shall bear the legends as set forth in the Warrant
Agreement.

     

         (h)
Organization; Authorization; Enforcement; Validity. The Acquiror is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of formation and has the requisite corporate power and authority to
enter into and perform its obligations under this Agreement, the Warrant
Agreement, and each other agreement entered into by the parties hereto in
connection with the transactions contemplated by this Agreement to which it is
party (collectively, the “Transaction
Documents”). The execution and delivery of the Transaction Documents by
the Acquiror and the consummation by the Acquiror of the transactions
contemplated hereby have been duly authorized by the board of directors of the
Acquiror. The Transaction Documents to which the Acquiror is a party constitute,
or when duly executed and delivered by the Acquiror, will constitute, the legal,
valid and binding obligations of the Acquiror, enforceable against the Acquiror
in accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.

     

    

     

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         (i) No Conflicts; Consents. The execution, delivery and performance by the
Acquiror of this Agreement and the consummation by the Acquiror of the
transactions contemplated hereby will not (i) result in a violation of the
organizational or constitutional documents of the Acquiror, (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Acquiror is a party, or (iii) assuming the receipt of
all necessary consents, authorizations and approvals, result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws) applicable to the Acquiror, except in the case of clauses
(ii) and (iii) above, for such conflicts, defaults, rights or violations which
would not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the ability of the Acquiror to perform its
obligations hereunder; and no authorization, approval, consent and license from
any supranational, national, state, municipal, local or foreign government, any
instrumentality, subdivision, court, administrative agency or commission or
other governmental authority or regulatory body or instrumentality, or any
quasi-governmental or private body exercising any regulatory, taxing, importing
or other governmental or quasi-governmental authority (a “Governmental Entity”) is required for the entering into by
Acquiror of this Agreement and the performance by the Acquiror of its
obligations under this Agreement, except for (i) such as have already been
obtained and are in full force and effect, (ii) those approvals and
authorizations specifically identified in Section 5 hereof, and (iii) any
antitrust approvals, filings or notifications that may be required in connection
with the transactions contemplated hereby.

     

         (j) Prohibited Transactions. Since the time when the Acquiror and the
Company first initiated discussions related to the transactions contemplated
hereby, neither the Acquiror nor any affiliate of the Acquiror nor any Person
acting on behalf of or pursuant to any understanding with the Acquiror
(collectively, “Trading Affiliates”) has, directly or indirectly,
effected or agreed to effect any short sale, whether or not against the box,
established any “put equivalent position” (as defined in Rule 16a-l(h) under the
1934 Act) with respect to the Common Shares, granted any other right (including
without limitation, any put or call option) with respect to the Common Shares or
with respect to any security that includes, relates to or derived any
significant part of its value from the Common Shares or otherwise sought to
hedge its position in the Common Shares (each, a “Prohibited Transaction”), and neither the Acquiror nor its Trading Affiliates will enter into a
Prohibited Transaction after the date hereof until the transactions contemplated
hereby are publicly announced.

     

         (k) Independence of the Acquiror from Company. The Acquiror is independent of and is not
connected or acting in
concert with the Company or the
directors, chief executive, or other connected persons (as such terms are
defined under the Hong Kong Listing Rules) of the Company.

     

         (I) Acknowledgement. The Acquiror acknowledges and agrees that the
foregoing representations, warranties, covenants and acknowledgments are made by
it with the intention that they may be relied upon by the Company.

     

    

     

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    3. Representations and
Warranties of the Company. The Company represents and warrants to the
Acquiror, as of the date hereof, that, except as set forth in its Public
Documents (as defined in Section
3(h) below) (excluding disclosures of non-specific
risks faced by the Company or its subsidiaries included in any forward-looking
statement, disclaimer, risk factor disclosure or other similarly non-specific
statements that are similarly predictive or forward-looking in nature; provided,
however, that (i) any historical facts related to the Company or its
subsidiaries and (ii) any specific exposure or effect faced by the Company or
its subsidiaries emanating from specifically disclosed facts contained within
any such disclosure shall be deemed disclosed for purposes of the
representations and warranties set forth in this Article 3) that:

     

         (a)
Organization and Qualification. The Company is a corporation duly
incorporated and validly existing in good standing under the laws of the
jurisdiction in which it is incorporated, and has the requisite corporate power
and authorization to own its properties and to carry on its business as now
being conducted. The Company is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not reasonably be expected to have a Material Adverse
Effect. As used in this Agreement, “Material
Adverse Effect” means any material adverse effect on (i) the business,
properties, assets, liabilities, operations, results of operations or financial
condition of the Company and its subsidiaries, taken as a whole, or (ii) the
authority or ability of the Company to perform its obligations under the
Transaction Documents; provided, however, that for purposes of clause
(i) above, in no event shall any of the following
exceptions, alone or in combination with the other enumerated exceptions below,
be deemed to constitute, nor shall be taken into account in determining whether
there has been or will be, a Material Adverse Effect: (A) any effect resulting
from compliance with the terms and conditions of, or from the announcement of
the transactions contemplated by this Agreement, (B) any effect that results
from changes affecting any of the industries in which the Company operates
generally or the economy generally, (C) any effect that
results from changes affecting general worldwide economic or capital market
conditions, provided that any such changes in (B) and (C) do not substantially
disproportionately affect the Company in any material respect, or (D) any change
in the Company’s share price or trading volume, in and of itself, primarily
resulting from any of the effects or changes described in the foregoing clauses
(A), (B) or (C). Each subsidiary of the Company that is a
“significant subsidiary” within the meaning of Rule 1-01(w) of Regulation S-X
under the 1933 Act (individually a “Significant
Subsidiary” and collectively the “Significant Subsidiaries”) has been duly
organized and is validly existing in good standing under the laws of its
jurisdiction of organization except to the extent that the failure to be in good
standing would not reasonably be expected to have a Material Adverse
Effect.

     

         (b)
Authorization; Enforcement; Validity. The Company has the requisite corporate power and authority to enter into
and perform its obligations under the Transaction Documents and to issue the
Securities in accordance with the terms hereof and thereof. The issuance of the
Securities is within the scope of the general mandate granted to the Board by
the Company’s shareholders at the Company’s annual general meeting held on June
23, 2009, to allot, issue, grant, distribute and otherwise deal with additional
securities in the Company, not exceeding twenty percent of the issued share
capital of the Company at the date of such resolution. The execution and
delivery of the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby, including, without
limitation, the issuance of the Securities, has been duly authorized by the
Board. The Transaction Documents to which the Company is a party constitute, or
when duly executed and delivered by the Company, will constitute, the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.

     

    

     

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         (c) Equity Capitalization. As at October 31, 2009, the authorized share capital of the Company
consisted of (A) 50,000,000,000 Common Shares, of which as of such date
22,368,665,231 shares were issued and outstanding and (B) 5,000,000,000
Preferred Shares, of which none are issued. As of October 31, 2009,
3,020,347,823 shares were reserved for issuance pursuant to the Company’s
employee incentive plan and other options and warrants outstanding. There are no
other agreements or commitments outstanding which call for the allotment or
issue, or accords to any person the right to call for the allotment or issue, of
any shares (including shares issued pursuant to securities exercisable or
exchangeable for, or convertible into, or agreements relating to the issuance of
Common Shares), other than the preemptive rights provisions of the Datang
Agreement. With the possible exception of issuances in connection with exercises
of the outstanding options and warrants referenced above and employee or
consultant equity awards, there have been no further issuances of shares by the
Company subsequent to October 31, 2009 and through the date hereof. All of the
issued and outstanding share capital of the Company is duly authorized, validly
issued and fully paid.

     

         (d) Issuance of
Securities.

     

              (i) The New Common Shares are duly authorized and, when issued in accordance
with the terms hereof, will be validly issued and fully paid, free of all
preemptive or similar rights, taxes, liens and charges (whether arising under
Cayman Islands law, the Memorandum and the Articles of Association of the
Company (the “Articles”), any agreement
or instrument to which the Company is a party or is subject, or otherwise), and
restrictions on transfer other than as expressly contemplated by the Transaction
Documents and under applicable securities laws, with the holders being entitled
to all rights accorded to a holder of the Common Shares.

     

              (ii) The Warrant Shares are duly authorized
and, when issued in accordance with the terms of the Warrant Agreement, shall be
validly issued and fully paid, free of all preemptive or similar rights, taxes,
liens and charges (whether arising under Cayman Islands Law, the Articles, any
agreement or instrument to which the Company is a party or is subject, or
otherwise), and restrictions on transfer other than as expressly contemplated by
the Transaction Documents and under applicable securities laws, with the holders
being entitled to all rights accorded to a holder of the Common Shares. The
Company has sufficient authorized capital to issue the Warrant
Shares.

     

     

     

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              (iii) Prior to the execution and delivery of
the 2009 Settlement Agreement, Datang Telecom Technology & Industry Holdings Limited (“Datang”) executed and delivered to the Company
an irrevocable waiver of the application of the pre-emptive rights granted under
Section 4(m) of that certain Share Purchase Agreement dated as of November 6,
2008, between Datang and the Company (the “Datang Agreement”) to the issuance of the
Securities hereunder, which waiver is in full force and effect as of the date
hereof.

     

              (iv) Assuming the accuracy of each of the
representations and warranties of the Acquiror set forth in Section 2 of this Agreement, the offer
and issuance by the Company of the Securities is exempt from registration under
the 1933 Act.

     

         (e) No
Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of
the Securities) will not (i) result in a violation of the Articles, (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any Significant Subsidiary is a
party, or (iii) assuming the receipt of all necessary consents, authorizations
and approvals, result in a violation of any law, rule, regulation, order,
judgment or decree (including the Hong Kong Code on Takeovers and Mergers,
foreign, U.S. federal and state securities laws and regulations and the rules
and regulations of The Stock Exchange of Hong Kong Limited (the “HKSE”) or of the New York Stock Exchange (the
“NYSE”) applicable to the Company),
except in the case of clauses (ii) and (iii) above, for such conflicts,
defaults, rights or violations which would not reasonably be expected to result
in a Material Adverse Effect.

     

         (f) Consents. The Company is not required to obtain
any consent, authorization or order of, or make any filing or registration with,
(i) any court, Governmental Entity or any regulatory or self-regulatory agency
or (ii) any third party pursuant to any agreement, indenture or instrument to
which the Company or any Significant Subsidiary is a party in order for it to
execute, deliver or perform any of its obligations under or contemplated by the
Transaction Documents, except for (i) such as have already been obtained and are
full force and effect, (ii) those approvals and authorizations specifically
referenced in Section 5 hereof,
(iii) any required filings or notifications regarding the issuance or listing of
additional securities with the HKSE or the NYSE and (iv) any antitrust
approvals, filings or notifications that may be required in connection with the
transactions contemplated hereby. The Company is not in violation of the listing
requirements of the HKSE or the NYSE and has no knowledge of any facts that
would reasonably lead to delisting or suspension of its Common Shares from the
HKSE or of its American depository receipts from the NYSE in the foreseeable
future. As used herein, “knowledge” shall mean actual knowledge of the executive
officers (as defined in Rule 405 under the 1933 Act) of the Company after due
inquiry.

     

     

     

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         (g) No Integrated Offering.
Assuming the accuracy of the Acquiror’s representations and warranties set forth
in Section 2 hereof, none of the
Company, any of its affiliates, or any Person acting on their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would
require registration of
the issuance of any of the Securities under the 1933 Act, whether through
integration with prior offerings or otherwise, or cause the offering of
Securities hereunder to require approval of shareholders of the Company for
purposes of any applicable shareholder approval provisions, including, without
limitation, under the rules and regulations of the HKSE and the NYSE. None of
the Company, their affiliates and any Person acting on their behalf will take
any action or steps referred to in the preceding sentence that would require
registration of the issuance of any of the Securities under the 1933 Act or
cause the offering of the Securities to be integrated with other offerings for
purposes of any such applicable shareholder approval provisions.

     

         (h) Public
Documents. The Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the 1934 Act or with the HKSE and has timely
issued all announcements and circulars required to be issued by it by the HKSE
or the NYSE (all of the foregoing filed or announced prior to the date of this
Agreement and all exhibits included therein and financial statements, notes and
schedules thereto and documents and incorporated by reference therein being
hereinafter referred to as the “Public
Documents”). As of their respective filing or issuance dates, the Public
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder and the
rules and regulations of the HKSE and the NYSE, as applicable to the respective
Public Documents, and, other than as corrected or clarified in a subsequent
Public Document, none of the Public Documents, at the time they were filed or
issued, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.

     

         (i) Financial
Statements. The consolidated financial statements (including any related
notes thereto) included or incorporated by reference in the Public Documents
fairly presented in all material respects the consolidated financial position of
the Company and its consolidated subsidiaries as of the dates indicated therein
and the consolidated results of their operations for the periods specified
therein, other than as corrected or clarified in a subsequent Public Document.
Such financial statements were prepared in material conformity with accounting
principles generally accepted in the United States of America (“GAAP”) applied on a materially consistent
basis (except as may be noted therein). The Company and its subsidiaries do not
have any liabilities or obligations required under GAAP to be set forth on a
consolidated balance sheet (accrued, absolute, contingent or otherwise), other
than (i) liabilities or obligations reflected on, reserved against, or disclosed
in the Company’s balance sheet as of June 30, 2009, (ii) liabilities or
obligations that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, and (iii) liabilities incurred since
June 30, 2009 in the ordinary course of business consistent with past practices
and any liabilities incurred pursuant to this Agreement.

     

    

     

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         (j) Acknowledgement. The Company acknowledges and
agrees that the foregoing representations and warranties are made by it with the
intention that they may be relied upon by the Acquiror and that the representations of
the Acquiror set forth in Section 2(d) hereof (Information)
shall in no way limit such reliance or the benefits thereof.

     

    4. Covenants.

     

         (a)
Commercially Reasonable Efforts. Each party shall use its commercially
reasonable efforts to satisfy each of the conditions to Closing set forth in
Section 5 below as soon as
practicable.

