INVESTOR'S RIGHTS AGREEMENT
THIS INVESTOR'S RIGHTS AGREEMENT (this "Agreement") is made as of the 30th
day of June 1997 by and among FAROUDJA, INC., a Delaware corporation (the
"Company") and S3 INCORPORATED, a Delaware corporation (the "Investor").
WHEREAS, the Company and the Investor have entered into that certain Stock
Purchase Agreement of even date herewith (the "Stock Purchase Agreement")
whereby the Company agreed to issue to the Investor shares (the "Shares" (which
term includes the Additional Shares that may be issued pursuant to the Stock
Purchase Agreement)) of common stock, $0.001 par value, of the Company ("Common
Stock"); and
WHEREAS, in connection with the issuance of the Shares, the Company and the
Investor desire to provide for the rights of the Investor with respect to the
registration of the Shares and certain other matters according to the terms of
this Agreement.
NOW THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. REGISTRATION RIGHTS.
1.1 DEFINITIONS.
(a) The term "Commission" means the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(b) The term "Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to time.
(c) The term "Holder" means the Investor, as a holder of
Registrable Securities, and any holder of Registrable Securities to whom the
registration rights conferred by this Agreement have been transferred in
accordance with Section 1.9 hereof;
(d) The terms "register," "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document by the
Commission.
(e) The term "Registrable Securities" means (i) the Shares,
(ii) any Common Stock issued upon conversion of any preferred stock, $0.001 par
value, of the Company ("Preferred Stock"), issued pursuant to Section 6 of the
Stock Purchase
Agreement, and (iii) Common Stock issued as (or issuable upon the conversion or
exercise of any warrant, right or other security that is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
the Shares or for the Preferred Stock or Common Stock referred to in (ii) above,
excluding in all cases, however, any Common Stock sold by a person in a
transaction in which such person's registration rights are not assigned;
provided, however, that any shares that have been sold to the public pursuant to
a registered public offering or Rule 144 under the Securities Act shall cease to
be Registrable Securities.
(f) The term "Securities Act" means the Securities Act of 1933,
as amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to time.
(g) All other capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Stock Purchase Agreement to
which this Exhibit A is attached.
1.2 REQUEST FOR REGISTRATION.
(a) So long as there are at least 100,000 shares of Registrable
Securities outstanding, if the Company shall receive, at any time after twelve
months after the effective date of the registration statement relating to the
IPO, a written request from the Holders of at least 40% of the Registrable
Securities then outstanding that the Company file a registration statement under
the Securities Act covering the registration of at least 20% of the Registrable
Securities then outstanding (or a lesser percentage if the anticipated aggregate
offering price, before deduction of any underwriting discounts and commissions,
would exceed $5,000,000), then the Company shall, within ten days of the receipt
thereof, give written notice of such request to all other Holders of Registrable
Securities and shall, subject to the limitations of subsection 1.2(b), use its
best efforts to effect as soon as practicable the registration under the
Securities Act of all Registrable Securities that the Holders request to be
registered under this Section 1.2(a) within 30 days of the mailing of such
notice by the Company in accordance with Section 3.2.
(b) If the Holders of Registrable Securities initiating the
registration request pursuant to subsection 1.2(a) ("Initiating Holders") intend
to distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to this Section 1.2 and the Company shall include such information in
the written notice referred to in subsection 1.2(a). The underwriter or
underwriters shall be selected by the Company and shall be reasonably acceptable
to a majority in interest of the Initiating Holders. In such event, the right of
any such Holder to include such Holder's Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the
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extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company as provided in
Section 1.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting. Notwithstanding any
other provision of this Section 1.2, if the underwriter advises the Initiating
Holders in writing that marketing factors require a limitation of the number of
shares to be underwritten, then the Initiating Holders shall so advise all
Holders of Registrable Securities that would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Securities that may be included
in the underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities owned by each Holder; provided, however, that the number
of shares of Registrable Securities to be included in such underwriting shall
not be reduced unless all other securities are first entirely excluded from the
underwriting.
