Exhibit 10.17(a)
CONFIDENTIAL TREATMENT
TSMC/OmniVision
October 29, 2003
TSMC /OMNIVISION CONFIDENTIAL
SHAREHOLDERS' AGREEMENT
This Shareholders' Agreement ("Agreement"), made this 29 day of October
2003 by and among Taiwan Semiconductor Manufacturing Company, a company
incorporated under the laws of Taiwan, Republic of China ("TSMC"), OmniVision
International Holding Ltd., an exempted company incorporated under the
Companies Law of Cayman Islands ("OmniVision"), and VisEra Technology Company,
Ltd., a company to be incorporated under the laws of Taiwan, Republic of China
("NEWCO"), and to become a party hereto in accordance with Section 8.8.
OmniVision and TSMC are each sometimes referred to herein as a "Shareholder"
and collectively as the "Shareholders"; OmniVision, TSMC and NEWCO are each
sometimes referred to herein as a "Party" or collectively as the "Parties".
BACKGROUND
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A. TSMC is engaged in the business of manufacturing and selling
semiconductor related products.
B. OmniVision is engaged in the business of developing, manufacturing
and selling CMOS-based products including CMOS image sensors.
C. TSMC and OmniVision desire to enter into a joint venture ("JV") and
to form a separate JV entity in Taiwan, Republic of China (ROC) [***] for the
purposes of providing [***] and testing services as more specifically provided
hereinafter.
D. The Parties acknowledge that ROC companies' investments in [***]
for providing [***] and automated final testing service for [***] Therefore,
the Parties agree to divide this JV planning into three Phases, i.e. Phases I,
II and III to comply with the relevant laws and regulations in the ROC.
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
CONFIDENTIAL TREATMENT
E. Accordingly, the Parties desire to set forth the rights, duties and
obligations of the Parties in connection with the formation and operation of
the JV entity in three Phases.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements and covenants contained herein, the Parties agree as follows:
ARTICLE 1. PURPOSES, STRUCTURE AND CAPITALIZATION.
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1.1 Purposes. The purposes of this JV and the establishment of the JV
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entities described below are: (1) to provide to [***] high-quality, cost-
efficient and fast-turn-around [***] and automated final testing services in
the ROC [***] for certain [***] products; and (2) to consolidate the [***]
business relationship between OmniVision and TSMC (the "Purposes").
Recognizing that the Purposes may be achieved in the most effective and
efficient manner by combining the technologies, expertise, equipment and
personnel from both OmniVision and TSMC, OmniVision and TSMC hereby mutually
agree upon the establishment of one or more JV entities. Subject to the terms,
conditions, covenants and obligations contained herein, TSMC and OmniVision
hope that the formation and operation of one or more JV entities will be
mutually beneficial to TSMC and OmniVision.
1.2 Structure. The Shareholders agree that the JV set forth in this
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Agreement shall be initially structured as a separate business entity ("NEWCO")
incorporated and/or registered under the laws of a mutually acceptable
jurisdiction. [***], TSMC and OmniVision agree to establish NEWCO as a company
limited by shares under the laws of the ROC throughout the Phase I and II to
implement the concerning JV contemplated herein. Subject to the terms and
conditions set forth in this Agreement and the approval of relevant government
authorities of the ROC [***], the final business entity ultimately to be formed
(the "Final JV Entity"), and its jurisdiction for incorporation and/or
registration, shall be selected on the basis of at least the following factors:
suitability for achieving the Purposes; operability from the corporate
operation, governance, management, and tax planning viewpoints; acceptance by
potential future investors for prospective equity investment and capital
infusion; and exit strategies including the possibility of becoming in due
course a publicly listed and traded company on a major stock exchange or
market, including without limitation one or more of the NASDAQ National Market,
the Taiwan Stock Exchange, and the Stock Exchange of Hong Kong (an "Initial
Public Offering").
1.3 Capitalization. The Shareholders agree that, at the end of Phase III
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described in Section 3.10, the total cumulative capital from Phase I to Phase
III of NEWCO shall be U.S. Dollars fifty million (U.S.$50,000,000), including
U.S. Dollars forty-seven million (U.S.$47,000,000) contributions in cash and in
kind and U.S. Dollars three million (U.S.$3,000,000) for subscription made in
consideration of technology contributions.
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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CONFIDENTIAL TREATMENT
(a) Ownership Ratio. The Shareholders agree that, at the end of Phase
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III, the relative cumulative ownership interests in NEWCO held respectively by
the Shareholders (or their respective designated entities approved by both
Shareholders) shall be in the ratio of: TSMC - forty seven percent (47%) and
OmniVision - forty seven percent (47%) (the "Ownership Ratio").
(b) Technical Stock. (i) The Shareholders agree that as set forth in
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Sections 3.1 (c) and 3.2 NEWCO shall issue its common stock having value of
U.S. Dollars three million (U.S.$3,000,000), which shall be six percent (6%) of
the total ownership interest in NEWCO, in consideration of acquiring the
technical team's assignment of technology needed by NEWCO ("Technical Stock").
(ii) The Shareholders acknowledge and agree that the fair market value of
the technical team's technology assigned to NEWCO shall be U.S. Dollars three
million (U.S.$3,000,000).
(iii) The Shareholders agree that the Technical Stock shall be issued to
members of the technical team or employees of NEWCO in accordance with
resolution(s) to be adopted by the Board of Directors of NEWCO.
ARTICLE 2. FORMATION OF NEWCO.
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2.1 Formation of NEWCO. Within a reasonable time after the execution of
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this Agreement, TSMC and OmniVision agree to use their commercially reasonable
efforts to apply to the relevant government authorities of ROC for requisite
approval so as to incorporate NEWCO, with the mutual understanding that time is
of the essence.
2.2 NEWCO Name. The Shareholders agree that the official and legal name
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of NEWCO shall be :(i) " " (in Chinese); (ii) "VisEra
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Technology Company, Ltd." (in English).
ARTICLE 3. SUBSCRIPTION FOR STOCK.
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3.1 Capitalization of Phase I.
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(a) Phase I shall commence upon the Effective Date of this Agreement
(as defined below) and shall continue for a period of twelve (12) months
("Phase I") unless the Shareholders agree otherwise. In Phase I, TSMC and
OmniVision shall each subscribe, within thirty (30) business days immediately
upon the necessary approval of the shareholders by the ROC government, the
number of shares of common stock of NEWCO at a par value of New Taiwan Dollars
Ten per share (NTD 10) set forth below in Section 3.1(c).
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CONFIDENTIAL TREATMENT
(b) The consideration for such shares shall be made in cash or in
kind in the amounts as set forth in Section 3.1(c) below. The shares issued
upon said payment shall be legended as described in Section 3.11 and issued as
fully paid and non-assessable.
(c) NEWCO shall issue shares of stock (including Technical Stock) in
Phase I as set forth immediately below at a par value of New Taiwan Dollars Ten
per share (NTD 10):
Phase I USD NTD Common Stock
------- --- --- ------------
TSMC 1,500,000 51,000,000 5,100,000
OmniVision 1,500,000 51,000,000 5,100,000
Technical Stock 3,000,000 102,000,000 10,200,000
(d) For the purposes of this Agreement, the Parties agree the
exchange rate of NTD/USD shall be fixed at 34 NTD per one USD.
3.2 Issuance of Technical Stock. Subject to the resolutions adopted by
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Board of Directors of NEWCO and the approval of relevant government authorities
of the ROC, TSMC and OmniVision shall cause NEWCO to issue the foregoing shares
of Technical Stock, within thirty (30) business days of the foregoing
government approval. The shares of Technical Stock issued under this Section
3.2 shall, in the event of future transfer, be subject to rights of first
refusal in favor of, first, NEWCO; and second, TSMC and OmniVision on an equal
basis, and shall be legended as set forth in section 3.11.
3.3 Future subscriptions; Pre-emptive Rights. Other than for stock set
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forth in Section 3.5 and 3.8 below, each TSMC and OmniVision shall have
preemptive rights to the issuance of any new shares of the capital stock of
NEWCO, thereby allowing each TSMC and OmniVision to maintain its percentage
ownership of the capital stock. Future subscriptions for NEWCO stock may be
made in cash, technology, or other in kind contributions, or any combination
thereof to the extent allowed by law and as approved by the Board of Directors
of NEWCO. Such stock shall have such par value as shall be determined as set
forth in Section 3.1 of this Agreement or as may additionally be determined by
the Board of Directors from time to time.
3.4 The Phase I Closing. The "Phase I Closing" shall mean the completion
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of all of TSMC's and OmniVision's contributions to the capital of NEWCO set
forth in Section 3.1. The Phase I Closing shall take place on the "Phase I
Closing Date" at the principal offices of NEWCO. Within a reasonable time
after the Phase I Closing, TSMC and OmniVision shall use their commercially
reasonable efforts to apply to the relevant government authorities of the ROC
for requisite approval of capital increase relating to Phase II (as defined
below).
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CONFIDENTIAL TREATMENT
3.5 Capitalization of Phase II.
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(a) Phase II ("Phase II") shall commence immediately following the
end of Phase I as described under Section 3.1, and shall continue until the
Approval (as defined below) is obtained. In accordance with the amounts set
forth immediately below in (c), TSMC and OmniVision shall each subscribe, at
the commencement of Phase II, the following shares of common stock at a par
value of New Taiwan Dollars Ten per share (NTD 10).
(b) The consideration for such shares shall be made in cash or in
kind as set forth in (c) below. The shares issued upon said payment shall be
issued as fully paid and non-assessable.
(c) NEWCO shall issue shares in Phase II at a par value of New Taiwan
Dollars Ten per share (NTD10) as set forth immediately below:
Phase II USD NTD Common Stock
-------- --- --- ------------
TSMC 9,500,000 323,000,000 32,300,000
OmniVision 9,500,000 323,000,000 32,300,000
3.6 No Issuance of Technical Stock. No Technical Stock shall be issued
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during Phase II.
3.7 The Phase II Closing. The "Phase II Closing" shall mean the
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completion of OmniVision's and TSMC's contributions to capital to NEWCO set
forth in Section 3.5. The Phase II Closing shall take place on the "Phase II
Closing Date" at the principal offices of NEWCO. Within a reasonable time
after the Phase II Closing, the Parties shall each use their commercially
reasonable efforts to (i) apply for and (ii) obtain the approval by the
relevant authorities of Taiwan, R.O.C. to permit TSMC and NEWCO [***] for
providing [***] and testing service (the "Approval").
3.8 Final JV Entity; Phase III Transaction; Capitalization of Phase III.
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(a) Phase III shall commence on the date of the Approval ("Phase
III"). Immediately upon the Approval, the Parties shall decide upon and
establish the Final JV Entity, which may be NEWCO, with or without
redomiciliation; a new business entity to be selected and formed on the basis
described in Section 1.2 and to have a capital structure identical (to the
maximum extent possible) to NEWCO; or Hua Wei Technologies International, Ltd.,
a company incorporated in the Cayman Islands and wholly owned by OmniVision
("Hua Wei Cayman "), provided that Hua Wei Cayman is the surviving entity of
the Phase III Transaction (as defined below).
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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CONFIDENTIAL TREATMENT
(b) Concurrently with or immediately after the selection and/or
formation of the Final JV Entity, the Parties shall cause the further
capitalization of the Final JV Entity by (i) the acquisition of the capital
stock of [***] or (ii) the acquisition of the [***] (as defined below) as set
forth in Section 8.1 below; or (iii) the exchange or contribution of the
capital stock of [***] for capital stock of the Final JV Entity, through one or
more appropriate transactions mutually agreed upon by the Parties
(collectively, the "Phase III Transaction"). To the maximum extent possible,
the Parties shall cooperate with one another to minimize tax and other
liabilities to any Party or Parties resulting from structuring and
capitalization of the JV.
(c) In consideration of the contributions in cash and in kind made by
TSMC and OmniVision described in this Section 3.8, NEWCO shall issue the
numbers of shares of common Stock to TSMC and OmniVision, respectively, as set
forth immediately below, at a par value of New Taiwan Dollars Ten per share
(NTD 10). Such shares shall be issued as fully paid and non-assessable. No
Technical Stock will be issued during Phase III.
Phase III USD NTD Common Stock
-------- --- --- ------------
TSMC 12,500,000 425,000,000 42,500,000
OmniVision 12,500,000 425,000,000 42,500,000
3.9 The Phase III Closing. The "Phase III Closing" shall mean the
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consummation of the Phase III Transaction set forth in Section 3.8. The Phase
III Closing shall take place on the "Phase III Closing Date" at the principal
offices of the Final JV Entity or another location mutually agreed upon. The
capitalization of the Final JV Entity shall reflect the Ownership Ratio on the
Phase III Closing Date.