     

         (b) Regulatory
Filings. Without limiting the generality of Section 4(a) above, the Company and
the Acquiror shall use their respective commercially reasonable efforts to
obtain all governmental approvals required to complete the transactions
contemplated by this Agreement and, as promptly as practicable after the date
hereof, the Company and the Acquiror shall make all filings, notices, petitions,
statements, registrations, submissions of information, application or submission of other documents
required by any Governmental Entity in connection with this Agreement and the
transactions contemplated hereby. The Company and the Acquiror will notify one
another promptly upon the receipt of (i) any comments from any officials of any
Governmental Entity in connection with any filings made pursuant hereto and (ii)
any requests by any officials of any Governmental Entity for amendments or
supplements to, or additional information in connection with, any filings made
pursuant hereto. In addition, the Company and the Acquiror shall
each use their commercially reasonable efforts to furnish such information,
supply such documents, give such undertakings and do all such acts and things as
may reasonably be required by any Governmental Entity in relation to or arising
out of the transactions contemplated hereby.

     

         (c)
Listing. The Company shall use its commercially reasonable efforts to
promptly secure the listing of, and permission to deal in, the New Common Shares
and the Warrant Shares on the HKSE as promptly as practicable after the date
hereof and shall use commercially reasonable efforts to maintain such listing of
and permission to deal in such Common Shares, so long as any Common Shares shall
be so listed. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(c).

     

         (d)
Fees. Each party shall bear its own expenses in connection with the
transactions contemplated hereby.

     

         (e)
Standstill. At any time following the date of this
Agreement:

     

              (i) Except with the prior approval of the
Board, for so long as the Acquiror holds any of the Securities, the Acquiror
shall not, and shall cause its controlled affiliates not to, directly or
indirectly, acquire or agree to acquire any Voting Securities,
except:

     

              (1) Voting Securities acquired by way of share
splits, share dividends or other distributions or offerings made available to
holders of Voting Securities generally;

     

              (2)
the Securities purchased by Acquiror pursuant to this Agreement;

     

    

     

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              (3)
the Warrant Shares issuable upon exercise of the Warrant; and

     

              (4)
Voting Securities acquired in compliance with Section 4(g) hereof.

     

    “Voting Securities” shall mean the
Common Shares of the Company, and any other security carrying voting rights in
the Company and any outstanding convertible securities, options, warrants or
other rights which are convertible into or exchangeable or exercisable for, or
carrying rights of subscription for, securities carrying voting rights in the
Company.

     

              (ii) Except with the prior approval of the
Board or as specifically permitted by Section 4(e)(i) above, for so long as
the Acquiror holds any of the Securities, the Acquiror shall not, and shall
cause its controlled affiliates not to:

     

              (1) make, effect, initiate, cause or in any
way participate directly or indirectly in (i) any acquisition of beneficial
ownership of any Voting Securities of the Company or any Voting Securities of
any subsidiary or other affiliate of the Company, (ii) any acquisition of any
assets of the Company or any assets of any subsidiary or other affiliate of the
Company, or (iii) any tender offer, exchange offer, merger, business
combination, recapitalization, restructuring, liquidation, dissolution or
extraordinary transaction involving the Company or any subsidiary or other
affiliate of the Company, or involving any securities or assets of the Company
or any securities or assets of any subsidiary or other affiliate of the
Company;

     

              (2) make, effect, initiate, cause or in any
way participate directly or indirectly in any “solicitation” of “proxies” (as
such terms are used in the rules of the SEC) to vote any Voting Securities of
the Company or any subsidiary thereof, or seek to advise or influence any Person
with respect to the voting of any Voting Securities of the Company or any
subsidiary thereof;

     

              (3) make any public announcement with respect
to, or submit a proposal for or offer of (with or without conditions) any
merger, recapitalization, reorganization, business combination or other
extraordinary transaction involving the Company or any subsidiary thereof or any
of their securities or assets;

     

              (4) enter into any discussions, negotiations,
arrangements or understandings with any third party with respect to any of the
foregoing, or otherwise form, join or in any way engage in discussions relating
to the formation of, or participate in, any “group”, as such term is interpreted
under Rule 13d-5(b)(1) under the 1934 Act in connection with any of the
foregoing;

     

              (5) take any action that might require the
Company to make a public announcement regarding any of the types of matters set
forth in clause “(1)”, clause “(2)” or clause “(3)” of
this sentence;

     

    

     

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              (6) agree or offer to take, or encourage or
propose (publicly or otherwise) the taking of, any action referred to in clause
“(1)”, clause “(2)”, clause “(3)”, clause “(4)”, or clause “(5)” of this sentence;

     

              (7) assist, induce or encourage any other
Person to take any action of the type referred to in clause “(1)”, clause “(2)”, clause “(3)”, clause “(4)”, clause “(5)” or clause
“(6)” of this sentence;

     

              (8) deposit any Voting Securities in a voting
trust or subject them to a voting agreement or other arrangement of similar
effect;

     

              (9) enter into any discussions, negotiations,
arrangement or agreement with any other Person related to any of the foregoing;
or

     

              (10) request the Company or any of its
representatives, directly or indirectly, to amend or waive any provision of this
Section 4(e).

     

              (iii) The restrictions imposed by this Section 4(e) shall terminate on the
earlier of such time as (A) a tender offer is made by another Person for not
less than 50% of the Voting Securities where such tender offer is not subject to
financing conditions and is evidenced by applicable filings with appropriate
regulatory agencies and tender offer materials have been disseminated to
security holders (provided that if such tender offer is not completed within six
months of its commencement, the restrictions imposed by this Section 4(e) shall resume at that time
and continue in full force and effect in accordance with their
terms), (B) another Person acquires 50% or more of the Voting Securities, or
(C)
the Company enters into a
definitive agreement with a Person other than a subsidiary of the Company
providing for: (1) a merger, share exchange, business combination or similar
extraordinary transaction as a result of which the Persons possessing,
immediately prior to the consummation of such transaction, beneficial ownership
of the voting securities of the Company entitled to vote generally in elections
of directors of the Company, would cease to possess, immediately after
consummation of such transaction, beneficial ownership of voting securities
entitling them to exercise at least 50% of the total voting power of all
outstanding securities entitled to vote generally in elections of directors of
the Company (or, if not the Company, the surviving Person resulting from such
transaction); (2) a sale, exchange or lease of all or substantially all of the
assets of the Company and its subsidiaries (determined on a consolidated basis);
or (3) the acquisition (by purchase, merger or otherwise) by any Person
(including any syndicate or group deemed to be a “person” under Section 13(d)(3)
of the 1934 Act and the rules promulgated thereunder) of beneficial ownership of
voting securities of the Company entitling that Person to exercise 50% or more
of the total voting power of all outstanding securities entitled to vote
generally in elections of directors of the Company (provided that if such
agreement is terminated, the restrictions imposed by this Section 4(e) shall resume at that time
and continue in full force and effect in accordance with their
terms).

     

     

     

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         (f) Permitted Methods of Disposition. Until such time following the Closing as the
Acquiror no longer beneficially owns (as such term is used under Rule 13d-3
under the 1934 Act) any of the Securities, the Acquiror shall not offer, pledge,
sell, contract to sell, sell any option or contract to purchase, enter into any option or contract to
sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any of the Securities, or enter
into any swap, hedging or other arrangement that transfers to another, in whole
or in part, any of the economic consequences of ownership of any of such
Securities without the prior approval of the Board, except that the Acquiror may
sell the New Common Shares and the Warrant Shares:

     

              (i) through open market transactions through
the facilities of the HKSE, provided that the amount sold through such market
transactions during any three month period do not exceed (1) 1% of the total outstanding Common Shares or (2) if greater, the average
weekly reported volume of trading in the Common Shares on the HKSE during the
four calendar weeks preceding the last sale; or

     

              (ii) through one or more block trades or
privately arranged sales, provided that in the reasonable determination of the
Acquiror (1) none of the buyers is a competitor of the Company and (2) none of
the buyers would beneficially own more than 5% of the outstanding Common Shares
following its purchase.

     

         (g)
Pre-emptive Rights. If the Company proposes, following the date hereof,
to issue any new Common Shares, any securities convertible or exchangeable into
Common Shares, or any warrants or other rights to subscribe for Common Shares
(“Relevant Securities”), the Company
shall notify Acquiror in writing of such proposal (an “Issue Notice”). The Issue Notice shall specify
the number and type of Relevant Securities to be offered by the Company and the
material terms of the proposed offer (including the proposed price per Relevant
Security to be paid by the proposed third party purchaser(s)).

     

              (i) Subject to Section 4(g)(vi) below, the Acquiror
shall have the right to purchase such number of the Relevant Securities which
are the subject of the Issue Notice so as to enable the Acquiror to hold, after
the issue of the Relevant Securities, a pro rata portion of the Relevant
Securities equal to the percentage of the issued share capital of the Company
then beneficially owned by the Acquiror prior to the issuance of the Relevant
Securities, provided that the Acquiror maintains an ownership interest equal to
at least half of the New Common Shares acquired hereunder (as appropriately
adjusted for share splits, share consolidation, share dividends,
recapitalizations and the like), in each case upon the same terms and conditions
set forth in the Issue Notice, by giving written notice to the Company of the
exercise of this right within ten (10) Business Days (as defined below) of the
giving of the Issue Notice. If such notice is not given by the Acquiror within
such ten (10) Business Days (as defined below), the Acquiror shall be deemed to
have elected not to exercise its rights under this Section 4(g) with respect to the
issuance described in that specific Issue Notice. The parties acknowledge that
any rights of the Acquiror to purchase the Relevant Securities pursuant to this
Section 4(g) will lapse if
completion thereof does not occur simultaneously with the Acquiror’s completion
of the offering of Relevant Securities (or such later date as specified in Section 4(g)(vi) below) or at such
other time and place as shall be mutually agreed by the Company and the
Acquiror, provided that if the reason for the Acquiror’s failure to complete by
the time specified above is solely due to a delay of the Governmental Entity in
granting the relevant authorizations, approvals, permits, qualifications or
exemptions, the Acquiror shall notify the Company in writing at least seven (7)
days prior to the completion of the offering of the Relevant Securities to
extend the completion date for Acquiror to a date within three (3) months or
such other reasonable period as may be mutually agreed between the parties
following the completion of the issue of the Relevant Securities, after such
period the right of the Acquiror to purchase the Relevant Securities pursuant to
this Section 4(g) shall lapse. A
notice given by the Acquiror pursuant to this Section 4(g) shall be
irrevocable.

     

    

     

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              (ii) Subject to Section 4(g)(i) above, the completion
of the Acquiror’s purchase of Relevant Securities pursuant to this Section 4(g) shall occur
simultaneously with the completion of the offering of Relevant Securities. For
the avoidance of doubt, the completion by the Company of the offering of the
Relevant Securities shall not be affected by the timing of the completion of any
issue of the Relevant Securities to the Acquiror. The Acquiror shall execute and
deliver to the Company all transaction documents related to Acquiror’s purchase
of Relevant Securities as may be reasonably requested by the Company prior to
the completion of the Acquiror’s purchase of Relevant Securities. At such
completion, the Acquiror shall deliver the aggregate purchase price for the
Relevant Securities to be purchased by the Acquiror pursuant to this Section 4(g).

     

              (iii) Any Common Shares issued to the Acquiror
pursuant to this Section 4(g)
shall be issued on the same terms and subject to the same conditions as the
Relevant Securities are issued to any proposed third party purchaser(s), such
terms and conditions being set out in the Issue Notice.

     

              (iv)
The provisions of Section
4(g)(i) to (iii) shall
not apply to:

     

              (1) the grant of any options, or the issue of
any Relevant Securities pursuant to the exercise of share options granted
(whether prior to or after the date of this Agreement), pursuant to any share
purchase or share option plans of the Company in effect from time to
time;

     

              (2) the issue of any Relevant Securities
pursuant to any share incentive scheme operated by the Company from time to
time;

     

              (3) the issue of any Common Shares or other
securities pursuant to the conversion, exchange or exercise of any securities
that were previously offered and/or issued to the Acquiror as Relevant
Securities;

     

              (4) any offer of the Relevant Securities open
for a period fixed by the Board to holders of Common Shares on the register of
members on a fixed record date in proportion to their then holdings of Common
Shares; provided that such offer of Relevant Securities is also made to the
Acquiror;

     

              (5) an issue of Common Shares as fully paid to
holders of Common Shares (including without limitation, Common Shares paid up
out of distributable profits or reserves and/or share premium account issued in
lieu of the whole or any part of any cash dividend and free distributions or
bonus issue of Common Shares); provided that such issuance of Common Shares is
also made to the Acquiror;

     

    

     

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              (6) an issue of the Relevant Securities
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets or other reorganization or to a
joint venture agreement; provided that such issuance is approved by the
Board;

     

              (7) an issue of the Relevant Securities to
banks, equipment lessors or other financial institutions pursuant to a
commercial leasing or commercial loan transaction approved by the
Board;

     

              (8) an issue of Relevant Securities in
connection with sponsored research, collaboration, technology license,
development, OEM, marketing or other similar agreements or strategic
partnerships approved by the Board; or

     

              (9) an issue of Relevant Securities to
suppliers or third party service providers in connection with the provisions of
goods or services pursuant to transactions approved by the Board.

     

              (v) The rights set forth in this Section 4(g) shall not apply with
respect to and shall expire immediately prior to a transaction that would result
in a change of control (as such term is defined under the Hong Kong Takeovers
Code).

     

              (vi) The Company and Acquiror acknowledge and
agree that the Acquiror’s exercise of the rights in this Section 4(g) shall in all cases be
subject to compliance with the rules, regulations, laws and requirements of
applicable government and regulatory bodies, including the Hong Kong Listing
Rules, the Hong Kong Takeovers Code, the Stock Exchange of Hong Kong Limited and
the Securities and Futures Commission of Hong Kong (including, where applicable,
any requirements to obtain the approval of the shareholders of the Company)
(“Applicable Law”),
and shall take such steps reasonably necessary to give effect to the rights
contained in this Section 4(g)
in compliance with Applicable Law, provided that all costs and expenses
(including, without limitation, reasonable legal fees and expenses) incurred by
the Company shall be resolved in a manner consistent with any terms agreed to by
the Company and the other potential investor(s) with respect to the issuance
described in the relevant Issue Notice. In the case of any
issuance of Relevant Securities prior to the consummation of the Closing, the
issuance of the Relevant Securities to be acquired by the Acquiror pursuant to
this Section 4(g) shall be
deferred until, and shall be conditioned upon, the consummation of the
Closing.

