Master Separation and Distribution Agreement - C-Cube Microsystems Inc. and C-Cube Semiconductor Inc.
FORM OF
MASTER SEPARATION AND DISTRIBUTION AGREEMENT
AMONG
C-CUBE MICROSYSTEMS INC.,
C-CUBE SEMICONDUCTOR INC.
AND
C-CUBE SEMICONDUCTOR II INC.
EFFECTIVE AS OF
__________ ____, 2000
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
ARTICLE I SEPARATION......................................................2
Section 1.1 Separation Date.............................................2
Section 1.2 Closing of Transactions.....................................2
Section 1.3 Exchange of Secretary's Certificates........................2
ARTICLE II DOCUMENTS AND ITEMS TO BE DELIVERED ON THE SEPARATION DATE......2
Section 2.1 Documents to Be Delivered By C-Cube.........................2
Section 2.2 Retention of Cash Reserves..................................3
Section 2.3 Documents to Be Delivered by Semiconductor I and
Semiconductor II............................................4
ARTICLE III THE DISTRIBUTION................................................4
Section 3.1 The Distribution............................................4
Section 3.2 Actions Prior To The Distribution...........................5
Section 3.3 Sole Discretion of C-Cube...................................6
Section 3.4 Conditions To Distribution..................................6
Section 3.5 Fractional Shares...........................................6
ARTICLE IV COVENANTS AND OTHER MATTERS.....................................7
Section 4.1 Other Agreements............................................7
Section 4.2 Further Instruments.........................................7
Section 4.3 Transitional Services Agreement.............................8
Section 4.4 Agreement For Exchange of Information.......................8
Section 4.5 Payment of Expenses.........................................9
Section 4.6 Dispute Resolution..........................................9
Section 4.7 Governmental Approvals.....................................10
Section 4.8 Cooperation in Obtaining New Agreements....................11
Section 4.9 Property Damage to Semiconductor Assets Prior to the
Separation Date............................................11
ARTICLE V MISCELLANEOUS..................................................11
Section 5.1 Limitation of Liability....................................11
Section 5.2 Entire Agreement...........................................12
Section 5.3 Governing Law..............................................12
Section 5.4 Termination................................................12
Section 5.5 Notices....................................................12
Section 5.6 Counterparts...............................................12
Section 5.7 Binding Effect; Assignment.................................12
Section 5.8 Severability...............................................12
Section 5.9 Failure or Indulgence Not Waiver; Remedies Cumulative......13
Section 5.10 Amendment..................................................13
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
Section 5.11 Authority..................................................13
Section 5.12 Interpretation.............................................13
Section 5.13 Conflicting Agreements.....................................13
ARTICLE VI DEFINITIONS....................................................13
Section 6.1 Affiliated Company.........................................13
Section 6.2 Ancillary Agreements.......................................14
Section 6.3 Assignment Agreement.......................................14
Section 6.4 Business Day...............................................14
Section 6.5 Code.......................................................14
Section 6.6 Commission.................................................14
Section 6.7 Disputes...................................................14
Section 6.8 Distribution...............................................14
Section 6.9 Distribution Agent.........................................14
Section 6.10 Distribution Date..........................................14
Section 6.11 Exchange Act...............................................14
Section 6.12 Governmental Approvals.....................................14
Section 6.13 Governmental Authority.....................................14
Section 6.14 Information................................................14
Section 6.15 Nasdaq.....................................................15
Section 6.16 NYSE.......................................................15
Section 6.17 Person.....................................................15
Section 6.18 Prime Rate.................................................15
Section 6.19 Record Date................................................15
Section 6.20 Semi Spin Taxes............................................15
Section 6.21 Semiconductor Assets.......................................15
Section 6.22 Semiconductor Business.....................................15
Section 6.23 Semiconductor Pro Forma Balance Sheet......................15
Section 6.24 Separation.................................................15
Section 6.25 Separation Date............................................15
Section 6.26 Subsidiary.................................................15
Section 6.27 WSGR.......................................................16
-ii-
<PAGE> 4
EXHIBITS
Exhibit A Certificate of Secretary of C-Cube
Exhibit B Certificate of Secretary of Semiconductor
Exhibit C General Assignment and Assumption Agreement
Exhibit D Transitional Services Agreement
Exhibit E Employee Matters Agreement
Exhibit F Tax Sharing Agreement
Exhibit G Master Confidential Disclosure Agreement
Exhibit H Indemnification and Insurance Matters Agreement
Exhibit I Real Estate Matters Agreement
-iii-
<PAGE> 5
SCHEDULES
Schedule 2.1(b) Subsidiaries of C-Cube to be Transferred to Semiconductor I or
Semiconductor II
-iv-
<PAGE> 6
MASTER SEPARATION AND DISTRIBUTION AGREEMENT
This Master Separation and Distribution Agreement (this "AGREEMENT") is
entered into as of _______ ___, 2000, by and among C-Cube Microsystems Inc., a
Delaware corporation ("C-CUBE"), C-Cube Semiconductor Inc., a Delaware
corporation ("SEMICONDUCTOR I"), and C-Cube Semiconductor II Inc., a Delaware
corporation ("SEMICONDUCTOR II"). Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to such terms in Article VI
hereof.
