<PAGE>

                                                                     Exhibit 4.2
                   United Microelectronics Corporation Limited

              Employee Stock Option Plan (Translation from Chinese)

1.    Plan Objectives:

      The objectives of this stock option plan (the "Plan") are to attract and
      retain the talents/skilled employees needed for the development of the
      Company, to provide incentives for employees to stay on their jobs, and to
      enhance employees' loyalty to the Company, all of which are intended to
      promote the interests of both the Company and the shareholders.

2.    Issue Period:

      The stock options will be granted within one year from the date of receipt
      of notice from the relevant authority (the "Authority") indicating that
      the Company's filing of the Plan with the Authority has become effective.
      The options may be granted in one or more tranches. The actual issue
      date(s) will be decided by the Chairman (the "Chairman") of the Board of
      Directors (the "Board") of the Company.

3.    Manner of Settlement:

      Settlement upon the exercise of the stock options will be made through the
      issue of new shares by the Company.

4.    Optionees:

      Only full-time regular employees of the Company and its domestic and
      overseas subsidiaries are eligible for the Plan, and the base date for
      eligibility shall be determined by the Chairman. In practice, eligible
      employees and the number of options that can be granted to an employee
      will be determined by a number of factors, including seniority, job grade,
      job performance, contribution, special achievement and other conditions
      deemed relevant by the management. The grant of options to respective
      employees will be finalized following the approval of the Chairman and
      consent of the Board.

      In case an optionee violates the employment agreement, codes of conduct or
      other company rules, the Company may, taking into account the severity of
      the violation, revoke, in whole or in part, the vested options of said
      employee that remain unexercised.

      The number of options granted to any single optionee shall not exceed ten
      percent (10%) of the total number of options granted, and the number of
      options to be exercised by any single optionee in each fiscal year under
      the Plan shall not exceed one percent (1%) of the number of outstanding
      shares of common stock of the Company at the year-end.

<PAGE>

5.    Volume of Issue:

      The total number of options to be granted under the Plan is one billion
      (1,000,000,000) units, with each unit entitling the optionee to subscribe
      for one (1) share of Company's common stock. The total number of new
      shares of common stock to be issued for settlement of the options granted
      shall be one billion (1,000,000,000) shares.

6.    Terms:

      a.  Exercise price: The exercise price for the options is the closing
          price of the Company's common shares on the Taiwan Stock Exchange on
          the day the options are granted.

      b.  Vesting Schedule: The grant period (the "Grant Period") for options is
          six (6) years, during which optionees may not transfer their options
          except to heirs. Upon the expiry of the grant period, unexercised
          options will be deemed forfeited by the optionee and the optionee may
          no longer claim the right to exercise the options.

          Unless the options are otherwise revoked in part or in whole, an
          optionee may exercise his/her options in accordance with the following
          schedule starting two years after the grant of options:

          (1)  an optionee may exercise up to 50% of his/her options two years
               after the grant, i.e., 50% of options shall vest in two years
               after the grant.

          (2)  an optionee may exercise up to 75% of his/her options three years
               after the grant, i.e., 75% of options shall vest in three years
               after the grant.

          (3)  an optionee may exercise up to 100% of his/her options four years
               after the grant, i.e., 100% of options shall vest in four years
               after the grant.

      c.  Type of shares underlying the options: common shares of the Company.

      d.  Optionees whose employment is terminated shall exercise their options
          during the aforesaid grant period in accordance with the following
          provisions:

          (1)  Voluntary Termination or Termination in accordance with the Labor
               Law of ROC:

               The employee shall exercise his/her vested options within thirty
               (30) days after termination of employment. Where days of the
               aforesaid period fall in the closed period as specified in the
               Plan, the exercise period may be extended accordingly. Upon the
               expiration of the aforesaid exercise period, unexercised options
               are deemed forfeited by the employee. Unvested options of the
               employee will lapse on the employment termination date.

          (2)  Retirement:

<PAGE>

               The employee may exercise all options received upon retirement
               without being subject to the restrictions specified under Article
               6.b. hereof, provided that two years have elapsed since the grant
               of options. However, the options shall be exercised within one
               (1) year from the later of: (x) the date of retirement and (y)
               two years after the grant of options. Upon the expiration of the
               aforesaid exercise period, unexercised options are deemed
               forfeited by the employee.

          (3)  Death of General Cause:

               The heir(s) of the deceased employee may exercise the vested
               options of said employee within one (1) year starting from the
               date of death. Upon the expiration of the aforesaid exercise
               period, unexercised options are deemed forfeited by the heir(s)
               of employee. Unvested options of the employee will lapse on the
               day of death of said employee.

