EXHIBIT 99.3
OPTION AGREEMENT
OPTION AGREEMENT, dated April 22, 2002, made by SONICblue Incorporated,
a Delaware corporation (the "Grantor"), in favor of the grantees listed on
Schedule I attached hereto (individually, a "Grantee" and collectively, the
"Grantees").
W I T N E S S E T H:
WHEREAS, the Grantor and the Grantees have entered into a certain
Securities Purchase Agreement, by and among the Grantor and the Grantees, dated
as of April 21, 2002 (as amended or otherwise modified from time to time, the
"Purchase Agreement"), pursuant to which the Grantor is selling to the Grantees
an aggregate principal amount of $75,000,000 of its 7 3/4% Secured Senior
Subordinated Convertible Debentures due 2005 (the "Debentures") and Warrants
(the "Warrants") to purchase an aggregate of up to 7,500,000 shares of Common
Stock of the Grantor, par value $0.0001 per share (the "Common Stock") (the
transactions as contemplated by the Investment Documents (as defined herein),
the "Investment"); and
WHEREAS, it is a condition precedent to the closing (the " Closing ") of
the Investment that the Grantor shall have executed and delivered to the
Grantees this option agreement (as amended, modified or otherwise supplemented
from time to time, this "Agreement") to create a purchase option in favor of
each Grantee not later than July 17, 2002 (the date of the creation of such
purchase options being the "Option Date"), to purchase, from and after the
Option Date, such Grantee's pro rata portion of the Option Shares.
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Grantees to consummate the Investment, the
Grantor hereby agrees with the Grantees as follows:
SECTION 1. Definitions.
(a) The location of certain defined terms used in this Agreement is
crossed-referenced in Appendix A attached hereto.
(b) In addition, the following terms shall have the respective meanings
indicated below (such meanings to be applicable equally to both the singular and
plural forms of the terms defined):
"Bloomberg" means Bloomberg Financial Markets.
"Business Day" means any day other than Saturday, Sunday or other day on
which the banks in Taipei, Taiwan, R.O.C., are authorized or required by law to
remain closed.
"Closing Price" means, for any security as of any date, the last closing
trade price for such security on the Principal Market as reported by Bloomberg,
or if the Principal Market begins to operate on an extended hours basis, and
does not designate the closing trade price, then the last trade price at the
close of the Principal Market, as reported by Bloomberg, or, if no last
closing trade price is reported for such security by Bloomberg, the last closing
ask price of such security as reported by Bloomberg, or, if no last closing ask
price is reported for such security by Bloomberg, the average of the highest bid
price and the lowest ask price of any market makers for such security as
reported by Bloomberg. If the Closing Price cannot be calculated for such
security on such date on any of the foregoing bases, the Closing Price of such
security on such date shall be the fair market value of such security as
mutually determined by the Grantor and the Required Grantees. If the Grantor and
the Required Grantees are unable to agree upon the fair market value of such
security, the Closing Price shall be the fair market value as determined in good
faith by an independent, reputable investment bank selected by the Grantor and
approved by the Required Grantees. All fees and expenses of such determination
shall be borne by the Grantor. All such determinations shall be appropriately
adjusted for any stock dividend, stock split or other similar transaction during
such period.
"Indenture" means that certain indenture, dated as of the date hereof,
relating to the Debentures.
"Investment Commission" means the Investment Commission of the Ministry
of Economic Affairs of the R.O.C.
"Investment Documents" means the Purchase Agreement, the Registration
Rights Agreement, this Agreement, the Debentures, the Indenture, the Warrants,
the Pledge Agreement and any other documents, agreements, instruments,
certificates, UCC or other financing statements and all other contracts in
connection therewith.
"New Taiwan Dollars" and "NT$" means lawful currency for the time being
of the R.O.C.