RECITALS
WHEREAS, C-Cube has entered into the Agreement and Plan of Merger and
Reorganization, dated as of October 27, 1999 (the "MERGER AGREEMENT"), with
Harmonic Inc. ("HARMONIC") pursuant to which C-Cube will merge with and into
Harmonic (the "MERGER"), contingent on the sale or distribution by C-Cube of the
Semiconductor Business;
WHEREAS, C-Cube and Harmonic entered into an Amended and Restated
Agreement and Plan of Merger and Reorganization dated as of December 9, 1999
(the "RESTATED MERGER AGREEMENT");
WHEREAS, the Boards of Directors of C-Cube, Semiconductor I and
Semiconductor II have each determined that, if the Merger receives all required
approvals, it would be appropriate and desirable for C-Cube to contribute and
transfer to Semiconductor I and Semiconductor II, and for Semiconductor to
receive and assume, directly or indirectly, substantially all of the assets and
liabilities currently associated with the Semiconductor Business, including the
stock, investments or similar interests currently held by C-Cube in subsidiaries
and other entities that conduct such business (the "SEPARATION");
WHEREAS, C-Cube currently contemplates that, following the transfer and
assumption of such assets and liabilities to Semiconductor I and Semiconductor
II and immediately prior to and in connection with the Merger, C-Cube will
distribute to the holders of its common stock, $0.01 par value, by means of a
pro rata distribution, all of the shares of Semiconductor I common stock owned
by C-Cube (the "DISTRIBUTION");
WHEREAS, C-Cube and Semiconductor I intend the Distribution to qualify
as a distribution tax-free to stockholders under Section 355(a) of the Code,
although C-Cube and Semiconductor I anticipate that C-Cube will incur corporate
tax in connection with the Distribution; and
WHEREAS, the parties intend in this Agreement, including the Exhibits
and Schedules hereto, to set forth the principal arrangements between them
regarding the separation of the Semiconductor Business.
<PAGE> 7
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
ARTICLE I
SEPARATION
SECTION 1.1 SEPARATION DATE. Unless otherwise provided in this
Agreement, or in any agreement to be executed in connection with this Agreement,
the effective time and date of each transfer of property, assumption of
liability, license, undertaking, or agreement in connection with the Separation
shall be 12:01 a.m., Pacific Time, _______ ___, 2000 or such other date as may
be fixed by the Board of Directors of C-Cube (the "SEPARATION DATE").
SECTION 1.2 CLOSING OF TRANSACTIONS. Unless otherwise provided herein,
the closing of the transactions contemplated in ARTICLE II shall occur by the
lodging of each of the executed instruments of transfer, assumptions of
liability, undertakings, agreements, instruments or other documents executed or
to be executed with Wilson Sonsini Goodrich & Rosati, Professional Corporation
("WSGR"), 650 Page Mill Road, Palo Alto, California 94304, to be held in escrow
for delivery as provided in SECTION 1.3 of this Agreement.
SECTION 1.3 EXCHANGE OF SECRETARY'S CERTIFICATES. Upon receipt of a
certificate of the Secretary or an Assistant Secretary of C-Cube in the form
attached to this Agreement as Exhibit A, WSGR shall deliver to Semiconductor I
and Semiconductor II on behalf of C-Cube all of the items required to be
delivered by C-Cube hereunder pursuant to SECTION 2.1 of this Agreement and each
such item shall be deemed to be delivered to Semiconductor I and Semiconductor
II as of the Separation Date upon delivery of such certificate. Upon receipt of
a certificate of the Secretary or an Assistant Secretary of Semiconductor I and
Semiconductor II in the form attached to this Agreement as EXHIBIT B, WSGR shall
deliver to C-Cube on behalf of Semiconductor I and Semiconductor II all of the
items required to be delivered by Semiconductor I and Semiconductor II hereunder
and each such item shall be deemed to be delivered to C-Cube as of the
Separation Date upon receipt of such certificate.
ARTICLE II
DOCUMENTS AND ITEMS TO BE DELIVERED ON THE SEPARATION DATE
SECTION 2.1 DOCUMENTS TO BE DELIVERED BY C-CUBE. (a) On the Separation
Date, C-Cube will deliver, or will cause its appropriate Subsidiaries to
deliver, to Semiconductor I and Semiconductor II all of the following items and
agreements (collectively, together with all agreements and documents
contemplated by such agreements, the "ANCILLARY AGREEMENTS"):
(b) A duly executed General Assignment and Assumption Agreement (the
"ASSIGNMENT AGREEMENT") substantially in the form attached hereto as EXHIBIT C;
-2-
<PAGE> 8
(c) Certificates representing the stock and/or investments in the
Subsidiaries and other holdings of C-Cube set forth on SCHEDULE 2.1(B) with duly
executed stock powers in the form proper for transfer;
(d) A duly executed Transitional Services Agreement substantially in the
form attached hereto as EXHIBIT D;
(e) A duly executed Employee Matters Agreement substantially in the form
attached hereto as EXHIBIT E;
(f) A duly executed Tax Sharing Agreement substantially in the form
attached hereto as EXHIBIT F;
(g) A duly executed Master Confidential Disclosure Agreement
substantially in the form attached hereto as EXHIBIT G;
(h) A duly executed Indemnification and Insurance Matters Agreement
substantially in the form attached hereto as EXHIBIT H;
(i) A duly executed Real Estate Matters Agreement substantially in the
form attached hereto as EXHIBIT I;
(j) Resignations of each person who is an officer or director of any
member of C-Cube or its Subsidiaries, immediately prior to the Separation Date,
and who will be employees of Semiconductor I or Semiconductor II or any of their
Subsidiaries from and after the Separation Date; and
(k) Such other agreements, documents or instruments as the parties may
agree are necessary or desirable in order to achieve the purposes hereof,
including, without limitation, all service level agreements entered into in
accordance with SECTION 4.3 and those documents referred to in SECTION 4.4.
