STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is made as of June 30, 1996, pursuant to the
Foundry Venture Agreement which was entered into as of July 8, 1995 and the
Amendment to Foundry Venture Agreement and Foundry Capacity Agreement which was
entered into as of October 31, 1995, and the letter agreement dated June 26,
1996, all by and among the Venturers defined therein and described herebelow, by
and between the Venturers, referring to Alliance Semiconductor Corporation, a
Delaware corporation ("Alliance"), S3 Incorporated, a Delaware corporation
("S3"), and United Microelectronics Corporation, a corporation organized under
the laws of the Republic of China ("UMC"), and United Semiconductor Corporation
("USC"), the corporation contemplated under and referred to as FabCo in the said
Foundry Venture Agreement.
Venturers and USC agree:
1. PURCHASE AND SALE OF STOCK
1.1 Venturers hereby agree to purchase from USC and USC hereby agrees to
issue and sell to Venturers its stocks at par value New Taiwan Dollars Ten (NT$
10) each share. All stocks issued and sold by USC pursuant to this Stock
Purchase Agreement shall be common stocks.
1.2 Pursuant to the Foundry Venture Agreement, the total number of common
stock USC issues and sells under the laws of the Republic of China is One
Billion (1,000,000,000) shares. Each Venturer shall purchase the number of
shares according to the following table (assuming full exercise of the option to
purchase under Paragraph 5. 1 (b)):
$ investment represented
Share % paid in cash by standard shares
("Standard Shares") (NTD Billions) Technical share %
------------------- -------------- -----------------
Alliance 18.99% $1.9 B 0%
S3 23.75% $2.4 B 0%
UMC & UMC Affiliates* 39.76% $3.95B 15%
USC & UMC employees** 2.5%** $0.25B 0%
Total shareholding 85% $8.5 B 15%
<FN>
* For purposes of this Stock Purchase Agreement, "UMC Affiliates" shall mean
those entities: (i) nominated by UMC and approved by the Venturers in writing,
(ii) which UMC directly and/or indirectly controls, and/or (iii) in which UMC
directly or indirectly owns a majority interest; provided that no UMC Affiliate
which is a competitor of S3 and/or Alliance may hold shares in USC pursuant to
rights granted to UMC Affiliates under this Stock Purchase Agreement without the
prior written consent of the Venturer involved. In addition, UMC may transfer up
to 5% of USC's standard shares to UMC employees and/or to employees of USC for
purposes of providing additional incentives in connection with USC business
without necessity for any prior written consent from USC or from any Venturer.
* * UMC employees who intend to become (and who later become) regular employees
of USC will be among the USC shareholders pursuant to this table. The UMC
employees and the eligible USC employees shall be required to pay in cash upon
issuance the value shown in this table for their standard shares.
</FN>
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1.3 The Venturers shall pay in cash for their standard shares in two equal
funding installments, and each Venturer represents to the other Venturers that
the amount indicated in the column titled "First Installment" has been paid and
USC acknowledges receipt of such amounts:
First Installment Second Installment -due in full
(paid as shown) on or before July 4, 1996
(NTD billions) (NTD billions)
-------------- --------------
Alliance $1 B $0.45B
S3 $1 B $0.7 B
UMC & UMC Affiliates $2.25B $2.85B
USC employees & UMC employees $0 B $0.25B
Total payment for standard shares $4.25B $4.25B
1.4 Within fifteen days of receiving a signature version of such a voting
agreement, S3 will execute a voting agreement concerning 5% ownership of USC in
the form as signed by China Trust Group and the other Taiwan institutions
approved by S3 and Alliance for participation in USC.
1.5 The technical shares shall be issued in accordance with the Foundry
Venture Agreement.