     

         (h) Voting Rights. The Acquiror agrees to vote all Common Shares held by the Acquiror or any
controlled affiliate of the Acquiror to be voted on all matters submitted to a
vote of the Company shareholders in such manner as recommended by the Board,
other than in the case of any matter related to proposed Change of Control (as
defined in the 2009 Settlement Agreement) of the Company, with respect to which
the Acquiror and its controlled affiliates shall be free to vote in any manner
they determine in their sole discretion.

     

    

     

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         (i) Waiver of
Information. The Acquiror agrees that the Company shall not be obligated
to provide the Acquiror with any information that is not otherwise publicly
available, and the Acquiror waives any right to any such
information.

     

         (j) Board
Seats. The Acquiror acknowledges that the Acquiror is not entitled to
designate any member to the Board in connection with the transactions
contemplated hereby.

     

    5.
Conditions to Closing.
The consummation of the Closing shall be subject to the satisfaction of the
following conditions:

     

         (a)
Governmental Approvals. The Acquiror and the Company shall have obtained
each of the governmental authorizations and approvals identified in Schedule 5(a) hereto.

     

         (b) HKSE
Listing. The Company shall have obtained approval for the listing of, and
permission to deal in, the New Common Shares and the Warrant Shares, and for the
issue of the Warrants, from the HKSE and such approvals shall not have
subsequently been revoked prior to Closing.

     

         (c) Absence of
Prohibition. No legislative body, court, administrative agency or
commission or other governmental authority, instrumentality, agency or
commission shall have enacted, issued, promulgated, enforced or entered any law
or governmental regulation or order which has the effect of prohibiting the sale
and issuance of the Securities.

     

    6.
Alternative Transaction.
In the event the conditions to Closing set forth in Section 5 above have not been
satisfied prior to June 30, 2010, at any time after such date, but in any event
not later than the third anniversary of the date of this Agreement (such period,
the “Election Period”), the Acquiror may
elect, in its discretion, to direct the Company to effect the following
transactions (the “Alternative
Transaction”) in lieu of the issuance of the Securities to the Acquiror
as contemplated hereby:

     

         (a)
Election. The Acquiror will provide to the Company written notice of its
election to cause the Company to effect the Alternative Transaction no later
than the expiration of the Election Period.

     

    

     

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         (b) Share Placing or Share
Offering. Within 60 days of receipt of such written notice pursuant to
Section 6(a), subject to
reasonable deferral if, in the good faith judgment of the Board, the filing of a
registration statement or the making of an application for the approval for the
listing of, and permission to deal in, the Common Shares would be materially
detrimental to the Company and the Board concludes, as a result, that it is in
the best interests of the Company to defer the Share Placing or the Share
Offering, the Company shall use all reasonable efforts to initiate, at its
option, a primary, firm commitment placing involving the obtaining of
subscriptions by or on behalf of the Company from institutional investors
identified by the placing agent (the “Share
Placing”) or a primary, firm commitment, fully underwritten public
offering (the “Share Offering”), in
either case, of a number of Common Shares equal to the New Common Shares and
shall complete the Share Placing or the Share Offering as soon as reasonably
practicable thereafter. The placing agent (in the case of a Share Placing) or
the managing underwriter
(in the case of a Share Offering) will be an internationally recognized
investment banking firm reasonably acceptable to the Acquiror. The price at
which the Common Shares will be sold to the institutional investors (in the case
of a Share Placing) or the public (in the case of a Share Offering) will be such
price as is recommended to the Company and the Acquiror by such investment
banking firm in its professional judgment. All material terms of the Share
Placing or the Share Offering, including the compensation arrangement of the
placing agent or underwriters, will be subject to the approval of the Acquiror,
which approval shall not be unreasonably withheld. The cash proceeds of the
Share Placing or the Share Offering, net of commissions of the placing agent (in
the case of a Share Placing) or the underwriters’ discounts (in the case of a
Share Offering), shall be transmitted to the Acquiror by wire transfer to the
account specified by the Acquiror immediately upon the consummation of the Share
Placing or the Share Offering. All other expenses of the Share Placing or the
Share Offering, including counsel fees and agent expenses, shall (i) in the
event the Closing fails to occur due to the inability of the Acquiror to secure
required approvals of the Republic of Taiwan Investment Commission of MOEA
(Ministry of Economic Affairs), as contemplated by Section 5(a), be borne by the
Acquiror, up to a maximum of US$100,000, with any excess to be borne by the
Company, and (ii) in all other cases, be borne entirely by the
Company.

     

         (c) Warrant
Placing or Warrant Offering. Additionally, at any time following receipt
of such written notice and prior to the expiration of the Election Period,
provided that the average closing price of the Common Shares on the HKSE during
the immediately preceding thirty (30) trading days (the “Average Price”) exceeds the per share exercise
price that would then be payable under the terms of the Warrant had the Warrant
been issued hereunder on the date of this Agreement (the “Exercise Price”), the Acquiror may deliver to
the Company a written notice directing the Company to initiate, at the option of
the Company, a further primary, firm commitment placing involving the obtaining
of subscriptions from institutional investors identified by the placing agent
(the “Warrant Placing”) or primary, firm
commitment, fully underwritten public offering (the “Warrant Offering”), in either case, with
respect to a number of Common Shares equal to the Warrant Shares that would have
been issuable on exercise of the Warrant on such date had the Warrant been
issued on the date of this Agreement. Within 60 days of receipt of such notice,
the Company shall either:

     

              (i) use all reasonable efforts to initiate, at
the option of the Company, a Warrant Placing or a Warrant Offering, provided
that the Warrant Offering may be reasonably deferred if, in the good faith
judgment of the Board, the filing of the registration statement or the making of
an application for the approval for the listing of, and permission to deal in,
the Common Shares would be materially detrimental to the Company and the Board
concludes, as a result, that it is in the best interests of the Company to defer
the Warrant Placing or the Warrant Offering, and shall complete the Warrant
Placing or the Warrant Offering as soon as reasonably practicable thereafter.
The placing agent (in the case of a Warrant Placing) or the managing underwriter
(in the case of a Warrant Offering) will be an internationally recognized
investment banking firm reasonably acceptable to the Acquiror. The price at
which the Common Shares will be sold to the institutional investors (in the case
of a Warrant Placing) or the public (in the case of a Warrant Offering) will be
such price as is recommended to the Company and the Acquiror by such investment
banking firm in its professional judgment. All material terms of the Warrant
Placing or the Warrant Offering,
including the compensation arrangement of placing agent or underwriters, will be
subject to the approval of the Acquiror, which approval shall not be
unreasonably withheld. The cash proceeds of the Warrant Offering, net of
commissions of the placing agent (in the case of a Warrant Placing) or the
underwriters’ discounts (in the case of Warrant Offering) and the aggregate
Exercise Price attributable to the Common Shares sold in the offering (which
Exercise Price shall be payable to the Company), shall be transmitted to the
Acquiror by wire transfer to the account specified by the Acqurior immediately
upon the consummation of the Warrant Placing or the Warrant Offering. All other
expenses of the Warrant Placing or the Warrant Offering, including counsel fees
and agent expenses, shall (A) in the event the Closing fails to occur due to the
inability of the Acquiror to secure required approvals of the Republic of Taiwan
Investment Commission of MOEA (Ministry of Economic Affairs), as contemplated by
Section 5(a), be borne by the
Acquiror, up to a maximum of US$100,000, with any excess to be borne by the
Company, and (B) in all other cases, be borne entirely by the Company;
or

     

    

     

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              (ii) transmit to the Acquiror, by wire
transfer, a cash sum equal to the product of (A) the positive difference between
the Average Price and the Exercise Price and (B) the number of Common Shares
that would have been issuable on exercise of the Warrant on such date ifthe
Warrant had been issued on the date of this Agreement.

     

         (d) Satisfaction of
Obligations. Upon remittance of all proceeds
due and owing to the Acquiror upon consummation of the Share Placing or the
Share Offering, the Company’s obligations to
issue the New Common Shares hereunder shall terminate and be of no further force
and effect. Upon remittance of all proceeds due and owing to the Acquiror upon
consummation of the Warrant Placing or the Warrant Offering or the payment to
the Acquiror of the amount provided in Section 6(c)(ii) above, the Company’s
obligations to issue the Warrant or the Warrant Shares hereunder shall terminate
and be of no further force and effect. In addition, the obligations of the
Company to issue the New Common Shares or the Warrant hereunder, to the extent
that such obligations have not been previously satisfied as a result of the
failure of one or more conditions to the Closing hereunder, shall terminate upon
the delivery of written notice of an election by the Acquiror to have the
Company complete the Alternative Transactions or the expiration of the Election
Period.

     

    7. Miscellaneous.

     

         (a) Governing
Law; Arbitration. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed in accordance with the laws of Hong Kong. Any dispute, controversy or
claim arising out of or relating to this Agreement, or the interpretation,
breach, termination or validity hereof, shall be submitted to arbitration upon
the request of any party with notice to the other parties. The arbitration shall
be conducted in Hong Kong under the auspices of the Hong Kong International
Arbitration Centre (the “HKIAC”) in
accordance with the UNCITRAL Arbitration Rules (“UNCITRAL
Rules”) in effect, which rules are deemed to be incorporated by reference
into this Section 7(a). There
shall be three (3) arbitrators. The complainant and the respondent to such
dispute shall each select one arbitrator within thirty (30) days after giving or
receiving the demand for arbitration. The Chairman of the HKIAC shall select the third arbitrator, who shall
be qualified to practice law in Hong Kong. If either party to the arbitration
does not appoint an arbitrator who has consented to participate within thirty
(30) days after selection of the first arbitrator, the relevant appointment
shall be made by the Chairman of the HKIAC. The arbitration proceedings shall be
conducted in English. Each party hereto shall cooperate with any party to the
dispute in making full disclosure of and providing complete access to all
information and documents requested by such party in connection with such
arbitration proceedings, subject only to any confidentiality obligations binding
on the party receiving the request. Each party irrevocably waives, to the
fullest extent it may effectively do so, any objection which it may now or
hereafter have to the laying of venue of any such arbitration in Hong Kong and
the HKIAC, and hereby submits to the exclusive jurisdiction of HKIAC in any such
arbitration. The award of the arbitration tribunal shall be conclusive and
binding upon the disputing parties, and any party to the dispute may apply to a
court of competent jurisdiction for enforcement of such award. Any party to the
dispute shall be entitled to seek preliminary injunctive relief, if possible,
from any court of competent jurisdiction pending the constitution of the
arbitral tribunal.

     

    

     

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         (b) Effect of
Completion. Without prejudice to other provisions of this Agreement, the
representation, warranty, covenant or undertaking (the “Warranties”) contained in this Agreement shall
remain in full force and effect notwithstanding Closing or the consummation of
the Alternative Transaction and shall remain operative and in full force and
effect until the expiration of the applicable statute of limitations, regardless
of (i) any investigation, or statement as to the results thereof, made by or on
behalf of the Acquiror and (ii) acceptance of the New Common Shares, Warrant, or
Warrant Shares or the proceeds of the Share Placing, the Share Offering, the
Warrant Placing or the Warrant Offering, except as waived or released by the
party entitled to enforce such Warranties. For the avoidance of doubt, the
agreements and covenants set forth in Section 4 and this Section 7 shall survive in accordance
with their terms.

     

         (c)
Waivers. No delay or omission by any party to this Agreement in
exercising any right, power or remedy provided by law or under this Agreement or
any other documents referred to in it shall: (i) affect that right, power or
remedy; or (ii) operate as a waiver thereof. The single or partial exercise of
any right, power or remedy provided by law or under this Agreement shall not
preclude any other or further exercise or any other right, power or
remedy.

     

         (d)
Remedies. Except as otherwise expressly provided in this Agreement, the
rights, powers and remedies provided in this Agreement are cumulative and not
exclusive of any rights, powers and remedies provided by law.

     

         (e) Specific
Enforcement. The parties agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of competent
jurisdiction, without bond or other security being required, this being in
addition to any other remedy to which they are entitled at law or in
equity.

     

         (f) Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. A facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.

     

    

     

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         (g)
Headings. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.
“Business Day” shall mean a day that is
not a Saturday, Sunday or a public holiday in Taiwan, Hong Kong or the People’s
Republic of China. “$” or “dollar” refers to United States dollars.

     

         (h) Severability. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other
jurisdiction.

     

         (i) Entire Agreement; Amendments. This
Agreement and the other Transaction Documents supersede all other prior oral or
written agreements between the Acquiror, the Company, their affiliates and
Persons acting on their behalf with respect to the matters addressed herein.
This Agreement and the other Transaction Documents and the instruments
referenced herein and therein contain the entire understanding of and agreement
between the parties with respect to the matters covered herein and, except as
specifically set forth herein, neither the Company nor the Acquiror makes any
representation, warranty, covenant or undertaking with respect to such matters.
In entering into this Agreement and the other
Transaction Documents, each party to such agreements acknowledges that it is not
relying upon any pre-contractual statement which is not expressly set out in
them. No provision of this Agreement may be amended other than by an instrument
in writing signed by the Company and the Acquiror. No provision hereof may be
waived other than by an instrument in writing signed by the party against whom
enforcement is sought. For the purposes of this section, “pre-contractual statement” means any draft,
agreement, undertaking, representation, warranty, promise, assurance or
arrangement of any nature whatsoever, whether or not in writing, relating to the
matters covered in this Agreement and/or the other Transaction Documents made or
given by any person at any time prior to the date of this Agreement or the other
Transaction Documents.