(c) If the Company shall receive, at any time after twelve
months after the effective date of the registration statement relating to the
IPO, a written request or requests from any Holder or Holders that the Company
effect a registration on Form S-3 and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by such Holder
or Holders, the Company shall, within ten days of the receipt thereof, give
written notice of such request to all other Holders of Registrable Securities
and shall use its best efforts to effect as soon as practicable such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within 20 days after receipt of such written notice from
the Company; provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance pursuant to this
subsection 1.2(c): (i) if Form S-3 is not available for such offering by the
Holders or (ii) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public (before deduction of any underwriters' discounts or
commissions) of less than $3,000,000.
(d) The Company is obligated to effect only two registrations
pursuant to subsection 1.2(a) and one registration pursuant to
subsection 1.2(c).
(e) Notwithstanding the foregoing, if the Company shall furnish
to the Initiating Holders a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors of the Company
it would be seriously detrimental to the Company for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than 120 days after receipt of the request of the
Initiating Holders (or, if the Company is engaged or has fixed plans to engage
in a
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registered public offering as to which the Holders may include Registrable
Securities pursuant to Section 1.3, the Company may defer such filing for a
period beginning 60 days prior to the initial filing with the Commission of the
registration statement relating to such offering, and ending not more than 180
days (90 days in the case of a request pursuant to subsection 1.2(c)) after the
effective date of such registration statement); provided, however, that the
Company may not utilize this right more than once in any 12-month period.
1.3 COMPANY REGISTRATION.
(a) If (but without any obligation to do so), at any time after
twelve months after the effective date of the registration statement relating to
the IPO, the Company proposes to register (including for this purpose a
registration effected by the Company for stockholders other than the Holders)
any of its stock or other securities under the Securities Act in connection with
the public offering of such securities solely for cash (other than the IPO, a
registration relating solely to the sale of securities to participants in a
Company stock plan, or a registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities), the
Company shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within 20 days
after the mailing of such notice by the Company, the Company shall. subject to
the provisions of subsection 1.3(b), cause to be registered under the Securities
Act all of the Registrable Securities that each such Holder has requested to be
registered.
(b) In connection with any offering involving an underwriting of
shares being issued by the Company, the Company shall not be required under this
Section 1.3 to include any of the Holders' securities in such underwriting
unless they accept the terms of the underwriting as agreed upon between the
Company and the underwriters selected by it (or by other persons entitled to
select the underwriters), and then only in such quantity as will not, in the
opinion of the underwriters, jeopardize the success of the offering by the
Company. If the total amount of securities, including Registrable Securities,
requested by stockholders to be included in such offering exceeds the amount of
securities sold other than by the Company that the underwriters reasonably
believe compatible with the success of the offering, then the Company shall be
required to include in the offering only that number of such securities,
including Registrable Securities, which the underwriters believe will not
jeopardize the success of the offering (the securities so included to be
apportioned pro rata among the selling stockholders according to the total
amount of securities entitled to be included therein owned by each selling
stockholder or in such other proportions as shall mutually be agreed to by such
selling stockholders) but in no event shall (i) the amount of securities of the
selling Holders included in the offering be reduced below 30% of the total
amount of securities included in such offering or (ii) notwithstanding (i)
above, any shares being sold by a stockholder exercising a demand registration
right similar to that granted in Section 1.2 be excluded from such offering.
For purposes of the preceding parenthetical concerning apportionment, for any
selling stockholder that is a
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Holder of Registrable Securities and that is a partnership or corporation, the
partners, retired partners and stockholders of such Holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "selling
stockholder," and any pro rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder," as defined in this sentence.