3.10 Cumulative Shareholding. The total cumulative capitalization
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structure and cumulative stockholding ratio of NEWCO for each of the Phases I,
II, and III is summarized below:
Cumulative Phase I Phase II Phase III
Capital and Contribution Shareholding Contribution Shareholding Contribution Shareholding
Shareholding (USD) (%) (USD) (%) (USD) (%)
- ------------ ----- --- ----- --- ----- ---
TSMC 1,500,000 25.00% 11,000,000 44.00% 23,500,000 47.00%
OmniVision 1,500,000 25.00% 11,000,000 44.00% 23,500,000 47.00%
Technical Stock 3,000,000 50.00% 3,000,000 12.00% 3,000,000 6.00%
--------- ------ ---------- ------ ----------- ------
Total 6,000,000 100.00% 25,000,000 100.00% 50,000,000 100.00%
========= ====== ========== ====== ========== ======
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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CONFIDENTIAL TREATMENT
3.11 Stock Certificates. Each Party agrees that the stock certificates of
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NEWCO first subscribed or thereafter acquired by any party subject to this
Agreement including all owners of Technical Stock, shall be endorsed with the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO AN AGREEMENT DATED OCTOBER [XX], 2003, BY
AND BETWEEN TAIWAN SEMICONDUCTOR
MANUFACTURING COMPANY, LTD. AND OMNIVISION
INTERNATIONAL HOLDING, LTD., A COPY OF WHICH IS ON
FILE AT THE MAIN OFFICE OF THE CORPORATION AND ANY
SUBSEQUENT HOLDER ACQUIRING THESE SHARES IN ANY
MANNER WHATSOEVER TAKES THE SAME UNDER AND
SUBJECT TO THE TERMS OF SAID AGREEMENT."
3.12 Non-Dilution. The Parties agree that notwithstanding anything to the
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contrary in this Agreement or the Exhibits, any further issuance of and
subscription for NEWCO stock, or any stock held by any Party, shall not be
diluted at any time before the completion of an Initial Public Offering in any
jurisdiction during the Term (as defined below) without the prior approval of
the other Party.
ARTICLE 4. ARTICLES OF INCORPORATION.
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4.1 Articles of Incorporation. Subject to the laws of the ROC, the
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Articles of Incorporation of NEWCO shall provide for the following:
(a) The duration of NEWCO shall be perpetual.
(b) The total initial number of shares authorized to be issued by
NEWCO shall be eighty million (80,000,000) shares of common stock with a par
value of Ten NTD (NT $10) per share.
(c) The initial principal place of business of NEWCO shall be located
in Hsinchu, Taiwan.
(d) The purpose of NEWCO is to provide back-end service for [***],
including but not limited to [***] testing and [***] service.
4.2 Form of Articles of Incorporation and Conflict. The Articles of
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Incorporation shall otherwise be substantially in the form annexed hereto as
Exhibit A. In the event of a conflict between this Agreement and any provision
of the Articles of Incorporation, the Articles of Incorporation shall control.
4.3 Ratification of Articles of Incorporation. The Parties shall cause
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NEWCO to adopt the Articles of Incorporation of NEWCO.
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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CONFIDENTIAL TREATMENT
ARTICLE 5. MANAGEMENT OF NEWCO.
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5.1 Inaugural Meeting of the Promoters. As soon as practical after the
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first issue of NEWCO shares have been fully subscribed, TSMC and OmniVision
shall cause the inaugural meeting of the promoters (i.e. the Shareholders) to
be convened. At said inaugural meeting the promoters shall elect the Directors
and Supervisors of NEWCO in accordance with Section 5.3 and 5.4.
5.2 Board of Directors and Supervisors. The Articles of Incorporation of
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NEWCO shall provide that the Board of Directors will consist of not less than
three (3) and not more than five (5) Directors and two (2) Supervisors.
5.3 Board Members and Supervisors Nomination. OmniVision and TSMC agree
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that the initial Board of Directors of NEWCO (the "Board") will consist of
three (3) Directors. OmniVision shall nominate one (1) Director (an "OmniVision
Director") and TSMC shall nominate one (1) Director (a "TSMC Director"). The
third (3rd) Director shall be nominated by the mutual agreement of TSMC and
OmniVision. In the event that OmniVision and TSMC agree to increase the number
of Directors to five, OmniVision shall nominate two (2) Directors (each an
"OmniVision Director") and TSMC shall also nominate two (2) Directors (each a
"TSMC Director"). The fifth (5th) Director shall be nominated by the mutual
agreement of TSMC and OmniVision. TSMC shall nominate one (1) Supervisor and
OmniVision shall nominate one (1) Supervisor. Each Shareholder shall vote all
of its shares for the election of such nominees of Directors and Supervisors.
If any Director or Supervisor resigns or is unable to serve, the Party which
nominated him or her shall, as soon as possible, nominate a replacement and
each Shareholder shall vote all of its shares for the election of such nominee
so that the Board shall have either three (3) members or five (5) members and
two (2) Supervisors, as applicable, at all times, provided, that if a Party
having the right to nominate a Director or Supervisor does not do so, within 60
days of the commencement of vacancy, the Board consisting of the remaining
Directors shall have the right to nominate a new Director or Supervisor to fill
the vacancy.
5.4 Inaugural meeting of the Board of Directors. As soon as practical
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after the inaugural meeting of promoters, the Directors shall hold the
inaugural meeting of the Board of Directors. At the first meeting of the Board,
the Directors shall appoint any officers and managers of NEWCO and shall
establish any resolutions necessary for the initial operations of NEWCO and
otherwise to deal with all matters arising out of the implementation of this
Agreement.
5.5 Special Rights. At such time, if any, as either TSMC or OmniVision
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acquires fifty-one percent (51%) interest in NEWCO, TSMC and OmniVision shall
promptly cause a special meeting of the shareholders to be called, at which
time the then sitting Board shall resign, and the Party owning the majority of
NEWCO shares shall nominate (i) in the case of a three-member Board, two (2)
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CONFIDENTIAL TREATMENT
members, and the other Party shall nominate one (1) member; and (ii) in the
case of a five-member Board, three (3) members, and the other Party shall
nominate two (2) members. Each Shareholder shall vote all of its shares for
the election of such nominees.
5.6 Officers. Each shareholder shall cause the Director (s) nominate by it
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to vote in favor of the election of the following persons as the initial
officers of NEWCO:
Chairman: Michael Tsai
President: NS Tsai (initial term)
CEO: Michael Tsai
Treasurer: To be nominated by TSMC
5.7 President. The President of NEWCO shall be appointed by the Board.
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The President shall be nominated by three Board members until such time, if
any, as either TSMC or OmniVision acquires a fifty-one percent (51%) interest
in NEWCO, thereupon the President shall resign and the then sitting Chairman
shall promptly call a special meeting of the Board at which time the majority
Shareholder's Board members shall nominate a new President; and further
provided, the other Party agrees to cause its shares to be voted for the said
nominee for President.
5.8 Empowerment. Pursuant to the procedures prescribed in this Agreement
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and by the Articles of Incorporation of NEWCO, the Board of Directors shall be
empowered to discuss and take action on all fundamental issues concerning NEWCO
including, but not limited to, expansion projects, budgets, long term (greater
than one (1) year duration) agreements, distribution of profits, borrowing of
capital or the financing of NEWCO concerning manpower and pay scales.
5.9 Authority. The Directors shall act only as a board, and an individual
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Director shall have no power as such. Except as otherwise limited by law, this
Agreement, or the Articles of Incorporation, all business, affairs and powers
of NEWCO shall be exercised by, or under the authority/control of the Board of
Directors. The Board of Directors may, by contract, resolution or otherwise as
they may see fit, give general of limited or special power and authority to any
Director, officer, employee and/or other person to transact the general
business, or any special business of NEWCO, and may give powers of attorney to
agents of NEWCO to transact any special business requiring such authorization.
5.10 Board Guidelines. In addition to such authority proscribed by law to
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a Board of Director(s), the Board of Directors shall issue guidelines or
directives for:
(a) The financial goals of NEWCO;
(b) The business plan of NEWCO;
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CONFIDENTIAL TREATMENT
(c) Any borrowing by NEWCO;
(d) The application and distribution of profits as dividends;
(e) The appointment, terms of service, remuneration, and dismissal of
the managers of NEWCO except as is otherwise set forth in the ROC law, this
Agreement, or the Articles of Incorporation of NEWCO;
(f) The size of the staff and of the work force required by NEWCO
from time-to-time and the general policies and guidelines for their appointment
and dismissal; and
(g) The extent of any special reserve funds, development funds, and
bonus and welfare funds.
5.11 Board Responsibility. The Board of Directors shall prepare management
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and operating instructions in the form of Board Resolutions to be observed in
the day-to-day conduct and administration of NEWCO's business, and will take
such steps as are necessary to ensure that those resolutions are available to
and observed by the management of NEWCO. The Board of Directors will pass such
resolutions as may be necessary to put into practice in NEWCO the provisions of
this Agreement.
5.12 Supermajority Actions. Notwithstanding the foregoing, the Parties
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agree that the below stated corporate actions shall be referred to the Board
and that no decision in relation thereto shall be taken or implemented (whether
by the Parties as Shareholders of NEWCO or otherwise) unless such decision has
received the approval of at least one OmniVision Director and one TSMC
Director, until such time as either TSMC or OmniVision shall obtain an equity
interest of 51% or more, or after the completion of an Initial Public Offering
in any jurisdiction, at which time this provision shall terminate:
(a) The entering into any new business activity or the change in its
major products or services;
(b) The alteration, amendment, cancellation or other change in the
schedules for technology transfer, production start up and output;
(c) The alteration, amendment, cancellation or invalidation of any
and all supply contracts or technical assistance agreements between NEWCO and
TSMC or OmniVision;
(d) The incurring of any borrowings, loans or other indebtedness in
excess of NT Dollars one hundred million (NTD 100,000,000);
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(e) The acquisition or disposal of any capital asset where the
aggregate amount involved in the transaction is more than NT Dollars fifty
million (NTD 50,000,000);
(f) The merger, acquisition, divestiture, transfer, sale or disposal
of all or a substantial portion of NEWCO's business or assets, joint venture,
or partnership with, by or of NEWCO;
(g) The alteration of the capital structure of NEWCO (including the
increase in authorized capital, issuance of new shares or securities, etc.);
(h) The alteration, amendment or restatement of the Articles of
Incorporation of NEWCO;
(i) Passage of any resolution to dissolve, liquidate, file voluntary
bankruptcy, wind up, or reorganize NEWCO;
(j) The alteration or cancellation of the capitalization obligations
of the Stockholders;
(k) The entering into any contractual commitment in excess of NT
Dollars fifty million (NTD 50,000,000);
(l) The declaration of dividends;
(m) The sale or license of software, patents, other intellectual
property or other technology by NEWCO except as set forth in this Agreement or
the other agreements between NEWCO and the Parties described herein;
(n) Approval of annual and quarterly budgets, and proposals or
reports required to be submitted to the Shareholders; and
(o) The entering into any technical assistance agreement, or the
substantial equivalent, between NEWCO and any party other than TSMC or
OmniVision.
5.13 Regular Meetings of the Board. The Board of Directors shall meet
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together for the dispatch of routine business at least four (4) times in each
calendar year at regular intervals of three (3) months.
5.14 Quorum. If the Board consists of three (3) members, the presence of
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two (2) Directors including one (1) TSMC Director and one (1) OmniVision
Director, and if the Board consists of five (5) members, the presence of three
(3) Directors including at least one (1) TSMC Director and one (1) OmniVision
Director, shall constitute a quorum.
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5.15 Deadlock.
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(a) In the event of a deadlock of the Board on the corporate actions
stated in Section 5.12 and on any issue material to the ongoing operation of
NEWCO, either Shareholder may request a meeting of the Shareholders with the
Board for the purpose of resolving the deadlock. Such request shall be in
writing and given to the other Shareholder and NEWCO, and shall specify in
reasonable detail the nature of the issue giving rise to the deadlock. Within
thirty (30) days from the date of the request, an officer at the senior vice
president level or its equivalent, or above, of each of the Shareholders shall
meet with the Board to discuss the issue or issues that have given rise to the
deadlock.
(b) If the deadlock is not resolved within sixty (60) days of such
meeting, then the rights and obligations of the Parties shall be as follows:
(i) In the event the deadlock has been caused intentionally by
a Shareholder without just cause, and the deadlock results in the frustration
of the Purposes, then said Shareholder shall be deemed to be in a Material
Breach (as defined below) and the provisions of Article 11 shall apply.
(ii) In the event the deadlock results from a just cause
through no fault of either Shareholder, in order to protect the Shareholders'
rights, interests or entitlements pursuant to and under this Agreement and any
of the other agreements between NEWCO and the Shareholders described herein,
then the Shareholders shall meet within sixty (60) days of failure to resolve
the deadlock to attempt to agree on mutually acceptable terms and conditions to
terminate this Agreement and to sell the shares of one Shareholder in NEWCO to
the other Shareholder; provided, however, that in the event the Shareholders
fail to reach agreement on such terms and conditions within said sixty (60) day
period, then NEWCO shall be wound up and liquidated in accordance with Article
13; and further provided that neither TSMC nor OmniVision will be under any
additional ongoing obligation to provide any technical assistance to NEWCO
during the interim except to the extent such assistance is required to wind
down the business of NEWCO or as is reasonably required to satisfy any
obligations of NEWCO to third parties.
