CONSULTING AGREEMENT
This Consulting Agreement, dated as of July 22, 1997 (the "Agreement"), is
entered into by and among Faroudja, Inc., a Delaware corporation ("FI"),
Faroudja Laboratories, Inc., a California corporation and wholly-owned
subsidiary of FI ("FLI") and Xxxxxxx X. Xxxxxx ("Consultant"). FI and FLI are
collectively referred to herein as the "Company."
RECITALS
A. The Company desires to employ the Consultant as a consultant to the
Company and the Consultant desires to provide specified services to the Company
as its consultant.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and for other good and valuable consideration had and received, the
parties agree as follows:
1. TERM. Subject to the terms of this Agreement, the Company has
retained the Consultant for a period of one (1) year, beginning on the date
hereof (the "Term"), and the Consultant hereby accepts such retention by the
Company. This Agreement shall be renewable upon the mutual consent of the
Consultant and the board of directors of FI (the "BOD").
2. SERVICES PROVIDED. The Consultant will advise the Company as a
consultant on strategic, technology and communications matters and will provide
such assistance and advice related to such matters as the Company may request,
including, but not limited to the following (some of which may have been
previously performed by the Consultant):
2.1 working with management of the Company and the underwriters for
the Company's initial public offering to develop the Company's vision and
strategy and to express the same in FI's Form S-1 Registration Statement (the
"Form S-1");
2.2 drafting and overseeing revisions to the "Business" section of
the Form S-1;
2.3 working with external public relations/investor relations firms
to promote the Company's central role in the evolving digital television
environment to the press, the personal computer industry, the broadcast
industry, the television manufacturing industry and the financial community;
2.4 representing the Company at seminars and industry workshops;
2.5 assisting the Company in the development of its strategic
planning process, including, but not limited to (i) catalyzing and facilitating
the Company's strategic
planning process, (ii) coordinating the Company's strategic vision with research
and development, engineering, marketing and finance, (iii) drafting the
Company's initial internal strategic plan for internal review and comment, and
(iv) deriving the Company's external plan, which will be presented to third
parties, from its internal plan; and
2.6 coordinating and overseeing the development of public relations
and investor relations plans.
3. COMPENSATION AND EXPENSES.
3.1 COMPENSATION. For services rendered by the Consultant during the
Term, and any extensions thereof, the Company shall pay the Consultant a
consulting fee (the "Consulting Fee") of seven thousand dollars ($7,000) per
month, to be paid by the Company in accordance with those regular procedures
adopted by the Company from time to time. Notwithstanding the above, upon the
full exercise of the Faroudja Option (as defined below), the Consulting Fee
shall be reduced to five thousand dollars ($5,000) per month for the remainder
of the Term, and any extensions thereof. Consultant may also receive a
performance-based year-end bonus which shall be determined by the BOD in its
sole discretion.
"Faroudja Option" as used in this Section 3.1 shall mean that
certain option to purchase a total of 1,537,500 shares of FI common stock for an
aggregate purchase price of six million dollars ($6,000,000) previously granted
by Yves Faroudja and Xxxxxxx Faroudja to Xxxxxxx Investors, LLC, Images
Partners, L.P. and Faroudja Images Investors, LLC.
3.2 STOCK OPTIONS. For services rendered by the Consultant under
this Agreement, FI hereby grants to the Consultant under its 1997 Performance
Stock Option Plan (the "1997 Plan") an option, dated July 22, 1997 (the
"Consultant Option"), to purchase 50,000 shares of FI's common stock (the
"Shares") at an exercise price of $9.50 per share. The Consultant Option shall
have a term of three (3) years, subject to the provisions of the 1997 Plan, and
shall vest as to 1/24th of the Shares each month during the first year after the
date of this Agreement and as to 1/2 of the Shares one (1) year after the date
of this Agreement.
3.3 EXPENSES. The Company shall reimburse the Consultant for
reasonable and actual out-of-pocket business expenses incurred by the Consultant
in the performance of his responsibilities hereunder, provided the Consultant
shall first furnish proper voucher and expense accounts setting forth the
information required by the United States Treasury Department for deductible
business expenses. Expense items greater than one thousand dollars ($1,000),
except for customary travel expenses, must be approved in advance by the
President or Vice President-Finance of FI.
4. TRADE SECRETS. Consultant shall not disclose or use in any way,
either during his engagement with the Company or thereafter, except as required
in the course of his
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engagement with the Company, any confidential business or technical information
or trade secrets acquired during his engagement by the Company, whether or not
conceived of, discovered, developed or prepared by the Consultant, including,
but not limited to, encoding, transcoding and decoding technology, line doubling
and quadrupling processors, video enhancement technology, television enhancement
products, digital video players and broadcast, personal computer and noise
reduction technologies.
5. SOLICITATION OF CLIENTS AND EMPLOYEES. During the Term, except as
required in the ordinary course of the business of the Company and for the
Company's benefit and purposes, the Consultant shall not call on, solicit,
interfere with or attempt to entice away, either directly or indirectly, any
employee or customer of the Company, either for his own benefit or purposes or
for the benefit or purposes of any other person, partnership, corporation, firm,
association or other business organization, entity or enterprise.