1.4 OBLIGATIONS OF THE COMPANY.
Whenever required under this Section 1 to effect the registration of
any Registrable Securities, the Company shall, as expeditiously as reasonably
possible:
(a) Prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for a period (the
"Effectiveness Period") of up to 120 days. In the event that, in the judgment
of the Company, it is advisable to suspend use of the prospectus relating to
such registration statement for a discrete period of time (a "Deferral Period")
due to pending material corporate developments or similar material events that
have not yet been publicly disclosed and as to which the Company believes public
disclosure will be prejudicial to the Company, the Company shall deliver a
certified resolution of the Board of Directors of the Company or a duly
authorized committee thereof, signed by a duly authorized officer of the
Company, to each Holder, to the effect of the foregoing and, upon receipt of
such certificate, such Holders agree not to dispose of such Holders' Registrable
Securities covered by such registration or prospectus (other than in
transactions exempt from the registration requirements under the Securities
Act); provided, however, that such Deferral Period shall be no longer than 60
days. The Effectiveness Period shall be extended for a period of time equal to
such Deferral Period.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders of the Registrable Securities covered
by such registration statement such numbers of copies of a prospectus, including
a preliminary prospectus, and any amendment or supplement thereto and a
reasonable number of copies of the then-effective registration statement and any
post-effective amendment thereto, all in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of such Registrable Securities.
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(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders
thereof, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and at the request of any such Holder prepare and furnish
to such Holder a reasonable number of copies of a supplement or an amendment to
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 1, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) in the case of an underwritten
public offering a letter dated such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters.
(h) Cause all Registrable Securities covered by the registration
statement to be listed on each securities exchange or automated quotation system
on which shares of Common Stock are then listed. If any of such shares are not
so listed, the Company shall cause such shares to be listed on the securities
exchange or automated
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quotation system as may be reasonably requested by the Holders of a majority of
the Registrable Securities being registered.
(i) Permit a single firm of counsel designated as selling
stockholders' counsel by the holders of a majority in interest of the
Registrable Securities to review, at the Holders' expense, the registration
statement and all amendments and supplements thereto for a reasonable period of
time prior to their filing with the Commission and state authorities, which
documents shall not be filed in a form to which such counsel reasonably objects.
(j) Cause the Company's officers, directors and independent
certified public accountants to supply all information reasonably requested by a
representative of any Holder of Registrable Securities, and any attorney or
accountant retained by such Holder, in connection with such registration;
provided, however, that such representatives, attorneys or accountants enter
into a confidentiality agreement, in form and substance reasonably satisfactory
to the Company, prior to the release or disclosure of any such information.
1.5 OBLIGATIONS OF THE HOLDERS.
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Agreement that the selling Holders
shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them, and the intended method of disposition of
such securities as shall be required to effect the registration of the
Registrable Securities.
(b) Upon the receipt by a Holder of any notice from the Company
of (i) the existence of any fact or the happening of any event as a result of
which the prospectus included in a registration statement filed pursuant to
Section 2, as such registration statement is then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, (ii) the issuance by
the Commission of any stop order or injunction suspending or enjoining the use
or the effectiveness of such registration statement or the initiation of any
proceedings for that purpose, or the taking of any similar action by the
securities regulators of any state or other jurisdiction, or (iii) the request
by the Commission or any other federal or state governmental agency for
amendments or supplements to such registration statement or related prospectus
or for additional information related thereto, such Holder shall forthwith
discontinue disposition of such Holder's Registrable Securities covered by such
registration or prospectus (other than in transactions exempt from the
registration requirements under the Securities Act) until such Holder's receipt
of the supplemented or amended prospectus or until such Holder is advised in
writing by the Company that the use of the applicable prospectus may be resumed.
In such a case, the Effectiveness Period shall be extended by the number of days
from and including the date
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of the giving of such notice to and including the date when each Holder shall
have received a copy of the supplemented or amended prospectus or when such
Holder is advised in writing by the Company that the use of the applicable
prospectus may be resumed. The Company shall use its best efforts to limit the
duration of any discontinuance of disposition of Registrable Securities pursuant
to this section.
1.6 EXPENSES. The Company shall bear and pay all expenses incurred
in connection with any registration, filing or qualification of Registrable
Securities with respect to the registrations pursuant to Section 1.2 and 1.3
hereof, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees relating or apportionable
thereto, fees and disbursements of counsel for the Company, blue sky fees and
expenses, including fees and disbursements of counsel related to all blue sky
matters, fees and expenses of listing any Registrable Securities on any
securities exchange or automated quotation system on which shares of Common
Stock are then listed, and the expenses of providing materials pursuant to
Section 1.4 hereof, but excluding the fees and disbursements of counsel for the
selling Holders, stock transfer taxes that may be payable by the selling
Holders, and all underwriting discounts and commissions relating to Registrable
Securities covered by such registration, which shall be borne by the Holders.