(c) For purposes of this Section 5.16, "deadlock" shall mean an
inability of the Board to reach a decision, with the result that the operations
of NEWCO effectively cease.
5.16 Director Resignation or Removal.
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(a) If at any time a Director resigns or is removed, the Parties
shall cause a special shareholders' meeting to be called, at which meeting the
Shareholder that nominated such Director shall nominate a replacement, and each
Shareholder shall vote all NEWCO shares held by it for the election of such
nominee.
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(b) In the event a Shareholder (the "Initiating Shareholder") gives
written notice to the other Shareholder that the Initiating Shareholder desires
to be removed from the Board a Director nominated for such directorship by the
Initiating Shareholder, then upon delivery of such notice the Shareholders
agree that they shall cause a special meeting of Shareholders to be called and
held as soon as practicable in order to remove such Director and to elect a
successor in the manner provided in Section 5.3.
5.17 Advisory Committees. TSMC, OmniVision and NEWCO shall establish a
-------------------
senior management Advisory Committee and an advisory Coordinating Committee,
each of which shall meet periodically at least once per calendar year as TSMC
and OmniVision may agree upon:
(a) To advise TSMC and OmniVision, NEWCO and/or the Board on
extraordinary matters;
(b) To provide such other advise to the Parties from time to time as
may be appropriate; and
(c) To provide dispute resolution assistance in accordance with
Article 14 of this Agreement.
5.18 Structure and Operation of Advisory Committees.
----------------------------------------------
It is the intention of the parties that the advisory Committees shall
operate in accordance with the following guidelines and procedures.
(a) General Structure. The Advisory Committee shall, from time-to-
-----------------
time as requested, provide NEWCO advice with respect to extraordinary matters.
The Coordinating Committee and other sub-committees may be established by the
Advisory Committee with the unanimous concurrence of TSMC, OmniVision and NEWCO
from time to time to address specific issues as they may arise. The composition
and duties of these advisory committees are set forth below. Legal counsel of
the Parties shall be permitted to attend all of the Advisory Committee and the
Coordinating Committee meetings.
(b) Composition and Term of Advisory Committee
The Advisory Committee shall consist of three members: (i) one TSMC
representative; (ii) one OmniVision representative; and (iii) an officer of
NEWCO. Each of the members of the Advisory Committee shall serve a one-year
term, which can be renewed annually. Each member shall have the right to
designate an alternate to attend Committee meetings and to make decisions in
his/her absence.
13
CONFIDENTIAL TREATMENT
The Advisory Committee shall select one of its members as chairman. One
of the members of the Advisory Committee shall be designated a secretary. The
secretary and the chairman shall be from different parties to this
Shareholders' Agreement, and the chairmanship shall alternate from one party to
the other on an annual basis.
Each chairman shall serve a one-year term. The chairman shall be
responsible for coordinating all sub-projects, if any, and for coordinating the
review of any disputes that may be brought before the Advisory Committee
pursuant to Section 5.17 of this Agreement.
Committees reporting to the Advisory Committee shall include initially the
Coordinating Committee.
The Advisory Committee shall have no authority over the operation of NEWCO
but shall serve in a purely advisory capacity.
The Advisory Committee shall meet when requested by the parties.
ARTICLE 6. RIGHT OF FIRST OFFER.
--------------------------------
6.1 Except as otherwise provided in this Agreement or upon the mutual
agreement of the Shareholders, the Shareholders agree that they shall not sell,
give, encumber, pledge or otherwise transfer, assign or dispose of either
voluntarily or by operation of law, all or any part of their shares in NEWCO
and/or withdraw from NEWCO within the first three (3) years from the date of
incorporation of NEWCO, unless NEWCO has completed an Initial Public Offering
in any jurisdiction, at which time this provision shall terminate.
6.2 The Shareholders agree that they will not sell, give, encumber, pledge
or otherwise transfer, assign or dispose of, either voluntarily or by operation
of law, all or any part of the stock which either of them now owns or may
hereafter acquire in NEWCO without first offering such stock to the other
Shareholder as provided herein.
6.3 After three (3) years from the date of incorporation of NEWCO:
(a) If either Shareholder desires to withdraw from NEWCO, the
withdrawing Shareholder shall first provide the non-withdrawing Shareholder
with written notice of its intention to withdraw and shall offer (the "Offer")
its shares to the non-withdrawing Shareholder, whereupon the non-withdrawing
Shareholder shall have the irrevocable first right, exercisable within thirty
(30) days of the withdrawing Shareholder to so withdraw, to purchase the entire
equity interest of the withdrawing Shareholder in NEWCO at a price per share
equal to the proportionate Book Value Per Share (in the aggregate, the "Offer
Price"). For purposes of this Agreement the "Book Value Per Share" shall mean
the book value set forth in NEWCO's most recent quarterly financial statements,
defined in accordance with the ROC Generally Accepted Accounting Principles,
divided by the number of shares of common stock of NEWCO on the date of such
financial statements.
14
CONFIDENTIAL TREATMENT
(b) Upon receipt of the Notice, the Shareholders shall promptly
confer on a date (the "Offer Closing Date") for closing such transaction (the
"Offer Closing"), which in any event shall not be more than thirty (30) days
from receipt of Notice.
(c) At the Offer Closing on the Offer Closing Date, the withdrawing
Shareholder shall deliver to the non-withdrawing Shareholder certificates
representing all of its shares, duly endorsed and in proper form for transfer,
accompanied by all notices, permits, authorizations and other documents
required for such transfer under the ROC law or other relevant laws.
(d) At the Offer Closing on the Offer Closing Date, in consideration
of the withdrawing Shareholder's delivery to the non-withdrawing Shareholder of
the shares, the non-withdrawing Shareholder shall pay to the withdrawing
Shareholder cash in the amount of the Offer Price.
(e) In the event a Shareholder tenders an offer in accordance with
this Section 6.3 and the other Shareholder does not exercise their rights
hereunder, then the offering Shareholder shall have the right to solicit an
offer in accordance with Sections 6.4 and 6.5; provided, however, that (x) in
the event the offering Shareholder makes a good faith attempt to locate a buyer
but cannot so find a buyer within ninety (90) days of the non-withdrawing
Shareholder's rejection of the initial offer, or (y) in the event the offering
Shareholder finds only a [***] which is interested in making an offer; for
purposes of this Section 6.3, a "[***]" shall be reasonably determined by TSMC;
then:
(i) in the case of "(x)", the non-withdrawing Shareholder shall
be obligated to buy said shares in accordance with Section 6.3; or
(ii) in the case of "(y)", the non-withdrawing Party will
either agree to waive the restriction of Section 6.5 or else shall be obligated
to buy the offering Party's shares in accordance with Section 6.3.
6.4 Unsolicited Offer. In the event either Shareholder shall receive an
-----------------
unsolicited offer for any or all of its shares in NEWCO (hereinafter in this
Section 6 said Shareholder will be referred to as the "Seller") and shall
obtain a bona fide written offer (which offer must be accompanied by a good
faith deposit in the form of a certified check equal to at least ten percent
(10%) of the purchase price) for such interest, which offer shall set forth the
name and address of the prospective and beneficial (if any) purchaser, the
number of shares to be purchased, the prospective purchase price, and the other
terms and conditions of such offer, the Seller may thereupon sell such shares
only upon the following terms and conditions:
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
15
CONFIDENTIAL TREATMENT
(a) Upon receipt of such written offer which Seller desires to
accept, Seller shall send to NEWCO and to the other Stockholder a photocopy of
such offer (the "Offer"), together with a photocopy of the accompanying
certified check, whereupon the other Shareholder shall have the option to
purchase (which option shall be exercised by written notice given to the Seller
and NEWCO within sixty (60) days after such notification), all (but not less
than all) of the shares offered to be sold by the Seller for the same aggregate
price and on the same terms and conditions (except that the closing shall be
held at a mutually agreeable place and time within thirty (30) days after the
expiration of the option period as defined above) as contained in the Offer.
(b) If, at the end of such time periods as specified herein, the
rights under this Article 6 to purchase all of the shares offered to be sold
have not been exercised, then the consent of the other Shareholder is deemed to
have been given and then, for those shares Seller shall be permitted to accept
the Offer within sixty (60) days thereafter for the price and according to the
terms and conditions set forth in the Offer; provided however, that the party
to whom such shares are to be sold shall first agree to be bound by the
provisions of this Article 6.
(c) In the event shares are to be sold to a third party pursuant to
this Section 6.4, and as a condition precedent to any such transaction, the
Shareholders agree that the Seller shall first obtain from the third party its
written consent to be bound by the terms and conditions of this Agreement upon
the transfer of said shares.
6.5 Limitation on Sale.
------------------
(a) In consideration for entering into this Agreement, the
Shareholders agree that they shall not at any time, transfer any part or all of
their shares in NEWCO to any [***] without the prior written approval of all of
the TSMC Directors then holding office. For purposes of this Section 6.4, a
"[***]" shall be reasonably determined by TSMC.
(b) In consideration for entering into this Agreement, the Parties
agree that they shall not at any time, transfer any part or all of their shares
in NEWCO to any entity or company which is a competitor of OmniVision or its
affiliates without prior approval of all of the OmniVision Directors then
holding office. For purposes of this Section, a "competitor of OmniVision or
its affiliates" shall be reasonably determined by OmniVision.
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
16
CONFIDENTIAL TREATMENT
ARTICLE 7. OPTION TO PURCHASE.
--------------------------------
7.1 Option Grant. Subject to the occurrence and within sixty (60) days of
------------
a Triggering Event (as defined in Section 7.4), either TSMC or OmniVision, as
the case may be (the "Granted Shareholder"), shall have an exclusive,
irrevocable right and option (the "Option") to require the other Shareholder
(the "Granting Shareholder") to sell to the Granted Shareholder such number of
the Granting Shareholder's shares in NEWCO as shall enable the Granted
Shareholder to obtain an equity interest in NEWCO of fifty-one percent (51%) of
the total issued and outstanding shares of NEWCO in accordance with the terms
and conditions of this Agreement; provided, however, that this Article 7 shall
terminate after NEWCO has completed an Initial Public Offering in any
jurisdiction.
7.2 Exercise of the Option. Should the Granted Shareholder desire to
----------------------
exercise either of the Options set forth in Section 7.1 the Granted Shareholder
shall give the Granting Shareholder thirty (30) days written notice (the
"Notice") of its intent to exercise its option, stating the number of shares to
be acquired, and shall also state its reasons for the exercise. Delivery of
the Notice shall constitute an irrevocable exercise of the Option. Upon
receipt of the Notice the Granting Shareholder shall promptly confer on a date
(the "Option Closing Date") for closing such transaction (the "Option
Closing"). In the event the Shareholders are unable to agree on the Option
Closing Date, such Option Closing Date shall be sixty (60) days from the date
of Notice (or the next subsequent business day, if such sixtieth day is not a
business day).
7.3 Option Price. In the event of the exercise of the Option by either
------------
Shareholder under this Article 7, the Shareholders agree that the purchase
price per share (the "Purchase Price") shall be the higher of (a) the Book
Value Per Share (as defined in Section 6.3(a)) or (b) the original purchase
price multiplying by the Option Premium, where the "Option Premium" equals (1 +
0.02) to the nth power, and n equals the number of years (expressed as a
decimal rounded to the nearest .xx after the decimal point of a year based on a
365-day year) from the date on which the shares of NEWCO purchased by the
Granting Shareholder were fully paid; provided, however, that if such shares
were fully paid on more than one dates, then the Option Premium shall be the
weighted average of (1 + 0.02), whichever applies, to the nth power for all
such dates. For purposes of determining the weighted average, the results of
each (1 + 0.02) to the nth power calculation shall be weighted by the number of
shares paid for by the grating Shareholder on that date as a percentage of the
total number of shares owned by the grating Shareholder as of the date of
Notice.
7.4 Triggering Events. For the purpose of this Article 7, a "Triggering
-----------------
Event" shall be the event, action or failure to act, as set forth in Sections
8.6(j) and 11.1(b).
7.5 Delivery. At the Option Closing on the Option Closing Date, the
--------
Granting Shareholder shall deliver to the Granted Shareholder certificates
representing the shares to be sold pursuant to this Article 7, duly endorsed,
and accompanied by all notices, permits, authorizations and other documents
required for such transfer under the ROC law.
17
CONFIDENTIAL TREATMENT
7.6 Payment. At the Option Closing on the Option Closing Date, in
-------
consideration of Granting Shareholder's delivery to Granted Shareholder of such
shares, Granted Shareholder shall pay to Granting Shareholder cash in the
amount of the Purchase Price.
