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Exhibit 99.1
C-CUBE SEMICONDUCTOR II INC.
PROMISSORY NOTE
Palo Alto, California May 2, 2000
12:15 p.m.
FOR VALUE RECEIVED C-Cube Semiconductor II Inc., a Delaware corporation
("Company") promises to pay to C-Cube Microsystems Inc. ("Holder"), or its
registered assigns, a principal sum equal to the Adjusted Principal Amount, or
such lesser amount as shall equal the outstanding principal amount hereof,
together with interest from the date of this Note on the unpaid principal
balance at a rate equal to fifteen percent (15.00%) per annum, computed on the
basis of the actual number of days elapsed and a year of 365 days. All unpaid
principal, together with any then unpaid and accrued interest and other amounts
payable hereunder, shall be due and payable on the earlier of (i) June 29, 2000
(the "Due Date"), or (ii) when, upon or after the occurrence of an Event of
Default (as defined below), such amounts are declared due and payable by Holder
or made automatically due and payable in accordance with the terms hereof.
The following is a statement of the rights of Holder and the conditions
to which this Note is subject, and to which Holder, by the acceptance of this
Note, agrees:
1. DEFINITIONS. As used in this Note, the following capitalized terms
have the following meanings:
"Adjusted Principal Amount" has the meaning given in the Waiver
Agreement, dated as of the date hereof, between C-Cube Microsystems Inc. and
Harmonic Inc.
"Asset Sale" means any sale, transfer or other disposition (including
by way of merger, consolidation or sale-leaseback transaction) in one
transaction or a series of related transactions by the Company or any of its
subsidiaries to any Person other than the Company or any of its subsidiaries of
(i) all or any of the capital stock of any subsidiary, (ii) all or substantially
all of the property and assets of a division or line of business of the Company
or any of its subsidiaries or (iii) any other property and assets of the Company
or any of its subsidiaries outside the ordinary course of business of the
Company or such subsidiary.
"Company" includes the corporation initially executing this Note and
any Person which shall succeed to or assume the obligations of Company under
this Note.
"Event of Default" has the meaning given in Section 4 hereof.
"Financial Statements" shall mean, with respect to any accounting
period for any Person, statements of operations, retained earnings and cash flow
of such Person for such period, and balance sheets of such Person as of the end
of such period, setting forth in each case in comparative
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form figures for the corresponding period in the preceding fiscal year if such
period is less than a full fiscal year or, if such period is a full fiscal year,
corresponding figures from the preceding fiscal year, all prepared in reasonable
detail and in accordance with GAAP. Unless otherwise indicated, each reference
to Financial Statements of any Person shall be deemed to refer to Financial
Statements prepared on a consolidated basis.
"GAAP" shall mean generally accepted accounting principles as in effect
in the United States of America from time to time.
"Governmental Authority" shall mean any nation, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of government, including any
tribunal or arbitrator(s) of competent jurisdiction.
"Holder" shall mean the Person specified in the introductory paragraph
of this Note or any Person who shall at the time be the registered holder of
this Note.
"Indebtedness" shall mean and include the aggregate amount of, without
duplication (i) all obligations for borrowed money, (ii) all obligations
evidenced by bonds, debentures, notes or other similar instruments, (iii) all
obligations to pay the deferred purchase price of property or services (other
than accounts payable incurred in the ordinary course of business determined in
accordance with GAAP), (iv) all obligations with respect to capital leases, (v)
all obligations created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person, (vi) all
reimbursement and other payment obligations, contingent or otherwise, in respect
of letters of credit and similar surety instruments, and (vii) all guaranty
obligations with respect to the types of Indebtedness listed in clauses (i)
through (vi) above.
"Lien" shall mean any lien, mortgage, pledge, security interest, charge
or encumbrance of any kind (including any conditional sale or other title
retention agreement or any lease in the nature thereof) and any agreement to
give or refrain from giving any of the foregoing.
"Net Cash Proceeds" shall mean (a) with respect to any Asset Sale by
any Person, cash or cash equivalents received (including by way of sale or
discounting of a note, installment receivable or other receivable, but excluding
any other consideration received in the form of assumption by the acquiror of
Indebtedness or other obligations relating to such properties or assets)
therefrom by such Person, net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred and all federal,
state, foreign and local taxes required to be accrued as a liability as a
consequence of such Asset Sale, and (ii) appropriate amounts to be provided by
such Person as a reserve in accordance with generally accepted accounting
principals against any liabilities associated with such assets and retained by
such Person after such Asset Sale, including, without limitation, liabilities
under any indemnification obligations and severance and other employee
termination costs associated with such Asset Sale; and (b) with respect to a
debt or equity financing, the proceeds of such financing in the form of cash or
cash equivalents, net of attorney's fees, accountant's fees and brokerage,
consultation, underwriting, bank and other fees and expenses actually incurred
in connection with such financing and, with respect to debt financing, net of
any proceeds required by
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the terms of such financing to be held in an escrow account for the payment of
interest and to secure amounts due with respect to such debt financing.