     

         (j) Notices. Any notices, consents, waivers or
other communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Business Day
after deposit with an overnight courier service, in each case properly addressed
to the party to receive the same. The addresses and facsimile numbers for such
communications shall be:

     

    

     

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         If to
the Company:

     

    
      	Semiconductor
      Manufacturing International Corporation
	Address:	       	Suite
      3003, 30th Floor
	
            	
            	No. 9
      Queen’s Road Central
	
            	
            	Hong Kong
	Telephone:	
            	(+852)
      2537-8588
	Facsimile:	
            	(+852)
      2537 8206
	Attention:	
            	Anne
      Chen/Blondie Poon

    

    with a copy (for informational purposes only) to:

     

    
      	Wilson Sonsini Goodrich
      & Rosati, P.C.
	Address:	       	Jin Mao
      Tower, 38F
	
            	
            	88 Century Boulevard
	
            	
            	Pudong
      New Area, Shanghai 200121
	
            	
            	People’s Republic of China
	Telephone:	
            	(+86-21) 6165-1700
	Facsimile:	
            	(+86-21) 6165-1799
	Attention:	
            	Carmen
      Chang, Esq.

    

    If to the Acquiror:

     

    
      	Taiwan Semiconductor
      Manufacturing Company, Ltd.
	Address:	
            	No. 8
      Li-Hsin Road 6, Hsin-Chu Science Park
	
            	       	Hsin-Chu, Taiwan, Republic of China
	Telephone:	
            	(+886) 3-5682002
	Facsimile:	
            	(+886)
      3-5678689
	Attention:	
            	General
      Counsel

    

    with a copy (for informational purposes only) to:

     

    
      	Weil, Gotshal & Manges LLP
	Address:	       	200
      Crescent Court, Suite 300
	
            	
            	Dallas,
      Texas 75201
	
            	
            	United
      States of America
	Telephone:	
            	+1
      (214) 746 7700
	Facsimile:	
            	+1
      (214) 746 7777
	Attention:	
            	R.
      Scott Cohen

    

    

     

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         (k) Successors and Assigns.
This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns. Neither party hereto shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other party
hereto; provided, however, that the Acquiror may assign the right to acquire the
Securities hereunder to any affiliate so long as such assignment would not
reasonably be expected to impose any material delay in the consummation of the
transactions contemplated hereunder. If such assignment is made, then all references herein to the
Acquiror shall be deemed references to such other entity, except that all
representations and warranties made herein with respect to the Acquiror as of
the date of this Agreement shall be deemed representations and warranties made
with respect to such other entity as of the date of such
assignment.

     

         (I) No Third Party Beneficiaries.
This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.

     

         (m) Further Assurances. Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as any other party may
reasonably request in
order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

     

    [Remainder of Page Intentionally Left
Blank]

     

    

     

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         IN WITNESS WHEREOF, the Acquiror and the Company have caused its respective signature page to
this Share and Warrant Issuance Agreement to be duly executed as of the date
first written above.

     

     

     

     

     

    [Signature Page to
Share and Warrant Issuance Agreement]

     

    

    
    

    Execution Copy

     

    Schedule 5(a) –
Approvals

     

    Republic of Taiwan
Investment Commission of MOEA (Ministry of Economic Affairs)

     

    Any required
antitrust approvals, filings or notifications.

     

     

     

    

    
    

    Exhibit A

     

    Warrant
Agreement

     

    [Please see
attached.]

     

     

     

     

     

     

     

    
       

       

       

       

       

       

    

     

     

     

    

    
    

    Final Form

     

    WARRANT AGREEMENT

     

         This WARRANT AGREEMENT, dated as of
[______ __, 20__]
(the “Agreement”), is made by and
between Taiwan Semiconductor Manufacturing Company, Ltd., a Taiwanese
corporation having a place of business located at No.8 Li-Hsin Road 6, Hsin-Chu
Science Park, Hsin-Chu, Taiwan, Republic of China (the “Initial
Holder”), and Semiconductor Manufacturing International Corporation, an
exempted company incorporated under the laws of the Cayman Islands having a
place of business located at No. 18 Zhang Jiang Road, Pudong New Area, Shanghai
201203, People’s Republic of
China (the “Company”).

     

    W I T N E S S E T
H

     

         WHEREAS, the Initial Holder and the Company
entered into that certain Settlement Agreement, dated November 9, 2009 (the
“2009 Settlement
Agreement”), whereby the Initial Holder and the Company settled and
resolved various litigation and disputes as specified therein;

     

         WHEREAS, in connection with the execution of
the 2009 Settlement Agreement, the Initial Holder and the Company entered into
that certain Share and Warrant Issuance Agreement dated November 9, 2009 (the
“Share and Warrant Issuance
Agreement”);
and

     

         WHEREAS, pursuant to the Share and Warrant
Issuance Agreement, the Company proposes to issue warrants (each a “Warrant” and collectively,
the “Warrants”) to
initially purchase [695,914,030] validly issued and fully paid common shares,
par value US$.0004 of the Company (the “Common
Shares, with the Common Shares deliverable upon exercise of the Warrants
being referred to herein as the “Warrant
Shares”).

     

         NOW, THEREFORE, in consideration of the mutual
promises, agreements and covenants contained herein, and for other valuable
consideration, receipt of which is hereby acknowledged, the Company and the
Initial Holder hereby agree as follows:

     

    ARTICLE I

DEFINITIONS

     

    1.1 Definitions.

     

         (a) Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Share and Warrant Issuance Agreement.

     

         (b) The following terms shall have the meanings
set forth below.

     

         “Affiliate” means “affiliate”
within the meaning of Rule 144(a)(1) under the Securities Act.

     

    

     

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         “Agreement” shall mean
this Warrant Agreement, together with all annexes attached hereto, as amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms hereof.

     

         “Applicable Law” means any
statute, rule, regulation, law or ordinance, or any judgment, decree or
order.

     

         “Assignment Form” means the
assignment form attached as Annex C to a
Warrant.

     

         “Board” means the board of
directors of the Company.

     

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

     

         “Capital Stock” means the
Common Shares, and any other shares of the Company.

     

         “Cash” means money, currency
or a credit balance in a demand deposit account.

     

         “Common Share Equivalents”
means any Capital Stock, evidence of indebtedness, Options or other securities
or rights exercisable for, convertible into or exchangeable for Common Shares
(including the Warrants).

     

         “Common Shares” has the
meaning set forth in the preamble. 

     

         “Company” has the meaning set
forth in the preamble. 

     

         “Delivery Date” has the meaning given to such
term in Section
4.3(a).

     

         “Distribution” means, in
respect of any Person, (a) the payment or making of any dividend or other
distribution of Property in respect of capital stock of such Person or
(b) the redemption or other acquisition of any
capital stock of such Person.

     

         “Exchange Form” means the
exchange form attached as Annex B to a Warrant.

     

         “Exchange Number” has the
meaning given to such term in Section 4.2.

     

         “Exercise Form” means the
exercise form attached as Annex A to a
Warrant.

     

         “Exercise Price” means HK$1.30
per Warrant Share, subject to change from time to time in the manner provided in
Article
V.

     

         “Expiration Time” means 11:59
p.m., Hong Kong Time, on the date that is three (3) years after the date hereof.
If such day is not a Business Day, the Expiration Time shall be extended until
11:59 p.m., Hong Kong Time on the next Business Day.

     

     

     

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         “Extraordinary Event” means
the occurrence of any sale, transfer, assignment, lease, conveyance or other
disposition, directly or indirectly, of all or substantially all of the property
of the Company and its subsidiaries, considered as a whole, or the Company
merges, consolidates or amalgamates with or into any other Person pursuant to a
transaction other than a transaction in which the holders of the outstanding
Capital Stock of the Company immediately prior to such transaction own, directly
or indirectly, not less than a majority of the Capital Stock of the surviving
person immediately after such transaction and in substantially the same
proportion as before the transaction.

     

         “Fair Market Value” means,
with respect to Property, the fair market value of such Property as determined
by the Board in good faith as of the date of determination, without discount for
lack of liquidity or minority position; provided, however, that if the holder of
this Warrant disputes such determination, the fair market value of such Property
will be determined, at the expense of the Company, by an internationally
recognized investment bank, selected by the Board, with experience in making
valuations of such type. Notwithstanding the foregoing, if the Property is then
Publicly Traded (or if the Property is not Publicly Traded but a derivative form
thereof is Publicly Traded in the form of depositary shares or depositary
receipts), then the value shall be deemed to be the average of the closing
prices of such Property on such exchange (as reported by Bloomberg) or system
over the five (5) trading days immediately prior to the date of determination,
which shall be the Delivery Date in the case of exercise of the
Warrants.

     

         “Fully Diluted
Basis” means the number of
Common Shares that would be issued and outstanding at such time, assuming full
conversion, exercise or exchange of all issued and outstanding Common Share
Equivalents and Options that shall be (or may become) exchangeable for, or
exercisable for or convertible into, Common Shares, including the exercise of
the Warrant for the Warrant Shares.

     

         “Governing Documents” means as
to any Person, its memorandum and articles of association and/or other
applicable constitutional, organizational or governing documents of such
Person.

     

         “Holder” means with respect to
any Warrant, the holder of such Warrant as set forth in the Warrant Register,
which as of the date hereof is the Initial Holder.

     

         “Initial Holder” has the
meaning set forth in the preamble.

     

         “Lien” means, with respect to
any Property of any Person, any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, security interest, lien, charge,
easement (other than any easement not materially impairing usefulness or
marketability), encumbrance, preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever on or with respect to
such Property (including any conditional sale or other title retention agreement
having substantially the same economic effect as any of the
foregoing).

     

         “Options” means any warrants,
options or other rights to subscribe for or to purchase (a) Capital Stock or (b)
Common Share Equivalents.

     

    

     

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         “Other Equity Securities”
means any capital stock, other than the Common Shares, Common Share Equivalents
or Options.

     

         “Other Transaction Documents”
means the (a) the Warrant, (b) the Share and Warrant Issuance Agreement and (c)
the 2009 Settlement Agreement, as the same may be amended, restated,
supplemented or otherwise modified from time to time.

     

         “Person” means an individual,
sole proprietorship, partnership, limited liability company, joint venture,
trust, incorporated organization, association, corporation, institution, public
benefit corporation, entity or government (whether federal, state, county, city,
municipal or otherwise, including any instrumentality, division, agency, body or
department thereof).

     

         “Property” means any interest
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible.

     

         “Publicly Traded” means, with
respect to any security, that such security is (a) listed on the Hong Kong Stock
Exchange or (b) listed (either directly or indirectly represented by American
Depositary Receipts) on the New York Stock Exchange or a similar successor
organization.

     

         “Requisite Holders” means, as
of any date of determination, Holders holding Warrants representing a majority
of the Warrant Shares that are either (a) previously issued and are then
outstanding or (b) issuable upon exercise of Warrants then outstanding; provided that any Warrants or Warrant
Shares held by the Company or its Affiliates shall not be counted in either the
numerator or the denominator of the calculation of Requisite Holders. For the
purpose of any matter applicable only to Warrants and not Warrant Shares, “Requisite Holders” will be Holders holding a
majority of Warrants without regard to Warrant Shares.

     

         “Responsible Officer” means
the Chief Executive Officer, the President, the Chief Financial Officer or any
executive officer of such Person.

     

         “Securities Act” means the
Securities Act of 1933, as amended, of the United States, or any similar United
States federal statute, and the rules and regulations of the United States
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time.

     

         “Share and Warrant Issuance Agreement”
has the meaning given to such term in the preamble.

     

         “Transfer” means any sale,
transfer, assignment, or other disposition of any interest in, with or without
consideration, any security, including any disposition of any security or of any
interest therein which would constitute a sale thereof within the meaning of the
Securities Act.

     

         “Warrant” has the meaning set
forth in the preamble.

     

         “Warrant Register” has the
meaning given to such term in Section
3.1(b).

     

         “Warrant Shares”
has the meaning set forth in the preamble.

     

     

     

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    1.2 Rules of
Construction.

     

         The definitions in Section 1.1 shall apply equally to the
singular and plural forms of the terms defmed. The words “include”, “includes” and “including” shall be deemed to
be followed by the phrase “without limitation”. The
words “herein,” “hereof,” “hereunder” and other words of
similar import refer to this Agreement as a whole, including the annexes hereto,
as the same may from time to time be amended, restated, supplemented or
otherwise modified, and not to any particular section, subsection, paragraph,
subparagraph or clause contained in this Agreement. All references to sections,
schedules and exhibits mean the sections of this Agreement and the schedules and
exhibits attached to this Agreement, except where otherwise stated. The title of
and the section and paragraph headings in this Agreement are for convenience of
reference only and shall not govern or affect the interpretation of any of the
terms or provisions of this Agreement. The use herein of the masculine, feminine
or neuter forms shall also denote the other forms, as in each case the context
may require. Where specific language is used to clarify by example a general
statement contained herein, such specific language shall not be deemed to
modify, limit or restrict in any manner the construction of the general
statement to which it relates. Any reference to any term contained in any other
agreement or other document shall be deemed to be a reference to such term in
the applicable agreement or document as in effect as of the date hereof, unless
the Requisite Holders have consented to any amendment of such applicable
agreement since the date hereof, in which case such reference shall be deemed to
be a reference to such term in the applicable agreement or document, as amended
through the date of the most recent consent by the Requisite Holders. The
language used in this Agreement has been chosen by the parties to express their
mutual intent, and no rule of strict construction shall be applied against any
party. “HK$” shall mean Hong Kong dollars and “US$” shall mean United States
dollars.

     

    ARTICLE II
ISSUANCE OF WARRANTS AND AUTHORIZATION OF
WARRANT SHARES

     

    2.1 Issuance of Warrants to
Initial Holder; Warrant Agreement.

     

         The Company shall issue and deliver Warrants,
dated as of the date hereof, to the Holder in accordance with this Agreement and
the Share and Warrant Issuance Agreement on the Closing Date (as defined in the
Share and Warrant Issuance Agreement). The provisions of this Agreement shall
apply to all Warrants (and, to the extent applicable, Warrant Shares), and each
Holder that is not a party to this Agreement, by its acceptance of a Warrant or
a Warrant Share, agrees to be bound by the applicable provisions
hereof.