7.7 Nonperformance. Except as otherwise provided in this Agreement, in
--------------
the event that the Granted Shareholder provides Notice, as required herein, to
exercise its option under this Article 7, and the Granting Shareholder fails to
sell to the Granted Shareholder any or all of its shares of NEWCO, then, in the
event a court of competent jurisdiction upholds the validity of Granted
Shareholder's exercise (should the Granting Shareholder challenge said
exercise) and, in the event the Granted Shareholder cannot obtain specific
performance, the Granting Shareholder shall pay the Granted Shareholder
liquidated damages in the amount of the greater of: (a) five (5) times the
proportionate Book Value of shares issued but not sold by the Granting
Shareholder to the Granted Shareholder at the time Notice is provided; or (b)
10 x (total issue price of shares not sold) x (the Option Premium, as defined
in Section 7.3); provided, however, in addition to liquidated damages, if any,
NEWCO shall be forthwith wound up if the Granted Shareholder is prevented by
the Granting Shareholder from obtaining the fifty-one percent (51%) equity
interest pursuant to this Article 7. Nothing in this Article 7 shall preclude
the Granted Shareholder from seeking and receiving any other legal or equitable
remedies.
7.8 Rights Additional to the Right of First Offer. The rights and
---------------------------------------------
privileges granted to the Granted Shareholder under this Article 7 are in
addition to and independent of the Right of First Offer under Article 6 and do
not place any limitation or restriction on the Granted Shareholder's ability to
exercise such right. In the event the Granting Shareholder exercises its
rights under this Article 7, the Granted Shareholder shall first have the right
to exercise its Options under Section 7.1. Any additional shares in excess of
the amount purchased by the Granted Shareholder under the Option shall then be
subject to the procedures set forth in Article 6.
7.9 Assumption. As part of the consideration paid for the Granting
----------
Shareholder's interest under this Article 7, the Granted Shareholder shall
deliver to the Granting Shareholder a written assumption of the Granting
Shareholder's percentage of the shares of the debts and liabilities of NEWCO
equivalent to the equity percentage of the shares being sold to the Granted
Shareholder; provided, however, the Granting Shareholder shall remain fully
liable for all debts and liabilities caused or incurred by its negligence,
intentional or wrongful acts or omissions, or incurred by the Granting
Shareholder in violation of this Agreement, and shall indemnify NEWCO and the
Granted Shareholder against all such debts and liabilities immediately on
demand.
18
CONFIDENTIAL TREATMENT
7.10 Escrow. In the event that either TSMC or OmniVision challenges the
------
validity of the exercise of the Option, the non-exercising Shareholder shall
place the shares in dispute in escrow with the law firm of Lee and Li, Taipei,
Taiwan, during such challenge.
ARTICLE 8. COVENANTS.
---------------------
8.1 OmniVision's Commitments.
------------------------
(a) Commitment to TSMC. Immediately upon the incorporation of NEWCO,
------------------
OmniVision shall enter into a [***] with TSMC ([***], substantially in the form
set forth on Exhibit B attached hereto, under which OmniVision and its
affiliates shall [***] to TSMC (i) a minimum of [***] of all of their [***]
requirement [***] during Phase I; and (ii) a minimum of [***] of all of their
[***] requirement [***] during Phase II and Phase III (up to the term specified
in the [***]); provided however, that TSMC shall fulfill its commitments,
guarantees and obligations under Section 8.2(a)(i) - (iii) and , provided
further , that TSMC shall not have [***] pursuant to Section 10.4.
Notwithstanding [***] provided in Section 8.2, OmniVision shall have the right
[***]. TSMC and OmniVision shall immediately meet and confer regarding such
[***] request, and shall use their best efforts to agree upon [***], consistent
with the principle that both Parties have business related margin requirements.
Should such meetings fail to produce agreement within a reasonable time,
OmniVision has the right to seek the [***] (as that term is defined in the
[***]) by a third party; provided, however, that prior to placing any [***]
from such third parties, OmniVision shall, subject to restrictions under any
confidential agreement or arrangement with such third parties, give TSMC a
"last look" by informing TSMC of such [***] and giving TSMC an opportunity to
match. Notwithstanding the technology guarantees provided in Section 8.2,
OmniVision shall have the right [***]. TSMC and OmniVision shall immediately
meet and confer regarding such [***] request, and shall use their best efforts
to agree upon the [***]. Should such meetings fail to produce agreement within
a reasonable time, OmniVision has the right to seek the [***] (as that term is
defined in the [***]) by a third party; provided, however, that prior to
placing any [***] from such third parties, OmniVision shall, subject to
restrictions under any confidential agreement or arrangement with such third
parties, give TSMC a "last look" by sharing with TSMC OmniVision's knowledge
about such third party's [***] and giving TSMC an opportunity to match.
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
19
CONFIDENTIAL TREATMENT
(b) Commitment to NEWCO.
-------------------
(i) OmniVision shall enter into a [***] with NEWCO, with terms
and conditions to be negotiated between OmniVision and NEWCO, under which
OmniVision shall [***] a minimum of [***] of its [***] activities to NEWCO;
provided, however, that NEWCO shall fulfill its commitments, guarantees and
obligations under this Agreement and [***]. Notwithstanding the foregoing,
OmniVision shall have the right to request [***] from NEWCO. NEWCO and
OmniVision shall immediately meet and confer regarding such [***] request, and
shall use their best efforts to agree upon [***]. Should such meetings fail to
produce agreement within a reasonable time, OmniVision has the right to engage
a third party for the [***] activities under the [***].
(ii) Under the Phase III Transaction, OmniVision shall cause
the transfer to NEWCO of either (x) the capital stock of [***], or (y) the
assets consisting of the facilities of [***] and the right to use the land for
such facilities as set forth on Schedule 8.1(b)(ii) attached here to
(collectively, the "[***]") and an aggregate of [***] of [***]; provided that
the consideration set forth in Section 8.4(b) and (c) is paid in full. The
Parties acknowledge and agree that no other assets of [***] are included in the
foregoing consideration.
(c) Prior to the Phase III Closing, OmniVision shall make proper
arrangements with [***] authorities to satisfy the registered capital
commitment of [***].
(d) Except as set forth in Sections 3.1, 3.5 and 3.8, neither TSMC
nor OmniVision are required to make any further investment in NEWCO or [***].
However, in the event OmniVision or TSMC shall be required to make further
capital contributions in [***], including without limitation contributions made
pursuant to any arrangements between OmniVison and the [***] authorities to
satisfy the registered capital commitment of [***], TSMC and OmniVision shall
negotiate in good faith to
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
20
CONFIDENTIAL TREATMENT
account for such contributions by either Shareholder, including without
limitation the making of comparable contributions in cash or in kind by the
other Shareholder, in order to maintain the Ownership Ratio.
8.2 TSMC's Commitments.
------------------
(a) Commitment to OmniVision and Its Affiliates.
-------------------------------------------
(i) TSMC guarantees to fulfill the [***] requirements of
OmniVision and its affiliates described in Section 8.1, and as set forth in
more detail in [***].
(ii) TSMC hereby guarantees [***]
(1) [***]
(2) [***]
(3) [***]
(4) [***]
(iii) Upon a commercially reasonable request of OmniVision,
TSMC agrees to provide OmniVision with TSMC's commercially competitive [***]
(b) Commitment to NEWCO.
-------------------
(i) TSMC shall enter into an [***] with NEWCO, with terms and
conditions to be negotiated between TSMC and NEWCO, as soon as practicable
after the incorporation of NEWCO, under which agreement TSMC will provide NEWCO
with [***] to assist NEWCO to establish its [***].
(ii) At the commencement of Phase II and Phase III,
respectively, and subject to the consideration paid in accordance with Section
8.4(a), TSMC shall sell and transfer to NEWCO TSMC's [***]
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
21
CONFIDENTIAL TREATMENT
[***].
8.3 TSMC's Operation of [***] Business.
----------------------------------
(a) Subject to the terms and conditions set forth in Section 8.3 (b)
and (c), during the Term, TSMC acknowledges and agrees that it will not operate
directly or indirectly any [***] business in competition with NEWCO. TSMC
agrees that it shall notify its current customers upon the Effective Date, and
shall use its best commercial efforts to transfer its current customers, and
refer future customers, [***] to NEWCO as soon as practicable after the
commencement of Phase II.
(b) In the event that a TSMC customer rejects such transfer effort by
TSMC, and the rejection would result in the loss of [***] business of such
customer to TSMC, TSMC shall have the option to provide that customer the [***]
services upon notification to and discussion with NEWCO.
(c) In the event that TSMC provides [***] service to those customers
who do not accept the transfer of service to NEWCO and that there is any profit
accrued from TSMC's [***] services to such customers, TSMC shall transfer such
profit to NEWCO. In the event the transfer of such profit to NEWCO is
prohibited for any reasons including but not limited to the ROC law, such
reasons not attributable to TSMC, TSMC agrees to compensate or credit NEWCO by
other commercially applicable alternatives reasonably acceptable to NEWCO.
8.4 NEWCO's Commitments.
-------------------
(a) NEWCO shall pay TSMC U.S. Dollars eight million (U.S.$ 8,000,000)
during Phase II and pay U.S. Dollars eight million one hundred thousand
(U.S.$8,100,000) during Phase III to purchase TSMC's [***] equipments.
(b) NEWCO shall acquire an aggregate of [***] for a value of U.S.
Dollars six million (U.S.$ 6,000,000) from OmniVision and/or its affiliates
under the Phase III Transaction.
(c) NEWCO shall acquire the [***] and compensate OmniVision for
certain [***] start-up costs, for an aggregate value of U.S. Dollar eleven
million five hundred thousand (U.S.$ 11,500,000) under the Phase III
Transaction.
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
22
CONFIDENTIAL TREATMENT
(d) In the event additional assets (for example, additional [***])
are sold or otherwise transferred to NEWCO, the value of such assets sold or
otherwise transferred shall be the fair market value determined by the Board.
(e) During Phase I, NEWCO will provide to its customers [***]
services through subcontracting the work with TSMC, [***] services through
subcontracting with other vendors approved by TSMC and OmniVision, and testing
services through subcontracting with [***].
8.5 Technology and Patent Licenses. TSMC and OmniVision shall each grant
------------------------------
to NEWCO, and OmniVision shall cause [***] to grant to NEWCO, a license under
certain [***] technology and related patents and technical information, under
agreements substantially in the form attached hereto as Exhibits C and D,
respectively. OmniVision shall also cause Hua Wei Shanghai to provide NEWCO
with [***] under the foregoing agreement between OmniVision and NEWCO. Such
agreements shall also set forth [***] to each of TSMC and OmniVision under any
improvements and modifications to [***]. The consideration for the [***]
granted by TSMC to NEWCO shall be [***] during Phase I and [***] during Phase
II, and the consideration for the [***] granted by OmniVision to NEWCO shall be
[***] during Phase I and [***] during Phase II.
8.6 Hua Wei Shanghai. OmniVision represents, warrants, and covenants as
follows with respect to Hua Wei Shanghai that, except as otherwise expressed
below, as of the Effective Date and prior to the Phase III Closing:
(a) The legal name of Hua Wei Shanghai is: _________________(in
Chinese) and Hua Wei Semiconductor (Shanghai) Co., Ltd. (in English).
(b) Hua Wei Shanghai is duly organized, incorporated and registered
in accordance with all applicable laws and regulations of [***], with an
address at 111 Ronghua Road, Songjiang Export Processing Zone, Shanghai,
China.
(c) The only shareholder of Hua Wei Shanghai is and shall remain a
wholly owned subsidiary of Hua Wei Cayman.
(d) All information and documents provided to TSMC as requested by
TSMC during its due diligence investigations and requests were complete,
accurate, and true and did not omit any material fact and fairly present in all
material respects the corporate structure, business, debt and obligation of Hua
Wei Shanghai.
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
23
CONFIDENTIAL TREATMENT
(e) Hua Wei Shanghai shall be continuously organized, registered,
maintained, operated and managed in strict compliance with all applicable
local, provincial, and state laws, rules, regulations, ordinance and statutes
of [***].
(f) Hua Wei Shanghai shall not engage in any activities, enter into
any contracts, incur any indebtedness, or conduct any business that will
substantially adversely affect Hua Wei Shanghai's financial conditions.
Furthermore, prior to the Phase III Closing Date, Hua Wei Shanghai shall not
enter into any new contractual commitment not existing as of the Effective Date
in excess of U.S. Dollars one million (U.S.$ 1,000,000) without prior written
consent from TSMC and OmniVision, such consent not to be unreasonably withheld
or delayed.
(g) OmniVision shall cause Hua Wei Shanghai to keep complete and
accurate books and records of its operations, including all contracts,
obligations and liens.
(h) Upon a joint written request from TSMC and NEWCO, OmniVision
shall cause Hua Wei Shanghai to permit their auditor to examine, during normal
business hours, relevant records and documents of Hua Wei Shanghai to assure
Hua Wei Shanghai's compliance with provisions stated in this Section 8.6. Such
audit shall be limited to an audit of relevant records and documents only.