"Option Shares" means, collectively up to 21,426,586 UMC Shares, subject
to any adjustment for any stock split, stock dividend, recapitalization, stock
combination or similar transaction after the date of this Agreement and
including, with respect to each such Option Share, the right to receive all
other dividends and distributions (whether in cash, securities or otherwise)
thereon and all other rights and interests currently existing with respect
thereto, or otherwise vested in or granted to the owner of such Option Shares
from and after the date of this Agreement.
"Pledge Agreement" means that certain Pledge and Security Agreement,
dated as of the date hereof, by and among the Grantor and the Grantees.
"Principal Market" means, with respect to the UMC Shares, the Taiwan
Stock Exchange or, if the UMC Shares are not listed on the Taiwan Stock
Exchange, the principal securities exchange on which the UMC Shares are listed
or to which the UMC Shares are admitted to trading.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of the date hereof, by and among the Grantor and the
Grantees.
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"Required Grantees" means the Grantees with the right to exercise the
Purchase Option for more than 50% of the remaining number of previously
unexercised Option Shares.
"R.O.C." means the Republic of China.
"Spot Rate" means, in relation to any specific date, the United States
Dollars to New Taiwan Dollars exchange rate indicated on the Bloomberg page,
"TWD Currency HP" for the offer side on the Business Day immediately preceding
such date.
"UMC" means United Microelectronics Corporation, a corporation organized
under the laws of the R.O.C. and having its principal place of business at 300
No. 3, Li-hsin RD. II, Science-Based Industrial Park, Hsinchu, Taiwan, R.O.C.
"UMC Shares" means the common shares, par value NT$10.00, of UMC.
"Unrestricted Shares" means securities that are not restricted in any
way with respect to disposition or transferability either by agreement, contract
or other arrangement or by the applicable law of the R.O.C. or of any other
non-U.S. jurisdiction.
SECTION 2. Purchase Option. (a) From and after the Option Date and
expiring (the "Purchase Option Expiration Date") three (3) Business Days after
the later of (i) the maturity date of the Debentures (as the same may be
extended from time to time) and (ii) the date of satisfaction in full of the
Obligations (as defined in the Pledge Agreement), each Grantee shall have the
option, but not the obligation (the "Purchase Option"), to purchase from time to
time up to its pro rata portion of the Option Shares (based on the ratio that
the principal amount of the Debentures purchased by each such Grantee at Closing
bears to the total principal amount of Debentures purchased by all Grantees at
Closing). The exercise price for each Option Share shall be NT$ 62.15 (the
"Exercise Price"). Each Grantee may, at any time and from time to time from and
after the Option Date, exercise the Purchase Option by delivering written notice
to the Grantor (a "Purchase Option Notice"), which notice shall state: (i) the
number of Option Shares being purchased by such Grantee and (ii) the date on
which such Grantee shall purchase such Option Shares, which date shall be five
(5) Business Days after delivery of the Purchase Option Notice (such day, the
"Purchase Option Date"). On the Purchase Option Date, the Grantor shall deliver
or cause to be delivered to such Grantee (i) certificates representing the
number of Option Shares set forth in the Purchase Option Notice without legends
or other restrictions on their transferability, properly endorsed for transfer,
together with all required documents and instruments necessary to effect the
transfer of the Option Shares and the recordation of such transfer with UMC,
(ii) any dividends and distributions (whether in cash, securities or otherwise)
in respect of such Option Shares and any right and interest on such Option
Shares arising after the date of this Agreement and prior to such delivery,
(iii) evidence that all required Investment Commission and other approvals have
been obtained and (iv) a written certificate certifying that the representations
and warranties set forth in Section 3 below remain true and correct as if made
on the Purchase Option Date, against payment of the purchase price for such
Option Shares, which shall be paid (less applicable R.O.C. securities transfer
tax) in immediately available funds by such Grantee to an account designated in
writing by the Grantor. Notwithstanding anything to the contrary contained in
this Agreement, if any Grantee delivers to the Grantor a Purchase Option Notice
prior to the Purchase Option Expiration Date, the Purchase Option Expiration
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Date shall be extended, for such Grantee, until after the Grantee has purchased
the number of Option Shares set forth in the Purchase Option Notice.