"Obligations" shall mean and include all loans, advances, debts,
liabilities and obligations, howsoever arising, owed by Company to Holder of
every kind and description (whether or not evidenced by any note or instrument
and whether or not for the payment of money), now existing or hereafter arising
under or pursuant to the terms of this Note and the other Transaction Documents,
including, all interest, fees, charges, expenses, attorneys' fees and costs and
accountants' fees and costs chargeable to and payable by Company hereunder and
thereunder, in each case, whether direct or indirect, absolute or contingent,
due or to become due, and whether or not arising after the commencement of a
proceeding under Title 11 of the United States Code (11 U. S. C. Section 101 et
seq.), as amended from time to time (including post-petition interest) and
whether or not allowed or allowable as a claim in any such proceeding.
"Parent Guaranty" shall mean the Parent Guaranty, dated as of the date
hereof, executed by C-Cube Semiconductor Inc. in favor of Lender.
"Person" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, a limited
liability company, an unincorporated association, a joint venture or other
entity or a governmental authority.
"Stock Pledge Agreement" shall mean the Stock Pledge Agreement, dated
as of the date hereof, executed by C-Cube Semiconductor Inc. in favor of Lender.
"Transaction Documents" shall mean this Note, the Parent Guaranty and
the Stock Pledge Agreement.
2. REPAYMENTS AND PAYMENTS OF PRINCIPAL AND INTEREST ON NOTES.
2.1 Interest. Interest is payable in cash on the earlier of
the last business day of each calendar quarter and the Due Date.
2.2 Optional Prepayments of Note. The Company may, at its
option, prepay all or, from time to time, part of the Note, at the principal
amount so prepaid without penalty or premium, together with interest on the
principal amount so prepaid accrued to the date fixed for such prepayment.
2.3 Notice of Prepayment to Holders. Not less than five (5)
nor more than ten (10) days prior to the date fixed for each optional
prepayment, the Company shall give notice thereof to the registered Holder,
specifying the date fixed for prepayment and the aggregate principal amount to
be prepaid on such date. Such notice shall also contain instructions for the
delivery of the Note by the Holder to the Company. Such notice shall be
irrevocable.
2.4 Mandatory Prepayments of Note. The Company shall prepay
all or, from time to time, part of the Note, at the principal amount so prepaid
without penalty or premium, together with
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interest on the principal amount so prepaid accrued to the date fixed for such
prepayment within two business days of the consummation by the Company or C-Cube
Semiconductor Inc. ("Parent") of (i) a debt or equity financing transaction with
gross proceeds to the Company or Parent of at least One Hundred Million Dollars
($100,000,000) or (ii) an Asset Sale (other than an Asset Sale governed by the
provisions of Section 3.4) having net proceeds in excess of Twenty-Five Million
Dollars ($25,000,000). The amount of any such mandatory prepayment shall be
equal to the Net Cash Proceeds of such debt or equity financing transaction or
Asset Sale.
3. CERTAIN COVENANTS. While any amount of principal or interest is
outstanding under the Note:
3.1 Information Rights: Notices. Company shall furnish to
Holder the following:
(a) Quarterly Financial Statements. Within forty-five
(45) days after the last day of each quarter, a copy of the Financial Statements
of Company for such quarter and for the fiscal year to date, certified by the
chief financial officer or controller of Company to present fairly the financial
condition, results of operations and other information presented therein and to
have been prepared in accordance with GAAP consistently applied, subject to
normal year end adjustments and except that no footnotes need be included with
such Financial Statements;
(b) Annual Financial Statements. Within ninety (90)
days after the close of each fiscal year of Company, (i) copies of the audited
Financial Statements of Company for such year, audited by nationally recognized
independent certified public accountants, (ii) copies of the unqualified
opinions and management letters delivered by such accountants in connection with
such Financial Statements, and (iii) a report containing a description of
projected business prospects (including capital expenditures) and management's
discussion and analysis of financial condition and results of operation of
Company and its Subsidiaries;
(c) SEC Reports. As soon as possible and in no event
later than five (5) Business Days after they are sent, made available or filed,
copies of all registration statements and reports filed by Company with the
Securities and Exchange Commission and all reports, proxy statements and
financial statements sent or made available by Company to its shareholders
generally; and
(d) Notice of Defaults. Promptly upon the occurrence
thereof, written notice of the occurrence of any Event of Default hereunder.