OmniVision shall cause Hua Wei Shanghai to provide full cooperation in such
audit, including, but not limited to, providing sufficient time for such
examination and convenient access to relevant records and documents. Except as
otherwise agreed to by OmniVision and Hua Wei Shanghai, the foregoing audit
shall be allowed only on a once-per-year basis.
(i) OmniVision shall cause Hua Wei Shanghai to transfer the [***] and
to provide NEWCO with technical assistance as set forth in Sec. 8.5.
(j) Governmental Approvals.
----------------------
(i) Each of OmniVision, TSMC, NEWCO, the Final JV Entity and
Hua Wei Shanghai shall use its commercially reasonable efforts to obtain, with
good faith and reasonable cooperation from the other Parties, all governmental
approvals requisite for the transactions contemplated by this Agreement and the
operation of the Final JV Entity during Phase III.
(ii) In the event that ROC law requires that either OmniVision
or TSMC to own an equity interest of fifty-one percent (51%) in NEWCO for the
purpose of obtaining the Approval, such an event shall be deemed a Triggering
Event for the purpose of Article 7; provided, however, that the Shareholder
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
24
CONFIDENTIAL TREATMENT
required to own such majority interest in NEWCO shall give the other
Shareholder sufficient prior written notice of such requirement in order for
the Shareholders to seek any applicable remedy including a waiver for such
requirement, or to find some other mutually acceptable solution.
8.7 Maintenance of Shareholding.
---------------------------
(a) Except as otherwise provided in Section 6.1, OmniVision's
shareholding in NEWCO will decrease from 47% to 25% during a three-year period
after the completion of an Initial Public Offering in any jurisdiction.
(b) OmniVision undertakes to maintain a shareholding in NEWCO of a
minimum of 25% for a period of at least five (5) years commencing from the date
of incorporation of NEWCO.
(c) TSMC shall maintain shareholding in NEWCO of a minimum of 25% for
a period of at least five (5) years commencing from the date of incorporation
of NEWCO.
8.8 NEWCO as a Party to this Agreement. Upon the incorporation of NEWCO,
----------------------------------
TSMC and OmniVision shall cause NEWCO to ratify, join in and become bound by
all of the terms and conditions of this Agreement, and to perform all of its
obligations under this Agreement. Upon ratification, NEWCO shall be considered
a "Party" for purposes of this Agreement.
8.9 Audit.
-----
(a) Throughout the Term, TSMC, OmniVision and NEWCO shall each
maintain and keep relevant records and all relevant documents in accordance
with the generally accepted accounting principles and in sufficient detail to
permit the determination of the satisfaction of the following obligations of
the Parties:
(i) OmniVision and Hua Wei Shanghai shall have performed their
obligations under Sections 8.1,8.5 and 8.6;
(ii) TSMC shall perform its obligations under Sections 8.2, 8.3
and 8.5; and
(iii) NEWCO its obligations under Sections 8.4 and 8.5.
(b) Upon a Party's written request for an audit, the audited Party
shall permit auditors designated by the requesting Party to examine, during
ordinary business hours, relevant records and documents for the purposes of the
audit. Such audit shall be limited to an audit of relevant records and
documents only. The audited Party shall provide full cooperation in such
audit, including, but not limited to, providing sufficient time for such
examination and convenient access to relevant records and documents.
25
CONFIDENTIAL TREATMENT
(c) Except as otherwise agreed to by the requesting Party and the
audited Party, the foregoing audit shall be allowed only on a once-per-year
basis.
8.10 Shareholders Freedom to Conduct Business Without Restriction. Except
------------------------------------------------------------
as expressly provided in this Agreement or other agreements between or among
the Parties, nothing contained herein or therein shall be deemed or construed
to limit or restrict in any way the freedom of any Shareholder or any
affiliates thereof to conduct or engage in any business activity whatsoever for
its own account without regard to the business of NEWCO.
ARTICLE 9. CONFIDENTIALITY.
---------------------------
9.1 Confidential Information. The terms and conditions of the existing
------------------------
Non-Disclosure Agreement by and between the Shareholders are incorporated
herein by this reference as if set forth at length; further, NEWCO and the
Final JV Entity hereby agree to be bound by said Non-Disclosure Agreement as if
made a party thereto.
9.2 Treatment of Extremely Confidential Information. The Shareholders
-----------------------------------------------
will each contribute extremely confidential information to the other and to
NEWCO and the Final JV Entity during the performance of their obligations under
this Agreement. With respect to TSMC, such information comprises TSMC's
process information; with respect to OmniVision, such information comprises its
[***] technology and architecture, [***], and automated final testing processes
(all of which are hereinafter referred to as "Extremely Confidential
Information"). The Parties hereby agree to keep confidential, and not disclose
to any third party without the prior written consent of the originating Party,
any Extremely Confidential Information they receive through the course of the
business to be conducted pursuant to this Agreement. Each Party agrees to do
the following with respect to any such Extremely Confidential Information: (i)
exercise the same degree of care to safeguard the confidentiality of, and
prevent the unauthorized use of, such information as that party exercises to
safeguard the confidentiality of its own similar type of Extremely Confidential
Information; (ii) restrict disclosure of such information to those of its
employees and agents who have a "need to know" and, with prior written approval
of the disclosing party, those of its third party contractors who have a "need
to know," and (iii) instruct, require and obtain the written agreement of such
employees, agents and subcontractors to maintain the confidentiality of such
information and not to use such Confidential Information except as expressly
permitted. Each Party further agrees not to remove or destroy any proprietary
or confidential legends or markings placed upon any documentation or other
materials.
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
26
CONFIDENTIAL TREATMENT
9.3 Disclosure. Notwithstanding Sections 9.1 and 9.2, each Party may
----------
disclose this Agreement and the Exhibits: (a) to its legal and financial
advisers on a need-to-know basis; (b) to third-party financing sources on a
need-to-know basis and subject to a non-disclosure agreement; (c) to the extent
necessary to comply with applicable laws or regulations, including, but not
limited to any rule , regulation or policy statement of any national
securities exchange, market or automated quotation system on which either of
the Party's securities are listed or quoted; and (d) to governmental
authorities as required by law, provided that the party required to make such
disclosure shall, if possible, provide to the Parties prior notice and an
opportunity to reasonably contest such disclosure or seek a protective order or
other appropriate remedy prior to such disclosure.
ARTICLE 10. COVENANT NOT TO COMPETE.
------------------------------------
10.1 A. Except as otherwise provided in this Agreement, OmniVision shall
ensure that OmniVision and its affiliates, during the Term and within twelve
(12) months after the cancellation or termination of this Agreement, shall not
engage in any business, either on its (their) own behalf or for the behalf of a
third party, nor shall it (they) enter into any agreement or direct or indirect
arrangement, that will directly compete with the business of NEWCO.
B. Notwithstanding the foregoing, the Parties agree that Section 10.1. A
shall not apply to either: (i) any activities of OmniVision strictly for its
own account; or (ii) any arm's length transaction with an unrelated third party
(a) into which OmniVision is consolidated or merged, or (b) which acquires all
or substantially all of the assets of OmniVision, subsequent to the Effective
Date; provided however, that in the event of the occurrence of either
subsections B.(ii) (a) or (b), the parties agree that if after consultation
among the Parties, TSMC and or Newco determine that the resulting company or
activity will be detrimental to the ongoing activities of Newco then OmniVision
and/or any affiliate shall sell its entire equity holding(s) in Newco to TSMC
pursuant to Article 6 of this Agreement, and further provided, in the event
that OmniVision sells its equity interest(s) to TSMC hereunder, then OmniVision
shall have the right to terminate this Agreement or any or all of the other
agreements then in force and effect with the other Parties.
10.2 Except as otherwise provided in this Agreement, TSMC shall ensure
that TSMC and its affiliates, during the Term and within twelve (12) months
after the cancellation or termination of this Agreement, shall not engage in
any business, either on its (their) own behalf or for the behalf of a third
party, nor shall it (they) enter into any agreement or direct or indirect
arrangement, that will directly compete with the business of NEWCO.
10.3 Each Party agrees that it and its affiliates will not, during the
Term, solicit for employment as an employee, officer, agent, consultant,
advisor, or in any other capacity whatsoever, any individual employed by the
other Party or Parties in a technical capacity, who is at the time of such
27
CONFIDENTIAL TREATMENT
solicitation, or within six (6) months of such time was, involved directly or
indirectly in positions associated with the subject matter of this Agreement.
As used herein, "solicit" means contact or communicate in any manner
whatsoever, including, but not limited to, contacts or communications by or
through intermediaries, agents, contractors, representatives, or other parties,
provided, however, that nothing herein shall be construed to prohibit the
Parties from (a) placing advertisements for employment which are aimed at the
public at large in any newspaper, trade magazine, or other periodical in
general circulation, or (b) responding to any unsolicited inquiry by an
employee concerning employment.
10.4 NEWCO shall adopt appropriate measures to ensure that its employees
will not solicit the employees, officers, agents, consultants, advisors or
customers of NEWCO for a period of one (1) year after the termination of
employment with NEWCO.
ARTICLE 11. MATERIAL BREACH AND REMEDIES.
-----------------------------------------
11.1 Definition of "Breach" and "Material Breach".
--------------------------------------------
(a) For purposes of this Agreement, a "breach" shall mean a failure
to comply with any terms or conditions of this Agreement, whether by reason of
negligence or willful, intentional or reckless conduct of acts or omissions.
Any breach of TSMC, OmniVision and/or NEWCO that, in itself or in combination
with other actions or omissions of another Party, substantially impairs the
operations of NEWCO, or directly and proximately causes the frustration of the
Purposes, or makes it impossible for any Party to comply with the terms and
conditions of this Agreement, shall be deemed a "Material Breach". By way of
example, a breach of any of Sections 1.1, 3.1, 3.2, 3.4 - 3.9, 5.3, 5.5, 5.12,
5.15 and 5.16, and Articles 6 - 10 and 12, shall be deemed a Material Breach.
(b) A Material Breach shall also exist in the event that:
(i) A Shareholder causes NEWCO to materially breach its
obligations under an agreement with the first Shareholder described herein; or
(ii) A Shareholder intentionally causes NEWCO to experience
financial difficulties of either (x) an accumulated loss in the [third (3rd)]
fiscal year following the year of incorporation of NEWCO or (y) pre-tax losses
for any three (3) consecutive fiscal quarters after the first two years from
the year of incorporation of NEWCO.
A Material Breach in Section 11.1(b)(i) or (ii) shall be deemed a
Triggering Event under which the non-breaching Shareholder shall have the right
to exercise the Option set forth under Article 7.
28
CONFIDENTIAL TREATMENT
11.2 Ramifications of a Material Breach by TSMC or OmniVision. Except as
otherwise provided in this Article 11, as between TSMC and OmniVision, in the
event that either TSMC or OmniVision commits a Material Breach that has not
been remedied within ninety (90) days after written notice thereof to the
breaching Shareholder given by the non-breaching Shareholder, then:
(a) The non-breaching Shareholder shall have the right, upon written
notification to the breaching Shareholder, to require the breaching Shareholder
to sell and transfer all or any shares held by it to the non-breaching
Shareholder at a price per share equal to the original purchase price, such
sale to occur within ten (10) days of such notification.
(b) The non-breaching Shareholder shall have the right to terminate
this Agreement with respect to the breaching Shareholder and be entitled to
pursue other remedies available to it at law or in equity against the breaching
Shareholder.
(c) The rights and obligations of the non-breaching Shareholder and
NEWCO with respect to each other under this Agreement and any other agreements
between the two Shareholders shall continue and subsist to the extent possible,
unless the two Shareholders otherwise agree upon, including without limitation
winding up NEWCO.
11.3 Ramifications of a Material Breach by NEWCO. Except as otherwise
provided in this Article 11, in the event that NEWCO in and by itself commits a
Material Breach that has not been remedied within ninety (90) days after
written notice thereof to NEWCO given by either TSMC or OmniVision (with a copy
of the notice sent to the other non-breaching Party), then:
(a) Either non-breaching Party shall have the right to terminate this
Agreement with respect to NEWCO and be entitled to pursue other remedies
available to it at law or in equity against NEWCO.
(b) The rights and obligations of TSMC and OmniVision with respect to
each other under this Agreement and any other agreements between TSMC and
OmniVision shall continue and subsist to the extent possible, unless TSMC and
OmniVision otherwise agree upon, including without limitation winding up NEWCO,
taking over the management of NEWCO, or entering into a new agreement or
arrangement with respect to NEWCO.
11.4 Material Breach by NEWCO Caused by a Shareholder. Except as
------------------------------------------------
otherwise provided in this Article 11, in the event that either TSMC or
OmniVision causes NEWCO to commit a Material Breach that has not been remedied
within ninety (90) days after written notice thereof to NEWCO and the
Shareholder causing the breach by the non-breaching Shareholder, then
29
CONFIDENTIAL TREATMENT
(a) The non-breaching Shareholder shall have the right, upon written
notification to the Shareholder causing the breach, to require the Shareholder
causing the breach to sell and transfer all or any shares held by it to the
non-breaching Shareholder at a price per share equal to the original purchase
price, such sale to occur within ten (10) days of such notification.