(b) Inability to Deliver/Cash Settlement. If, upon any exercise of the
Purchase Option hereunder, the Grantor does not or cannot on the applicable
Purchase Option Date deliver to the applicable Grantee full complete,
unencumbered and unrestricted title to the relevant Option Shares as
contemplated by subsection (a), above, the Grantor shall, at the option of the
applicable Grantee, instead pay to the applicable Grantee on the applicable
Purchase Option Date, by wire transfer of immediately available funds to such
bank account or bank accounts as the applicable Grantee shall designate in
writing to the Grantor, an amount equal to the Market Price minus the Exercise
Price times the number of Option Shares to have been delivered pursuant to
Subsection (a) above. For purposes of the above, "Market Price" shall mean the
US Dollar equivalent (calculated at the Spot Rate on the date of payment) of the
average closing price of UMC Shares on the Principal Market on the three (3)
trading days immediately preceding the applicable Purchase Option Date.
Notwithstanding the foregoing, nothing herein shall preclude any Grantee from
seeking specific performance and/or claiming damage from the Grantor if such
failure to deliver arises from the Grantor's breach of its obligations
hereunder.
SECTION 3. Representations and Warranties. The Grantor hereby represents
and warrants to the Grantees that:
(a) the Grantor is and shall be on the Purchase Option Date the legal
and beneficial owner of the Option Shares, free and clear of any lien, security
interest, pledge, charge, option, right of first refusal, claim, mortgage,
lease, easement or any other encumbrance whatsoever ("Liens"), except for Liens
in favor of the Grantees pursuant to the Investment Documents;
(b) on the date hereof, the Grantor is the legal, beneficial and record
owner of at least 25,184,000 UMC Shares;
(c) the Grantor has furnished each Grantee with a true, correct and
complete copy of each lock-up agreement, pledge agreement, registration rights
agreement and other agreement in respect of or otherwise affecting any of the
UMC Shares held or beneficially owned by the Grantor in existence on the date
hereof;
(d) on the Option Date and thereafter the Option Shares will be
Unrestricted Shares;
(e) except for those approvals referred to elsewhere herein, all
governmental (R.O.C. and non-R.O.C.) and other consents, approval or
authorizations that are required to have been obtained by the Grantor with
respect to this Agreement and the grant of the Purchase Option hereunder have
been obtained and are, and will continue to be, in full force and effect and all
conditions of any such consent, approval or authorization will have been
complied with on or prior to the Option Date;
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(f) except as expressly contemplated herein, the Grantor is not required
to obtain any governmental or other consent or approval, including, without
limitation, from any governmental authority or entity in the R.O.C. in
connection with the execution, delivery and performance of this Agreement or the
transfer of the Option Shares to the Grantees;
(g) the Grantor's investment in the Option Shares has been approved by
the Investment Commission under the Statute for Investments by Foreign Nationals
and the Option Shares are, and will upon transfer to the Grantees, remain fully
eligible for all benefits associated with such approval; and
(h) to the extent that any of the Option Shares are dividend shares,
such shares are not subject to deferred dividend tax upon any future sale
thereof.
SECTION 4. Covenants.
(a) The Grantor hereby covenants (i) immediately after the Option Date,
but in no event later than five (5) Business Days thereafter, to jointly file
with the Grantees, for approval with the Investment Commission, for the Grantor
to sell, and one or more Grantees to purchase, some or all of the Option Shares
at the Exercise Price, and (ii) if, and each time the Required Grantees request
that the Grantor file an extension to the approval referred to in clause (i)
above, the Grantor shall file such extension in form and substance acceptable to
the Required Grantees, within five (5) Business Days after such request.