     

    

     

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    2.2 Authorization of Warrant
Shares.

     

         From and after the date hereof, the Company
shall at all times have authorized, and keep available, free from preemptive or
similar rights, taxes, and Liens and charges with the respect to the issue
thereof (arising under Cayman Islands law, the Governing Documents or any
agreement or instrument to which the Company is a party or subject) for the
purpose of enabling it to satisfy any obligation to issue Warrant Shares, upon
the exercise or exchange of the Warrants, the number of authorized but unissued
Warrant Shares issuable upon exercise or exchange of all outstanding Warrants.
The Company shall promptly take all actions necessary to ensure that Warrant
Shares shall be duly and validly authorized and, when issued upon exercise or
exchange of any Warrant in accordance with the terms hereof, shall be duly and
validly issued and fully paid, free and clear of all taxes, Liens (except to the
extent of any applicable provisions of this Agreement) and all preemptive or
similar rights, and free of restrictions on transfer other than as expressly
contemplated by the Other Transaction Documents. If any securities to be
authorized for the purpose of exercise of this Warrant require approvals or
registrations under applicable securities laws, the Company will use its
reasonable best efforts to obtain such approvals or registrations as may be
appropriate.

     

    2.3 No
impairment.

     

         The Company shall not by any action, including
amending its Governing Documents or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such actions as may
be necessary or appropriate to protect the rights of the Holder against
impairment. Without limiting the generality of the foregoing, the Company will
use its best efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant. Upon
request of the Holder, the Company will at all times during the period this
Warrant is outstanding acknowledge in writing, in form satisfactory to the
Holder, the continuing validity of this Warrant and the obligations of the
Company hereunder.

     

    ARTICLE III
CERTAIN ADMINISTRATIVE
PROVISIONS

     

    3.1 Form of Warrant;
Register.

     

         (a) Each Warrant issued hereunder shall be in
the form of Exhibit
A attached hereto (each, a “Warrant”) and shall be
executed on behalf of the Company by a Responsible Officer of the Company. Each
Warrant shall bear the legend(s) appearing on the first page of such form,
except that the Company shall promptly remove any such legend from a Warrant
from and after such time as all the restrictions to which such legend relates no
longer apply. Upon initial issuance, each Warrant shall be dated as of the date
of signature thereof by the Company. Irrespective of any adjustments in the
Exercise Price or the number or kind of Common Shares or other Property issuable
upon the exercise of the Warrants, any Warrants theretofore or thereafter issued
may, as a matter of form, continue to express the same Exercise Price and the
same number of Warrant Shares issuable upon the exercise of such Warrants as
were stated in the Warrants initially issued pursuant the Share and Warrant
Issuance Agreement, however such adjustments that have theretofore been made
shall nevertheless be binding and effective.

     

    

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         (b) Each Warrant issued, exchanged or
Transferred hereunder shall be registered in a warrant register (the “Warrant Register”) maintained
at the principal office of the Company, in which register the Company shall
record the name and address of the Person in whose name this Warrant has been
issued, as well as the name and address of each successor and prior owner of
such Warrant. The Warrant Register shall set forth (i) the number of each
Warrant, (ii) the name and address of the Holder thereof, (iii) the original
number of Warrant Shares purchasable upon the exercise thereof, (iv) the number
of Warrant Shares purchasable upon the exercise thereof, as adjusted from time
to time in accordance with this Agreement, and (v) the Exercise Price for each
Warrant Share, as adjusted from time to time in accordance with this Agreement.
The Warrant Register will be maintained by the Company and will be available for
inspection by any Holder at the principal office of the Company or such other
location as the Company may designate to the Holders in the manner set forth in
Section 7.1.
The Company shall be entitled to treat the Holder of any Warrant as the owner in
fact thereof for all purposes and shall not be bound to recognize any equitable
or other claim to or interest in such Warrant on the part of any other Person.
The Company may, with the written consent of the Holder (such consent not to be
unreasonably withheld), appoint a transfer agent or other agency with an office
in Hong Kong to be the transfer agent and registrar for the Common Shares as the
Company’s agent for the purpose of (a) maintaining the register described
herein, (ii) issuing Common Shares on the exercise of this Warrant pursuant to
Section 4.1,
(iii) exchanging this Warrant pursuant to Section 3.2, and (iv)
replacing this Warrant pursuant to Section
3.2.

     

    3.2 Exchange of Warrants for
Warrants.

     

         (a) The Holder may exchange any Warrant issued
hereunder for another Warrant of like kind and tenor representing in the
aggregate the right to purchase the same number and class or series of Warrant
Shares that could be purchased pursuant to the Warrant being so exchanged. In
order to effect an exchange permitted by this Section 3.2, the
Holder shall deliver to the Company such Warrant accompanied by a written
request signed by the Holder thereof specifying the number and denominations of
Warrants to be issued in such exchange and, subject to the transfer restrictions
contained in the Other Transaction Documents, the names in which such Warrants
are to be issued. As promptly as practicable but in any event within two (2)
Business Days of receipt of such a request, the Company shall, without charge,
issue, register and deliver to the Holder thereof each Warrant to be issued in
such exchange and make any necessary changes to the Warrant
Register.

     

         (b) Upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of the Holder being satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any Warrant, and
in the case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Company (if the Holder is a financial institution
or other institutional investor, its own indemnity agreement being satisfactory)
or, in the case of any such mutilation, upon surrender of such Warrant, the
Company shall, without charge, issue, register and deliver in lieu of such
Warrant a new Warrant of like kind representing the same rights represented by,
and dated the date of, such lost, stolen, destroyed or mutilated Warrant. Any
such new Warrant shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be at any time enforceable by any Person.

     

     

     

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    3.3 Mechanics of Transfer of
Warrants.

     

         (a) Subject to the further provisions of this
Agreement, the Other Transaction Documents and applicable securities laws, each
Warrant may be Transferred, in whole or in part, by the Holder thereof by
delivering to the Company such Warrant accompanied by a properly completed, duly
executed, Assignment Form. As promptly as practicable but in any event within
two (2) Business Days of receipt of such Assignment Form, the Company shall,
without charge, issue, register and deliver to the Holder thereof a new Warrant
of like kind and tenor representing in the aggregate the right to purchase the
same number of Warrant Shares that could be purchased pursuant to the Warrant
being Transferred. Any Warrant, if properly assigned in compliance with the
provisions hereof, may be exercised by a new holder for the purchase of Warrant
Shares without having a new Warrant issued.

     

         (b) At the request of the Company, any Person
to whom a Warrant is Transferred in accordance with this Article III
shall execute and deliver to the
Company the assignment form in the form of Annex C to the
Warrant pursuant to which such Person agrees to become a party to, and to be
bound by the terms of and entitled to the benefits under this
Agreement.

     

    ARTICLE IV
EXERCISE OF WARRANT; EXCHANGE FOR WARRANT
SHARES

     

    4.1 Exercise of Warrants;
Expiration.

     

         (a) On any Business Day on or prior to the
Expiration Time, a Holder may exercise a Warrant, in whole or in part, by
delivering to the Company such Warrant accompanied by a properly completed
Exercise Form and consideration in the form set forth in Section 4.1(b) in an
aggregate amount equal to the product of (x) the Exercise Price and (y) the
number of Warrant Shares being purchased. Any partial exercise of a Warrant
shall be for a whole number of Warrant Shares only.

     

         (b) Upon exercise of a Warrant, in whole or in part, the Holder thereof shall
deliver to the Company the aggregate Exercise Price:

     

              (i) by wire transfer of immediately available
funds to a bank account designated by the Company or a certified check payable
to the Company;

     

              (ii) by surrender of a number Warrant Shares
having a Fair Market Value equal to the aggregate Exercise Price;
or

     

              (iii)
a combination of the methods set forth in clauses (i) and (ii).

     

         (c) A Warrant shall terminate and become void
as of the earlier of (x) the Expiration Time and (y) the date such Warrant is
exercised in full.

     

    

     

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    4.2 Exchange for Warrant
Shares.

     

         On any Business Day on or prior to the
Expiration Time, a Holder may exchange a Warrant, in whole or in part, for
Warrant Shares by delivering to the Company such Warrant accompanied by a
properly completed Exchange Form. The number of Warrant Shares to be received by
a Holder upon such exchange shall be equal to the number of Warrant Shares
allocable to the portion of the Warrant being exchanged (the “Exchange Number”),
as specified by such Holder in the Exchange Form, minus a number of
Warrant Shares equal to the quotient obtained by dividing (i) the product of (x)
the Exercise Price and (y) the Exchange Number by (ii) the Fair Market Value of one Warrant
Share as of the Delivery Date.

     

    4.3 Issuance of Warrant
Shares.

     

         (a) Issuance of Warrant Shares. As
promptly as practicable but in any event within two (2) Business Days following
the first date on which each of the following items has been delivered to the
Company (the “Delivery
Date”): (i) an Exercise Form or Exchange Form in accordance with Section 4.1 or 4.2, (ii) the related
Warrant and (iii) any required payment of the Exercise Price, the Company shall,
without charge, upon compliance with the applicable provisions of this
Agreement, issue to such Holder one or more stock certificates or other
appropriate evidence of ownership of the aggregate number of Warrant Shares to
which the Holder of such Warrant is entitled and the other securities or
Property (including any Cash) to which such Holder is entitled, in such
denominations, and registered or otherwise placed in, or payable to the order
of, such name as may be directed in writing by such Holder. The Company shall
deliver such stock certificates or evidence of ownership and any other
securities or Property (including any Cash) to the Person entitled to receive
the same, together with an amount in Cash in lieu of any fraction of a Warrant
Share (or fractional interest in any other security), as hereinafter provided.
If any securities included in the Warrant Shares are Publicly Traded, then at
the request of such Holder, the Company shall use commercially reasonable
efforts to cause its transfer agent to electronically transmit such securities
to such Holder through the Depository Trust Company’s
Deposit/Withdrawal at Custodian system or the Central Clearing and Settlement
System of the Hong Kong Exchanges and Clearing Limited market system, or similar
organization, as applicable.

     

         (b) Partial Exercise or Exchange.
If a Holder shall exercise or exchange a Warrant for less than all of the
Warrant Shares that could be purchased or received thereunder, the Company shall
issue, register and deliver to the Holder, as promptly as practicable but in any
event within two (2) Business Days following the Delivery Date, a new Warrant
evidencing the right to purchase the remaining Warrant Shares represented by
such Warrants. In the case of an exchange pursuant to Section 4.2, the number of remaining
Warrant Shares represented by such Warrant shall be the original number of
Warrant Shares subject to the Warrant so exchanged reduced by the Exchange
Number. Each Warrant surrendered pursuant to Section 4.1 or 4.2 shall be
cancelled.

     

         (c) Fractional Shares. The Company
shall not be required to issue fractional Warrant Shares or fractional units of
any other security upon the exercise or exchange of a Warrant. If any fraction
of a Warrant Share or fractional unit of any other security would be issuable on
the exercise or exchange of any Warrant, the Company may, in lieu of issuing
such fraction of a Warrant Share or
fractional unit, pay to such Holder for any such fraction an amount in Cash
equal to the product of (x) such fraction and (y) the Fair Market Value for one
Warrant Share or for a unit of such other security, as the case may be, as of
the Delivery Date.

     

     

     

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         (d) Record Ownership. To the extent permitted by Applicable Laws,
the Person in whose name any certificate for Warrant Shares or other evidence of
ownership of any other security is issued upon exercise or exchange of a Warrant
shall for all purposes be deemed to have become the holder of record of such
Warrant Shares or other security on the Delivery Date, irrespective of the date
of delivery of such certificate or other evidence of ownership (subject, in the
case of any exercise to which Section 4.3(f)
applies, to the consummation of a transaction upon which such exercise is
conditioned, in which case the date of fulfillment of all conditions shall be
deemed to be the date that such Holder shall for all purposes be deemed to have
become a holder of record of such Warrant Shares), notwithstanding that the
transfer books of the Company shall then be closed or that such certificates or
other evidence of ownership shall not then actually have been delivered to such
Person.

     

         (e) Listings. The Company shall promptly take all action
that may be necessary so that any such securities, immediately upon their
issuance upon exercise or exchange of Warrants, will be listed on the Hong Kong
Stock Exchange, if any other securities of the Company of the same class or type
are then so listed or quoted.

     

         (f) Conditional Exercise or
Exchange. Any Exercise
Form or Exchange Form delivered under Section 4.1 or 4.2 may condition the
exercise or exchange of any Warrant on the consummation of a transaction being
undertaken by the Company or the Holder of such Warrant, and such exercise or
exchange shall not be deemed to have occurred except concurrently with the
consummation of such transaction, except that, for purposes of determining
whether such exercise or exchange is timely, it shall be deemed to have occurred
on the Delivery Date. If any exercise of a Warrant is so conditioned, then,
subject to delivery of the items required by Section 4.3(a) and
compliance with the other terms hereof, the Company shall deliver the
certificates and other evidence of ownership of other securities or other
Property in such manner as such Holder shall direct as required in connection
with the consummation of such transaction upon which the exercise or exchange is
conditioned. If, at any time prior to the consummation of a conditional exercise
or exchange, such Holder shall give notice to the Company that such transaction
has been abandoned or such Holder has withdrawn from participation in such
transaction, the Company shall return the items delivered pursuant to Section 4.3(a), and
such Holder’s election to exercise such Warrant shall be deemed
rescinded.

     

    ARTICLE V
ADJUSTMENT OF EXERCISE PRICE AND
NUMBER OF WARRANT SHARES

     

    5.1 General.

     

         The Exercise Price and the number and kind of
Warrant Shares issuable upon exercise of each Warrant shall be subject to
adjustment from time to time in accordance with this Article
V.

     

    

     

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    5.2 Distributions, Subdivisions
and Combinations.