3.2 Inspection Rights. Holder and its representatives shall
have the right, at any time during normal business hours, upon reasonable prior
notice, to visit and inspect the properties of Company and its corporate,
financial and operating records, and make abstracts therefrom, and to discuss
Company's affairs, finances and accounts with its directors, officers and
independent public accountants.
3.3 Limitation on Sale and Leaseback Transactions. The Company
may not enter into any direct or indirect arrangement pursuant to which its
property is sold or transferred by the
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Company and is thereafter leased back from the purchaser thereof by the Company
without the prior written consent of Holder.
3.4 Company May Consolidate, etc., Only on Certain Terms.
(a) The Company shall not consolidate with or merge
into any other Person or, directly or indirectly, convey, transfer, sell, lease
or otherwise dispose of all or substantially all of its properties and assets to
any Person, and the Company shall not permit any Person to consolidate with or
merge into the Company or convey, transfer, sell, lease or otherwise dispose of
all or substantially all of its properties and assets to the Company, unless:
(b) in case the Company shall consolidate with or
merge into another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such
consolidation or into which the Company is merged or the Person which acquires
by conveyance or transfer, or which leases, the properties and assets of the
Company substantially as an entirety shall be a corporation, partnership or
trust, shall be organized and validly existing under the laws of the United
States of America, any State thereof or the District of Columbia and shall
expressly assume, by an instrument, executed and delivered to the Holder, in
form satisfactory to the Holder, the due and punctual payment of the principal
of and accrued interest on this Note and the performance or observance of every
covenant of this Note on the part of the Company to be performed or observed;
and
(c) immediately after giving effect to such
transaction, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have happened and be
continuing.
3.5 Limitation on Restricted Payments and Restrictions of
Distributions from Subsidiaries. The Company will not permit any of its
subsidiaries to, directly or indirectly, (i) declare or pay any dividend or make
any distribution on or with respect to its capital stock (other than dividends
or distributions payable solely in shares of its capital stock or in options,
warrants or other rights to acquired shares of such capital stock) held by
Persons other than the Company or any of its subsidiaries, (ii) purchase,
redeem, retire or otherwise acquire for value any shares of capital stock of (A)
the Company or a subsidiary (including options, warrants or other rights to
acquire such shares of capital stock) held by any Person or (B) a subsidiary
(including options, warrants or other rights to acquire such shares of capital
stock) held by any affiliate of the Company (other than a wholly owned
subsidiary) or any holder (or any affiliate of such holder) of 5% or more of the
capital stock of the Company, (iii) make any voluntary or optional principal
payment, or voluntary or optional redemption, repurchase, defeasance, or other
acquisition or retirement for value, of Indebtedness of the Company that is
subordinated in right of payment to the Note or (iv) make any investment (other
than investments in cash equivalents) in any Person (such payments or any other
actions described in clauses (i) through (iv) above being collectively
"Restricted Payments") without the prior written consent of the Holder.
3.6 Limitation on Transactions with Affiliates. The Company
will not, and will not permit any of its subsidiaries to, directly or
indirectly, enter into, renew or extend any transaction
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(including, without limitation, the purchase, sale, lease or exchange of
property or assets, or the rendering of any service) with any affiliate of the
Company or any subsidiary, except upon fair and reasonable terms no less
favorable to the Company or such subsidiary than could be obtained, at the time
of such transaction or, if such transaction is pursuant to a written agreement,
at the time of the execution of the agreement providing therefor, in a
comparable arm's length transaction with a Person that is not such an affiliate.
3.7 Limitation on Asset Sales. The Company will not, and will
not permit any subsidiary to, consummate any Asset Sale without the prior
written consent of the Holder, unless the net proceeds of such Asset Sale are
used to prepay this Note in accordance with Section 2.4.