(b) The Grantor at its own cost and expense shall do, make, execute and
deliver all such additional and further acts, documents, assurances,
certificates and instruments as may be necessary or that the Required Grantees
may reasonably require to exercise their rights under the Purchase Option,
including, without limitation, (i) executing, delivering and, where appropriate,
filing any documents with the Investment Commission or any other governmental
authority and (iii) delivering any legal opinion of Grantor's R.O.C. counsel
with respect to the validity of the Purchase Option, in each case in form and
substance satisfactory to the Required Grantees.
(c) Upon exercise of the Purchase Option by any Grantee, in whole or in
part, the Grantor shall cause (i) the Option Shares subject to such exercise to
be released from the pledge in favor of the Grantees as set forth in the Pledge
Agreement, and (ii) the certificates representing such shares to be endorsed and
delivered to the Grantees as contemplated by Section 2(a) above, and (iii) the
transfer of such shares to be recorded with UMC's transfer agent.
(d) Notice Received from UMC. From and after the date hereof, Grantor
shall promptly notify the Grantees after the Grantor receives any notice from
UMC that may reasonably be expected to affect the value of the Option Shares,
including, without limitation, a notice of corporate action or proposed
corporate action, and shall deliver a copy of such notice to each of the
Grantees, but in no event shall the Grantor notify and deliver such notice to
the Grantees later than five (5) Business Days after it has received such
notice.
(e) Grantees' Payment for Rights Offering. If there is an offering by
UMC to its shareholders of any rights or options to subscribe for, purchase or
receive any securities, cash
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or any other items and the Grantor elects not to participate in such offering,
then, if permitted by applicable law, the Grantor shall notify the Grantees of
the Grantor's intention not to participate prior to the earlier of (i) ten (10)
days prior to the expiration of the offering and (ii) the number of days prior
to the expiration of the offering equal to one-half of the number of days that
such offering is to remain open, and the Grantor shall grant the Grantees the
opportunity to deliver to the Grantor the funds and any actual reasonable
expenses of the Grantor, including, without limitation, any securities transfer
taxes, necessary for the Grantor to participate in such offering. Upon receipt
of such funds, the Grantor shall be obligated to participate in such offering
and shall do all acts and execute all documents necessary or appropriate to
transfer the securities, options, cash or other items that were issued, granted,
purchased or received pursuant to such offering to the Grantees.
(f) Release from Collateral. Any Option Shares purchased by a Grantee
pursuant to Section 2 shall be released from the Collateral (as defined in the
Pledge Agreement) pledged pursuant to the Pledge Agreement.
SECTION 5. Notices, Etc. All notices and other communications provided
for hereunder shall be in writing and shall be mailed, telecopied or delivered
pursuant to the terms of the Indenture.
SECTION 6. Miscellaneous.
(a) No amendment of any provision of this Agreement shall be effective
unless it is in writing and signed by the Grantor and the Required Grantees, and
no waiver of any provision of this Agreement, and no consent to any departure by
the Grantor therefrom, shall be effective unless it is in writing and signed by
the Required Grantees, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
(b) This Agreement shall (i) remain in full force and effect until the
Purchase Option Expiration Date; and (ii) be binding on the Grantor and its
successors and assigns and shall inure, together with all rights and remedies of
the Grantees hereunder, to the benefit of the Grantees and their successors,
transferees and assigns. The Grantees may assign or transfer, as collateral or
otherwise, any or all of its interest hereunder and under the other Investment
Documents. None of the rights or obligations of the Grantor hereunder may be
assigned or otherwise transferred without the prior written consent of the
Required Grantees.
(c) Upon the Purchase Option Expiration Date, this Agreement and the
Purchase Option shall terminate.
(d) This Agreement may be executed in counterparts, each of which, when
so executed and delivered, shall be deemed to be an original and enforceable,
but all of which counterparts, taken together, shall constitute one and the same
instrument.
(e) In the event that any one or more of the provisions, paragraphs,
words, clauses, phrases or sentences contained herein, or the application
thereof in any circumstances, is held invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and
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enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the other remaining provisions,
paragraphs, words, clauses, phrases or sentences hereof shall not be in any way
impaired, it being intended that all rights, powers and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law;
provided that this paragraph shall not cause this Agreement to differ materially
from the intent of the parties as herein expressed.