     

         If, at any time after the Closing
Date, the Company shall:

     

              (i)
make a Distribution in Common Shares;

     

              (ii) subdivide, split or reclassify its
outstanding Common Shares into a larger number of Common Shares; or

     

              (iii) combine its outstanding Common Shares
into a smaller number of Common Shares;

     

    then (A) the number
of Warrant Shares issuable upon exercise of each Warrant shall be adjusted so as
to equal the number of Warrant Shares that the Holder of such Warrant would have
held immediately after the occurrence of such event if the Holder had exercised
such Warrant for Common Shares immediately prior to the occurrence of such event
(or, in the case of clause (i), the record date therefor) and (B) the Exercise
Price shall be adjusted to be equal to the product of (x) the Exercise Price
immediately prior to the occurrence of such event and (y) a fraction (1) the
numerator of which is the number of Warrant Shares issuable upon exercise of
such Warrant immediately prior to the adjustment in clause (A) and (2) the
denominator of which is the number of Warrant Shares issuable upon exercise of
such Warrant immediately after the adjustment in clause (A); provided, that in
no event shall such adjustment result in an Exercise Price per share which is
less than the par value per Warrant Share. An adjustment made pursuant to this Section 5.2 shall
become effective immediately after the occurrence of such event retroactive to
the record date, if any, for such event. Additionally, the Exercise Price shall
be adjusted in the manner contemplated by clause (B).

     

    5.3 Reorganizations, Mergers and
Consolidations.

     

         If any Extraordinary Event shall be effected,
then, as a condition of such Extraordinary Event, the Company shall cause lawful
and adequate provision to be made whereby the registered holder of this Warrant
shall thereafter have the right to purchase and receive, upon exercise hereof
and the payment of the exercise price, in lieu of the Common Shares of the
Company immediately theretofore purchasable and receivable upon the exercise of
this Warrant, such shares of stock, securities or Property (including Cash) as
may be issued or payable with respect to or in exchange for a number of Common
Shares of the Company immediately theretofore purchasable and receivable upon
the exercise of this Warrant had such Extraordinary Event not taken place, and
in any such case appropriate provision shall be made with respect to the rights
and interests of the holder of this Warrant to the end that the provisions
hereof (including, without limitation, provisions for adjustments of the number
of shares purchasable upon the exercise of this Warrant) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or Property thereafter deliverable upon the exercise hereof. The foregoing
provisions shall similarly apply to successive Extraordinary Events. The Company
shall not effect any consolidation, merger or sale that constitutes an
Extraordinary Event unless, prior to the consummation thereof, the successor
company (if other than the Company) resulting from such consolidation or merger
or the company purchasing assets in an Extraordinary Event shall assume by
written instrument executed and mailed to the registered Holder at the last
address of such registered Holder appearing on the books of the Company, the
obligation to deliver to such registered Holder such shares of stock, securities
or Property as, in accordance with the foregoing provisions, such registered
Holder may be entitled to purchase or receive.

     

     

     

    11

     

    

    
    

    Final Form

     

    5.4 Adjustment upon Issuance of
Common Shares or Common Share Equivalents.

     

         If at any time or from time to time after
November 9, 2009 the Company issues or sells, or is deemed to have issued or
sold (including, without limitation, pursuant to any “equity appreciation
right,” “phantom equity” or otherwise), any Common Shares (or Common Share
Equivalents, as described in Section 5.5(a)) for a
consideration per share less than the Exercise Price per Common Share at the
time of such issuance or sale, then forthwith upon such issue or sale, the
number of Warrant Shares shall be increased by multiplying such number by a
fraction (A) the numerator of which is the Exercise Price and (B) the
denominator of which is determined by dividing (i) the sum of (x) the Exercise
Price multiplied
by the number of Common Shares outstanding immediately prior to such
issue or sale plus (y) the
aggregate consideration, if any, received by the Company upon such issue or sale
by (ii) the number of Common Shares outstanding
immediately after such issue or sale.

     

    5.5 Effect on Warrant Shares of
Certain Events.

     

         For purposes of determining the adjusted
number of Warrant Shares under Section
5.4 above, the following shall
be applicable:

     

         (a) Issuance of Common Share
Equivalents. If the Company in any manner grants or issues any Common
Share Equivalents and the lowest price per Common Share for which any one Common
Share or analogous economic right is issuable upon the exercise of any such
Common Share Equivalent is less than the Exercise Price at the time of the
granting or issuing of such Common Share Equivalent, then such Common Share will
be deemed to have been issued and sold by the Company for such price per Common
Share. For purposes of this paragraph, the “lowest price per
share” will
be equal to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one Common Share or analogous
economic right upon the exercise of the Common Share Equivalent (whether by
conversion, exchange or otherwise) or other similar indication of the price per
Common Share as of the time of granting (such as the floor value for stock
appreciation rights). No further adjustment of the Warrant Shares will be made
upon the actual issue of such Common Shares or upon the exercise of any rights
under such Common Share Equivalents.

     

         (b) Change in Option Price or Conversion
Rate. If the purchase price provided for in any Common Share Equivalent,
the additional consideration (if any) payable upon the issue, conversion or
exchange of any Common Share Equivalent or the rate at which any Common Share
Equivalent is convertible into or exercisable or exchangeable for Common Shares
changes at any time, the number of Warrant Shares issuable at the time of such
change will be readjusted to the number of Warrant Shares that would have been
issuable at such time had such Common Share Equivalents provided for such
changed purchase price, additional consideration or changed conversion rate, as
the case may be, at the time initially granted, issued or sold; provided that if such adjustment would result
in a decrease in the number of Warrant Shares then issuable, such adjustment
will not be effective until 30 days after written notice thereof has been given
by the Company to the Holders of the Warrants.

     

     

     

    12

     

    

    
    

    Final Form

     

         (c) Treatment of Expired and Unexercised
Common Share Equivalents. Upon the expiration of any Common Share Equivalents or the termination of
any right to convert or exchange any Common Share Equivalents without the
exercise of such Common Share Equivalents, the number of Warrant Shares then
issuable will be adjusted to the number of Warrant Shares that would have been
issuable at the time of such expiration or termination had such Common Share
Equivalents to the extent outstanding immediately prior to such expiration or
termination, never been issued.

     

    5.6 Other Actions Affecting
Equity Securities.

     

         If at any time or from time to time the
Company shall take any action affecting its capital stock (including, without
limitation, the creation of equity appreciation rights or phantom equity), other
than any action of a type otherwise described in this Article V, then the number of Warrant
Shares issuable upon exercise of each Warrant shall be adjusted (with a
corresponding adjustment to the Exercise Price) to such extent, if any, and in
such manner and at such time, as the Board shall, in the good faith exercise of
its reasonable business judgment, determine to be equitable in the
circumstances; provided that no such adjustment shall decrease the number of
Warrant Shares issuable upon exercise of such Warrant or increase the Exercise
Price.

     

    5.7 Miscellaneous.

     

         (a) Calculation of Consideration Received. If any Common Shares, Common Share Equivalents
or Other Equity Securities are issued or sold or deemed to have been issued or
sold for Cash, then the consideration received therefor shall be deemed to be
the net amount received or to be received by the Company therefor. If any Common
Shares, Common Share Equivalents or Other Equity Securities are issued or sold
for consideration other than Cash (including in connection with any merger in
which the Company issues such securities), then the amount of the consideration
other than Cash received by the Company shall be the Fair Market Value of such
consideration, as of the date of receipt.

     

         (b) Treasury Shares. The number of Common Shares outstanding at any given time does not
include Common Shares owned or held by or for the account of the Company or any
Affiliate of the Company, and the disposition of any Common Shares so owned or
held shall be considered an issuance of Common Shares.

     

         (c) Notice; Adjustment Rules. Whenever the Exercise Price or the number of issuable Warrant Shares
shall be adjusted as provided in this Article V, the
Company shall provide to each Holder a statement, signed by a Responsible
Officer of the Company, describing in detail the facts requiring such adjustment
and setting forth a calculation of the Exercise Price and the number of issuable
Warrant Shares applicable to each Warrant after giving effect to such
adjustment. All calculations under this Article V shall be
made to the nearest one thousandth of a cent ($.00001) or to the nearest one-thousandth of a share, as the case
may be. Adjustments pursuant to this Article V shall apply to successive
events or transactions of the types covered thereby. Notwithstanding any other
provision of this Article V, no
adjustment shall be made to the number of issuable Warrant Shares or to the
Exercise Price if such adjustment represents less than .5% of the number of issuable Warrant Shares
previously required to be so issued, but any lesser adjustment shall be carried
forward and shall be made at the time and together with the next subsequent
adjustment which together with any adjustments so carried forward shall amount
to .5% or more of the number of Warrant Shares to be so
issued.

     

     

     

    13

     

    

    
    

    Final Form

     

    5.8 Excluded Issuances. Notwithstanding any
other provision of this Article V, no
adjustment shall be made pursuant to this Article V in respect
of (i) the issuance of Common Shares pursuant to any adjustment provided for in
this Article V
or (ii) securities issued upon the exercise of Warrants.

     

    ARTICLE VI
COVENANTS OF THE
COMPANY

     

    6.1 No
Avoidance; Further Assurances.

     

         The Company will
not, by amendment of its Governing Documents or through any Extraordinary Event,
reorganization, Transfer of Properties, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company. The Company shall at all times in good faith
assist in the carrying out of all the provisions of this Agreement and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holders hereunder against impairment. Each party hereto shall,
without further consideration, make, execute, acknowledge and deliver such other
instruments and documents, and take or cause to be taken all actions as may be
necessary or appropriate in order to effect the purposes of this
Warrant.

     

    6.2 Preemptive
Rights.

     

         Except as
otherwise provided herein or in the Other Transaction Documents, no Warrant
shall entitle the holder thereof to any preemptive rights or any other rights as
a shareholder of the Company, as such except for those rights as a stockholder
of the Company that attach to the Warrant Shares following their issuance upon
the exercise of any Warrant.

     

    6.3 Sale of
Warrants.

     

         In any merger,
consolidation, reorganization, repurchase or reclassification or similar
transaction, in which holders of Capital Stock sell or otherwise Transfer
Capital Stock held by them, the Company will use commercially reasonable efforts
to cause the transaction to be structured to permit the Holders to deliver
Warrants in connection with any such transaction without requirement for
exercise thereof as a condition to participation and for consideration not less
than the consideration such Holders would have received had such Holders
exercised their Warrants immediately prior thereto, less any applicable Exercise
Price, unless such arrangement would result in a material legal, tax or similar
detriment to the Company, a significant counterparty to the transaction or their
respective securityholders.

     

    

     

    14

     

    

    
    

    Final Form

     

    ARTICLE VII

MISCELLANEOUS

     

    7.1 Notices.

     

         All notices and other communications provided
for or permitted hereunder shall be made by hand-delivery, telecopier or
overnight air courier guaranteeing next day delivery:

     

    
      	
            	
            	
            	(i)	
            	if to the Company, to:
	
            	 
	     	Semiconductor Manufacturing
      International Corporation
	
            	Address:	       	Suite 3003, 30th Floor
	
            	
            	
            	No. 9 Queen’s Road Central
	
            	
            	
            	Hong Kong
	
            	Telephone:	
            	(+852) 2537 8588
	
            	Facsimile:	
            	(+852) 2537 8206
	
            	Attention:	
            	Anne Chen/Blondie Poon
	
            	 
	
            	
            	
            	
            	       	with a copy to:
	
            	 
	
            	Wilson Sonsini Goodrich &
      Rosati, P.C.
	
            	Address:	
            	Jin Mao Tower, 38F
	
            	
            	
            	88 Century Boulevard
	
            	
            	
            	Pudong New Area, Shanghai
    200121
	
            	 	People’s Republic of
      China
	
            	Telephone:	
            	(+86-21) 6165-1700
	
            	Facsimile:	
            	(+86-21) 6165-1799
	
            	Attention:	
            	Carmen Chang, Esq.
	
            	 
	
            	
            	
            	(ii)	
            	if to the Holder, to
	
            	 
	
            	Taiwan Semiconductor Manufacturing Co.,
      Ltd.
	
            	Address:	
            	No. 8 Li-Hsin Road 6, Hsin-Chu Science
      Park
	
            	
            	
            	Hsin-Chu, Taiwan, Republic of
      China
	
            	Telephone:	
            	(+886) 3-5682002
	
            	Facsimile:	
            	(+886) 3-5678689
	
            	Attention:	
            	General Counsel
	
            	 
	
            	 	 	 	 	with a copy to:
	
            	 
	
            	Weil, Gotshal & Manges LLP
	
            	Address:	200 Crescent
      Court, Suite 300
	
            	
            	Dallas, Texas
      75201
	
            	
            	United States of
      America
	
            	Telephone:	+1 (214)
      746 7700
	
            	Facsimile:	+1 (214)
      746 7777
	
            	Attention:	R. Scott
      Cohen

    

    

     

    15

     

    

    
    

    Final Form

     

         Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered:
(i) upon receipt, when delivered personally; (ii)
upon receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one Business Day after deposit with an overnight courier service, in
each case properly addressed to the party to receive the same. The parties may
change the addresses to which notices are to be given by giving five days’ prior
notice of such change in accordance herewith.

     

    7.2 No Voting Rights; Limitation
of Liability.

     

         Except as otherwise provided herein, no
Warrant shall entitle the holder thereof to any voting rights or any other
rights as a stockholder of the Company, as such. No provision hereof, in the
absence of affirmative action by the Holder to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder shall give rise to
any liability of such Holder for the Exercise Price of Warrant Shares acquirable
by exercise hereof or as an equity holder of the Company.

     

    7.3 Amendments and
Waivers.

     

         (a) Written Document. Any provision of this Agreement may be amended or waived, but only
pursuant to a written agreement signed by the Company and the Requisite Holders;
provided that no such amendment or modification shall without the written
consent of each Holder affected thereby (i) shorten the Expiration Time of any
Warrant, (ii) increase the Exercise Price of any Warrant, (iii) change any of
the provisions of this Section
7.3(a) or the definition of “Requisite
Holders” or
any other provision hereof specifying the number or percentage of Holders
required to waive, amend, or modify any rights hereunder or required to make any
determination or grant any consent hereunder or otherwise to act with respect to
this Agreement or any Warrants, (iv) change any of the provisions of Article V or (v) increase the obligations of any
Holder.