SECTION 2.2 RETENTION OF CASH RESERVES. (a) On or around the Separation
Date, C-Cube will provide to Semiconductor I all cash of C-Cube and its
Subsidiaries other than the following amounts (collectively, the "Retained
Cash"), the sum of (i) sixty million dollars ($60,000,000), (ii) cash in an
amount reasonably estimated to be sufficient to pay all Taxes of C-Cube and its
Subsidiaries accrued through the Distribution Date but not including, as
determined pursuant to the Tax Sharing Agreement, Semi Spin Taxes (the "Pre-Semi
Disposition Taxes"), (iii) cash in an amount sufficient to pay the fees and
expenses associated with the transactions contemplated by the Merger Agreement,
including, but not limited to, the fees and expenses of C-Cube's investment
bankers, attorneys, accountants and other professional advisors, (iv) cash in an
amount reasonably estimated to be sufficient to pay the Semi Spin Taxes, as
determined pursuant to the Tax Sharing Agreement, and (v) cash in an amount
sufficient to make all severance payments to any employee of C-Cube who is not a
Continuing Employee nor an employee of the Semiconductor Business, it being
understood that any cash retained under this paragraph in excess of the actual
amounts required to be
-3-
<PAGE> 9
paid will be included in C-Cube's basis in Semiconductor I or the Semiconductor
Business assets for purposes of calculating the Semi Spin Taxes.
(b) The amount of cash retained under Sections 2.2(a)(ii) and (iv) shall
be subject to adjustment pursuant to Sections 4.2 and 4.3 of the Tax Sharing
Agreement. For purposes of calculating the Semi Spin Taxes, any such adjustment
shall be treated as an adjustment to C-Cube's basis in the stock of
Semiconductor I in accordance with Sections 4.2(b) or 4.3(e) of the Tax Sharing
Agreement.
(c) Prior to the Distribution, C-Cube shall certify the amount of the
Retained Cash to Harmonic, which schedule shall include a breakdown of the
amount retained for Pre-Semi Disposition Taxes and Semi Spin Taxes (in each case
on a Tax-by-Tax basis).
SECTION 2.3 DOCUMENTS TO BE DELIVERED BY SEMICONDUCTOR I AND
SEMICONDUCTOR II. As of the Separation Date, Semiconductor I and Semiconductor
II will or will cause their appropriate Subsidiaries to deliver to C-Cube all of
the following:
(a) In each case where Semiconductor I or Semiconductor II or any of
their subsidiaries is a party to any agreement or instrument referred to in
SECTION 2.1, a duly executed counterpart of such agreement or instrument; and
(b) Resignations of each person who is an officer or director of C-Cube,
or any of its Subsidiaries, immediately prior to the Separation Date, and who
will be employees of Semiconductor I or Semiconductor II or any of their
Subsidiaries from and after the Separation Date.
ARTICLE III
THE DISTRIBUTION
SECTION 3.1 THE DISTRIBUTION.
(a) Delivery of Shares for Distribution. Subject to SECTION 3.4 hereof,
on or prior to the date the Distribution is effective (the "DISTRIBUTION DATE"),
C-Cube will deliver to the distribution agent (the "DISTRIBUTION AGENT") to be
appointed by C-Cube to distribute to the stockholders of C-Cube the shares of
common stock of Semiconductor I held by C-Cube pursuant to the Distribution for
the benefit of holders of record of common stock of C-Cube on the Record Date, a
single stock certificate, endorsed by C-Cube in blank, representing all of the
outstanding shares of common stock of Semiconductor I then owned by C-Cube, and
shall cause the transfer agent for the shares of common stock of C-Cube to
instruct the Distribution Agent to distribute on the Distribution Date the
appropriate number of such shares of common stock of Semiconductor I to each
such holder or designated transferee or transferees of such holder.
(b) Shares Received. Subject to SECTIONS 3.4 and 3.5, each holder of
common stock of C-Cube on the Record Date (or such holder's designated
transferee or transferees) will be entitled to receive in the Distribution a
number of shares of common stock of Semiconductor I equal
-4-
<PAGE> 10
to the number of shares of common stock of C-Cube held by such holder on the
Record Date multiplied by a fraction the numerator of which is the number of
shares of common stock of Semiconductor I beneficially owned by C-Cube on the
Record Date and the denominator of which is the number of shares of common stock
of C-Cube outstanding on the Record Date.
(c) Obligation to Provide Information. Semiconductor I and C-Cube, as
the case may be, will provide to the Distribution Agent all share certificates
and any information required in order to complete the Distribution on the basis
specified above.
SECTION 3.2 ACTIONS PRIOR TO THE DISTRIBUTION.
(a) Transfer of Semiconductor II Stock. C-Cube will, (i) before the
Separation, cause Semiconductor II to issue all outstanding shares of Non-Voting
Series A Preferred Stock to WSGR in exchange for legal and other related
services, and (ii) after the Separation, will transfer all outstanding shares of
Common Stock of Semiconductor II to Semiconductor I.
(b) Information Statement. C-Cube and Semiconductor I shall prepare and
mail, prior to the Distribution Date, to the holders of common stock of C-Cube,
such information concerning the Semiconductor Business and the Distribution and
such other matters as C-Cube shall reasonably determine are necessary and as may
be required by law. C-Cube and Semiconductor I will prepare, and Semiconductor I
will, to the extent required under applicable law, file with the Securities and
Exchange Commission (the "COMMISSION") any such documentation which C-Cube and
Semiconductor I determine is necessary or desirable to effectuate the
Distribution, and C-Cube and Semiconductor I shall each use its reasonable
commercial efforts to obtain all necessary approvals from the Commission with
respect thereto as soon as practicable.