2. REPRESENTATIONS OF USC
2.1 USC represents and warrants, which representations and warranties shall
survive the purchase date, that:
(i) USC has been duly formed and is in existence and has operated in
conformity with all laws and regulations applicable to its operation;
(ii) The issuance of the shares of common stock contemplated herein is
in conformance with all laws and regulations applicable to the issuance of the
shares;
(iii) Attached hereto is the true copy of USC's Articles of
Incorporation; and
(iv) USC has duly authorized the sale and issuance of the shares to
the Venturers.
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3. BOARD OF DIRECTORS AND SUPERVISORS
3.1 USC will have at least seven (7) directors on its board of directors,
of which at least five (5) directors shall be designated by UMC and/or UMC
Affiliates, and each of Alliance and S3 shall designate one (1) director.
3.2 USC will have at least two (2) supervisors, of which at least one (1)
supervisor shall be designated by Alliance and S3.
3.3 Notwithstanding anything to the contrary, (i) all such directors
and/or supervisors shall be subject to the requirements of applicable law, and
(ii) the rights to designate directors and/or supervisors will expire if (for
reasons other than a failure of conditions precedent to such payment) the
Venturer fails to make timely payment of its second installment of the funding
outlined in Paragraph 1.3 above.
3.4 The following decisions shall be made only by resolutions of the board
of directors requiring an attendance of all the directors and an unanimous vote
of all of the directors, and are not within the authority of the chairman. These
decisions are as follows:
(i) All actions directly deciding strategic technical issues
(including without limitation, the type of process technology, such as that used
in the manufacture of logic, SRAM, DRAM, EPROM, EEPROM, and/or FLASH) to be
developed, implemented and/or offered by USC;
(ii) All actions directly making material changes to the technology
road map as approved by the board and/or authorizing liquidation, merger, sale
of all or substantially all of USC or USC's assets, and/or the offer of any
equity (except pursuant to a public offering of USC's shares on a recognized
securities exchange); and
3.5 The Venturers each commit to vote their shares in a manner so as to
implement this Paragraph 3.
3.6 This Paragraph 3 shall expire and have no further effect upon the
successful completion of a public offering of USC's shares on a recognized
securities exchange.
3.7 The Venturers and USC have held a shareholders' meeting and thereby
amended the articles of incorporation of USC to reflect the provisions of this
Paragraph 3.
4. DELIVERY OF FINANCIAL STATEMENTS; AUDIT RIGHTS
4.1 USC shall deliver to each Venturer:
(i) as soon as practicable, but in any event within 60 days after the
end of each fiscal year of USC, (A) a statement of operations and statement of
cash flows of USC for such year, and a balance sheet of USC as of the end of
such year, such year-end financial reports to be in reasonable detail, prepared
in accordance with generally accepted accounting principles ("GAAP") of the
Republic of China ("ROC"), accompanied by a reconciliation of such financial
statements to United States ("US") GAAP, and audited and certified by
independent public accountants of internationally recognized standing selected
by USC, and (B) a management discussion and analysis, certified by the President
or Chief Financial Officer of USC, explaining material variations in such
financial statements from USC's business plan;
(ii) within 15 days after the end of each Venturer's fiscal year
(March 31 for Alliance, December 31 for S3), an unaudited statement of
operations and balance sheet for and as of USC's most recent fiscal year (or
interim period thereof), together with such other financial information as shall
be reasonably requested by such Venturer in connection with the preparation of
such Venturer's annual earnings release, including a statement of USC's
independent public accounting firm indicating that on the basis of a review of
such financial statements nothing
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has come to the attention of such accountants that such financial statements
have not been prepared in accordance with ROC GAAP on a basis substantially
consistent with USC's audited financial statements or that any material
modifications should be made to the unaudited statement of operations for them