(b) The non-breaching Shareholder shall have the right to terminate
this Agreement and be entitled to pursue other remedies available to it at law
or in equity against either or both of NEWCO and the Shareholder causing the
breach.
ARTICLE 12. REPRESENTATIONS AND WARRANTIES.
-------------------------------------------
12.1 Corporate Standing. Each of TSMC and OmniVision represents and
------------------
warrants to the other Shareholder that:
(a) it is a corporation duly incorporated, validly existing, and in
good standing under the law of the jurisdiction of it incorporation, and has
full corporate power and authority to execute this agreement and to perform all
obligation hereunder; and
(b) approval of this JV and respective investment by its board of
directors, and the execution, delivery and performance of this agreement by
each will have been duly authorized by all necessary corporate proceedings on
the part of it and this Agreement will constitute the valid and legally binding
obligations of it enforceable in accordance with the terms; except to the
extent limited by bankruptcy or similar laws affecting creditors rights
generally, or by general equitable principles.
12.2 Investment Intention. Each Shareholder represents and warrants that
--------------------
it is acquiring the securities for investment for its own account and not with
a view to, or for resale in connection with, any distribution thereof. Each
Shareholder represents that, except for otherwise permitted by this Agreement,
it has no agreement, contract, arrangement or undertaking with any person or
entity to sell, transfer, or grant any rights in any of the securities.
12.3 TSMC and OmniVision agree that neither Shareholder shall cause the
other Shareholder or NEWCO to be in violation of their respective home country
laws. NEWCO, its officers, employees or agents will not participate in or
provide any information in furtherance of any boycott in violation of U.S. law
or offer to pay or receive any bribe to/from any individual or corporation.
When other individuals or organizations are required to participate in program
of NEWCO, they shall be compensated fairly based on the task performed. In no
circumstances are public servants or other holders of public offices to be
offered or paid any bribe or other benefits, directly or indirectly. No
contribution in any way related to NEWCO will be made to candidates for public
offices or to political parties or other political organizations, regardless of
whether such contributions are permitted by local laws.
30
CONFIDENTIAL TREATMENT
ARTICLE 13. TERM AND TERMINATION.
---------------------------------
13.1 Effective Date. The "Effective Date" of this Agreement shall be the
--------------
date of execution of the Agreement by a duly authorized representative of each
of TSMC and OmniVision.
13.2 Term and Expiration.
-------------------
(a) This Agreement shall come into force on the Effective Date and
remain in effect for a period of [***] years, unless it is terminated earlier
by written agreement between TSMC and OmniVision or in accordance with the
terms and conditions of this Agreement. At the end of the initial [***] year
term, this Agreement shall automatically be extended for additional terms of
[***] years each, unless it is earlier terminated (i) by written agreement
between TSMC and OmniVision; (ii) in accordance with the terms and conditions
of this Agreement; or (iii) by either TSMC or OmniVision with written notice to
the other Parties twenty-four (24) months before the end of any such additional
term. The "Term" shall mean collectively the initial term and all the
additional terms.
(b) Upon the termination of the Term, the future relationship of the
Parities, as well as NEWCO's existence, shall be determined by such other terms
and conditions to which the Parties shall agree, provided, however, in the
event the Parties shall not agree, the Parties shall take such steps as are
necessary to cause NEWCO to be wound up as soon as practical thereafter, in
accordance with the Articles.
13.3 Termination. This Agreement shall be terminated automatically and
-----------
NEWCO shall be dissolved upon the occurrence of any of the following events of
or pertaining to NEWCO:
(a) liquidation, bankruptcy or insolvency; or
(b) termination of business by a final decision at a shareholders
meeting; or
(c) the appointment of any trustee, receiver or liquidator for
substantially all of the assets of the business of NEWCO; or
(d) the attachment, sequestration, execution or seizure of
substantially all of the assets of NEWCO, which attachment, sequestration,
execution or seizure is not vacated within thirty (30) days from the
institution thereof; or
(e) judicial, governmental or any sale other than a voluntary sale of
substantially all of the assets of NEWCO by its Board of Directors; or
(f) in accordance with any other terms and conditions of this
Agreement.
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
31
CONFIDENTIAL TREATMENT
13.4 Termination for Material Breach. TSMC or OmniVision may in the event
-------------------------------
of a Material Breach terminate this Agreement in accordance with the provisions
of Article 11.
13.5 Termination and Dissolution. In the event this Agreement is
---------------------------
terminated by written agreement of TSMC and OmniVision, NEWCO may acquire the
licenses granted under Section 8.5, and the future relationship between TSMC
and OmniVision as well as NEWCO's existence shall be determined by such other
terms and conditions to which TSMC and OmniVision shall agree; provided,
however, that, in the event TSMC and OmniVision are unable to reach agreement,
TSMC and OmniVision shall take all steps as are necessary to cause NEWCO to be
wound up as soon as practicable thereafter.
13.6 Wind Up NEWCO. In the event that:
-------------
(a) all or material portions of the assets or properties of NEWCO or
those assets of one of the Parties which are under the control of NEWCO
including but not limited to the patents, trade secrets, trademarks, copyrights
or mask work rights of TSMC or OmniVision are expropriated, requisitioned for
use, infringed or made inoperative or unavailable for normal use by government
action; or
(b) the government of the ROC [***], or any other governmental
entity, including any courts of such government or governmental entity, for any
reason shall directly prohibit or indirectly effectively prevent NEWCO from
conducting operations essentially as contemplated herein, then either TSMC or
OmniVision shall have the right by thirty (30) days prior written notice to
terminate this Agreement and require NEWCO to be wound up. TSMC and OmniVision
shall cause NEWCO to take immediate steps to reduce expenditures to a minimum
and to bring its operations to a close as quickly and efficiently as possible
so that NEWCO may as soon as practicable be wound up.
13.7 Liquidation of NEWCO. In the event that NEWCO is liquidated, and in
--------------------
the absence of agreement by the Parties to the contrary, the liquidator shall
observe the following principles to the extent permitted by the ROC [***] laws,
whichever may be the case:
(a) The business and affairs of NEWCO shall terminate and be wound up
as promptly as orderly business practice permit.
(b) The Technology Transfer Agreement of TSMC and OmniVision and all
rights, privileges, and licenses hereunder shall terminate immediately and
shall be returned to the requesting Party, and at no time will they be
considered to be assets of NEWCO, and they may not be levied upon by any Party,
or otherwise be used as NEWCO collateral or security by NEWCO or any other
Party.
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
32
CONFIDENTIAL TREATMENT
(c) A full inventory and account of the asset, liabilities and
transactions of NEWCO shall promptly be taken and a balance sheet prepared as
of date of liquidation.
(d) Subject to the rights of secured parties, if any, the assets of
NEWCO shall be disassemble and liquidated as promptly as is consistent with
obtaining fair market value of such assets; provided, however, that, subject to
the ROC [***] laws, whichever my be the case, a Party may purchase any assets
upon agreement with the other Parties.
(e) Subject to the applicable ROC [***] laws, proceeds of such
liquidation shall be applied in the following order:
(i) First, to the payment of debts and liabilities of NEWCO to
third parties, and then to the payment and debts and liabilities of NEWCO to
the Parties, if any, then
(ii) The surplus, if any, to be paid to each Shareholder pro
rata based upon shares of NEWCO then held by it.
(f) Except as provided elsewhere in this Agreement and subject to the
applicable ROC [***] laws, pre-production and prototype products, designs,
patents, copyrights, and technical information of NEWCO shall be distributed in
kind to TSMC and OmniVision, respectively, and TSMC and OmniVision shall
receive full right, title and interest, to perform, practice, sell and license
such products, designs, patents, copyrights, and technical information in any
manner for any purpose.
13.8 Expiration or termination of this Agreement for any reason shall not
affect:
(a) the obligations or liabilities of the Parties which have accrued
as of the date of termination;
(b) those obligations set forth in Article 9 and any non-disclosure
agreement between or among the Parties; or
(c) the Parties' respective rights to each Party's rights conferred
under the applicable ROC [***] laws as a Shareholder, all of which obligations
and rights shall survive the termination of this Agreement.
ARTICLE 14. DISPUTE RESOLUTION
------------------------------
14.1 Introduction. It is the intention of the Stockholders that any breach
------------
of this Agreement or any Exhibits shall initially be attempted to be resolved
in an amicable manner to the fullest extent possible, and that any such
resolution be reasonable in light of the rights and obligations of the
Shareholders. If a dispute arising between or among the Parties cannot be
resolved by personnel directly involved, the following procedures shall apply
in each of the circumstances described below.
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
33
CONFIDENTIAL TREATMENT
14.2 Conciliation Process. At any time during the Term, upon the
--------------------
occurrence of one or more disputes under this Agreement and/or under any other
agreements described herein, the Party allegedly aggrieved and/or damaged (the
"Asserting Party") shall promptly deliver written notification to the allegedly
offending and/or non-complying Party (the "Defending Party") and the
Coordinating Committee, setting out in reasonable detail and in clear and
concise language and on a good faith basis, the specifics of the matter in
dispute. If the Defending Party has not cured the matter prior to the later of
(i). five (5) business days after delivery of such written notification or (ii)
the expiration of the time period, if any, specified for such cure in this
Agreement or the applicable agreement (the "Applicable Cure Period"), then the
Coordinating Committee shall convene a meeting within ten (10) business days
thereafter for the purpose of, among other things:
(a) Assessing the good faith basis for the assertions;
(b) Defining, assessing and prioritizing the alternatives reasonably
available to cure or to correct the circumstances and, to make its reoccurrence
unlikely; and
(c) Adopting by unanimous votes, one or more curative or corrective
courses of action.
14.3 Composition, Term and Duty of Coordinating Committee
----------------------------------------------------
(a) Composition. The Coordinating Committee shall be comprised of
-----------
such number of members as shall be agreed upon by the parties. Each party
shall contribute one-third of the number of members, as selected by the
Advisory Committee. The members of the Coordinating Committee shall select one
of themselves as a Chairman who shall be a member from one of the other parties
to which the Chairman of the Advisory Committee does not belong.
(b) Term. The Chairman of the Coordinating Committee shall alternate
----
from among the parties on an annual basis. Each member of the Coordinating
Committee shall serve a two (2) year term, which can be renewed. Each
Committee member shall have the right to designate an alternate to attend
Committee meetings and to make decisions in his or her absence. All members
(or designated alternatives) of the Coordinating Committee shall be officers or
employees of the parties.
(c) Duties. The duties of the Coordinating Committee are to:
------
(i) Establish work groups and submit proposals and
recommendations as directed by the Advisory Committee, and submit these
proposals to the Advisory Committee for review;
34
CONFIDENTIAL TREATMENT
(ii) Report on the progress of the matters to the Advisory
Committee;
(iii) Maintain continuous communication between the Parties
throughout the matter at hand to ensure timely exchanges of information and
identification/resolution of issues as they may arise;
(iv) With respect to the resolution of any disputes among the
Parties, to perform conciliation responsibilities;
(v) Perform such other duties and responsibilities or as may be
agreed by and among the parties from time to time.
(d) Either the Defending Party or the Asserting Party shall be
entitled to:
(i) Make reasonable requests for information from the other
party ("Information Request") pertaining to the dispute (provided such requests
are not unduly burdensome and can be accomplished within two (2) business
days), and
(ii) Present its views to the Coordinating Committee with
respect to the allegations, through its appropriate officer "Presentation". If
within five (5) business days of its first meeting the Coordinating Committee
shall be unable to resolve the conflict by unanimous vote, then the matter
shall immediately be referred to the Advisory Committee for further attempts at
resolution.
Within ten (10) days of such inability to resolve the conflict, the Advisory
Committee shall convene a meeting for the purpose of attempting a resolution.
The procedures described above concerning Information Requests and Presentation
shall also apply to the Advisory Committee proceedings.
If within five (5) business days of its first meeting the Advisory Committee
shall be unable to resolve the conflict by unanimous vote, then the matter
shall immediately be referred to the chief executive officer of TSMC and
OmniVision (or his or her designated representative) for the purpose of
attempting a resolution during the period of ten (10) business days following
the submission of such matter to them for their consideration.
14.4 Definition of "Conciliation Process". The process described in
------------------------------------
Section 14.2 is herein referred to as the "Conciliation Process". Resolution of
all disputes shall be attempted initially through the foregoing Conciliation
Process.
14.5 Exhibits. In the case of any breach of any other agreements
--------
described herein, in the event such breach is not resolved through the
Conciliation Process, the Asserting Party shall be entitled to exercise all
such rights and remedies as provided under the applicable agreement or
otherwise provided at law or in equity.