(c) Blue Sky. C-Cube, Semiconductor I and Semiconductor II shall take
and shall cause any of their Subsidiaries to take all such actions as may be
necessary or appropriate under the securities or blue sky laws of the United
States (and any comparable laws under any foreign jurisdiction) in connection
with the Distribution.
(d) NYSE or Nasdaq Listing. Semiconductor I shall prepare and file, and
shall use its reasonable commercial efforts to have approved, an application for
the listing of the common stock of Semiconductor I to be distributed in the
Distribution on the New York Stock Exchange (the "NYSE") or the Nasdaq National
Market (the "NASDAQ"), subject to official notice of distribution.
(e) Retained Cash. The amount of case required to be retained by C-Cube
pursuant to Section 2.2(a) hereof shall have been retained.
(f) Conditions. C-Cube, Semiconductor I and Semiconductor II shall take
and shall cause any of their Subsidiaries to take all reasonable steps necessary
and appropriate to cause the conditions set forth in SECTION 3.4 to be satisfied
and to effect the Distribution on the Distribution Date.
-5-
<PAGE> 11
SECTION 3.3 SOLE DISCRETION OF C-CUBE. C-Cube shall, in its sole and
absolute discretion, determine the date of the consummation of the Distribution
and all terms of the Distribution, including, without limitation, the form,
structure and terms of any transaction(s) and/or offering(s) to effect the
Distribution and the timing of and conditions to the consummation of the
Distribution. In addition, C-Cube may at any time and from time to time until
the completion of the Distribution modify or change the terms of the
Distribution, including, without limitation, by accelerating or delaying the
timing of the consummation of all or part of the Distribution. Semiconductor I
and Semiconductor II shall cooperate with C-Cube in all respects to accomplish
the Distribution and shall, at C-Cube's direction, promptly take any and all
actions necessary or desirable to effect the Distribution, including, without
limitation, the registration under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT") of the common stock of Semiconductor I on an
appropriate registration form or forms to be designated by C-Cube. C-Cube shall
select any financial printer, solicitation and/or exchange agent and outside
counsel for C-Cube; provided, however, that nothing herein shall prohibit
Semiconductor I from engaging (at its own expense) its own financial, legal,
accounting and other advisors in connection with the Distribution.
SECTION 3.4 CONDITIONS TO DISTRIBUTION. The following are conditions to
the consummation of the Distribution. The conditions are for the sole benefit of
C-Cube and shall not give rise to or create any duty on the part of C-Cube or
the C-Cube Board of Directors to waive or not waive any such condition.
(a) Government Approvals. Any material governmental approvals and
consents necessary to consummate the Distribution shall have been obtained and
be in full force and effect;
(b) No Legal Restraints. No order, injunction or decree issued by any
court or agency of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Distribution shall be in effect
and no other event outside the control of C-Cube shall have occurred or failed
to occur that prevents the consummation of the Distribution; and
(c) Transfer of Semiconductor II Stock. The transfer of all outstanding
shares of Common Stock of Semiconductor II to Semiconductor I shall have been
effected.
SECTION 3.5 FRACTIONAL SHARES. As soon as practicable after the
Distribution Date, C-Cube shall direct the Distribution Agent to determine the
number of whole shares and fractional shares of common stock of Semiconductor I
allocable to each holder of record or beneficial owner of common stock of C-Cube
as of the Record Date, to aggregate all such fractional shares and sell the
whole shares obtained thereby at the direction of C-Cube, in open market
transactions, at then prevailing trading prices, and to cause to be distributed
to each such holder or for the benefit of each such beneficial owner to which a
fractional share shall be allocable such holder's or owner's ratable share of
the proceeds of such sale, after making appropriate deductions of the amount
required to be
-6-
<PAGE> 12
withheld for federal income tax purposes and after deducting an amount equal to
all brokerage charges, commissions and transfer taxes attributed to such sale.
C-Cube and the Distribution Agent shall use their reasonable commercial efforts
to aggregate the shares of common stock of C-Cube that may be held by any
beneficial owner thereof through more than one account in determining the
fractional share allocable to such beneficial owner.
ARTICLE IV
COVENANTS AND OTHER MATTERS
SECTION 4.1 OTHER AGREEMENTS. In addition to the specific agreements,
documents and instruments annexed to this Agreement, C-Cube and Semiconductor I
agree to execute or cause to be executed by the appropriate parties and deliver,
as appropriate, such other agreements, instruments and other documents as may be
necessary or desirable in order to effect the purposes of this Agreement and the
Ancillary Agreements.
SECTION 4.2 FURTHER INSTRUMENTS. At the request of Semiconductor I or
Semiconductor II and without further consideration, C-Cube will execute and
deliver, and will cause its applicable Subsidiaries to execute and deliver, to
Semiconductor I or Semiconductor II or any of their Subsidiaries such other
instruments of transfer, conveyance, assignment, substitution and confirmation
and take such action as Semiconductor I or Semiconductor II may reasonably deem
necessary or desirable in order to more effectively transfer, convey and assign
to Semiconductor I or Semiconductor II or any of their Subsidiaries and confirm
Semiconductor I's, Semiconductor II's and their Subsidiaries' title to all of
the assets, rights and other things of value contemplated to be transferred to
Semiconductor I or Semiconductor II or any of their Subsidiaries pursuant to
this Agreement, the Ancillary Agreements, and any documents referred to therein,
to put Semiconductor I or Semiconductor II or any of their Subsidiaries in
actual possession and operating control thereof and to permit Semiconductor I or
Semiconductor II or any of their Subsidiaries to exercise all rights with
respect thereto (including, without limitation, rights under contracts and other
arrangements as to which the consent of any third party to the transfer thereof
shall not have previously been obtained). At the request of C-Cube and without
further consideration, Semiconductor I and Semiconductor II will execute and
deliver, and will cause their applicable Subsidiaries to execute and deliver, to
C-Cube and its Subsidiaries all instruments, assumptions, novations,
undertakings, substitutions or other documents and take such other action as
C-Cube may reasonably deem necessary or desirable in order to have Semiconductor
I and Semiconductor II fully and unconditionally assume and discharge the
liabilities contemplated to be assumed by Semiconductor I, Semiconductor II or
any of their Subsidiaries under this Agreement or any document in connection
herewith and to relieve the C-Cube or any of its Subsidiaries of any liability
or obligation with respect thereto and evidence the same to third parties. None
of C-Cube, Semiconductor I or Semiconductor II shall be obligated, in connection
with the foregoing, to expend money other than reasonable out-of-pocket
expenses, attorneys' fees and recording or similar fees. If any additional fees
arise for any reason, such fees shall be the responsibility of Semiconductor I.