to be stated on a basis substantially consistent with USC's audited financial
statements;
(iii) within 30 days after the end of each fiscal quarter, an
unaudited statement of operations, statement of cash flows and balance sheet for
and as of the end of such quarter, in reasonable detail; such quarterly
statements shall also contain the foregoing information on a year-to-date basis,
be prepared in accordance with ROC GAAP, and include a reconciliation of such
financial statement to US GAAP;
(iv) within 10 days after the end of each fiscal quarter, an unaudited
statement of operations and balance sheet for and as of the end of such quarter,
in reasonable detail, together with such other financial information, as shall
be reasonably requested by such Venturer in connection with the preparation of
such Venturer's quarterly earnings release, such quarterly statements shall also
contain the foregoing information on a year-to-date basis, be prepared in
accordance with ROC GAAP, and include a reconciliation of such financial
statements to US GAAP;
(v) within 30 days after the end of each month, an unaudited statement
of operations, statement of cash flows and balance sheet for and as of the end
of such month, in reasonable detail, such monthly statements shall also contain
the foregoing information on a year-to-date basis, shall also compare actual
performance to budget, and be prepared in accordance with ROC GAAP;
(vi) within 60 days prior to the close of each fiscal year, a
comprehensive operating budget for the next fiscal year forecast USC's revenues,
expenses and cash position, prepared on a monthly basis, including balance
sheets and sources and applications of funds statements for such months and, as
soon as prepared, any other budgets or revised budgets prepared by USC; and
(vii) such other financial information relating to USC as such
Venturer may from time to time reasonably request, provided, however, that USC
shall not be obligated to provide information pursuant to this Paragraph 4. 1
(vii) which it deems in good faith to be proprietary.
4.2 With respect to the financial statements called for in subsections
(ii), (iii), (iv) and (v) of Paragraph 4.1, an instrument executed by the
President or Chief Financial Officer of USC and certifying that such financial
statements were prepared in accordance with internally consistent accounting
methods consistently applied with prior practice for earlier periods and fairly
present the financial condition of USC and its results of operation for the
period specified, subject to year-end audit adjustment.
4.3 Upon the written request of a Venturer, USC shall permit such
Venturer's independent certified public accounting firm, at such Venturer's
expense, to have access during normal business hours of USC to such of the
records of USC and of USC's independent public accounting firm as may be
reasonably necessary to audit USC's financial statements and records in
connection with the preparation of such Venturer's audited financial statements.
5. SHARE TRANSFER
5.1 Notwithstanding anything to the contrary,
(a) the shares of UMC and UMC Affiliates shall be transferable amongst UMC
and UMC Affiliates without the necessity of USC's, Alliance's and/or S3's prior
written consent.
(b) Notwithstanding anything to the contrary, and without any need for any
further consents from any Venturer or from USC, under the terms stated in this
Paragraph 5. I (b), S3 will have the option to purchase from
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UMC up to 70 Million standard shares of USC, and Alliance will have the option
to purchase from UMC up to 45 Million standard shares of USC as follows:
(i) The purchase price under these options will be at NTD 10 per
share, plus interest on the total purchase amount. This interest will be
calculated at a cumulative rate of 8.5%, with interest accruing as of July 4,
1996.
(ii) Each of S3 and Alliance may exercise these options with at least
fifteen days advance written notice to the other Venturers given prior to the
end of calendar year 1996, but all unexercised options will expire if not fully
exercised (including full payment to UMC for the shares involved) on or before
midnight December 31, 1996 (Taiwan, R.O.C. time).
(iii) Subject to the terms of this Agreement, each of Alliance and S3
can exercise its respective options all at once, or in installments, and thus,
with at least fifteen days advance written notice to the other Venturers can
select its closing dates (so long as they occur on or before the end of December
31, 1996) at times it finds convenient.
