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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
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FAROUDJA, INC.
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(Name of Issuer)
Common Stock, $.001 par value
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(Title of Class of Securities)
311643 10 0
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(CUSIP Number)
MERV ADELSON, 10900 WILSHIRE BOULEVARD, SUITE 750, LOS ANGELES, CALIFORNIA 90024
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
OCTOBER 30, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box / /.
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
(Continued on following page(s))
Page 1 of 6 Pages
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CUSIP No. 311643 10 0 13D Page 2 of 6 Pages
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(1) Names of Reporting Persons. S.S. or I.R.S. Identification Nos. of Above
Persons
MERV ADELSON
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(2) Check the Appropriate Box if a Member (a) / /
of a Group* (b) /X/
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(3) SEC Use Only
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(4) Source of Funds*
PF
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(5) Check if Disclosure of Legal Proceedings is Required Pursuant to / /
Items 2(d) or 2(e)
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(6) Citizenship or Place of Organization
UNITED STATES OF AMERICA
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Number of Shares (7) Sole Voting
Beneficially Owned Power 750 SHARES
by Each Reporting --------------------------------------------------
Person With (8) Shared Voting
Power 1,461,579 SHARES
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(9) Sole Dispositive
Power 750 SHARES
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(10) Shared Dispositive
Power 1,461,579 SHARES
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(11) Aggregate Amount Beneficially Owned by Each Reporting Person
1,462,329
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(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares* /X/
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(13) Percent of Class Represented by Amount in Row (11)
12.13%
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(14) Type of Reporting Person*
IN
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*SEE INSTRUCTION BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
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CUSIP No. 311643 10 0 Page 3 of 6 Pages
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(1) Names of Reporting Persons. S.S. or I.R.S. Identification Nos. of Above
Persons
ADELSON INVESTORS, LLC
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(2) Check the Appropriate Box if a Member (a) / /
of a Group* (b) /X/
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(3) SEC Use Only
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(4) Source of Funds*
WC
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(5) Check if Disclosure of Legal Proceedings is Required Pursuant to / /
Items 2(d) or 2(e)
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(6) Citizenship or Place of Organization
DELAWARE
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Number of Shares (7) Sole Voting
Beneficially Owned Power -0-
by Each Reporting --------------------------------------------------
Person With (8) Shared Voting
Power 1,431,579
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(9) Sole Dispositive
Power -0-
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(10) Shared Dispositive
Power 1,431,579
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(11) Aggregate Amount Beneficially Owned by Each Reporting Person
1,431,579
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(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares* / /
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(13) Percent of Class Represented by Amount in Row (11)
11.87%
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(14) Type of Reporting Person*
OO
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*SEE INSTRUCTION BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
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CUSIP NO. 311643 10 0 SCHEDULE 13D
ITEM 1. SECURITY AND ISSUER
This Schedule 13D relates to the Common Stock, $.001 par value, of
Faroudja, Inc., whose principal executive offices are located at 750 Palomar
Avenue, Sunnyvale, California 94096.
ITEM 2. IDENTITY AND BACKGROUND
This Schedule 13D is filed on behalf of Merv Adelson and Adelson Investors,
LLC, a Delaware limited liability company. The business address of Mr. Adelson
and Adelson Investors, LLC is 10900 Wilshire Boulevard, Suite 750, Los Angeles,
California 90024. Mr. Adelson is a private investor and Adelson Investors, LLC
is a Delaware limited liability company.
Neither Mr. Adelson nor Adelson Investors, LLC has, during the last five
years, been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors), nor has either of them been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction as the result of
which either of them was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activity subject to,
federal or state securities laws or finding any violation with respect to such
laws.