Furthermore, each party, at the request of another party hereto, shall execute
and deliver such other
-7-
<PAGE> 13
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of the transactions
contemplated hereby.
SECTION 4.3 TRANSITIONAL SERVICES AGREEMENT. C-Cube and Semiconductor I
and Semiconductor II will enter into a Transitional Services Agreement covering
the provisions of various transitional services, including telecommunications,
networks, enterprise applications and other services by Semiconductor I or
Semiconductor II to C-Cube or, in certain circumstances, vice versa. The
Transitional Services Agreement will generally provide for a term of two (2)
years.
SECTION 4.4 AGREEMENT FOR EXCHANGE OF INFORMATION. Each of C-Cube,
Semiconductor I and Semiconductor II, for itself and on behalf of its
Subsidiaries, agrees to provide, or cause to be provided, to each other, at any
time before or after the Distribution Date, as soon as reasonably practicable
after written request therefor, any Information in the possession or under the
control of such party that the requesting party reasonably needs (i) to comply
with reporting, disclosure, filing or other requirements imposed on the
requesting party (including under applicable securities laws) by a Governmental
Authority having jurisdiction over the requesting party, (ii) for use in any
other judicial, regulatory, administrative or other proceeding or in order to
satisfy audit, accounting, claims, regulatory, litigation or other similar
requirements, (iii) to comply with its obligations under this Agreement or any
Ancillary Agreement or (iv) in connection with the ongoing businesses of C-Cube,
Semiconductor I or Semiconductor II, as the case may be; provided, however, that
in the event that any party determines that any such provision of Information
could be commercially detrimental, violate any law or agreement, or waive any
attorney-client privilege, the parties shall take all reasonable measures to
permit the compliance with such obligations in a manner that avoids any such
harm or consequence.
(a) Internal Accounting Controls; Financial Information. After the
Separation Date, (i) each party shall maintain in effect at its own cost and
expense adequate systems and controls for its business to the extent necessary
to enable the other party to satisfy its reporting, accounting, audit and other
obligations, and (ii) each party shall provide, or cause to be provided, to the
other party and its Subsidiaries in such form as such requesting party shall
request, at no charge to the requesting party, all financial and other data and
information as the requesting party determines necessary or advisable in order
to prepare its financial statements and reports or filings with any Governmental
Authority.
(b) Ownership of Information. Any Information owned by a party that is
provided to a requesting party pursuant to this SECTION 4.4 shall be deemed to
remain the property of the providing party. Unless specifically set forth
herein, nothing contained in this Agreement shall be construed as granting or
conferring rights of license or otherwise in any such Information.
(c) Record Retention. (i) To facilitate the possible exchange of
Information pursuant to this SECTION 4.4 and other provisions of this Agreement
after the Distribution Date, each party agrees to use its reasonable commercial
efforts to retain all Information in their respective possession or control on
the Distribution Date. However, except as set forth in the Tax Sharing
Agreement, at any time after the Distribution Date, each party may amend their
respective record retention policies at such party's discretion; provided,
however, that if a party desires to effect the amendment within
-8-
<PAGE> 14
three (3) years after the Distribution Date, the amending party must give thirty
(30) days prior written notice of such change in the policy to the other party
to this Agreement.
(ii) No party will destroy, or permit any of its Subsidiaries to
destroy, any Information that exists on the Separation Date (other than
Information that is permitted to be destroyed under the current record retention
policy of such party) without first using its reasonable commercial efforts to
notify the other party of the proposed destruction and giving the other party
the opportunity to take possession of such Information prior to such
destruction.
(d) Limitation of Liability. No party shall have any liability to any
other party in the event that any Information exchanged or provided pursuant to
this Section is found to be inaccurate, in the absence of willful misconduct by
the party providing such Information. No party shall have any liability to any
other party if any Information is destroyed or lost after reasonable commercial
efforts by such party to comply with the provisions of SECTION 4.4(C).
(e) Other Agreements Providing For Exchange of Information. The rights
and obligations granted under this SECTION 4.4 are subject to any specific
limitations, qualifications or additional provisions on the sharing, exchange or
confidential treatment of Information set forth in this Agreement and any
Ancillary Agreement.
(f) Production of Witnesses; Records; Cooperation. After the
Distribution Date, except in the case of a legal or other proceeding by one
party against another party (which shall be governed by such discovery rules as
may be applicable under SECTION 4.8 or otherwise), each party hereto shall use
its reasonable commercial efforts to make available to each other party, upon
written request, the former, current and future directors, officers, employees,
other personnel and agents of such party as witnesses and any books, records or
other documents within its control or which it otherwise has the ability to make
available, to the extent that any such person (giving consideration to business
demands of such directors, officers, employees, other personnel and agents) or
books, records or other documents may reasonably be required in connection with
any legal, administrative or other proceeding in which the requesting party may
from time to time be involved, regardless of whether such legal, administrative
or other proceeding is a matter with respect to which indemnification may be
sought hereunder. The requesting party shall bear all costs and expenses in
connection therewith.