3.8 Liens. The Company shall not directly or indirectly
create, incur, assume or permit to exist any Lien on or with respect to any
asset, or any income or profits therefrom whether now owned or hereafter
acquired, except:
(a) (i) Liens for taxes, assessments or charges of any
Governmental Authority for claims that are not material and are not yet due or
are being contested in good faith by appropriate proceedings and that have the
effect of preventing forfeiture or sale of the assets to which such Liens
attach, and, in each case, with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with GAAP; (ii)
statutory Liens of landlords and Liens of carriers, warehousemen, mechanics,
materialmen, bankers and other Liens imposed by law and created in the ordinary
course of business for amounts that are not material and that are not overdue by
more than 30 days or that are being contested in good faith by appropriate
proceedings that have the effect of preventing forfeiture or sale of the assets
to which such Liens attach, and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with GAAP; (iii) Liens
incurred and deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social security
benefits or to secure the performance (including by way of surety bonds or
appeal bonds) of tenders, bids, leases, contracts, statutory obligations or
similar obligations or arising as a result of progress payments under contracts,
in each case in the ordinary course of business and not relating to the
repayment of debt; (iv) easements, rights-of-way, covenants, consents,
reservations, encroachments, variations and other restrictions, charges or
encumbrances (whether or not recorded) that do not materially interfere with the
ordinary conduct of business, materially detract from the value of the asset to
which they attach or materially impair the use thereof; (v) building
restrictions, zoning laws and other statutes, laws, rules, regulations,
ordinances and restrictions; and (vi) leases or subleases granted in the
ordinary course of business to others not materially interfering with the
business of, and consistent with past practices of, the Company, provided that
clauses (i), (ii) and (iii) shall not apply to (A) Liens in favor of any
Governmental Authority for damages, losses, costs and expenses that are incurred
at any time as a result of the existence of hazardous materials upon, about or
beneath any real property of the Company, or (B) Liens imposed under ERISA;
(b) any attachment or judgment Lien not constituting an Event
of Default;
(c) Liens upon any equipment acquired or held by the Company
to secure the purchase price of such equipment or indebtedness incurred solely
for the purpose of financing the
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acquisition of such equipment, so long as (i) such Lien extends only to the
equipment financed, and any accessions, replacements, substitutions and proceeds
(including insurance proceeds) thereof or thereto and (ii) such Lien attaches
within 120 days of the date of acquisition of such equipment; and
(d) other Liens incidental to the conduct of the business or
the ownership of the assets of the Company that (i) were not incurred in
connection with borrowed money, (ii) do not in the aggregate materially detract
from the value of the assets subject thereto or materially impair the use
thereof in the operation of such business and (iii) do not secure obligations
aggregating in excess of $250,000.
4. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Note and the other Transaction
Documents:
4.1 Failure to Pay. Company shall fail to pay (i) when due any
principal payment on the due date hereunder or (ii) any interest or other
payment required under the terms of this Note or any other Transaction Document
on the date due; or
4.2 Breaches of Certain Covenants. Company shall fail to
observe or perform any covenant, obligation, condition or agreement set forth in
Section 3 of this Note; or
4.3 Breaches of Other Covenants. Company shall fail to observe
or perform any other covenant, obligation, condition or agreement contained in
this Note or the other Transaction Documents (other than those specified in
Sections 4.1 and 4.2) and such failure shall continue for fifteen (15) days; or
4.4 Representations and Warranties. Any representation,
warranty, certificate, or other statement (financial or otherwise) made or
furnished by or on behalf of Company to Holder in writing in connection with
this Note or any of the other Transaction Documents, or as an inducement to
Holder to enter into this Note and the other Transaction Documents, shall be
false, incorrect, incomplete or misleading in any material respect when made or
furnished; or
4.5 Other Payment Obligations. Company shall (i) fail to make
any payment when due under the terms of any bond, debenture, note or other
evidence of Indebtedness to be paid by such Person (excluding this Note and the
other Transaction Documents but including any other evidence of Indebtedness of
Company or any of its Subsidiaries to Holder) and such failure shall continue
beyond any period of grace provided with respect thereto, or (ii) default in the
observance or performance of any other agreement, term or condition contained in
any such bond, debenture, note or other evidence of Indebtedness, and the effect
of such failure or default is to cause, or permit the holder or holders thereof
to cause, Indebtedness in an aggregate amount of One Million Dollars
($1,000,000) or more to become due prior to its stated date of maturity; or
4.6 Voluntary Bankruptcy or Insolvency Proceedings. Company
shall (i) apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature, (iii) make a general assignment for the benefit of its
or any of its creditors,
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(iv) be dissolved or liquidated, (v) become insolvent (as such term may be
defined or interpreted under any applicable statute), (vi) commence a voluntary
case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or consent to any such relief or to the
appointment of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it, or (vii) take any