Mr. Adelson is a citizen of the United States of America and Adelson
Investors is a Delaware limited liability company.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Adelson Investors, LLC directly owns 1,431,579, all of which were acquired
by working capital in the following manner:
(a) In March, 1996 (i) Faroudja, Inc. issued 1,043,105 shares of its
Common Stock for an aggregate purchase price of $4.0 million of which 213,642
shares were issued to Adelson Investors, LLC; (ii) Yves and Isabell Faroudja
(the "Founders") sold an aggregate of 3,569,395 share of Common Stock of
Faroudja, Inc. for an aggregate purchase price of $14.0 million, of which
731,062 shares were purchased by Adelson Investors, LLC; and (iii) the Founders
granted Adelson Investors, LLC an option to purchase 486,875 shares of Faroudja,
Inc.'s Common Stock (the "Founders Option") for an exercise price of $3.90 per
share.
(b) In September, 1997, Adelson Investors, LLC exercised its
Founders Option for a total purchase price of $1,898,813.
Mr. Adelson directly owns 30,750 shares of Common Stock of Faroudja, Inc.
750 shares were issued to Mr. Adelson by Faroudja, Inc. as compensation for
services rendered as a member of the Board of Directors of Faroudja, Inc. and
30,000 shares were purchased in the open market in joint tenancy with his spouse
(the "Joint Shares"). The Joint Shares were purchased from personal funds for
$8.00 per share, or an aggregate purchase price of $240,000.
ITEM 4. PURPOSE OF TRANSACTION
Adelson Investors, LLC and Merv Adelson acquired the shares for investment.
Neither Adelson Investors, LLC nor Mr. Adelson has any plans or proposals which
relate to or would result in:
(a) the acquisition by any person of additional securities of
Faroudja, Inc. (the "Issuer"), or the disposition of securities of the Issuer;
provided, however, that Adelson Investors, LLC and Mr. Adelson reserve the
right to acquire additional securities or dispose of securities from time to
time.
(b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its subsidiaries;
(c) a sale or transfer of a material amount of assets of the Issuer
or any of its subsidiaries;
(d) any change in the present Board of Directors or the management of
the Issuer, including any plans or proposals to change the number or term of
Directors or to fill any existing vacancies on the Board;
(e) any material change in the present capitalization or dividend
policy of the Issuer;
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(f) any other material change in the Issuer's business or corporate
structure;
(g) changes in the Issuer's Certificate of Incorporation or Bylaws or
other actions which may impede the acquisition of control of the Issuer by any
person;
(h) causing a class of securities of the Issuer to be delisted from a
national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
(i) a class of equity securities of the Issuer becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934; or
(j) any action similar to any of those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
Adelson Investors, LLC directly owns 1,431,579 shares of Common Stock of
Faroudja, Inc. representing 11.87% of the outstanding shares. This number
includes (i) 213,642 shares purchased from Faroudja, Inc. in March, 1996;
(ii) 731,062 shares purchased from the Founders in March, 1996; and
(iii) 486,875 shares obtained upon exercise of the Founders Option.
Mr. Adelson beneficially owns 1,462,329 shares of Common Stock of
Faroudja, Inc., representing 12.13% of the outstanding shares. This number
includes (i) 1,431,579 shares owned directly by Adelson Investors, LLC of which
Mr. Adelson has sole voting and investment power; (ii) 30,000 shares owned in
joint tenancy with his spouse; and (iii) 750 shares received from Faroudja,
Inc., as compensation for services as a member of the Board of Directors. On
October 30, 1997, Mr. Adelson's spouse purchased 6,250 shares of Common Stock
of Faroudja, Inc. for $8.00 per share from her separate property funds (the
"Separate Shares"). Mr. Adelson disclaims beneficial ownership of the
Separate Shares.