SECTION 4.5 PAYMENT OF EXPENSES. Except as otherwise provided in this
Agreement, the Ancillary Agreements or any other agreement between the parties
relating to the Separation or the Distribution, all costs and expenses of the
parties hereto in connection with the Distribution and certain costs and
expenses of the parties hereto in connection with the Separation shall be paid
by Semiconductor I or Semiconductor II.
SECTION 4.6 DISPUTE RESOLUTION. Except as otherwise set forth in the
Ancillary Agreements, resolution of any and all disputes arising from or in
connection with this Agreement, whether based on contract, tort, or otherwise
(collectively, "DISPUTES"), shall be exclusively governed by and settled in
accordance with the provisions of this SECTION 4.7.
-9-
<PAGE> 15
(a) Negotiation. The parties shall make a good faith attempt to resolve
any Dispute arising out of or relating to this Agreement through negotiation.
Within thirty (30) days after notice of a Dispute is given by either party to
the other party, each party shall select a negotiating team comprised of vice
president level employees of such party and shall meet within thirty (30) days
after the end of the first thirty (30) day negotiating period to attempt to
resolve the matter. During the course of negotiations under this SECTION 4.7(A),
all reasonable requests made by one party to the other for information,
including requests for copies of relevant documents, will be honored. The
specific format for such negotiations will be left to the discretion of the
designated negotiating teams but may include the preparation of agreed upon
statements of fact or written statements of position furnished to the other
party.
(b) Non-Binding Mediation. In the event that any Dispute arising out of
or related to this Agreement is not settled by the parties within fifteen (15)
days after the first meeting of the negotiating teams under SECTION 4.7(A), the
parties will attempt in good faith to resolve such Dispute by non-binding
mediation in accordance with the American Arbitration Association Commercial
Mediation Rules. The mediation shall be held within thirty (30) days of the end
of such fifteen (15) day negotiation period of the negotiating teams. Except as
provided below in SECTION 4.7(C), no litigation for the resolution of such
dispute may be commenced until the parties try in good faith to settle the
dispute by such mediation in accordance with such rules and either party has
concluded in good faith that amicable resolution through continued mediation of
the matter does not appear likely. The costs of mediation shall be shared
equally by the parties to the mediation. Any settlement reached by mediation
shall be recorded in writing, signed by the parties, and shall be binding on
them.
(c) Proceedings. Nothing herein, however, shall prohibit either party
from initiating litigation or other judicial or administrative proceedings if
such party would be substantially harmed by a failure to act during the time
that such good faith efforts are being made to resolve the Dispute through
negotiation or mediation. In the event that litigation is commenced under this
SECTION 4.7(C), the parties agree to continue to attempt to resolve any Dispute
according to the terms of SECTIONS 4.7(A) and 4.7(B) during the course of such
litigation proceedings under this SECTION 4.7(C).
(d) Pay and Dispute. Except as provided herein or in any Ancillary
Agreement, in the event of any dispute regarding payment of a third-party
invoice (subject to standard verification of receipt of products or services),
the party named in a third party's invoice must make timely payment to such
third party, even if the party named in the invoice desires to pursue the
dispute resolution procedures outlined in this SECTION 4.7. If the party that
paid the invoice is found pursuant to this SECTION 4.7 to not be responsible for
such payment, such paying party shall be entitled to reimbursement, with
interest accrued at a compound annual rate of the Prime Rate plus 2%, from the
party found responsible for such payment.
SECTION 4.7 GOVERNMENTAL APPROVALS. To the extent that the Separation
requires any Governmental Approvals, the parties will use their reasonable
commercial efforts to obtain any such Governmental Approvals.
-10-
<PAGE> 16
SECTION 4.8 COOPERATION IN OBTAINING NEW AGREEMENTS. Each of C-Cube,
Semiconductor I and Semiconductor II understand that, prior to the Separation
Date, all parties have derived benefits under certain agreements amongst
themselves and third parties, which agreements are not being assigned to C-Cube,
Semiconductor I or Semiconductor II in connection with the Separation. Upon the
request of C-Cube, Semiconductor I or Semiconductor II, the other party agrees
to make introductions to appropriate personnel at such third parties, and agrees
to provide reasonable assistance to the other party at its own expense, so that
the other party may obtain agreements from such third parties under
substantially equivalent terms and conditions, including financial terms and
conditions, that apply to it. Such assistance may include, but is not limited
to, requesting and encouraging such third parties to enter into such
agreements. All parties also understand that there are certain agreements
between themselves and third parties, which agreements are being assigned to the
other party in connection with the Separation but which may require the consent
of the applicable third party. Upon request, one party agrees to assist the
other party in seeking and obtaining the consent of such third parties to such
assignment. The parties expect that the activities contemplated by this Section
will be substantially completed by the Distribution Date, but in no event will
either party have any obligations hereunder after the first anniversary of the
Distribution Date.