          (4)  Occupational Casualty:

               (a)  Unless otherwise specified by law, employees who are unable
                    to continue their employment due to occupational casualty
                    may, upon departure, exercise all options received without
                    being subject to the restrictions specified under Article
                    6.b. hereof. However, the options shall be exercised within
                    one (1) year from the later of: (x) the date of departure or
                    two (2) years after the grant of options. Upon the
                    expiration of the aforesaid exercise period, unexercised
                    options are deemed forfeited by the employee.

               (b)  Unless otherwise specified by law, the heir(s) of employee
                    who died in occupational casualty may exercise all remaining
                    options received by said employee within one (1) year from
                    the date of death without being subject to the restrictions
                    specified under Article 6.b. hereof. However, the options
                    shall be exercised within one (1) year from the later of:
                    (x) the date of death or (y) two (2) years after the grant
                    of options. Upon the expiration of the aforesaid exercise
                    period, unexercised options are deemed forfeited by the
                    heir(s) of said employee.

          (5)  Transfer:

               In case an employee requests to transfer to an affiliated company
               or another company, the options granted to said employee shall be
               settled in accordance with Article 6.d.(1) hereof or by the
               related rules specified for dismissal under the Labor Law of ROC.
               However, if the transfer is initiated by the Company due to
               business needs, options granted to said employee shall not be
               affected by the transfer.

          (6)  Leave Without Pay:

               In case an employee is approved to leave without pay, his/her
               vested options shall be exercised within thirty (30) days from
               the day of leave. Where days of the aforesaid period fall in the
               closed period as specified in the Plan, the exercise

<PAGE>

               period may be extended accordingly. Upon the expiration of the
               aforesaid exercise period, unexercised options are deemed
               forfeited by the employee. Unvested options of the employee shall
               be reinstated on the day said employee returns to work, while the
               exercise schedule provided in Article 6.b. hereof shall be
               extended according to the duration of leave and the options shall
               still be exercised during the Grant Period specified herein.

          (7)  Layoff:

               An employee who has been laid off shall exercise his/her vested
               options within thirty (30) days after termination of employment.
               Where days of the aforesaid period fall in the closed period as
               specified in the Plan, the exercise period may be extended
               accordingly. Upon the expiration of the aforesaid exercise
               period, unexercised options are deemed forfeited by the employee.
               Unvested options of the employee will lapse upon the effective
               date of the layoff, unless otherwise approved by the Chairman and
               subsequently confirmed by the Board.

          (8)  Termination of Employment Due to Other Causes:

               In case of termination or adjustment of employment under
               circumstances other than those described above, the Grant Period
               and vesting schedule for options granted specified in Article
               6.b. hereof or otherwise approved by the Chairman and subject to
               subsequent confirmation by the Board shall apply.

          (9)  Options not exercised by an employee or his/her heir(s) during
               the period specified in Article 6.b. hereof shall be deemed
               forfeited.

     e.   Upon expiration of the Grant Period, all vested but unexercised
          options shall be deemed forfeited by the employee and the optionee may
          no longer claim the right to exercise the options.

     f.   The Company will cancel all options forfeited by the employee or
          revoked by the Company without reissue.

7.   Adjustment of the Exercise Price:

     After the issuance of the options, the exercise price shall not be
     adjusted, except in the case the Company increases its capital by
     capitalizing surplus and/or capital reserve, the exercise price shall be
     adjusted based on the following formula:

     (Computation up to two decimal points of New Taiwan dollars and the
     fraction is rounded off at 4 to become 5)

     Exercise price after adjustment =

     [(Exercise price before adjustment x shares issued) + (Amount paid for each
     share x number of new shares issued)] / (shares issued + number of new
     shares issued)

<PAGE>

          a.   "Shares issued" means the total number of common shares issued,
               including the number of treasury shares which have not been
               cancelled or transferred, but excluding outstanding entitlement
               certificates issued in connection with the Plan or convertible
               bonds.

          b.   In the case of free distribution of shares, the amount paid for
               each share shall be zero.

          c.   If the exercise price after adjustment exceeds the exercise price
               before adjustment, no adjustment shall be made.