1.7 DELAY OF REGISTRATION. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.8 INDEMNIFICATION.
In the event any Registrable Securities are included in a registration
statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder of such Registrable Securities, the officers and
directors of each such Holder, any underwriter (as defined in the Securities
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages or liabilities (joint or several) to which
they may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively, a "Violation"): (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under the
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Securities Act, the Exchange Act or any state securities law; and the Company
will reimburse each such Holder, officer or director, underwriter or controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
subsection 1.8(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation that occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, officer, director, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter
and any other Holder selling securities in such registration statement or any of
its directors or officers or any person who controls such Holder, against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any such director, officer, controlling person, or underwriter or controlling
person, or other such Holder or director, officer or controlling person may
become subject, under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will
reimburse any legal or other expenses reasonably incurred by the Company or any
such director, officer, controlling person, underwriter or controlling person,
other Holder, officer, director, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this
subsection 1.8(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld;
provided, that, in no event shall any indemnity under this subsection 1.8(b)
exceed the net proceeds from the sale of the Registrable Securities received by
such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its
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own counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
Section 1.8 to the extent the indemnifying party was actually damaged or
suffered any loss or incurred any additional expense as a result thereof, but
the omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under this Section 1.8. An indemnifying party shall not, without the prior
written consent of the indemnified parties, settle, compromise or consent to the
entry of any judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification may be sought hereunder
by such indemnified parties (whether or not the indemnified parties are actual
or potential parties to such claim or action) unless such settlement, compromise
or consent includes a release of such indemnified party reasonably acceptable to
such indemnified party from all liability arising out of such claim, action,
suit or proceeding or unless the indemnifying party shall confirm in a written
agreement reasonably acceptable to such indemnified party, that notwithstanding
any federal, state or common law, such settlement, compromise or consent shall
not adversely affect the right of any indemnified party to indemnification as
provided in this Section 1. The indemnity provided for in this Section 1.8
shall apply to the Holders in their capacities as such, and shall be independent
of any other agreement, including without limitation an underwriting agreement,
entered into after the date hereof between the Company and any Holder in its
capacity as a Holder or otherwise.
(d) If the indemnification provided for in this Section 1.8 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission. Notwithstanding the foregoing, no Holder shall be
required to contribute any amount in excess of the amount of net proceeds from
the sale of the Registrable Securities received by such Holder.
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(e) The obligations of the Company and Holders under this
Section 1.8 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.9 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned by a Holder to (i) any transferee or assignee of the Registrable
Securities that is a wholly-owned subsidiary of the Holder or (ii) a successor
to substantially all the business or assets of the Holder; provided that the
Company is, within a reasonable time after such transfer, furnished with written
notice of the name and address of such transferee, assignee or successor
("Permitted Assigns") and the securities with respect to which such registration
rights are being assigned.
1.10 REPORTS UNDER THE EXCHANGE ACT. With a view to making available
to the Holders the benefits of Rule 144 under the Securities Act and any other
rule or regulation of the Commission that may at any time permit a Holder to
sell securities of the Company to the public without registration, the Company
agrees that from and after the IPO Closing Date, it will:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times after the date hereof;
(b) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, upon request (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested in availing any
Holder of any rule or regulation of the Commission which permits the selling of
any such securities without registration.
1.11 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company that would allow such holder or prospective holder preferential
rights (a) to include such securities in any registration filed under
Section 1.2 hereof, unless under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only to
the extent that the inclusion of such holder's securities will not reduce the
amount of the Registrable Securities of the Holders that is included or (b) to
make a demand registration that could result in such registration statement
being declared effective prior to the earlier
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of the date set forth in subsection 1.2(a) or within 120 days of the effective
date of any registration effected pursuant to Section 1.2.