SECTION 4.9 PROPERTY DAMAGE TO SEMICONDUCTOR ASSETS PRIOR TO THE
SEPARATION DATE. In the event of any property damage to any Semiconductor Assets
prior to the Separation Date, C-Cube shall repair or otherwise address such
damage in the ordinary course of business consistent with past practices;
provided, however, that nothing in this clause shall restrict C-Cube from
disposing of any Assets in the ordinary course of business consistent with past
practices.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 LIMITATION OF LIABILITY. IN NO EVENT SHALL C-CUBE OR ANY OF
ITS SUBSIDIARIES OR SEMICONDUCTOR I, SEMICONDUCTOR II OR ANY OF THEIR
SUBSIDIARIES BE LIABLE TO C-CUBE OR ANY OF ITS SUBSIDIARIES OR SEMICONDUCTOR I,
SEMICONDUCTOR II OR ANY OF THEIR SUBSIDIARIES FOR ANY SPECIAL, CONSEQUENTIAL,
INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON
ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS
AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES, EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, THE RESTATED MERGER
AGREEMENT, THE ANCILLARY AGREEMENTS, AND THE EXHIBITS AND SCHEDULES REFERENCED
OR ATTACHED HERETO OR THERETO; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATIONS
SHALL NOT LIMIT EACH PARTY'S INDEMNIFICATION OBLIGATIONS FOR LIABILITIES TO
THIRD PARTIES AS SET FORTH IN THE INDEMNIFICATION AND INSURANCE MATTERS
AGREEMENT.
-11-
<PAGE> 17
SECTION 5.2 ENTIRE AGREEMENT. This Agreement, the Restated Merger
Agreement, the other Ancillary Agreements and the Exhibits and Schedules
referenced or attached hereto and thereto, constitute the entire agreement
between the parties with respect to the subject matter hereof and shall
supersede all prior written and oral and all contemporaneous oral agreements and
understandings with respect to the subject matter hereof. In the event any
provision of any agreement conflicts with a provision of the Restated Merger
Agreement, the Restated Merger Agreement will govern.
SECTION 5.3 GOVERNING LAW. This Agreement shall be governed and
construed and enforced in accordance with the laws of the State of Delaware as
to all matters regardless of the laws that might otherwise govern under the
principles of conflicts of laws applicable thereto.
SECTION 5.4 TERMINATION. This Agreement may be terminated at any time
before the Distribution Date by mutual consent of C-Cube, Semiconductor I and
Semiconductor II and in any event, shall terminate three years after the date
first referenced above. In the event of termination pursuant to this Section, no
party shall have any liability of any kind to the other party.
SECTION 5.5 NOTICES. Any notice, demand, offer, request or other
communication required or permitted to be given by either party pursuant to the
terms of this Agreement shall be in writing and shall be deemed effectively
given the earlier of (i) when received, (ii) when delivered personally, (iii)
one (1) business day after being delivered by facsimile (with receipt of
appropriate confirmation), (iv) one (1) business day after being deposited with
an overnight courier service or (v) four (4) days after being deposited in the
U.S. mail, First Class with postage prepaid, and addressed to the attention of
the party's General Counsel at the address of its principal executive office or
such other address as a party may request by notifying the other in writing.
SECTION 5.6 COUNTERPARTS. This Agreement, including the Schedules and
Exhibits hereto and the other documents referred to herein, may be executed in
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
SECTION 5.7 BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective legal
representatives and successors, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. This Agreement may
not be assigned by any party hereto. This Agreement may be enforced separately
by C-Cube, Semiconductor I, Semiconductor II and any of their Subsidiaries.
SECTION 5.8 SEVERABILITY. If any term or other provision of this
Agreement or the Schedules or Exhibits attached hereto is determined by a
nonappealable decision by a court, administrative agency or arbitrator to be
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties
-12-
<PAGE> 18
as closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the fullest extent possible.
SECTION 5.9 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of either party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement or the Schedules or Exhibits attached hereto are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
SECTION 5.10 AMENDMENT. No change or amendment will be made to this
Agreement except by an instrument in writing signed on behalf of each of the
parties to such agreement.
SECTION 5.11 AUTHORITY. Each of the parties hereto represents to the
other that (a) it has the corporate or other requisite power and authority to
execute, deliver and perform this Agreement, (b) the execution, delivery and
performance of this Agreement by it have been duly authorized by all necessary
corporate or other actions, (c) it has duly and validly executed and delivered
this Agreement, and (d) this Agreement is a legal, valid and binding obligation,
enforceable against it in accordance with its terms subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equity principles.
SECTION 5.12 INTERPRETATION. The headings contained in this Agreement,
in any Exhibit or Schedule hereto and in the table of contents to this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized term used in any Schedule or
Exhibit but not otherwise defined therein, shall have the meaning assigned to
such term in this Agreement. When a reference is made in this Agreement to an
Article or a Section, Exhibit or Schedule, such reference shall be to an Article
or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated.
SECTION 5.13 CONFLICTING AGREEMENTS. In the event of conflict between
this Agreement and any Ancillary Agreement or other agreement executed in
connection herewith, the provisions of such other agreement shall prevail.
ARTICLE VI
DEFINITIONS
SECTION 6.1 AFFILIATED COMPANY. "AFFILIATED COMPANY" means, with respect
to C-Cube, any entity in which C-Cube holds a 50% or less ownership interest and
that is listed on SCHEDULE 6.1(A) hereto and, with respect to Semiconductor I
and II, any entity in which Semiconductor I and II holds a 50% or less ownership
interest and that is listed on SCHEDULE 6.1(B) hereto. SCHEDULES 6.1(A) and
6.1(B) may be amended from time to time after the date hereof upon mutual
written consent of the parties.
-13-
<PAGE> 19
SECTION 6.2 ANCILLARY AGREEMENTS. "ANCILLARY AGREEMENTS" has the meaning
set forth in SECTION 2.1 hereof.
SECTION 6.3 ASSIGNMENT AGREEMENT. "ASSIGNMENT AGREEMENT" has the meaning
set forth in SECTION 2.1(A) hereof.