5.2 Except as allowed under Paragraph 5.1, until USC completes a successful
offering of shares on a recognized securities exchange, the shares of the
Venturers (and of UMC Affiliates holding such shares) in USC will not be
transferable in any manner whatsoever except with the written consent of the
Venturers, provided however that any Venturer may transfer its entire right,
title and interest in USC (including its proportionate right of first refusal
for foundry capacity, the "Foundry Rights") and other rights under the Foundry
Venture Agreement and/or Venture Agreements (as defined in the Foundry Venture
Agreement):
(i) once but only to the extent and only as part of a transfer of all
or substantially all of the assets, business and/or ownership of that Venturer
to a transferee subject, with respect to the Foundry Rights, to the terms of
Paragraph 5.2 (iv) below;
(ii) as provided in Paragraphs 6.3 and/or 6.4 of the said Foundry
Venture Agreement, and/or
(iii) once to or between itself and any of its subsidiaries in which,
at the time of such transfer, the transferring Venturer owns at least 50%.
Notwithstanding anything to the contrary:
(iv)the Foundry Rights when and if transferred pursuant to Paragraph
5.2 (i) above shall only be exercisable with respect to the manufacture of
products which the transferring Venturer at the time of such transfer was
selling, was designing (as reflected in contemporaneous documents) or was
contemplating designing and selling (as demonstrated in its then written
business plan(s)), and all future versions and logical extensions of such types
of products (including without limitation, more highly integrated versions
thereof).
(v) if (a) prior to the completion of a public offering of USC
securities on a recognized securities exchange, any Venturer (or UMC Affiliate
holding such shares) wishes and/or attempts to transfer its shares in USC (other
than as allowed by Paragraphs 5.1, 5.2 (i), 5.2 (ii) and/or 5.2 (iii)) pursuant
to any Court or other order or law, or as a result of any nonconsensual action
by any authority with jurisdiction, and/or (b) a Venturer's rights are properly
terminated pursuant to Section 6.1 of the Foundry Venture Agreement, the shares
involved will be subject to a right of first refusal as follows:
(aa) the other Venturers (the "eligible other Venturers") will
have the right to purchase the shares involved at their then fair market value
as determined by a mutually agreeable independent appraiser;
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(bb) each such eligible other Venturer will have the right to
purchase such shares on a pro rata basis as determined by the ratio of their
respective shareholding percentages (which, absent any previously permitted
transfers, would be as shown in the table in Paragraph 1.2 above);
(cc) if any such eligible other Venturer elects not to exercise
any portion or all of such right of first refusal within 30 days of the
independent appraisal, such portion of such right of first refusal will be
subject to exercise by the other eligible other Venturer, and the shares
involved will be subject to a right of such other eligible other Venturer to
purchase on the same terms as outlined above; and
(dd) if the other eligible other Venturer does not commit to
purchase such shares within 60 days of the independent appraisal, all rights
under this Paragraph 5.2 (v) will expire as to such unpurchased shares.
5.3 Subject to the requirements of and to the extent permissible under
R.O.C. law, to the extent that USC wishes to offer any (equity beyond the NT$8.5
Billion referred to in Paragraph 1.2 (a) above, each Venturer shall have the
right of first refusal to participate in such offering in proportion to its then
current respective shareholding.
6. MISCELLANEOUS
6.1 Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the Republic of China.
6.2 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.3 Paragraphs 7, 8, 9.1, 9.2, 9.3, 9.4, 9.5, 9.7, 9.8, 9.10, 9.11, 9.13,
and 9.14 of the Foundry Venture Agreement are incorporated by reference as if
set forth fully herein, in each case with this Stock Purchase Agreement deemed
to be one of the Venture Agreement.
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IN WITNESS WHEREOF, the Venturers and USC have caused this Stock Purchase
Agreement to be signed below by their respective duly authorized officers.
Alliance Semiconductor Corporation
/s/ N. D. Reddy
- -----------------------------
N. D. Reddy, President
S3 Incorporated
/s/ Terry Holdt
- -----------------------------
Terry Holdt, President
United Microelectronics Corporation
/s/ John Hsuan
- -----------------------------
John Hsuan, President
United Semiconductor Corporation
/s/ Ing Dar Liu
- -----------------------------
Ing Dar Liu, President
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