1.12 "MARKET STAND-OFF" AGREEMENT. If requested by the Company or the
representative of the underwriters of Common Stock (or other securities) of the
Company, each Holder shall agree that it will not sell or otherwise transfer or
dispose (other than to donees who agree to be similarly bound) of any
Registrable Securities (other than Registrable Securities to be sold pursuant to
the registration statement described below) for a period of time specified by
the representative of the underwriters not to exceed 180 days, following the
effective date of the registration statement of the Company filed under the
Securities Act relating to the IPO, provided that all executive officers and
directors of the Company and all persons holding 5% or more of the then
outstanding Common Stock enter into similar agreements.
1.13 TERMINATION OF REGISTRATION RIGHTS. The Company's obligations
pursuant to this Agreement shall terminate as to any Holder of Registrable
Securities on the earlier of (a) the third anniversary of the IPO Closing Date
and (b) as to a Holder that owns less than 1% of the outstanding Common Stock,
the date on which the Holder can sell all of such Holder's Registrable
Securities pursuant to Rule 144 under the Securities Act during any three month
period.
2. COVENANTS OF THE COMPANY.
2.1 DELIVERY OF FINANCIAL STATEMENTS. So long as the Investor and
its Permitted Assigns hereunder hold in the aggregate not less than 100,000
Shares (as appropriately adjusted for subsequent stock splits, stock dividends
and stock combinations and the like and for any exchange of such Shares into
Preferred Stock pursuant to Section 6 of the Stock Purchase Agreement), the
Company shall deliver to the Investor:
(a) as soon as practicable, but in any event within 90 days
after the end of each fiscal year of the Company, a statement of operations
for such fiscal year, a balance sheet of the Company as of the end of such
year, and a statement of cash flows for such year, such year-end financial
reports to be in reasonable detail, prepared in accordance with generally
accepted accounting principles ("GAAP"), and audited and certified by
independent public accountants of nationally recognized standing selected
by the Company;
(b) within 30 days of the end of each quarter, an unaudited
statement of operations, statement of cash flows and balance sheet for and
as of the end of such quarter, in reasonable detail; such quarterly
statements shall also contain the foregoing information on a year-to-date
basis; and
(c) after the IPO and, so long as the Company is subject to the
periodic reporting requirements of Section 13 or 15(d) of the Exchange Act
and the
12
rules and regulations of the Commission thereunder, in lieu of the
documents required by (a) and (b) above, promptly after filing with the
Commission, the Company's reports (without exhibits) on Forms 10-K, 10-Q,
and 8-K.
2.2 RIGHT OF FIRST OFFER. Subject to the terms and conditions
specified in this Section 2.2, the Company agrees not to sell or issue any New
Securities (as hereinafter defined) without complying with the provisions of
this Section 2.2.
(a) In the event the Company proposes to sell or issue any New
Securities to a Competitor (as hereinafter defined), the Company hereby grants
to the Investor the right to purchase such New Securities. In the event the
Company proposes to sell or issue any New Securities to persons or entities
other than Competitors (as defined below in subsection 2.2(c)), the Company
hereby grants to the Investor a right of first offer to purchase a pro rata
share of New Securities (as hereinafter defined) that the Company may, from time
to time, propose to sell and issue. For purposes of this Section 2.2, the
Investor's pro rata share of New Securities is the ratio of the number of shares
of Common Stock owned by the Investor immediately prior to the issuance of New
Securities to the total number of shares of Common Stock outstanding immediately
prior to the issuance of New Securities (assuming full conversion of all
convertible securities).
(b) "New Securities" shall mean any capital stock (including
Common Stock) of the Company whether now authorized or not, and rights, options
or warrants to purchase capital stock of the Company, and securities of any type
whatsoever that are, or may become, convertible into capital stock of the
Company; provided, however, that the term "New Securities" does not include
(i) shares of Common Stock (or options therefor) issued or sold to employees,
directors, consultants or advisors of the Company for the primary purpose of
soliciting or retaining their services, provided each such person executes an
agreement, in substantially the form as approved by the Company's Board of
Directors, (ii) securities issued pursuant to the acquisition of another
business entity or business segment of any such entity by the Company by merger,
purchase of substantially all the assets or other reorganization whereby the
Company will own more than 50% of the voting power of such business entity or
business segment, (iii) securities issued in connection with any stock split,
stock dividend or recapitalization of the Company in which all holders of Common
Stock are entitled to receive their proportionate share of such issuance, and
(iv) any right, option or warrant to acquire any security convertible into the
securities excluded from the definition of New Securities pursuant to
clauses (i) through (iii) above.