     

         (b) No Waiver. No
failure on the part of any Holder to exercise and no delay in exercising, and no
course of dealing with respect to, any right, power or privilege under this
Agreement or the Warrants shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege under this Agreement
or the Warrant preclude any other or further exercise thereof or the exercise of
any other right, power or privilege.

     

    

     

    16

     

    

    
    

    Final Form

     

    7.4 Remedies.

     

         Each Holder shall
have all rights and remedies reserved for such Holder pursuant to this
Agreement, all rights and remedies which such Holder has been granted at any
time under any other agreement or instrument and all of the rights and remedies
such Holder may have at law or in equity. The remedies provided herein are
cumulative and not exclusive. Any Person having any rights under any provision
of this Agreement will be entitled to enforce such rights specifically, to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law or equity. The Company acknowledges
and agrees that irreparable damage would occur to the holder of this Warrant and
that such Holder will not have an adequate remedy at law in the event that any
of the provisions of this Warrant to be performed by the Company were not
performed in accordance with their specific terms or were otherwise breached.
Therefore, the Holder of this Warrant is entitled to an injunction or
injunctions to prevent breaches of this Warrant by the Company and to
specifically enforce the terms and provisions of this Warrant against the
Company in any court of competent jurisdiction, without bond or other security
being required, and appropriate injunctive relief may be applied for by such
Holder and granted in connection therewith.

     

    7.5 Binding
Effect.

     

         Subject to the
limitations set forth in this Agreement and the Other Transaction Documents,
each Holder has the right to assign or otherwise Transfer its rights under this
Agreement or any Warrants or Warrant Shares held by it. The Company shall not
assign its rights or obligations hereunder except in the context of an
Extraordinary Transaction, as contemplated herein. This Agreement shall be
binding upon and inure to the benefit of the Company, each Holder and their
successors and permitted assigns.

     

    7.6 Counterparts.

     

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

     

    7.7 Governing Law; Jurisdiction
and Venue.

     

         All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by and construed in accordance with the laws of Hong
Kong. Any dispute, controversy or claim arising out of or relating to this
Agreement, or the interpretation, breach, termination or validity hereof, shall
be submitted to arbitration upon the request of any party with notice to the
other party. The arbitration shall be conducted in Hong Kong under the auspices
of the Hong Kong International Arbitration Centre (the “HKIAC”) in accordance with
the UNCITRAL Arbitration Rules (“UNCITRAL Rules”) in effect,
which rules are deemed to be incorporated by reference into this Section 7.7. There
shall be three (3) arbitrators. The complainant and the respondent to such
dispute shall each select one arbitrator within thirty (30) days after giving or
receiving the demand for arbitration. The Chairman of the HKIAC shall select the
third arbitrator, who shall be qualified to practice law in Hong Kong. If either
party to the arbitration does not appoint an arbitrator who has consented to
participate within thirty (30) days after selection of the first arbitrator, the
relevant appointment shall be made by the Chairman of the HKIAC. The arbitration
proceedings shall be conducted in English. Each party hereto shall cooperate
with any party to the dispute in making full disclosure of and providing
complete access to all information and documents requested by such party in
connection with such arbitration proceedings, subject only to any
confidentiality obligations binding on the party receiving the request. Each
party irrevocably waives, to the fullest extent it may effectively do so, any
objection which it may now or hereafter have to the laying of venue of any such
arbitration in Hong Kong and the HKIAC, and hereby submits to the exclusive
jurisdiction of HKIAC in any such arbitration. The award of the arbitration
tribunal shall be conclusive and binding upon the disputing parties, and any
party to the dispute may apply to a court of competent jurisdiction for
enforcement of such award. Any party to the dispute shall be entitled to seek
preliminary injunctive relief, if possible, from any court of competent
jurisdiction pending the constitution of the arbitral tribunal.

     

    

     

    17

     

    

    
    

    Final Form

     

    7.8 Benefits of this
Agreement.

     

         Nothing in this Agreement shall be construed
to give to any Person other than the Company and each Holder of a Warrant or a
Warrant Share any legal or equitable right, remedy or claim
hereunder.

     

    7.9 Headings.

     

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

     

    7.10 Aggregation of Warrants and
Warrant Shares.

     

         All Warrants and Warrant Shares held or
acquired by any Person and its Affiliates shall be aggregated together for
purposes of measuring any numerical thresholds used in determining the
availability to such Person and its Affiliates, taken collectively, of rights
under this Agreement and the applicability of obligations and restrictions under
this Agreement.

     

    7.11 Operative
Date.

     

         This Agreement shall become
operative on the date hereof.

     

    [Remainder of Page Intentionally Left
Blank]

     

    

     

    18

     

    

    
    

    Final Form

     

         IN WITNESS WHEREOF,
each party hereto has caused this
Warrant Agreement to be duly executed and delivered by its authorized signatory,
all as of the date and year first above written.

     

    
      	SEMICONDUCTOR
    MANUFACTURING
	INTERNATIONAL
    CORPORATION
	
            	 
	
            	 
	By:  	 	 
	
            	Name: Jiang Shang Zhou
	
            	Title:   Chairman of the Board
	
            	 
	
            	 
	By:	 	 
	
            	Name: Richard Ru-Gin Chang
	
            	Title:   Chief Executive Officer
	
            	 
	
            	 
	TAIWAN SEMICONDUCTOR
    MANUFACTURING
	COMPANY, LTD.
	
            	 
	
            	 
	By:	 	
            
	
            	Name: F.C. Tseng
	
            	Title:   Vice
Chairman

    

    

     

    [Signature Page to
Warrant Agreement]

     

    

    
    

    Final Form

     

    Exhibit A to the Warrant
Agreement

     

         THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR BLUE SKY
LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS.

     

         ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE
CONDITIONS SPECIFIED IN THE SHARE AND WARRANT ISSUANCE AGREEMENT, DATED AS OF
NOVEMBER 9, 2009, AND THE WARRANT AGREEMENT, DATED AS OF [________ __, 20__],
AMONG THE ISSUER HEREOF AND
CERTAIN OTHER SIGNATORIES THERETO. UPON THE FULFILLMENT OF CERTAIN CONDITIONS,
THE ISSUER HEREOF HAS AGREED TO DELIVER TO THE HOLDER HEREOF A NEW CERTIFICATE,
NOT BEARING THIS LEGEND, FOR THE
SECURITIES REPRESENTED HEREBY REGISTERED IN THE NAME OF THE HOLDER HEREOF.
COPIES OF SUCH AGREEMENTS MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE ISSUER
HEREOF.

     

    Semiconductor Manufacturing
International Corporation

    
    

     

    
      	
              No. W -
      l

            	[________, __,
  20__]

    

     

    Common Share Purchase
Warrant

     

         THIS CERTIFIES that, for value received,
Taiwan Semiconductor Manufacturing Company, Ltd., a Taiwanese corporation (the
“Holder”), or its assigns, is entitled to
purchase from Semiconductor Manufacturing International Corporation, an exempted
company incorporated under the laws of the Cayman Islands (the “Company”), [695,914,030] common shares,
US$.0004 par value (the “Common Shares”),
of the Company (the “Warrant Shares”), at
the price (the “Exercise Price”) of
HK$1.30 per share, at any time or from time to time during the period commencing
on the date hereof and ending at 11:59 P.M. Hong Kong Time on the Expiration
Time (as defined in the Warrant Agreement).

     

         The Holder may exercise all or any part of
such rights at any time or from time to time prior to the Expiration
Time.

     

         This Warrant has been issued
pursuant to the Warrant Agreement dated as of [________ __, 20__] (as amended, restated,
supplemented or otherwise modified from time to time, the “Warrant Agreement”) between the Company and
the Holder named therein, and is subject to the terms and conditions, and the
Holder is entitled to the benefits, thereof. A copy of the Warrant Agreement is
on file and may be inspected at the principal executive office of the Company.
The Holder of this certificate, by acceptance of this certificate, agrees to be
bound by the provisions of the Warrant
Agreement. Capitalized terms used but not defined herein shall have the
respective meanings given to such terms in the Warrant
Agreement.

     

     

     

    A-1

     

    

    
    

         SECTION 1. Exercise of Warrant. On any
day on or prior to the Expiration Time, the Holder may exercise this Warrant, in
whole or in part, in the manner set forth in Article IV of the
Warrant Agreement.

     

         SECTION 2. Exercise Price and Number of Warrant
Shares. The Exercise Price and the number of Warrant Shares is subject to
adjustment from time to time as set forth in the Warrant Agreement.

     

         SECTION 3. Exchange of Warrant. On any
day on or prior to the Expiration Time, the Holder may exchange this Warrant, in
whole or in part, for Warrant Shares by delivering to the Company this Warrant
accompanied by a properly completed Exchange Form in the form of Annex B attached hereto. The number of
Common Shares to be received by the Holder upon such exchange shall be
determined as set forth in the Warrant Agreement.

     

         SECTION 4. Transfer. Subject to the
limitations set forth or referred to in the Warrant Agreement, this Warrant may
be Transferred by the Holder by delivery to the Company of this Warrant
accompanied by a properly completed Assignment Form in the form of Annex C attached hereto.

     

         SECTION 5. Lost, Stolen, Mutilated or Destroyed
Warrant. If this Warrant is lost, stolen, mutilated or destroyed, the
Company will issue a new Warrant of like denomination and tenor upon compliance
with the provisions set forth in the Warrant Agreement.

     

         SECTION 7. Successors. All of the
provisions of this Warrant by or for the benefit of the Company or the Holder
shall bind and inure to the benefit of their respective successors and permitted
assigns.

     

         SECTION 8. Headings. Section headings in
this Warrant have been inserted for convenience of reference only and shall not
affect the construction of, or be taken into consideration in interpreting, this
Warrant.

     

         SECTION 9. Governing Law. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by and construed in accordance with the laws of Hong
Kong. Any dispute, controversy or claim arising out of or relating to this
Agreement, or the interpretation, breach, termination or validity hereof, shall
be submitted to arbitration upon the request of any party with notice to the
other party. The arbitration shall be conducted in Hong Kong under the auspices
of the HKIAC in accordance with the UNCITRAL Rules in effect, which rules are
deemed to be incorporated by reference into this section. There shall be three
(3) arbitrators. The complainant and the respondent to such dispute shall each
select one arbitrator within thirty (30) days after giving or receiving the
demand for arbitration. The Chairman of the HKIAC shall select the third
arbitrator, who shall be qualified to practice law in Hong Kong. If either party
to the arbitration does not appoint an arbitrator who has consented to
participate within thirty (30) days after selection of the first arbitrator, the
relevant appointment shall be made by the Chairman of the HKIAC. The arbitration
proceedings shall be conducted in English. Each party hereto shall cooperate
with any party to the dispute in making full disclosure of and providing
complete access to all information and documents requested by such party in
connection with such arbitration proceedings, subject only to any
confidentiality obligations binding on the party receiving the request. Each
party irrevocably waives, to the fullest extent it may effectively do so, any
objection which it may now or hereafter have to the laying of venue of any such
arbitration in Hong Kong and the HKIAC, and hereby submits to the exclusive
jurisdiction of HKIAC in any such arbitration. The award of the arbitration
tribunal shall be conclusive and binding upon the disputing parties, and any
party to the dispute may apply to a court of competent jurisdiction for
enforcement of such award. Any party to the dispute shall be entitled to seek
preliminary injunctive relief, if possible, from any court of competent
jurisdiction pending the constitution of the arbitral tribunal.

     

    

     

    A-2

     

    

    
    

         IN WITNESS WHEREOF, the undersigned has caused this Warrant to be executed by its duly
authorized officers and this Warrant to be dated as of the date first set forth
above.

     

    
      	SEMICONDUCTOR
    MANUFACTURING
	INTERNATIONAL
    CORPORATION
	 
	 
	By:  	
            	 
	Name: Jiang Shang Zhou
	Title:  Chairman of the Board
	 
	 
	By:	
            	 
	Name: Richard Ru-Gin Chang
	Title:   Chief Executive
  Officer

    

    

     

    A-3

     

    

    
    

    Annex A to the
Warrant

     

    EXERCISE FORM

     

    [To be signed upon exercise of a
Warrant]
 

     

    TO SEMICONDUCTOR MANUFACTURING INTERNATIONAL
CORPORATION:

     

         The undersigned, being the Holder of the
attached Warrant, hereby elects to exercise the purchase right represented by
such Warrant for, and to purchase thereunder _____ Common Shares of
Semiconductor Manufacturing International Corporation, an exempted company
incorporated under the laws of the Cayman Islands (the “Company”), and requests that
the certificates or other evidence of ownership for such shares be issued in the
name of, and be delivered to, _______________, whose address is
______________________ _______________________.

     

         The foregoing exercise is (check
one):

     

    
      	 	
            	Irrevocable     
                
	
            	
            	 
	 	
            	Conditioned upon the consummation of the transaction described briefly below:
	
            	
            	 
	
            	
            	 
	
            	
            	 
	
            	
            	 
	             	          
	 

    

    
      	Dated:  	 	
            	 
	
            	 	Name:
	
            	                              
    	Title:

    

    

     

    

    
    

    Annex B to the
Warrant

     

    EXCHANGE FORM

     

    [To be signed upon exchange of a
Warrant]

     

     

    TO SEMICONDUCTOR MANUFACTURING
INTERNATIONAL CORPORATION:

     

         The undersigned, being the Holder of the
within Warrant, hereby elects to exchange, pursuant to Section 4.2
of the Warrant Agreement referred
to in such Warrant, the portion of such Warrant representing the right to
purchase ______ Common Shares of Semiconductor Manufacturing International
Corporation, an exempted company incorporated under the laws of the Cayman
Islands (the “Company”).
The undersigned hereby requests that the certificates or evidence of ownership
for the number of shares issuable in such exchange pursuant to such Section 4.2 be issued
in the name of, and be delivered to, __________________, whose address is
_____________________________.