Mr. Adelson is the managing member of Adelson Investors, LLC, and
Mr. Adelson has sole voting and investment power with respect to the 1,431,579
shares directly owned by Adelson Investors, LLC.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
In December 1996, Faroudja, Inc. (the "Company") entered into a three year
consulting agreement ("Adelson Consulting Agreement") with Merv Adelson, a
director of the Company pursuant to which Mr. Adelson agreed to provide certain
consulting services in the analysis and implementation of potential strategic
alliances ("Proposed Strategic Alliances") in the specific field of TV signal
enhancement for TV, cable TV, satellite TV and DVDs, including, but not limited
to (i) providing the Company with a list of possible corporate investors,
partners, customers, buyers, lenders and joint ventures ("Proposed Strategic
Alliance Partners"), (ii) coordinating and making approaches to Proposed
Strategic Alliance Partners, and (iv) assisting in the negotiation of the
principal forms of Proposed Strategic Alliances and preparation of all
contracts, documents, approvals and related matters necessary to consummate a
Proposed Strategic Alliance with a Proposed Strategic Alliance Partner. The
Company has agreed to compensate Mr. Adelson for any strategic alliance or
combination of strategic alliances during the term of the agreement in which the
Company receives consideration (as defined in the agreement) of at least $5
million, through the issuance of a three year warrant to Adelson for the
purchase of 65,152 shares of Common Stock with an exercise price of $.015 per
share. During the term of the Consulting Agreement, the Company also agreed to
use its best efforts to cause the election to the Board of Directors of Mr.
Adelson (or a designee of Mr. Adelson reasonably acceptable to the Board of
Directors) and an additional designee of Mr. Adelson reasonably acceptable to
the Board of Directors.
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ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Letter Agreement, dated December 31, 1996, between Faroudja, Inc. and Merv
Adelson for certain consulting services.
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: November 28, 1997
/s/ MERV ADELSON
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Merv Adelson
Adelson Investors, LLC
By: /s/ MERV ADELSON
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Merv Adelson, Managing Member
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December 31, 1996
Merv L. Adelson
c/o East-West Capital Associates
10900 Wilshire Boulevard,
Suite 750
Los Angeles, California 90024
Dear Mr. Adelson:
This letter 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 you to confirm your
prior agreement and our understanding that Merv L. Adelson will serve FI and
its subsidiary, FLI, as a consultant in the matter of the analysis and
implementation of potential strategic alliances ("Proposed Strategic
Alliances") in the specific field of television signal enhancement for
television, cable TV, satellite TV and digital video disks ("Signal
Enhancement") and that Mr. Adelson shall not provide consulting services in
the field of Signal Enhancement to any other entity or person, except for Mr.
Adelson's activities on behalf of Time Warner or its subsidiaries or
controlled affiliates.
Accordingly, the parties agree as follows:
1. SERVICES PROVIDED. Mr. Adelson will provide such reasonable
assistance (at no cost to Mr. Adelson) and advice as FLI may reasonably
request, specifically limited to the following (some of which may have been
previously performed during the period from February 9, 1996 to December 31,
1996):
(a) providing to FLI a list of possible corporate investors,
partners, customers, buyers, lenders and joint venturers for FLI's review and
reasonable approval (each, a "Proposed Strategic Alliance Partner");
(b) revising an executive summary regarding FLI's business (based on
detailed information supplied by FLI to Mr. Adelson) to be provided to
Proposed Strategic Alliance Partners;
(c) coordinating and making approaches to Proposed Strategic
Alliance Partners, after due consultation with FLI as to the prioritization
of approaching Proposed Strategic Alliance Partners; and
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(d) assisting (at no cost to Mr. Adelson) in the negotiation of the
principal terms of the Proposed Strategic Alliance and preparation of all
contracts, documents, approvals and related matters necessary to consummate a
Proposed Strategic Alliance with a Proposed Strategic Alliance Partner.
2. COMPENSATION. If FLI consummates a Proposed Strategic Alliance (or a
combination of Proposed Strategic Alliances), during the Term of this
agreement, as a result of which FLI receives Consideration (as defined below)
(in the aggregate) of at least $5,000,000, FI shall immediately grant to
Adelson Investors, LLC an additional warrant to purchase from FI at $.15 per
share, 65,152 shares of Common Stock of FI, which warrant shall be in the
form of Exhibit A attached hereto.