     8.   Procedure for Exercising Options:

          a.   Except the pre-defined closed period or a period in which
               exercise of options is not permitted by relevant laws or
               regulations or otherwise stipulated under the Plan, the optionee
               may, in accordance with Article 6(b) hereof, exercise the right
               to purchase shares by submitting a written request (the "Exercise
               Request") to the Company's stock transfer agent, SinoPac
               Securities Co.'s Department of Securities Affairs (the "Transfer
               Agent").

          b.   Upon receipt of the Exercise Request, the Transfer Agent shall
               notify the optionee that payment shall be made at a designated
               bank. The Exercise Request is irrevocable once the payment is
               made.

          c.   Unless otherwise stipulated in the Plan hereof, upon confirmation
               of payment the Transfer Agent shall register the number of shares
               exercised in the shareholders record and, within five (5)
               business days, issue the entitlement certificates.

          d.   Entitlement certificates are tradable upon the delivery to the
               optionee.

          e.   The pre-defined closed period mentioned under Article 8(a) above
               means:

               (1)  The period commencing on the seventh (7th) business day
                    prior to the date of the Board meeting in preparation for
                    the annual shareholders' general meeting, including the day
                    on which the Board meeting is being held, and ending on the
                    stock dividend record date or dividend record date,
                    whichever comes later. If the annual shareholders' general
                    meeting resolves not to distribute any dividends for that
                    year, the closed period shall end on the date the annual
                    shareholders' general meeting was held.

               (2)  The period commencing from the date of the Board meeting
                    date in which the merger record date is determined and
                    ending on the merger record date; or the period commencing
                    from the Board meeting date in which the stock split record
                    date is determined and ending on the stock split record
                    date; or the period commencing the Board meeting date in
                    which the dividend record date is determined and ending on
                    the dividend record date.

<PAGE>

     9.   Exchange for Common Shares:

          a.   The Company will establish the following three dates of each year
               as the consolidation dates on which the Company will proceed with
               the application for updating its paid-in capital and for the
               issuance of new shares with the Authority.

               (1)  Seven (7) business days prior to the annual Board meeting
                    (including the Board meeting date) in preparation for the
                    annual shareholders' general meeting.

               (2)  September 28.

               (3)  December 28.

          b.   In conjunction with the update registration for updating the
               Company's paid-in capital, all option holders that have submitted
               the Exercise Request with the Transfer Agent and paid in full
               prior to the consolidation date (excluding the consolidation
               date) may be included in such registration.

          c.   After completion of the registration for the paid-in capital
               update, printing of the share certificates, authenticating the
               share certificates and all other necessary procedures, the
               Company shall deliver the common shares in exchange for
               entitlement certificates.

     10.  Rights and Obligations after Exercising Options:

          The holders of entitlement certificates of the Company issued under
          the Plan shall have the same rights and obligations as holders of
          common shares of the Company.

     11.  Taxes:

          All optionees that have exercised their options shall pay related
          taxes as specified under the tax laws of the Republic of China.

     12.  Confidentiality and Restrictions on Disposal:

          a.   All employees who receive stock options of the Company must
               comply with relevant rules concerning confidentiality. Optionees
               are prohibited from inquiring other employees for information or
               disclosing related information to others, including, but not
               limited to, the number of options received and the interest
               related thereof. In case an optionee breaches this provision, the
               Company may revoke the unexercised options of said optionee.

          b.   In case an employee, after receiving the grant of options, is
               found to have grossly violated the employment agreement, codes of
               conduct or other company rules, the Company has the right to
               immediately revoke the unvested options, as well as vested but
               unexercised options of said employee, and demand compensation
               from said employee in an amount equivalent to all profits said
               employee has earned from

<PAGE>

               exercising his/her options within two years prior to the date of
               gross violation. The computing formula for the profits is: (the
               market price on the date of exercise - exercise price) x number
               of shares.

          c.   Employees shall not transfer, hypothecate, or pledge their
               options and related interest, or give them to others as a gift or
               dispose of them in any other manner.

     13.  Enforcement Rules:

          With respect to matters concerning the name list, seal, payment,
          issuance of share certificates, and other related procedures,
          operation details and timing, the Transfer Agent shall notify the
          optionees separately.

     14.  Other Important Provisions:

          a.   The Plan shall become effective upon the resolution by the Board
               and the approval by the Authority. In case of changes in relevant
               laws or regulations, reversal of decision by the Authority or
               changes in the objective environment, the amendment or
               termination of the Rules herein shall require both approval of at
               least 2/3 of the directors at a meeting at which at least half of
               all the directors are present and approval by the regulatory
               authority.

          b.   For matters not specified herein, relevant laws and regulations
               of the Republic of China shall govern.