     

         The foregoing exchange is (check
one):

     

    
      	 	
            	Irrevocable     
                
	
            	
            	 
	 	
            	Conditioned upon the consummation of the transaction described briefly below:
	
            	
            	 
	
            	
            	 
	
            	
            	 
	
            	
            	 
	             	          
	 

    

    
      	Dated:  	 	
            	 
	
            	 	Name:
	
            	                              
    	Title:

    

    

     

    

    
    

    Annex C to the
Warrant

     

    ASSIGNMENT FORM

     

    [To be signed only upon transfer of a
Warrant]

     

         For value received, the undersigned hereby
sells, assigns and transfers unto ______________________, all of the rights
represented by the within Warrant to purchase _______ Common Shares of
Semiconductor Manufacturing International Corporation, an exempted company
incorporated under the laws of the Cayman Islands (the “Company”), to which such
Warrant relates, and appoints ______________________ attorney to transfer such
Warrant on the books of the Company, with full power of substitution in the
premises.

     

    
      	Dated:  	 

    

    
      	By:  	 	
            
	Name:
	Title:

    

         By executing and delivering this Assignment
Form to the Company, the undersigned hereby agrees to become a party to, to be
bound by, and to comply with the provisions of the Warrant Agreement dated as of
[________ __, 20__] (as amended, restated, supplemented or otherwise modified
from time to time, the “Warrant
Agreement”), among
the Company and the Holders, in the same manner as if the undersigned were an
original signatory to the Warrant Agreement.

     

         The undersigned agrees that he, she or it
shall be a “Holder”, as such term is
defined in the Warrant Agreement.

     

    
      	Dated:  	 

    

    
      	 	
            
	Signature of transferee	 
	 	
            
	Print Name of
transferee	
            
	 	
            
	 	
            
	Address	
            
	 	
            
	Facsimile	
            
	 	
            
	Telephoneex10-1.htm

Exhibit 10.1

Page 1 of 2

 

		
Online Virtual Office Agreement

 

Agreement Date : Thursday, December 10, 2009        Confirmation No : 8192-182435

 

 

Business Center Details

 

 

NJ, Bridgewater - Bridgewater (HQ)

 

 

	Address	
1200 Route 22 East

Bridgewater

New Jersey

08807

United States of America

	 	 

 

 

	
Sales Manager

	
Reginald Jefferson

	 	 
	 	 	 	 
	 	 	 	 
	
Client Details

	 	 	 
	 	 	 	 
	Company Name	Energy Edge Technologies Corp.	 	 
	 	 	 	 
	Contact Name	Robert Holdsworth	 	 
	 	 	 	 
	Address	 	 	 
	 	United States of America	 	 
	 	 	 	 
	Phone	+ (908)5001643	 	 
	 	 	 	 
	Email	rholdsworth@energyet.com	 	 

 

 

Virtual Office Payment Details   (exc. tax and exc. services) 

 

Virtual Office Type :   Mailbox Plus

 

 

	Total per month (USD) : 	 	$	69.00	 
	 	 	 	 	 
	Initial Payment:	 	 	 	 
	 	 	 	 	 
	First month's fee : 	 	$	40.06	 
	 	 	 	 	 
	One Time Registration Fee :	 	$	49.00	 
	 	 	 	 	 
	Service Retainer: 	 	$	0.00	 
	 	 	 	 	 
	
Total Initial Payment:

	 	$	89.06	 
	 	 	 	 	 

 

 

https://www.regus.com/ServiceAgreement/ServiceAgreement.aspx?id=LT7LW%2b2dhp...    12/14/2009

 

  

  

  

 

Page 2 of 2

 

	Monthly Payment:	 	 	 	 
	 	 	 	 	 
	
Total Monthly Payment thereafter:

	 	$	69.00	 
	 	 	 	 	 

 

 

Length of Agreement :

 

 

Start Date Monday, December 14, 2009 February 3, 2010    End Date   Friday, December 31, 2010  January 31, 2011

 

 

All agreements end on the last calendar day of the month.

 

 

Terms and Conditions

 

We are HQ Global Workplaces, LLC [Regus], please click the link below for terms and conditions. 

 

þ  I accept the terms and conditions

 

 

Confirm by typing your name in the box below

 

 

Name :     Robert Holdsworth     on behalf of Energy Edge Technologies Corp.

 

 

Signed on Thursday, December

 

I confirm these details are correct to the best of my knowledge

 

 

https:/ywww.regus.com/ServiceAgreement/ServiceAgreement.aspx?id=LT7LW%2b2dhp...    12/14/2009

  

  

  

 

	
1. Product Definition

	 	
4. Use

	
1.1 Mailbox Plus: Entitles the Client to receive mail at the Regus Center specified in this Agreement ("designated Center"). The Client may use the address of the designated Center for business correspondence subject to exception in certain locations. The Client is not permitted to use the address of the designated Center as their registered office address unless permitted by law [and by Regus] and (if relevant) by local compliance rules.

1.2 Telephone Answering: Entitles the Client to a local telephone number determined by Regus in the designated Center, personalized call answering service during normal business hours, and after business hours and weekend voicemail access.

1.3 Virtual Office and Virtual Office Plus: Includes all services detailed in sections 1.1 and 1.2. In addition the Client is entitled to receive faxes at the designated Center. Due to postal requirements, in the United States only, the Virtual Office product provides 2 days of private office usage per month at the designated Center. Globally, the Virtual Office Plus product provides 5 days of private office usage per month at the designated Center, subject to availability.

2. This Agreement

2.1 Comply with House Rules: The Client must comply with any House Rules which Regus impose generally on users of the designated Center. Such rules are developed and/or imposed to protect Client's use of the designated Center for work.

The House Rules vary from country to country and from Center to Center and these

can be requested locally.

2.2 Duration: This Agreement lasts for the period stated in it and then will be extended automatically for successive periods equal to the current term but no less than 3 months (unless legal renewal term limits apply) until brought to an end by the Client or by Regus. All periods shall run to the last day of the month in which they would otherwise expire. The fees on any renewal will be at the then prevailing market rate.

2.3 Bringing this Agreement to an end: Either Regus or the Client can terminate this Agreement at the end date stated in it, or at the end of any extension or renewal period, by giving at least three months written notice to the other. However, if this Agreement, extension or renewal is for three months or less and either Regus or the Client wishes to terminate it, the notice period is two months or (if shorter) one week less than the period stated in this Agreement.

2.4. Ending this Agreement immediately: To the maximum extent permitted by applicable law, Regus may put an end to this Agreement immediately by giving the Client notice and without need to follow any additional procedure if (a) the Client becomes insolvent, bankrupt, goes into liquidation or becomes unable to pay its debts as they fall due, or (b) the Client is in breach of one of its obligations which cannot be put right, or (c) its conduct, or that of someone at the Center with its permission or invitation, is incompatible with ordinary office use which shall be determined at Regus' sole discretion.

If Regus puts an end to this Agreement for any of these reasons it does not put an end to any outstanding obligations, including the payment of any additional services used as well as the monthly fee for the remainder of the period for which this Agreement would have lasted if Regus had not ended it.

2.5 If the Center is no longer available: In the event that Regus is no longer able to provide the services at the designated Center stated in this Agreement then this agreement will end and the Client will only have to pay monthly fees up to the date it ends and for the additional services the Client has used. Regus will try to find suitable alternative for the Client at another designated Center.

2.6 Employees: While this Agreement is in force and for a period of six months after it ends, neither Regus nor the Client may knowingly solicit or offer employment to any of the other's staff employed in the designated Center. This obligation applies to any employee employed at the designated Center up to that employee's termination of employment, and for three months thereafter. It is stipulated that the breaching party shall pay the non-breaching party the equivalent of one year's salary for any employee concerned. Nothing in this clause shall prevent either Regus or the Client from employing an individual who responds in good faith and independently to an advertisement which is made to the public at large.

2.7 Client Representation of Regus Employees: Throughout the duration of this agreement, Client agrees that neither Client, nor any of Client's partners, members, officers or employees will represent, or otherwise provide legal counsel to, any of Regus' current or former employees in any dispute with, or legal proceeding against, Regus, or any of Regus' affiliates, members, officers or employees.

2.8 Notices: All formal notices must be in writing to the address first written on the front page of the Agreement. It is the Client's responsibility to keep their address of record up to date with the designated Center at all times.

2.9 Confidentiality: The terms of this Agreement are confidential. Neither Regus nor the Client may disclose them without the other's consent unless required to do so by law or an official authority. This obligation continues after this Agreement ends.

2.10 Applicable Law: This Agreement is interpreted and enforced in accordance with the law of the place where the designated Center is located. Regus and the Client both accept the exclusive jurisdiction of the courts of such jurisdiction. If any provision of these terms and conditions is held void or unenforceable under the applicable law, the other provisions shall remain in force. In the case of Japan ail agreements will be interpreted and enforced by the Tokyo District Court.

2.11 Enforcing this Agreement: The Client must pay any reasonable and proper costs including legal fees that Regus incurs in enforcing this Agreement.

3. Compliance

3.1 Compliance with the law: The Client must comply with ail relevant laws and regulations in the conduct of its business. The Client must do nothing illegal in connection with its use of the Business Center. The Client must not do anything that may interfere with the use of the Center by Regus or by others, cause any nuisance or annoyance, increase the insurance premiums Regus has to pay, or cause loss or damage to Regus (including damage to reputation) or to the owner of any interest in the building which contains the Center the Client is using. The Client acknowledges that (a) the terms of the foregoing sentence are a material inducement in Regus' execution of this agreement and (b) any violation by the Client of the foregoing sentence shall constitute a material default by the Client hereunder, entitling Regus to terminate this agreement, without further notice or procedure. 3.2 Data protection: The Client's personal data may be transferred outside the European Union where Regus has a Center for the purposes of providing the services herein. Regus has adopted internal rules to ensure data protection in accordance with European regulations.

	 	4.1 The Client must not carry on a business that competes with Regus' businessof providing serviced office accommodations and virtual offices. 

4.2 The Client's name and address: The Client may only carry on that business in its name or some other name that Regus previously agrees.

4.3 Use of the Center Address: The Client may use the designated Center address as its business address. Any other uses are prohibited without Regus' prior written consent.

5. Regus' Liability

To the maximum extent permitted by applicable law, Regus will not be liable for any loss sustained as a result of Regus' failure to provide a service as a result of any mechanical breakdown, strike, or termination of Regus' interest in the building containing the Center.. THE CLIENT EXPRESSLY AND SPECIFICALLY AGREES TO WAIVE, AND AGREES NOT TO MAKE, ANY CLAIM FOR DAMAGES, DIRECT, INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL, INCLUDING, BUT NOT LIMITED TO, LOST BUSINESS, REVENUE, PROFITS OR DATA, FOR ANY REASON WHATSOEVER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANY FAILURE TO FURNISH ANY SERVICE PROVIDED HEREUNDER, ANY ERROR OR OMISSION WITH RESPECT THERETO, FROM FAILURE OF ANY AND ALL COURIER SERVICE TO DELIVER ON TIME OR OTHERWISE DELIVER ANY ITEMS (MAIL, PACKAGES, ETC.) OR ANY INTERRUPTION OF SERVICES.

6. Fees

6.1 Taxes and duty charges: The Client agrees to pay promptly (i) all sales, use, excise and any other taxes and license fees which the Client is required to pay to any governmental authority (and, at Regus' request, will provide to Regus evidence of such payment) and (ii) any taxes paid by Regus to any governmental authority that are attributable to the accommodation, where applicable, including, without limitation, any gross receipts, rent and occupancy taxes, tangible personal property taxes, stamp tax or other documentary taxes and fees.

6.2 Service Retainer/Deposit: The Client will be required to pay a service retainer/deposit equivalent to two months of the monthly fee upon entering into this Agreement. This will be held by Regus without generating interest as security for performance of all the Client's obligations under this Agreement. The service retainer/deposit, or any balance after deducting outstanding fees, and other costs due to Regus, will be returned to the Client after the Client has settled their account with Regus and funds have cleared. Regus may require the Client to pay an increased retainer/deposit if outstanding fees exceed the service retainer/deposit held and/or the Client frequently fail to pay Regus' fees when due.

6.3 Registration Fee: The Client will be charged a one-time registration fee. This fee is listed in the House Rules.

6.4 Late payment: If the Client does not pay fees when due, a fee will be charged on all overdue balances. This fee will differ by country and is listed in the House Rules. If the Client disputes any part of an invoice the Client must pay the amount not in dispute by the due date or be subject to late fees. Regus also reserves the right to withhold services (including for the avoidance of doubt, denying the Client access to its accommodation, where applicable) while there are any outstanding fees and/or interest or the Client is in breach of this Agreement.

6.5 Insufficient Funds: The Client will pay a fee for any returned check or any other declined payments due to insufficient funds. This fee will differ by country and is listed in the House Rules.

6.6 Regus will increase the monthly virtual office fee each and every anniversary of the start date of this agreement by a percentage amount equal to the increase in the All Items Retail Prices Index, or such other broadly equivalent index which Regus substitutes provided that if the foregoing increase is not permitted by applicable law, then the monthly virtual office fee shall be increased as specified in the House Rules. This will only apply to agreements that have an original start and end date constituting more than a 12 month term. Renewals will be renewed as per clause 2.2 above and only those renewals with a start and end date constituting a term of over 12 months will have the same increase applied.

6.7 Standard services: The monthly fee and any recurring services requested by the Client are payable monthly in advance. Unless otherwise agreed in writing, these recurring services will be provided by Regus at the specified rates for the duration of this Agreement (including any renewal). Specific due dates will differ by country and are listed in the House Rules. Where a daily rate applies, the charge for any such month will be 30 times the daily fee. For a period of less than a month the fee will be applied on a daily basis.

6.8 Pay-as-you-use and Additional Variable Services: Fees for pay-as-you-use services, plus applicable taxes, in accordance with Regus' published rates which may change from time to time, are invoiced in arrears and payable the month following the calendar month in which the additional services were provided. Specific due dates will differ by country and are listed in the House Rules.

	 	 	
Terms and Conditions - August 2009 - Iveber

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