action for the purpose of effecting any of the foregoing; or
4.7 Involuntary Bankruptcy or Insolvency Proceedings.
Proceedings for the appointment of a receiver, trustee, liquidator or custodian
of Company or of all or a substantial part of the property thereof, or an
involuntary case or other proceedings seeking liquidation, reorganization or
other relief with respect to Company or the debts thereof under any bankruptcy,
insolvency or other similar law now or hereafter in effect shall be commenced
and an order for relief entered or such proceeding shall not be dismissed or
discharged within thirty (30) days of commencement; or
4.8 Judgments. A final judgment or order for the payment of
money in excess of One Million Dollars ($1,000,000) (exclusive of amounts
covered by insurance issued by an insurer not an Affiliate of Company) shall be
rendered against Company and the same shall remain undischarged for a period of
thirty (30) days during which execution shall not be effectively stayed, or any
judgment, writ, assessment, warrant of attachment, or execution or similar
process shall be issued or levied against a substantial part of the property of
Company and such judgment, writ, or similar process shall not be released,
stayed, vacated or otherwise dismissed within thirty (30) days after issue or
levy; or
4.9 Transaction Documents. Any Event of Default (as defined in
any other Transaction Document) shall occur under any other Transaction Document
or any Transaction Document or any material term thereof shall cease to be, or
be asserted by Company not to be, a legal, valid and binding obligation of
Company enforceable in accordance with its terms.
5. RIGHTS OF HOLDER UPON DEFAULT. Upon the occurrence or existence of
any Event of Default (other than an Event of Default, referred to in Sections
4.6 and 4.7) and at any time thereafter during the continuance of such Event of
Default, Holder may, by written notice to Company, declare all outstanding
Obligations payable by Company hereunder to be immediately due and payable
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived, anything contained herein or in the other
Transaction Documents to the contrary notwithstanding. Upon the occurrence or
existence of any Event of Default described in Sections 4.6 and 4.7, immediately
and without notice, all outstanding Obligations payable by Company hereunder
shall automatically become immediately due and payable, without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived, anything contained herein or in the other Transaction
Documents to the contrary notwithstanding. In addition to the foregoing
remedies, upon the occurrence or existence of any Event of Default, Holder may
exercise any other right power or remedy granted to it by the Transaction
Documents or otherwise permitted to it by law, either by suit in equity or by
action at law, or both.
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6. SUCCESSORS AND ASSIGNS. Subject to the restrictions on transfer
described in Section 8 below, the rights and obligations of Company and Holder
of this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
7. WAIVER AND AMENDMENT. Any provision of this Note may be amended,
waived or modified upon the written consent of Company and Holder.
8. ASSIGNMENT BY COMPANY. Neither this Note nor any of the rights,
interests or obligations hereunder may be assigned, by operation of law or
otherwise, in whole or in part, by Company without the prior written consent of
Holder except in connection with an assignment in whole to a successor
corporation to Company, provided that such successor corporation acquires all or
substantially all of Company's property and assets and Holder's rights hereunder
are not impaired.
9. NOTICES. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier or personal delivery at the
respective addresses of the parties as set forth in the Tax Sharing Agreement or
on the register maintained by Company. Any party hereto may by notice so given
change its address for future notice hereunder. Notice shall conclusively be
deemed to have been given when received.
10. PAYMENT. Payment shall be made in lawful tender of the United
States.
DEFAULT RATE; WAIVER; USURY LAWS. In the event that any payment of
principal or interest provided for herein is not paid by Company when due
(including the entire unpaid balance of this Note in the event such amount is
made immediately due and payable pursuant to the terms hereof), then Company
shall pay interest on the such amounts not paid when due at a rate per annum
equal to the rate otherwise applicable hereunder plus two percent (2%). During
any period in which an Event of Default has occurred and is continuing, Company
shall pay interest on the unpaid principal balance hereof at a rate per annum
equal to the rate otherwise applicable hereunder plus five percent (5%). The
Company covenants (to the extent that it may lawfully do so) that it will not at
any time insist upon, plead, or in any manner whatsoever claim to take the
benefit or advantage of, any stay or extension law or any usury law or other law
which would prohibit or forgive the Company or the Parent (in respect of the
related Parent Guaranty) from paying all or any portion of the principal of or
interest on the Note as contemplated herein, whenever enacted, now or at any
time hereafter in force, or which may materially affect the covenants in or the
performance of this Note in a manner inconsistent with the provisions of this
Note and (to the extent that it may lawfully do so) the Company hereby expressly
waives all benefit or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the Holder,
but will suffer and permit the execution of every such power as though no such
law had been enacted.
11. EXPENSES; WAIVERS. If action is instituted to collect this Note,
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred in connection with such action.
Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
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12. GOVERNING LAW. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the State of California, without regard to the conflicts of law
provisions of the State of California, or of any other state.
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IN WITNESS WHEREOF, Company has caused this Guaranty to be executed as
of the date first written above.
C-CUBE SEMICONDUCTOR INC.
a Delaware corporation
By: /s/ UMESH PADVAL
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Title: President and
Chief Executive Officer
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