AMENDED AND RESTATED OPTION
TO PURCHASE SHARES OF COMMON STOCK OF FAROUDJA, INC.
THIS AMENDED AND RESTATED OPTION TO PURCHASE SHARES OF COMMON STOCK OF
FAROUDJA, INC. dated as of December 31, 1996 (the "Option"), is made and
entered into by and among ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("Y&I"),
▇▇▇▇▇▇▇▇, Inc., a Delaware corporation ("FI"), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ as
liquidating trustee ("Liquidating Trustee") for Faroudja Images, Inc.
("Holder") and Faroudja Images, Inc., a Delaware corporation ("FII").
WHEREAS, Y&I granted separate options to purchase 2,120,192 shares of
common stock of Faroudja Laboratories ("FLI"), Inc., a California corporation
("FLI Option") and 480,264 shares of common stock of Faroudja Research
Enterprises ("FRE"), Inc., a California corporation ("FRE Option") to FII on
March 8, 1996.
WHEREAS, pursuant to the merger of FRE with and into FLI ("FLI/FRE
Merger"), all of the common stock of FRE was converted into FLI common stock
at the conversion ratio of .2125782 of a share of FLI common stock for each
outstanding FRE share of common stock;
WHEREAS, pursuant to the merger ("FLI/FAI Merger") of Faroudja
Acquisition, Inc., a California corporation and indirect wholly-owned
subsidiary of FLI, with and into FLI following the FLI/FRE Merger, all of the
common stock of FLI was converted into common stock of FI at the conversion
ratio of .6918552 of a share of FI common stock for each outstanding FLI
share of common stock, which resulted in an aggregate of 1,537,500 shares of
common stock of FI at an aggregate exercise price of $6,000,000 subject to
the FLI Option and FRE Option;
WHEREAS, pursuant to the FLI/FRE Merger and the FLI/FAI Merger
(collectively, the "Mergers"), FLI became a wholly-owned subsidiary of FI;
WHEREAS, FII liquidated effective December 31, 1996 (the "FII
Liquidation") and the assets, including the FLI Option and FRE Option, were
distributed to the Liquidating Trustee of FII to be subsequently distributed
at a later date to the shareholders of FII, including Faroudja Image
Investors LLC which is contemplated to be later formed (collectively, the
"Option Holders"), whose names, the number of shares of Common Stock of FI
subject to the portion of the FLI Option and FRE Option to be distributed to
such Option Holder, as amended and restated ("FI Option") and the aggregate
exercise price of each such FI Option which will be held by each Option
Holder, is set forth in the table below:
NO. OF FI
OPTION HOLDER SHARES EXERCISE PRICE
------------- ----------- --------------
▇▇▇▇▇▇▇ Investors, LLC 486,875 $1,900,000
Images Partners, LP 384,375 $1,500,000
Faroudja Images Investors, LLC 666,250 $2,600,000
--------- ----------
1,537,500 $6,000,000
WHEREAS, upon the subsequent distribution by the Liquidating Trustee Y&I
will concurrently enter into options ("Other Options") with holders of the
Other Options ("Other Holders") on the same terms as the Holder to reflect
the grant of separate options for the number of FI shares and at the exercise
price set forth in the preceding table;
WHEREAS, Y&I, FII and Holder want to amend and restate and confirm the
distribution from FII of the FLI Option and the FRE Option by entering into
this Agreement to reflect transactions resulting from the FLI/FRE Merger, the
FLI/FAI Merger (collectively, the "Mergers") and the FII Liquidation;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Y&I (collectively, the "Sellers") hereby grant to the Holder an option to
purchase from the Sellers, at any time or from time to time on or after
December 31, 1996 (the "Commencement Date") but not later than the earlier of
(i) the initial closing date of the sale of shares by FI to the public
pursuant to a registration statement filed with the SEC in compliance with
the Securities Act of 1933, as amended ("IPO") or (ii) September 5, 1997 (the
"Expiration Date"), for a price of $6,000,000 (the "Stock Purchase Price"),
1,537,500 shares of common stock of FI (the "Shares"), free and clear of all
claims, liens, security interests, restrictions, rights and other
encumbrances ("Liens"). The Sellers are granting this option pursuant to the
letter agreement dated November 13, 1995 among the Sellers and ▇▇▇▇▇▇▇ ▇▇▇▇▇
Holdings, Inc. ("ST"), as amended by the amendment to letter agreement dated
February 9, 1996 among the Sellers, ST and FII and pursuant to the Mergers
and the FII Liquidation.
This Option is subject to the following terms and conditions:
1. TERM AND EXERCISE. The Holder shall have the right, at any time or
from time to time on or after the Commencement Date but not later than the
Expiration Date, to give notice to the Sellers, of the purchase of all, but
not fewer than all, the Shares, upon written notice (the "Option Exercise
Notice") given to the Sellers on one occasion; provided, however, that such
right to exercise this Option is conditioned upon all Other Holders
simultaneously providing an Option Exercise Notice under the Other Options
and closing the purchase and sale under the Other Options on the same date,
unless Y&I waive this condition as to this Option and/or either or both of
the Other Options.
2
2. PAYMENT; DELIVERY OF SHARES. If the Holder exercises the Option
prior to the Expiration Date, the Holder and the Sellers shall consummate the
purchase and sale at FI's office at 10:00 a.m. (California time) on the
business day designated by, and mutually agreeable to, the Holder and the
Other Holders by written notice given to the Sellers, which shall not be
fewer than five or more than ten business days after the delivery of the
Option Exercise Notice. At the closing (the "Option Closing"):
(a) the Sellers shall deliver or cause to be delivered to the Buyer
certificates representing all the Shares, free and clear of all Liens,
together with duly executed stock powers, with all required stock transfer
tax stamps attached and all appropriate estate tax waivers; and
(b) the Holder shall deliver, to an account or accounts designated
by both Sellers, the Stock Purchase Price.