(c) If the Company proposes to issue New Securities, the Company
shall give written notice to the Investor stating (i) its bona fide intention to
offer or issue New Securities, (ii) the number of such New Securities to be
offered, (iii) the price and general terms upon which it proposes to offer such
New Securities, and (iv) the identity of the persons or entities or classes of
persons or entities to whom such New Securities are proposed to be issued.
Within 20 calendar days after receipt of such notice, the Investor
13
may elect to purchase or obtain, at the price and on the terms specified in the
notice, (x) all of such New Securities, in the event the Company proposes to
issue such New Securities to an entity that is a Competitor of the Investor (as
defined in Exhibit 2.2 hereto, as such Exhibit 2.2 may from time to time
hereafter be amended by the Investor with the reasonable concurrence of the
Company's Board of Directors), or (y) up to its pro rata share of such New
Securities, as such pro rata share is calculated pursuant to subsection 2.2(a)
above, in the event the Company proposes to issue such New Securities to persons
or entities other than Competitors, by giving written notice to the Company and
stating therein the quantity of New Securities to be purchased.
(d) If the Investor does not fully exercise its right to
purchase or obtain all such New Securities that the Investor has the right to
purchase or obtain pursuant to subsection 2.2(c) hereof, the Company may, during
the 60-day period following the expiration of the period provided in
subsection 2.2(c) hereof, offer the remaining unsubscribed New Securities to the
persons or entities or classes of persons or entities specified in the notice
sent to the Investor pursuant to subsection 2.2(c) at a price not less than
that, and upon terms no more favorable to the offeree than those, specified in
such notice. If the Company does not enter into an agreement for the sale of
the New Securities within such period, or if such agreement is not consummated
within 60 days of the execution thereof, the right provided hereunder shall be
deemed to be revived and such New Securities shall not be offered unless first
reoffered to the Investor in accordance herewith.
(e) The right of first offer granted in this Section 2.2 shall
not apply to or after the initial closing of the IPO and shall be null and void
thereafter.
(f) For purposes of this Section 2.2, the term Investor includes
any Permitted Assigns. The Investor shall be entitled to assign, or to
apportion, the right of participation hereby granted it among itself and its
Permitted Assigns in such proportions as it deems appropriate.
2.3 STANDSTILL AGREEMENT. For a period of four (4) years after the
IPO Closing Date:
(a) The Investor will not, unless it has obtained the prior
written consent of the Company, acquire any shares of Common Stock (except by
way of stock dividends or other distributions or offerings made available to
holders of Common Stock generally) if the effect of such acquisition would be to
increase the aggregate number of shares of Common Stock then owned by the
Investor or which it has a right to acquire to more than 4.95% of all shares of
Common Stock then outstanding (assuming the exercise or conversion of all
outstanding rights or convertible securities to acquire Common Stock then held
by the Investor); provided, that the Investor will not be required to dispose of
any shares of Common Stock if the aggregate ownership percentage of the Investor
is increased as a result of a recapitalization of or a repurchase of securities
by the Company or as a result of any other similar action taken by the Company.
14
(b) The Investor will advise the Board of Directors of the
Company as to the Investor's plans to acquire additional shares of Common Stock
or rights to acquire Common Stock reasonably in advance of any such acquisition.
(c) Notwithstanding the foregoing, the obligations of the
Investor under this Section 2.3 shall terminate immediately upon: (A) the
commencement or public announcement of an intent of any person or "group"
(within the meaning of Section 13(d) of the Exchange Act) to commence a tender
or exchange offer to acquire Common Stock that, if added to the Common Stock (if
any) already owned by such person or group, would result in such person or group
owning beneficially more than 30% of all shares of Common Stock then
outstanding; or (B) the acquisition or the public announcement of the proposed
acquisition by any person or group (other than a stockholder of the Company as
of the date of this Agreement and affiliates thereof) of beneficial ownership of
more than 30% of all shares of Common Stock then outstanding (all percentages in
this paragraph (c) shall be calculated assuming the exercise or conversion of
all outstanding rights or convertible securities to acquire Common Stock then
held by such person or group).
