Joint Venture Agreement

JOINT VENTURE AGREEMENT


BETWEEN


SONICblue INCORPORATED,


SONICA3, INC.


AND


VIA TECHNOLOGIES, INC.


DATED AS OF JANUARY 3, 2001


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TABLE OF CONTENTS


PAGE
---- 1. DEFINITIONS.................................................................................................1


1.1. "Articles of Association".............................................................................1
1.2. "Board of Directors"..................................................................................1
1.3. "Business Day"........................................................................................1
1.4. "Class A Common Shares," "Class B Common Shares" and "Class C Common Shares".........................1
1.5. "Confidential Information"............................................................................1
1.6. "Independent Accounting Firm".........................................................................2
1.7. "Investment Agreement"................................................................................2
1.8. "Memorandum of Association"...........................................................................2
1.9. "Transfer"............................................................................................2


2. INCORPORATION...............................................................................................2


2.1. Formation of JV.......................................................................................2
2.2. The Name of JV........................................................................................2
2.3. Principal Offices.....................................................................................2
2.4. Capital Contributions; Liabilities....................................................................2
2.5. Reimbursement of Incorporation Expenses...............................................................3
2.6. Profit-Based Earn Out.................................................................................4


3. MANAGEMENT OF JV............................................................................................4


3.1. Meetings and Resolutions of Stockholders..............................................................4
3.2. Election of Directors.................................................................................4
3.3. Officers..............................................................................................4
3.4. Statement of Policy...................................................................................4
3.5. Accounting and Reporting Obligations..................................................................5


4. RIGHTS AND OBLIGATIONS OF THE PARTIES.......................................................................5


4.1. Reports and Statements................................................................................5
4.2. Transfer of Shares....................................................................................5
4.3. Confidentiality.......................................................................................6


5. TERM AND TERMINATION........................................................................................8


5.1. Closing Date..........................................................................................8
5.2. Term..................................................................................................8
5.3. Termination Events....................................................................................8
5.4. Nonsolicitation.......................................................................................8


6. MISCELLANEOUS...............................................................................................8


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TABLE OF CONTENTS
(CONTINUED)
PAGE
----
6.1. Force Majeure.........................................................................................8
6.2. Assignment............................................................................................9
6.3. Survival..............................................................................................9
6.4. Notices...............................................................................................9
6.5. Export Control.......................................................................................10
6.6. Entire Agreement.....................................................................................10
6.7. Modification.........................................................................................11
6.8. Severability.........................................................................................11
6.9. No Waiver............................................................................................11
6.10. Governing Law and Dispute Resolution.................................................................11
6.11. Language.............................................................................................11
6.12. No Agency............................................................................................11
6.13. No Third Party Beneficiaries.........................................................................11
6.14. Headings.............................................................................................12
6.15. Construction and Reference...........................................................................12
6.16. Governmental Approvals...............................................................................12
6.17. Counterparts.........................................................................................12


Exhibits:


Exhibit A Articles of Association
Exhibit B Memorandum of Association


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JOINT VENTURE AGREEMENT


This Joint Venture Agreement (this "Agreement"), dated as of January 3, 2001 between SONICblue Incorporated, a corporation organized under the laws of the State of Delaware and Sonica3, Inc., a Delaware corporation (collectively "SONICblue" unless otherwise indicated herein), and VIA Technologies, Inc., a corporation organized under the laws of Taiwan ("VIA").


INTRODUCTION


A. SONICblue is engaged in the manufacture and sale of graphic accelerators and has a wide and rich experience in this field of industry.


B. VIA is engaged in the manufacture and sale of core logic chipsets and has a wide and rich experience in this field of industry.


C. SONICblue and VIA desire to form a corporation under the laws of the Cayman Islands ("JV") for the purpose of manufacturing and distributing graphics products and conducting related research and development activities. SONICblue Incorporated has designated Sonica3, Inc. to hold the Class A Common Shares of JV pursuant to Section 2.2(f) of the Investment Agreement (as defined below).