For purposes of this section, the term "Consideration" shall mean:
(a) in relation to any product-specific transaction (or combination
of transactions), the total of (i) all up-front license payments, PLUS (ii)
all payments by the Proposed Strategic Alliance Partner to FLI for research
and development PLUS (iii) the net present value of the estimated value of
all royalty payments in the seven-year period starting on the date of the
launch of each product, using 10% as the discount rate and using FLI's own
reasonable sales forecast for each product to estimate the annual royalties
payable; or
(b) in relation to an equity or debt investment (or series of such
investments) in FLI, the total cash paid by the Proposed Strategic Alliance
Partner(s), PLUS the fair market value of any equity or debt securities or
other consideration transferred by the Proposed Strategic Alliance Partner(s)
to FLI, PLUS any long-term debt or other obligations of FLI explicitly
assumed or refinanced by the approved Strategic Alliance Partner(s) in
connection with the Proposed Strategic Alliance; or
(c) in relation to both an equity or debt investment in FLI and a
product-specific transaction, the sum of the amounts calculated pursuant to
paragraphs (a) and (b) above; or
(d) the relationship with the Proposed Strategic Alliance Partner(s)
is expected, in the sole determination of the board of directors of FLI, to
result in FLI or a subsidiary or affiliate or parent of FLI receiving at
least $5,000,000 of revenues (or other consideration or value) attributable
to the relationship with the Proposed Strategic Alliance Partner(s).
3. ELECTION OF DIRECTORS. During the term of this agreement, FI shall
use its best efforts to cause Mr. Adelson (or a designee of Mr. Adelson who
is reasonably acceptable to the board of directors of FI) (the "First
Director"), and, in addition to the First Director, a designee of Mr. Adelson
who is reasonably acceptable to the board of directors of FI, to be elected
to the board of directors of FI, and, if so elected, the First Director and
the designee shall serve, at their discretion, on the board of directors of
FI.
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4. CERTAIN ADDITIONAL MATTERS. Notwithstanding anything to the contrary
in this agreement, FLI shall have no obligation to consummate any Proposed
Strategic Alliance, and FLI and FI shall have no liability or obligation to
Mr. Adelson or Adelson Investors, LLC for any failure by FLI to consummate
any Proposed Strategic Alliance for any reason. In addition, nothing in this
agreement, shall be deemed to authorize Mr. Adelson to commit or bind FLI to
enter into any Proposed Strategic Alliance or otherwise to act as FLI's agent
or representative.
5. TERM. Mr. Adelson shall serve as consultant for FI and its
subsidiary, FLI, until February 9, 1999 (the "Term").
6. INDEMNIFICATION. FLI agrees to indemnify and hold harmless Mr.
Adelson against and from any and all losses, claims, damages, liabilities and
expenses (including reasonable attorneys' fees and disbursements and other
expenses incurred by Mr. Adelson in connection with the preparation for, or
defense of, any claim, action or proceeding, whether or not resulting in any
liability) to which Mr. Adelson may become liable arising out of Mr.
Adelson's acting for FLI pursuant to this agreement; provided, that, FLI
shall not be liable hereunder to the extent any loss, claim, damage,
liability or expense is found to have resulted from Mr. Adelson's gross
negligence, bad faith or material breach of this agreement.
The provisions of this section 6 shall remain operative and in full force
and effect regardless of any termination of this agreement.
7. MISCELLANEOUS
7.1 GOVERNING LAW. This agreement shall be governed by and
construed in accordance with the law of the State of California applicable to
agreements made and to be performed wholly in California.
7.2 ARBITRATION. Any dispute arising under or in connection with
this agreement shall be resolved by binding arbitration in Los Angeles,
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.
7.3 ENTIRE AGREEMENT; AMENDMENT. This agreement contains a complete
statement of all the arrangements between the parties with respect to its
subject matter, supersedes all existing agreements between them with respect
to that subject matter, and may not be changed or terminated orally. Any
amendment or modification must be in writing and signed by the party to be
charged.
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If you are in agreement with the foregoing, please sign in the space
provided below, and the foregoing shall then become a binding agreement among
us.
Very truly yours,
FAROUDJA, INC.
By:/s/ Michael Moone
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Michael Moone,
President and CEO
FAROUDJA LABORATORIES, INC.
By:/s/ Michael Moone
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Michael Moone,
President and CEO
Agreed and Accepted:
/s/ Merv Adelson
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Merv Adelson
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