6. TERMINATION. This Consulting Agreement and all rights and obligations
of the parties hereunder (except for Sections 4 and 5 shall terminate
immediately upon occurrence of any of the following events:
6.1 Upon the expiration of the Term, unless the Agreement is
extended as set forth in Section 1;
6.2 Upon the disability or death of the Consultant;
6.3 If the Consultant materially breaches this Agreement; or
6.4 Upon four (4) weeks prior written notice if the BOD is not
satisfied, in its sole discretion, with the Consultant's performance of his
duties as set forth herein.
7. SUCCESSORS AND ASSIGNS.
7.1 The Company shall have the right to assign this Agreement to
any of the Company's subsidiaries, affiliates or successors including, without
limitation, any corporation which may acquire all or substantially all of the
Company's stock, assets or business or with or into which the Company may be
consolidated, merged or reorganized; provided, however, that any such assignee
must assume all of the obligations of the Company hereunder. If such assignment
is declared null and void, this Agreement shall terminate, except for Sections 4
and 5.
7.2 The parties hereto agree that the Consultant's services
hereunder are personal services. This Agreement shall not be assignable by the
Consultant but shall be binding upon the heirs, administrators, and executors of
the Consultant. Neither the Consultant nor his spouse nor his heirs have any
right to sell, transfer or assign the right to receive payments hereunder and
any such attempted assignment or transfer shall, at the option of the Company,
be null and void and terminate this Agreement, except for Sections 4 and 5.
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8. NOTICES. All notices and requests in connection with this Agreement
shall be in writing and may be given by personal delivery, registered or
certified mail, return receipt requested, telegram or any other customary means
of communications addressed as follows:
To Consultant: Xxxxxxx X. Xxxxxx
00 Xxxxxxxx Xxxx Xxxx
Xxxxxx, XX 00000
Facsimile (000) 000-0000
To the Company: Xxxxxxx Xxxxxxxxx, Esq.,
Vice President-Business Development
and General Counsel
c/o Faroudja, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile (000) 000-0000
or to such other address as the party to receive the notice or request shall
designate by notice to the other. The effective date of any notice or request
shall be five (5) days from the date which it is sent by the addressor by
registered or certified mail, or when delivered to a telegraph company, properly
addressed as above with charges prepaid, or when personally delivered.
9. MISCELLANEOUS.
9.1 NON-COMPETITION. During the Term, Consultant agrees that he
will not accept employment or provide consulting services to any person or
corporation if such engagement would result in a conflict of interest with the
interests of the Company.
9.2 NO CONFLICT. Consultant represents and warrants to the Company
that he has full power and legal authority to enter into this Agreement and that
he is not subject to or bound by any other obligation, agreement, rule or order
which would be violated or breached by his entering into this Agreement.
9.3 WAIVER. No waiver of any of the provisions of this Agreement
shall be valid unless the waiver is made in writing and signed by the party
against whom such waiver is sought to be enforced. The failure to enforce any
right hereunder shall not constitute a continuing waiver of the same or a waiver
of any other right hereunder.
9.4 AMENDMENTS. All amendments of this Agreement shall be made in
writing, signed by the parties, and no oral amendment shall be binding on the
parties.
9.5 INTEGRATION. This Agreement constitutes the entire agreement
between the parties relating to the subject matter hereof and supersedes and
cancels any other prior
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oral and/or written agreements or understanding of the parties in connection
with such subject matter. This Agreement expressly supersedes all prior
existing arrangements, whether oral or written, among M-Squared and Technology
L.L.C. ("M-Squared"), the Consultant and the Company, including, but not limited
to that certain Consulting Agreement, dated September 21, 1994, between the FLI
and M-Squared.
9.6 SEVERABILITY. The unenforceability or invalidity of any
provision or provisions of this Agreement shall not render any other provision
or provision hereof unenforceable or invalid. If any one or more of the
provisions of this Agreement shall for any reason be excessively broad as to
duration, scope, activity or subject, it shall be construed by reducing such
provision, so as to be enforceable to the extent compatible with applicable law.
9.7 HEADINGS. The headings or titles in this Agreement are for the
purposes of reference only and shall not in any way affect the interpretation or
construction of this Agreement.
9.8 GOVERNING LAW. This Agreement and the relations between the
parties hereto shall be governed by the laws of the State or California.
9.9 ARBITRATION. Any dispute arising under or in connection with
this Agreement shall be resolved by binding arbitration in Sunnyvale, California
in accordance with the rules and procedures of the American Arbitration
Association by a single neutral arbitrator appointed by the American Arbitration
Association or its president. Judgement upon the arbitrator's award may be
entered in any court having jurisdiction. Each party shall bear its or his own
costs of any arbitration or litigation, including, without limitation,
attorneys' fees and expenses, and the costs of the arbitration itself and of the
arbitrator shall be borne equally by each party, in each case unless determined
otherwise by the arbitrator.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first written above.
"The Company" FAROUDJA LABORATORIES, INC.,
a California Corporation
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------------
Xxxxxxx X. Xxxxx, President
and Chief Executive Officer
FAROUDJA, INC.,
a California Corporation
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------------
Xxxxxxx X. Xxxxx, President
and Chief Executive Officer
"The Consultant"
/s/ Xxxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxxx X. Xxxxxx
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