IN CONCLUSION, in consideration of the foregoing premises and the covenants contained herein, the parties agree as follows:


1. DEFINITIONS. Unless otherwise defined herein, capitalized terms used in this Agreement shall have the meanings ascribed to them in the Investment Agreement (as defined below). In addition, for the purpose of this Agreement, the following terms shall have the meanings hereinafter set forth:


1.1 "Articles of Association" shall mean the Articles of Association of JV attached hereto as Exhibit A, as amended from time to time.


1.2 "Board of Directors" shall mean the board of directors of JV as from time to time constituted pursuant to the terms of this Agreement.


1.3 "Business Day" shall mean any day except a Saturday, Sunday or other day on which commercial banks in New York are authorized or required by law or executive order to close.


1.4 "Class A Common Shares," "Class B Common Shares" and "Class C Common Shares" are defined in the Memorandum of Association.


1.5 "Confidential Information" shall mean any trade secrets, know-how, data, formulas, processes, source code, netlists, Intellectual Property or other nonpublic information, tangible or intangible, of one party that becomes known by the other party.


5 Any information exchanged by the parties and entitled to protection under this Agreement shall be identified as such by appropriate marking as "Confidential" on any documents exchanged, or, if the disclosure has been made orally or if it is not feasible to mark the disclosed information, then the disclosing party shall identify the information as "Confidential" at the time of disclosure and, within two (2) weeks of the disclosure, shall confirm in writing the confidential nature of such disclosure.


1.6 "Independent Accounting Firm" shall mean a certified public accounting firm qualified under the laws of the United States that, under the rules of the American Institute of Certified Public Accountants and the SEC, is independent from the Person retaining such firm.


1.7 "Investment Agreement" shall mean the Amended and Restated Investment Agreement, between SONICblue and VIA, dated as of August 28, 2000.


1.8 "Memorandum of Association" shall mean the Memorandum of Association of JV attached hereto as Exhibit B, as amended from time to time.


1.9 "Transfer", when used as a verb, shall mean to sell, pledge, assign, encumber, dispose of or otherwise transfer (including by merger, testamentary disposition, interspousal disposition pursuant to a domestic relations proceeding or otherwise or otherwise by operation of law), or, when used as a noun, means a sale, pledge, assignment, encumbrance, disposition, or other transfer (including a merger, testamentary disposition, interspousal disposition pursuant to a domestic relations proceeding or otherwise or other transfer by operation of law).


2. INCORPORATION.


2.1 Formation of JV. On the day prior to the Closing Date and after receipt of all Government Approvals, the Parties shall form JV by filing the Memorandum of Association and Articles of Association in the forms attached hereto as Exhibits A and B. On the Closing Date, the parties shall cause JV to execute this Agreement, the Investment Agreement, and the other JV Transaction Agreements to which it is a party and, thereupon, it shall become a party to this Agreement and the Investment Agreement, and the other JV Transaction Agreements to which it is a party.


2.2 The Name of JV. The name of JV shall be set forth in the Memorandum of Association as S3 Graphics Co., Ltd.


2.3 Principal Offices. The principal office and place of business of JV shall be located at 2841 Mission College Boulevard, Santa Clara, California, or at such other place as the Board of Directors may from time to time designate. The registered office of the company shall be at the offices of Charles Adams, Ritchie & Duckworth, P.O. Box 709 GT, Zephyr House, Mary Street, Grand Cayman, Cayman Islands, B.W.I.


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2.4 Capital Contributions; Liabilities.


2.4.1 The authorized capital stock of JV shall consist of the number and classes of shares set forth in the Memorandum of Association and each class of shares shall have such rights, preferences and privileges, and the qualifications, limitations or restrictions thereof, as are described in the Memorandum of Association. The parties hereby agree to form JV through the filing of the Memorandum of Association and Articles of Association, which provide that the Class A shareholders the Class B shareholders and Class C shareholders shall have fifty percent (50%), forty-eight percent (48%) and two percent (2%), respectively, of the voting power of JV irrespective of the actual number of outstanding shares of such class with respect to the election of directors and own one tenth of ...