SECTION 6.4 BUSINESS DAY. "BUSINESS DAY" means a day other than a
Saturday, a Sunday or a day on which banking institutions located in the State
of California are authorized or obligated by law or executive order to close.
SECTION 6.5 CODE. "CODE" means the Internal Revenue Code of 1986, as
amended from time to time.
SECTION 6.6 COMMISSION. "COMMISSION" means the Securities and Exchange
Commission.
SECTION 6.7 DISPUTES. "Disputes" has the meaning set forth in Section
4.6 hereof.
SECTION 6.8 DISTRIBUTION. "Distribution" has the meaning set forth in
the Recitals hereof.
SECTION 6.9 DISTRIBUTION AGENT. "Distribution Agent" has the meaning set
forth in Section 3.1 hereof.
SECTION 6.10 DISTRIBUTION DATE. "Distribution Date" has the meaning set
forth in Section 3.1 hereof.
SECTION 6.11 EXCHANGE ACT. "EXCHANGE ACT" means the Securities and
Exchange Act of 1934, as amended.
SECTION 6.12 GOVERNMENTAL APPROVALS. "GOVERNMENTAL APPROVALS" means any
notices, reports or other filings to be made, or any consents, registrations,
approvals, permits or authorizations to be obtained from, any Governmental
Authority.
SECTION 6.13 GOVERNMENTAL AUTHORITY. "GOVERNMENTAL AUTHORITY" shall mean
any federal, state, local, foreign or international court, government,
department, commission, board, bureau, agency, official or other regulatory,
administrative or governmental authority.
SECTION 6.14 INFORMATION. "Information" means information, whether or
not patentable or copyrightable, in written, oral, electronic or other tangible
or intangible forms, stored in any medium, including studies, reports, records,
books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by
-14-
<PAGE> 20
attorneys or under their direction (including attorney work product), and other
technical, financial, employee or business information or data.
SECTION 6.15 NASDAQ. "Nasdaq" means the Nasdaq National Market.
SECTION 6.16 NYSE. "NYSE" means the New York Stock Exchange.
SECTION 6.17 PERSON. "PERSON" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision thereof.
SECTION 6.18 PRIME RATE. "PRIME RATE" means the prime rate as published
in the Wall Street Journal on the date of determination.
SECTION 6.19 RECORD DATE. "RECORD DATE" means the close of business on
the date to be determined by the Board of Directors of C-Cube as the record date
for determining the stockholders of C-Cube entitled to receive shares of common
stock of Semiconductor in the Distribution.
SECTION 6.20 SEMI SPIN TAXES. "SEMI SPIN TAXES" has the meaning set
forth in ARTICLE I of the Tax Sharing Agreement.
SECTION 6.21 SEMICONDUCTOR ASSETS. "SEMICONDUCTOR ASSETS" has the
meaning set forth in SECTION 1.2 of the Assignment Agreement.
SECTION 6.22 SEMICONDUCTOR BUSINESS. "SEMICONDUCTOR BUSINESS" means the
business and operations of C-Cube defined as the Semiconductor Business in the
Restated Merger Agreement.
SECTION 6.23 SEMICONDUCTOR PRO FORMA BALANCE SHEET. "SEMICONDUCTOR PRO
FORMA BALANCE SHEET" means the unaudited pro forma condensed consolidated
balance sheet as set forth in C-Cube Semiconductor I's Registration Statement on
Form 10, filed on December 29, 1999, as amended.
SECTION 6.24 SEPARATION. "Separation" has the meaning set forth in the
Recitals hereof.
SECTION 6.25 SEPARATION DATE. "Separation Date" has the meaning set
forth in Section 1.1 hereof.
SECTION 6.26 SUBSIDIARY. "SUBSIDIARY" means with respect to any
specified Person, any corporation, any limited liability company, any
partnership or other legal entity of which such Person or its Subsidiaries owns,
directly or indirectly, more than 50% of the stock or other equity interest
entitled to vote on the election of the members of the board of directors or
similar governing body. Unless context otherwise requires, reference to C-Cube
and its Subsidiaries shall not include the subsidiaries of C-Cube that will be
transferred to Semiconductor I or Semiconductor II after
-15-
<PAGE> 21
giving effect to the Separation, and those subsidiaries will be treated as
Subsidiaries of Semiconductor I and Semiconductor II, as applicable.
SECTION 6.27 WSGR. "WSGR" means Wilson Sonsini Goodrich & Rosati,
Professional Corporation.
-16-
<PAGE> 22
WHEREFORE, the parties have signed this Master Separation and
Distribution Agreement effective as of the date first set forth above.
C-CUBE MICROSYSTEMS INC. C-CUBE SEMICONDUCTOR INC.
By: By:
----------------------------- --------------------------------------
Name: Name:
----------------------------- ------------------------------------
Title: Title:
-------------------------- -----------------------------------
C-CUBE SEMICONDUCTOR II INC.
By:
----------------------------
Name:
---------------------------
Title:
--------------------------
<PAGE> 23
SCHEDULE 2.1(b)
SUBSIDIARIES AND OTHER HOLDINGS OF C-CUBE TO BE TRANSFERRED TO
SEMICONDUCTOR I OR SEMICONDUCTOR II
C-Cube Microsystems International Ltd.
C-Cube U.S. Inc.
C-Cube Japan, Inc.
C-Cube Technology Limited
Media Computer Technologies, Inc.
<PAGE> 24
EXHIBIT A
C-CUBE SECRETARY'S CERTIFICATE
<PAGE> 25
EXHIBIT B
SEMICONDUCTOR I AND SEMICONDUCTOR II
SECRETARY CERTIFICATE