(f) Each party hereto shall do and perform or cause to be done and
performed all such further acts and things and shall execute and deliver all
such other agreements, certificates, instruments and documents as any other
party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(g) The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
(h) This Agreement supersedes all other prior oral or written agreements
between the Grantor and each Grantee, their affiliates and persons acting on
their behalf with respect to the matters discussed herein, and this Agreement
and the instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Grantor nor any Grantee
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be amended or waived other than by
an instrument in writing signed by the Grantor and the Required Grantees. No
such amendment shall be effective to the extent that it applies to less than all
of the Grantees. No consideration shall be offered or paid to any person to
amend or consent to a waiver or modification of any provision of any of this
Agreement unless the same consideration also is offered to all of the parties to
this Agreement.
(i) The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.
(j) Each Grantee and each permitted assignee under the Investment
Documents shall have all rights and remedies set forth in the Investment
Documents and all rights and remedies which such holders have been granted at
any time under any other agreement or contract and all of the rights which such
holders have under any law. Any person having any rights under any provision of
this Agreement shall be entitled to enforce such rights specifically (without
posting a bond or other security), to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights granted by law.
(k) All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any
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transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under the Indenture and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
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IN WITNESS WHEREOF, the Grantor has executed and delivered this
Agreement as of the date first above written.
SONICBLUE INCORPORATED
By: /s/ JOHN J. TODD
-----------------------------------
Name: John J. Todd
------------------------------
Title: Chief Operating Officer
-----------------------------
Acknowledged and Consented to:
PORTSIDE GROWTH AND OPPORTUNITY FUND
By: /s/ JEFFREY M. SOLOMON
------------------------------
Name: Jeffrey M. Solomon
-------------------------
Title: Managing Officer
------------------------
SMITHFIELD FIDUCIARY LLC
By: /s/ ADAM J. CHILL
------------------------------
Name: Adam J. Chill
-------------------------
Title: Authorized Signatory
------------------------
CITADEL EQUITY FUND LTD.
By: /s/ KENNETH A. SIMPLER
------------------------------
Name: Kenneth A. Simpler
-------------------------
Title: Vice President
------------------------
SCHEDULE I
SCHEDULE OF GRANTEES
Grantee Address
Grantee Name and Facsimile Number
--------------------------------------- -----------------------------------------------
Portside Growth & Opportunity Fund, Ltd. c/o Ramius Capital Group, L.L.C.
666 Third Avenue, 26th Floor
New York, NY 10017
Attention: Jeffrey M. Solomon
Andrew Strober
Telephone: (212) 845-7917
Facsimile: (212) 845-7999
Smithfield Fiduciary LLC c/o Highbridge Capital Management, LLC
9 West 57th Street, 27th Floor
New York, NY 10019
Attention: Ari J. Storch
Adam J. Chill
Telephone: (212) 287-4720
Facsimile: (212) 751-0755
Citadel Equity Fund Ltd. c/o Citadel Investment Group, L.L.C.
225 West Washington Street
Chicago, Illinois 60606
Attention: Kenneth A. Simpler
Telephone: (312) 338-7801
Facsimile: (312) 338-0780
APPENDIX A
DEFINED TERMS
Page
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Agreement....................................................................................1
Closing......................................................................................1
Common Stock.................................................................................1
Debentures...................................................................................1
Exercise Price...............................................................................3
Grantee......................................................................................1
Grantees.....................................................................................1
Grantor......................................................................................1
Investment...................................................................................1
Liens........................................................................................4
Market Price.................................................................................4
Option Date..................................................................................1
Purchase Agreement...........................................................................1
Purchase Option..............................................................................3
Purchase Option Date.........................................................................3
Purchase Option Expiration Date..............................................................3
Purchase Option Notice.......................................................................3
Warrants.....................................................................................1