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 NOTICES. Unless otherwise provided, any notice, request, demand
or other communication required or permitted under this Agreement shall be given
in writing and shall be deemed effectively given upon personal delivery to the
party to be notified, or when sent by telecopier (with receipt confirmed and
promptly confirmed by personal delivery, U.S. first class mail, or courier), or
overnight courier service, or upon deposit with the United States Post Office,
by registered or certified mail, postage prepaid and addressed as follows (or at
such other address as a party may designate by notice to the other):
If to the Company:
Faroudja, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx,
Vice President, Finance and Chief Financial Officer
Telecopier: (000) 000-0000
15
with a copy to:
Buchalter, Nemer, Fields & Younger,
a Professional Corporation
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Telecopier: (000) 000-0000
If to the Investor:
S3 Incorporated
0000 Xxxxxxx Xxxxxxx Xxxxxxxxx
Xxxxx Xxxxx, XX 00000
Attention: Chief Financial Officer
Telecopier: (000) 000-0000
with a copy to:
Pillsbury Madison & Sutro LLP
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxx del Xxxxx, Esq.
Telecopier: (000) 000-0000
3.3 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable, invalid or void by a court of competent jurisdiction,
such provision shall be excluded from this Agreement and the balance of this
Agreement shall be interpreted as if such provision were so excluded and shall
be enforceable in accordance with its terms.
3.4 ENTIRE AGREEMENT; AMENDMENTS.
(a) This Agreement contains the entire understanding of the
parties with respect to the matters covered herein and supersedes all prior
agreements and understandings, written or oral, between the Parties relating to
the subject matter hereof.
(b) Any term of Section 1 of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the Holders of a majority of the
Registrable Securities then outstanding. Any other term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the
16
Investor. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each Holder of any Registrable Securities then
outstanding, each future Holder of all such Registrable Securities, and the
Company. No waiver of any default with respect to any provision, condition or
requirement hereof shall be deemed to be a continuing waiver in the future
thereof or a waiver of any other provision, condition or requirement hereof; nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right accruing to it thereafter.
3.5 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California (irrespective of its choice of law
principles).
3.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.7 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement. Any reference in this Agreement to a
statutory provision or rule or regulation promulgated thereunder shall be deemed
to include any similar successor statutory provision or rule or regulation
promulgated thereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
FAROUDJA. INC.
By /s/ Xxxxxxx Xxxxx
-------------------------------------
Name: Xxxxxxx Xxxxx
Title: President, CEO
S3 INCORPORATED
By /s/ Xxxx Xxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxx
Title: President, CEO
17
EXHIBIT 2.2
TO
INVESTOR'S RIGHTS AGREEMENT
BY AND BETWEEN
FAROUDJA, INC.
AND
S3 INCORPORATED
JUNE 30, 1997
The following entities are Competitors of the Investor for purposes of
Section 2.2 of the above-described Investor's Rights Agreement:
Acer
ARK Logic, Inc.
ATI Technologies, Inc.
Avance Logic, Inc.
Chips & Technologies, Inc.
Cirrus Logic, Inc.
ESS Technology, Inc.
Intel Corporation
Lockheed Xxxxxx Corporation
LSI Logic Corporation
Matrox Graphics Inc.
NeoMagic Corporation
NVIDEA Corporation
Oak Technology, Inc.
OPTi Inc.
PMC-Sierra, Inc.
Rendition, Inc.
Rockwell Semiconductor Systems
Samsung Semiconductor
Silicon Integrated Systems Corporation
Silicon Magic Corporation
3Dfx Interactive, Inc.
3Dlabs Inc., Ltd.
Trident Microsystems, Inc.
Xxxxx Labs Inc.
United Microelectronics Group
VLSI Technology, Inc.
Western Digital Corporation
The foregoing list may be updated from time to time by S3 Incorporated with
the reasonable concurrence of the Board of Directors of Faroudja, Inc.