35
CONFIDENTIAL TREATMENT
ARTICLE 15. SPECIAL REMEDIES FOR BREACH OCCURRING WITHIN THREE
--------------------------------------------------------------
YEARS OF INCORPORATION OF NEWCO
-------------------------------
15.1 In addition to any remedies available under Article 11, in the event
of a final judgment of a court of competent jurisdiction of a Material Breach
occurring within three years of incorporation of NEWCO, the non-breaching
Shareholder may: (a) recover all damages, losses and liabilities both suffered
as a consequence of the breach and otherwise recoverable under the terms of
this Agreement or as judicially determined; and (b) elect either to (i)
purchase the facilities of NEWCO at a price equal to the [***] or to (ii)
convey to the breaching Party (and the breaching Party shall be obligated to
purchase) all shares of capital stock of NEWCO then owned by non-breaching
Party at a price, payable in cash at closing, equal to the [***]; and
15.2 Reacquisition of the Facility of NEWCO. The Closing of the purchase
--------------------------------------
and sale of the Facility pursuant to Section 15.1 shall take place at the
appropriate executive offices on the tenth business day following the date the
Determined Value is established hereunder, or such later date as all requisite
governmental approvals are secured in connection therewith. At the closing,
NEWCO shall convey to the Purchasing Party good title to the Facility, free of
all liens and encumbrances against receipt of the purchase price, which shall
be delivered by wire transfer of immediately available funds to the bank
account designated by NEWCO.
15.3 Sale of NEWCO Stock. The Closing of the purchase and sale of non-
-------------------
breaching Party's NEWCO stock pursuant to Section 15.1 shall take place at the
appropriate executive offices on the tenth business day following the date the
Determined Value is established hereunder, or such later date as all requisite
governmental approvals are secured in connection therewith. At the closing,
non-breaching Party shall convey the NEWCO stock owned by non-breaching Party
to the breaching Party, free of all liens and encumbrances against receipt of
the purchase price, which shall be delivered by wire transfer of immediately
available funds to the bank account designated by NEWCO.
Contemporaneously with the closing, all non-breaching Party officials and
appointees shall resign from the Board of Directors of NEWCO and all other
offices or other positions held with NEWCO.
ARTICLE 16. MISCELLANEOUS.
---------------------------
16.1 Force Majeure. No Party shall be liable for failure to perform
-------------
(other than payment of amounts due), in whole or in material part, its
obligations under this Agreement, if such failure is caused primarily by any
event or condition not existing as of the Effective Date and not reasonably
within the control of the affected party, including without limitation, by
fire, flood, typhoon, earthquake, explosion, strikes, labor troubles or other
industrial disturbances, unavoidable accidents, war (declared or undeclared),
acts of terrorism, sabotage, embargoes, blockage, acts of governmental
authorities, riots, insurrections, or any other cause beyond the control of the
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
36
CONFIDENTIAL TREATMENT
parties; provided that the affected party promptly notifies the other parties
of the occurrence of the event of Force Majeure and takes all reasonable steps
necessary to resume performance of its obligations so interfered with.
16.2 Insurance. NEWCO shall obtain from a reputable, international
---------
insurance company, and maintain throughout the Term, such kinds and amount(s)
of insurance as is reasonable and customary in the trade, including but not
limited to insurance covering product liability, theft fire, natural disasters,
employee injury and primary Directors and officers liability insurance.
16.3 Assignment. Neither Party shall assign this Agreement or any right,
----------
obligation, or interest under this Agreement, nor delegate any work or
obligation to be performed under this Agreement, without the other Party's
prior written consent. Any attempted assignment or delegation in contravention
of this Section shall be null and void, and ineffective in law or in equity.
16.4 Survival. Without limiting any provision in this Agreement, the
--------
obligations of the Parties pursuant to Articles 6, 9, 10, 14, and 16.11 shall
survive the Term or termination or expiration of this Agreement.
16.5 Notices. All communications, reports, approvals and notices required
-------
or permitted under this Agreement shall be made in writing and shall be deemed
to have been duly given or delivered if personally delivered or sent by (i) by
facsimile, or (ii) mailed by certified or registered mail, or overnight courier
return receipt requested and postage prepaid, addressed to the principal
offices of the Parties as listed below. Delivery by facsimile is effective
upon receipt of a successful fax transmission as indicated on the electronic
time/date stamp on the original transmission and shall be followed by delivery
by mail as set forth above. Notice by personal delivery is effective upon
receipt of the notice. Notice sent by mail shall for all purposes of this
Agreement be treated as being effective or having been given three days after
mailed.
If to OmniVision International Holding Ltd., to:
If to TSMC, to:
If to NEWCO:
37
CONFIDENTIAL TREATMENT
Any Party may change the address to which notice or payment is to be sent
by written notice to the others under any provision of this Section 10.4.
16.6 Export Control. Without in any way limiting the provisions of this
--------------
Agreement, each of the Parties agrees that no products procured from or
technical information disclosed by any Party under this Agreement are intended
to or shall be exported or re-exported, directly or indirectly, to any
destination restricted or prohibited by any applicable law without necessary
authorization by the relevant governmental authorities.
16.7 Entire Agreement. This Agreement and its Exhibits and Schedules
----------------
embody the entire agreement and understanding among the Parties with respect to
the subject matter hereof, superseding, all previous and contemporaneous
communications, representations, agreements and understandings, whether written
or oral, in existence on the date this Agreement is executed. No Party has
relied upon any representation or warranty of the other Party except as
expressly set forth herein.
16.8 Modification. This Agreement and the surviving provisions thereof
------------
may not be modified or amended, in whole or part, except by a writing executed
by duly authorized representatives of the Parties.
16.9 Severability. If any term or provision of this Agreement shall, for
------------
any reason, be held to be invalid, illegal or unenforceable, such provision
shall be deemed severed from this Agreement; provided, however, that to the
extent that such provision is deemed by the Parties to be material to the
performance of this Agreement, the Parties shall use their commercially
reasonable efforts to arrive at a mutually acceptable solution. The remaining
provisions of this Agreement shall remain in full force and effect, and shall
be construed and interpreted in a manner that corresponds as closely as
possible with the intentions of the Parties as expressed in this Agreement.
16.10 Non-Waiver. Except to the extent that a Party may have otherwise
----------
agreed in writing, no waiver by that Party of any condition of this Agreement
or breach by any other Party of any of its obligations or representations
hereunder shall be deemed to be a waiver of any other condition or subsequent
or prior breach of the same or any other obligation or representation by such
other Party, nor shall any forbearance by a Party to seek a remedy for any
noncompliance or breach by any other Party be deemed to be a waiver by the non-
breaching Party of its rights and remedies with respect to such noncompliance
or breach.
16.11 Applicable Laws.
---------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of California without regard to its conflict of laws
provisions. The Parties hereby agree that an action arising directly or
indirectly from the business relationship created by this Agreement shall be
brought in the United States District Court for the Northern District of
38
CONFIDENTIAL TREATMENT
California. The Parties expect such court to have subject matter jurisdiction
for matters arising under 28 U.S.C. section 1332 (diversity jurisdiction) or 28
U.S.C. section 1338 (for matters arising under the patent laws and other laws
of the United States), and hereby each expressly consent to the exclusive
personal jurisdiction of such court for such action.
(b) The Parties further agree that, in the event the United States
District Court for the Northern District of California would dismiss such
action for lack of subject matter jurisdiction, the Parties shall discuss and
mutually agree on the jurisdiction of another appropriate United States
District Court or State Court.
(c) For the purpose of any proceeding before the United States
District Court for the Northern District of California, the Parties hereby
appoint the respective person set out below as their agents for service of
process in California:
TSMC:
OmniVision:
NEWCO:
16.12 No Agency. This Agreement shall not constitute an appointment of
---------
either Party as the legal representative or agent of the other Party, nor shall
either Party have any right or authority to assume, create or incur in any
manner any obligation or other liability of any kind, express or implied,
against, in the name or on behalf of, the other Party. Nothing herein or in
the transactions contemplated by this Agreement shall be construed as, or
deemed to be, the formation of a partnership by or among the Parties.
16.13 No Third Party Beneficiaries. No provisions of this Agreement are
----------------------------
intended to, or shall be construed to, confer upon or give to any person other
than the parties hereto and thereto, any rights, remedies or other benefits
under or by reason of such agreements.
16.14 Headings. All headings contained in this Agreement are for
--------
convenience of reference only and shall not be deemed to be a part of this
Agreement or to affect the meaning or interpretation of this Agreement.
16.15 Publicity and Disclosure. Subject to limitations placed upon a
------------------------
Party by the securities laws of the United States of America (including
regulations of the Securities and Exchange Commission) or the securities laws
of the ROC (including regulations of the Securities and Exchange Commission),
timing and content of any announcements, press releases, and public statements
concerning the transaction contemplated herein will be by mutual agreement of
the Shareholders and the Shareholders hereby agree, to the extent reasonable,
to keep the terms of this Agreement and Ancillary Agreement contemplated hereby
confidential.
39
CONFIDENTIAL TREATMENT
16.16 Governing Language. This Agreement and its Exhibits and Schedules
------------------
are written and executed in English. No translation of the Agreement and its
Exhibits and Schedules into any other language shall have any force or effect
in the interpretation of the construction of this Agreement in determination of
the intent of the Parties hereto.
16.17 Constructions and Reference. Words used in this Agreement,
---------------------------
regardless of the number or gender specifically used, shall be deemed and
construed to include any other number, singular or plural, and any other gender
masculine, feminine or neutral, as the context shall require. Unless otherwise
specified, all references in this Agreement to Sections or Subsections are
deemed references to be corresponding Sections or Subsections in this
Agreement, and all references in this Agreement to Exhibits are references to
the corresponding Exhibits attached to this Agreement.
16.18 Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed an original, and all of which shall be deemed to
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives on the date set forth above.
OMNIVISION INTERNATIONAL
HOLDING LTD. TAIWAN SEMICONDUCTOR
MANUFACTURING COMPANY
- ------------------------------------- -------------------------------------
Signature Signature
By:
------------------------------- -------------------------------
Date:
------------------------------- -------------------------------
RATIFIED, JOINED IN, AND ACCEPTED ON BEHALF OF NEWCO THIS ____ DAY OF ___, 2003
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
____ day of ___, 2003
40
CONFIDENTIAL TREATMENT
EXHIBITS
EXHIBIT A ARTICLES OF INCORPORATION
EXHIBIT B [***] AGREEMENT
EXHIBIT C [***] AGREEMENT
EXHIBIT D [***] AGREEMENT
SCHEDULE 8.1(b)(ii) [***]
*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
41
Exhibit A
ARTICLES OF INCORPORATION
OF VISERA TECHNOLOGIES COMPANY, LIMITED
Section I - General Provisions
- ------------------------------
Article 1
- ---------
The Corporation shall be incorporated, as a company limited by shares, under
the Company Law of the Republic of China, and its name shall be [ ]
-------------
in the Chinese language, and VisEra Technologies Company, Limited in the
English language.
Article 2
- ---------
The scope of business of the Corporation shall be as follows:
1. CC01080 Manufacturing Business of Electronic Parts
2. IZ99990 Other Business of Industrial and Commercial Service (Provision of
back-end service for image capturing integrated circuit and module ,
including but not limited to post-wafer-fabrication process , packaging ,
testing and module assembly service).
3. Other business that is not a chartered business or a business either
prohibited or restricted by law.
Article 3
- ---------
The Corporation shall have its head office in Hsin Chu, Taiwan, Republic of
China, and shall be free, upon approval of government authorities in charge, to
set up representative and branch offices at various locations within and
without the territory of the Republic of China, wherever and whenever the Board
of Directors of the Corporation deems it necessary or advisable to carry out
any or all of its activities.
Article 4
- ---------
Public announcements of the Corporation shall be made in accordance with the
Company Law and other relevant rules and regulations of the Republic of China.
Article 5
- ---------
The Corporation may provide endorsement and guarantee and act as a guarantor
according to a resolution adopted at the meeting of the Board of Directors.
1
Article 6
- ---------
The total amount of the Corporation's reinvestment shall not be subject to the
restriction of not more than forty percent of the Corporation's paid-up capital
as provided in Article 13 of the Company Law. Any matters regarding the
reinvestment shall be resolved in accordance with the resolutions of the Board
of Directors.
Section II - Capital Stock
- --------------------------
Article 7
- ---------
The total capital stock of the Corporation shall be in the amount of
800,000,000 New Taiwan Dollars, divided into 80,000,000 shares, at ten New
Taiwan Dollars each, to be issued in installments with the authority delegated
to the meeting of the Board of Directors. The Corporation may issue shares
within the amount of the above total capital stock in consideration of
acquiring the technology needed by the Corporation
Article 8
- ---------
The Corporation may issue shares without printing share certificate(s). If the
Corporation decides to print share certificates for shares issued, the
Corporation shall comply with relevant provisions of the Company Law and
relevant rules and regulations of the Republic of China.
Article 9
- ---------
The share certificates of the Corporation shall all be name-bearing share
certificates, and issued in accordance with the Company Law and relevant rules
and regulations of the Republic of China.