3. NO ISSUANCES OR OTHER DILUTIVE ACTIONS.
3.1 Prior to the Expiration Date, neither Seller nor Holder (either
as a shareholder or through directors elected to represent such parties)
shall take any action to permit FI, without the prior written consent of (i)
▇▇▇▇ ▇▇▇▇▇▇▇▇ and (ii) the Holder and Other Holders holding in aggregate
Options and Other Options exercisable for a majority of the shares of FI
subject to this Option and the Other Options, to issue any securities to any
person, other than upon the exercise or conversion of options, warrants or
other rights outstanding on the date of this Option, or to distribute any
securities or other property to its securityholders, or to consolidate or
merge with or into another entity or to sell all or substantially all of its
assets.
3.2 Prior to an initial public offering of the common stock of FI
(at some later date) the parties hereto agree that the capitalization of FI
and the respective share ownership of the parties to this Option and other
listed shareholders and/or categories shall remain the same as set forth in
Exhibit "A" attached hereto, except that the FI Options may be exercised, and
further agree that the share capitalization of FI cannot be changed without
the prior written consent of (i) ▇▇▇▇ ▇▇▇▇▇▇▇▇ and (ii) the Holder and Other
Holders holding in aggregate Options and Other Options exercisable for a
majority of the shares of FI subject to this Option and the Other Options.
4. ESCROW AGREEMENTS. Subject to the terms and conditions of the
escrow agreement among FII (which will be amended to add the Holder and Other
Holders as parties in substitution for FII), the Sellers and Escrow Agent
(which will be amended to substitute Bank of the West Trust and Investment
Services Division, as successor escrow agent) (the "Escrow Agreement"), as
amended, the Sellers will be authorizing the Escrow Agent to exchange the
shares of FLI and FRE held pursuant to the FLI Option and FRE Option for the
Shares and shares subject to the Other Options.
3
5. MISCELLANEOUS.
5.1 NOTICES. All notices and other communications under this
Option shall be in writing and may be given by any of the following methods:
(a) personal delivery; (b) facsimile transmission; (c) registered or
certified mail, postage prepaid, return receipt requested; or (d) overnight
delivery service. Notices shall be sent to the appropriate party at its, his
or her address or facsimile number given below (or at such other address or
facsimile number for that party as shall be specified by notice given under
this Section 5.1):
if to either Seller, to him or her at:
Faroudja, Inc.
c/o Faroudja Laboratories, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Bank of the West Trust and Investment
Services Division
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, Fields & Younger
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Coudert Brothers
Four Embarcadero Center, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Holder, to it at:
the address set forth on the signature page of this Option
4
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ Securities, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Proskauer ▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices and communications shall be deemed received upon (a) actual
receipt by the addressee, (b) actual delivery to the appropriate address or
(c) in the case of a facsimile transmission, upon transmission by the sender
and issuance by the transmitting machine of a confirmation slip confirming
the number of pages constituting the notice having been transmitted without
error. In the case of notices sent by facsimile transmission, the sender
shall contemporaneously mail a copy of the notice to the addressee at the
address provided above. However, such mailing shall in no way alter the time
at which the facsimile notice is deemed received.
5.2 AMENDMENT. This Option may be modified or amended or the
provisions of this Option may be waived only with the written consent of the
Sellers and the Holder (it being understood that the Sellers shall, at the
request of the Holder, cooperate with the Holder to modify this Option or to
restructure this Option in any manner that does not adversely affect the
Sellers).
5.3 GOVERNING LAW. This Option shall be governed by the law of the
State of California, without regard to provisions thereof relating to
conflicts of laws.
5
5.4 ASSIGNMENT. This Option may not be assigned, in any manner,
without the written consent of Sellers, except that the Liquidating Trustee
may assign this Option to the entities (and in the amounts) as listed in the
Fifth whereas clause of this Option.
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Option to be duly executed as of the date first hereinabove written
above.
FAROUDJA, INC.,
a Delaware corporation
By: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇, President
/S/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
/S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Accepted and Agreed:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ as Liquidating Trustee for Faroudja Images, Inc.
By: /S/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-----------------------------
Address: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇.
18th Floor
New York, NY 10022
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
FAROUDJA IMAGES, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Secretary
6
EXHIBIT "A"
FI CAPITALIZATION
SECURITY HOLDER FI C/S PERCENT
--------------- ------ -------
Stock Option Plans(1) 1,800,000 17.86%
Y&I Direct Ownership 2,050,000 20.34%
Y&I Option Shares 1,537,500
▇▇▇▇▇▇▇ Investors, LLC 486,875 4.83%
Images Partners, LP 384,375 3.81%
Faroudja Images Investors, LLC 666,250 6.61%
FII Direct Ownership 4,612,500 45.76%
▇▇▇▇▇▇▇ Contingent Warrant 65,152 0.65%
▇▇▇▇ ▇▇▇ Warrant 14,449 0.14%
---------- ------
TOTAL 10,079,960 100%
(1) The Stock Option Plans for FI break down as follows:
STOCK OPTION PLAN RESERVED C/S GRANTED OPTIONS
----------------- ------------ ---------------
1995 Stock Option Plan 1,400,000 1,386,578
1997 Performance Stock Option Plan 300,000 0
1997 Non-Employee Director Stock Option 100,000 26,060
Plan
7