The share certificates of Corporation first subscribed or thereafter acquired
by it shall be endorsed with the following legend:
2
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO AN AGREEMENT DATED OCTOBER XX, 2003, BY AND BETWEEN TAIWAN
SEMICONDUCTOR MANUFACTURING COMPANY, LTD. AND OMNIVISION
INTERNATIONAL HOLDING, LTD., A COPY OF WHICH IS ON FILE AT
THE MAIN OFFICE OF THE CORPORATION AND ANY SUBSEQUENT HOLDER
ACQUIRING THESE SHARES IN ANY MANNER WHATSOEVER TAKES THE SAME
UNDER AND SUBJECT TO THE TERMS OF SAID AGREEMENT."
Article 10
- ----------
All transfer of stocks, pledge of rights, loss, succession, gift, loss of seal,
amendment of seal, change of address or similar stock transaction conducted by
shareholders of the Corporation shall follow the Company Law and relevant rules
and regulations of the Republic of China.
Article 11
- ----------
Registration for transfer of shares shall be suspended for a period of thirty
(30) days immediately before the date of regular meeting of shareholders, and
fifteen (15) days immediately before the date of any special meeting of
shareholders, or within five (5) days before the day on which dividend, bonus,
or any other benefit is scheduled to be paid by the Corporation.
Section III - Shareholders Meeting
- ----------------------------------
Article 12
- ----------
Shareholders' meetings of the Corporation are of two types, namely: (1) regular
meetings and (2) special meetings. Regular meetings shall be convened, by the
Board of Directors, within six (6) months after the close of each fiscal year.
Special meetings shall be convened whenever necessary in accordance with the
relevant laws, rules and regulations of the Republic of China.
Article 13
- ----------
Written notices shall be sent to all shareholders at their latest places of
residence as registered with the Corporation for the convening of shareholders'
meetings, at least twenty (20) days in advance, in case of regular meetings;
and at least ten (10) days in advance, in case of special meetings. The
3
purpose(s) for convening any such meeting shall be clearly stated in the
written notices sent out to the shareholders. Notices shall be written in
Chinese, and English when necessary.
Article 14
- ----------
Except as provided in the Company Law of the Republic of China, shareholders'
meetings may be held if attended by shareholders in person or by proxy
representing more than one half of the total issued and outstanding capital
stock of the Corporation, and resolutions shall be adopted at the meeting with
the concurrence of a majority of the votes held by shareholders present at the
meeting.
Article 15
- ----------
Each share of stock shall be entitled to one vote.
Article 16
- ----------
If a shareholder is unable to attend a meeting, he/she may appoint a
representative to attend it, and to exercise, on his/her behalf, all rights at
the meeting, in accordance with Article 177 of the Company Law of the Republic
of China. A representative does not need to be a shareholder of the
Corporation.
Article 17
- ----------
The shareholders' meeting shall be presided over by the Chairman of the Board
of Directors of the Corporation. In his absence, either the Vice Chairman of
the Board of Directors, or one of the Directors shall preside in accordance
with Article 208 of the Company Law of the Republic of China.
Article 18
- ----------
The Corporation shall establish the rules for the proceedings of shareholders'
meeting. The resolutions of the shareholders' meeting shall be recorded in the
minutes, and such minutes shall be signed by or sealed with the chop of the
chairman of the meeting and shall be distributed to the shareholders within
twenty (20) days. Such minutes, together with the attendance list and proxies,
shall be filed and kept at the head office of the Corporation. The minutes
shall be drafted in both the Chinese language and the English language.
4
Section IV - Directors and Supervisors
- --------------------------------------
Article 19
- ----------
The Corporation shall have three Directors and two Supervisors.
Article 20
- ----------
The term of office for Directors and Supervisors shall be three (3) years. Both
the Directors and the Supervisors shall be eligible for re-election.
Article 21
- ----------
Except as otherwise provided in the Company Law of the Republic of China, a
meeting of the Board of Directors may be held if attended by a majority of
total Directors and resolutions shall be adopted with the concurrence of the
majority of the Directors present at the meeting in person or by proxy.
Notwithstanding the foregoing, the below stated corporate actions shall be
referred to the Board of Directors and that no decision in relation thereto
shall be taken or implemented unless such decision has received the approval of
at least one OmniVision and one TSMC Board member, subject to any further
shareholders approval as required by the Company Law of ROC:
(a) The entering into any new business activity not provided herein or the
change in the major products;
(b) The alteration, amendment, cancellation or other change in the schedules
for technology transfer, production start up and output;
(c) The alteration, amendment, cancellation or invalidation of any and all
supply contracts or technical assistance agreements between the Corporation
and Taiwan Semiconductor Manufacturing Company Ltd., a company incorporated
under the laws of Taiwan, Republic of China ("TSMC"), OmniVision
Technologies, Inc., or OmniVision International Holding Ltd., an exempted
company incorporated under the Companies Law of Cayman Islands
("OmniVision");
(d) The incurring of any borrowings, loans or other indebtedness in excess of
one hundred Million NT Dollars (NT$100,000,000);
(e) The acquisition or disposal of any capital asset where the aggregate amount
involved in the transaction is more than fifty Million NT Dollars
(NT$50,000,000);
5
(f) The merger, acquisition, divestiture, transfer, sale or disposal of all or
a substantial portion of Corporation's business or assets, joint venture,
or partnership with, by or of Corporation;
(g) The alteration of the capital structure of the Corporation (the increase in
authorized capital, issuance of new shares or securities, etc.);
(h) The alteration, amendment or restatement of the Articles of Incorporation
of Corporation;
(i) The passage of any resolution to dissolve, liquidate, file voluntary
bankruptcy, wind up, or reorganize Corporation;
(j) The alteration or cancellation of the capitalization obligations of the
shareholders;
(k) The entering into any contractual commitment in excess of Fifty Million NT
Dollars (NT$50,000,000);
(l) The declaration of dividends;
(m) The sale or license of software, patents, other intellectual property or
other technology by the Corporation except as set forth in that certain
shareholders agreement by and between TSMC and OmniVision;
(n) Approval of annual and quarterly budgets, and proposals or reports required
to be submitted to the shareholders; and
(o) The entering into any technical assistance agreement, or the substantial
equivalent, between the Corporation and any party other than TSMC or
OmniVision
Article 22
- ----------
The Directors shall elect from among themselves a Chairman of the Board of
Directors, and may elect a Vice Chairman of the Board of Directors, by a
majority in a meeting attended by over two-thirds of the Directors. The
Chairman shall not have a second or casting vote at any meeting of the Board of
Directors. The Chairman of the Board of Directors shall have the authority to
represent the Corporation.
Article 23
- ----------
Except the first Board meeting of every term of the newly elected Board of
Directors, which shall be convened by the Director who has received the largest
number of votes after such new election, meetings of the Board of Directors
shall be convened by the Chairman of the Board of Directors, upon written
notice mailed to all the other Directors and Supervisor, at least seven (7)
days, unless in case of urgent circumstances, prior to the date of the meeting,
specifying the date and place of the meeting and its agenda. The meeting of the
Board of Directors shall be held at least once every quarter. Such prescribed
notices may be waived in writing by any Director and Supervisor, either before
or after the meeting. The meetings of the Board of Directors may be convened,
6
at any time, without such prescribed notice in case of urgent circumstances.
Notices shall be written in both the Chinese language and the English language.
Personal attendance at a meeting will represent a waiver of the notice. Any
Director attending the meeting via video conference shall be deemed attending
the meeting in person.
Article 24
- ----------
The Chairman of the Board of Directors shall preside over all meetings of the
Board of Directors. In addition, the Chairman shall have the right to execute
documents in accordance with the resolutions of the Board of Directors in the
name and on behalf of the Corporation as well as acting on behalf of the Board
pursuant to Board resolutions and the Corporation's objectives when the Board
is not in session. In his absence, the Vice Chairman of the Board of Directors,
or any one of the Directors shall be acting for him according to Article 208 of
the Company Law of the Republic of China.
Article 25
- ----------
A Director may, by written authorization, appoint another Director to attend on
his behalf any meeting of the Board of Directors, and to vote for him on all
matters presented at such meeting, but no Director may act as proxy for more
than one other Director.
Article 26
- ----------
In addition to such authority proscribed by law to a Board of Director(s), the
Board of Directors shall issue guidelines or directives for:
(a) The financial goals of the Corporation;
(b) The business plan of the Corporation;
(c) Any borrowing by the Corporation;
(d) The application and distribution of profits as dividends or otherwise as
provided herein;
7
(e) The appointment, terms of service, remuneration, and dismissal of the
managers of the Corporation except as is otherwise set forth in ROC Laws,
this Agreement, or the Articles of Incorporation of the Corporation;
(f) The size of the staff and of the work force required by the Corporation
from time-to-time and the general policies and guidelines for their
appointment and dismissal; and
(g) The extent of any special reserve funds, development funds, and bonus and
welfare funds.
The Directors shall exercise their functions by resolutions adopted at meetings
of shareholders and the Board of Directors.
Article 27
- ----------
The functions of the Supervisors shall be:
(1) To review the financial condition of the Corporation;
(2) To examine the accounting books and documents; and
(3) Any other functions assigned by law, rules, regulations or ordinance.
Article 28
- ----------
Supervisors, in addition to executing their own duties according to law, may
attend meetings of the Board of Directors and express their opinion, but shall
not be entitled to vote.
Article 29
- ----------
In the case that vacancies on the Board of Directors exceed, for any reason,
one third of the total number of the Directors, or all Supervisors are
discharged or resign concurrently, then the Board of Directors shall
immediately convene a shareholders' meeting to elect new Directors or
Supervisor to fill such vacancies in accordance with relevant laws, rules and
regulations. Except for the election of new Directors or Supervisor across the
board, the new Directors or Supervisor shall serve the remaining term of the
predecessors.
Article 30
- ----------
The Board of Directors is authorized to determine the compensation for the
Chairman, Directors and Supervisor, taking into account the extent and value of
the services provided for the management of the Corporation and the standards
of the industry within the R.O.C. and overseas.
8
Section V - Management of the Corporation
- -----------------------------------------
Article 31
- ----------
The Corporation may, by resolution of the Board of Directors, appoint a Chief
Executive Officer with overall responsibilities for the business of the
Corporation. The Corporation shall also have one President to be appointed by
the Board of Directors. Subject to the policies of the Corporation, the
President shall act under the direction of the Board of Directors headed by the
Chairman and be responsible for the overall control of allocated business and
operation of the Corporation and shall report to the Board of Directors. The
President shall supervise and control day-to-day business and operation of the
Corporation, subject to the policies of the Board of Directors headed by the
Chairman. The Chief Executive Officer shall cause to be prepared and furnished
to the Board of Directors of the Corporation a balance sheet of the Corporation
and related statements of income and loss, as of the end of each calendar
month, quarter and year. Monthly and quarterly statements shall be furnished no
more than sixty (60) days after the end of each month and quarter, and year-end
statements shall be furnished no more than ninety (90) days after the end of
each year. Such financial statements shall be prepared in accordance with
generally accepted accounting principles applied in the Republic of China on a
consistent basis. Such statements shall be accompanied by a certification of
the Corporation that such statements have been so prepared.
Article 32
- ----------
The President and Vice Presidents shall perform such duties as designated by
the Board of Directors. The President and Vice Presidents may, in accordance
with Chief Executive Officer's authorization, handle all matters within the
scope of his/her responsibilities and sign documents on behalf of the
Corporation.
Article 33
- ----------
Subject to the provisions of the Company Law of the Republic of China and these
Articles of Incorporation, all actions of the Corporation's officers shall be
in conformance with, and in furtherance of, the directions of the Board of
Directors.
9
Section VI - Financial Reports
- ------------------------------
Article 34
- ----------
The fiscal year for the Corporation shall be from January 1 of each year to
December 31 of the same year. After the close of each fiscal year, the
following reports shall be prepared by the Board of Directors, and, after being
audited by the Supervisors of the Corporation, shall be submitted by the Board
of Directors to the regular shareholders' meeting for acceptance:
(1) Business Report;
(2) Financial Statements; and
(3) Proposal Concerning Appropriation of Net Profits or Covering of Losses.
Article 35
- ----------
(1) When allocating the net profits for each fiscal year, the Corporation shall
first offset its losses in previous years and set aside a legal capital
reserve at 10% of the profits left over, until the accumulated legal
capital reserve has equaled the total capital of the Corporation; then set
aside 0.3% of the balance as bonus to directors and supervisors and not
less than 1% as bonus to employees of this Corporation. The Corporation may
issue stock bonuses to employees of an affiliated company meeting the
conditions set by the Board of Directors or, by the person duly authorized
by the Board of Directors. Any balance left over shall be the shareholders
dividends.
Section VII - Supplementary Provisions
- --------------------------------------
Article 36
- ----------
The internal organization of the Corporation and the detailed procedures of
business operation shall be determined by the Board of Directors.
Article 37
- ----------
In regard to all matters not provided for in these Articles of Incorporation,
the Company Law of the Republic of China shall govern.
Article 38
- ----------
These Articles of Incorporation are agreed to and signed on , 2003
------------
by all the promoters of the Corporation.
10