Pledge Agreement

PLEDGE AGREEMENT


PLEDGE AGREEMENT dated as of May 2, 2000 at 12:15 p.m., (the "Agreement") between C-CUBE SEMICONDUCTOR INC, a Delaware corporation (the "Pledgor") and C-CUBE MICROSYSTEMS INC., a Delaware Corporation ("C-Cube"), All capitalized terms used herein, unless otherwise specifically defined in this Agreement, shall have the meanings ascribed to them in the Note (as hereinafter defined) and Guaranty (as hereinafter defined).


W I T N E S S E T H:


WHEREAS, C-Cube has agreed to make a loan to C-Cube Semiconductor II Inc. (the "Borrower"), which will be evidenced by a Promissory Note dated May 2, 2000 at 12:15 p.m. in a principal amount of $ 150,000,000.00 (as amended from time to time, the "Note");


WHEREAS, pursuant to a Parent Guaranty dated May 2, 2000 at 12:15 p.m. (as amended from time to time, the "Guaranty") by the Pledgor in favor of C-Cube, the Pledgor has agreed to guaranty the obligations of the Borrower under the Note;


WHEREAS, the Pledgor is the record and beneficial owner of the shares of capital stock or other equity interests listed in Schedule I hereto;


NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:


SECTION 1. DEFINITIONS. The following shall have (unless otherwise provided elsewhere in this Agreement) the following respective meanings (such meanings being equally applicable to both the singular and plural form of the terms defined):


"Collateral Documents" means this Agreement, financing statements and all other documents executed or delivered from time to time in connection therewith or otherwise to secure the Pledgor's obligations under the Loan Documents, in each case as amended from time to time.


"Lien" means 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.


"Loan Documents" means, collectively, this Agreement, the Note, the Guaranty, the Collateral Documents and any other agreement, instrument or other writing executed or delivered by any Grantor in connection herewith, and all amendments, exhibits and schedules to any of the foregoing.


"Person" means an individual, a corporation, a partnership, a limited liability company, a trust, an unincorporated organization or any other entity or organization, including a governmental authority. 2
"Pledged Collateral" has the meaning assigned to such term in Section 2 hereof.


"Pledged Entity" means an issuer of Pledged Interests.


"Pledged Interests" means those shares of capital stock and other equity interests listed on Schedule I hereto (as modified from time to time by the delivery of one or more Pledge Amendments).


"Secured Obligations" has the meaning assigned to such term in Section 3 hereof.


SECTION 2. PLEDGE. The Pledgor hereby pledges to C-Cube and grants to C-Cube a security interest in, all of the following (collectively, the "Pledged Collateral"):


(a) the Pledged Interests and any certificates representing
the Pledged Interests, and all dividends, distributions, cash,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Interests; and


(b) any additional shares of capital stock or other equity
interests of a Pledged Entity, or any other Subsidiary of the Pledgor,
from time to time acquired by the Pledgor in any manner (which shares
or equity interests shall be deemed to be part of the Pledged
Interests), and any certificates representing such additional shares or
equity interests, and all dividends, distributions, cash, instruments
and other property or proceeds from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of
such Pledged Interests.


SECTION 3. SECURITY FOR OBLIGATIONS. This Agreement secures, and the Pledged Collateral is security for, the prompt payment in full when due, whether at stated maturity, by acceleration or otherwise, and performance of all Obligations of the Pledgor of any kind under or in connection with the Note and the Guaranty and all obligations of the Pledgor now or hereafter existing under this Agreement including, without limitation, all fees, costs and expenses whether in connection with collection actions hereunder or otherwise (collectively, the "Secured Obligations").


SECTION 4. DELIVERY OF PLEDGED COLLATERAL. All certificates or other instruments evidencing the Pledged Collateral shall be delivered to and held by or on behalf of C-Cube, pursuant hereto and all such certificates or instruments shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to C-Cube.


SECTION 5. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and warrants to C-Cube:


2 3
(a) Pledgor is, and at the time of delivery of the Pledged
Interests to C-Cube will be, the sole holder of record and the sole
beneficial owner of such Pledged Collateral pledged by Pledgor free and
clear of any Lien thereon or affecting the title thereto;


(b) All of the Pledged Interests have been duly authorized,
validly issued and are fully paid and non-assessable;


(c) Pledgor has all requisite, power, authority and legal
right to pledge, assign, transfer, deliver, deposit and set over the
Pledged Collateral pledged by Pledgor to C-Cube, as provided herein;


(d) None of the Pledged Interests has been created, issued or
transferred in violation of the securities registration, securities
disclosure or similar laws of any jurisdiction to which such issuance
or transfer may be subject;


(e) All of the Pledged Interests are presently owned by the
Pledgor, and with respect to certificated Pledged Interests, are
presently represented by the certificates listed on Schedule I hereto.
As of the date hereof, there are no existing options, warrants, calls
or commitments of any character whatsoever relating to the Pledged
Interests or with respect to any other capital stock of a Pledged
Entity;


(f) No consent, approval, authorization or other order or
other action by, and no notice to or filing with, any governmental
authority or any other Person is required (i) for the pledge by Pledgor
of the Pledged Collateral pursuant to this Agreement or for the
execution, delivery or performance of this Agreement by Pledgor, or
(ii) for the exercise by C-Cube of the voting or other rights provided
for in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Agreement, except as may be required in
connection with such disposition by applicable laws;


(g) The pledge, assignment and delivery of the Pledged
Collateral pursuant to this Agreement creates a valid first priority
Lien on and a first priority perfected security interest in favor of
C-Cube in the Pledged Collateral and the proceeds thereof, securing the
payment of the Secured Obligations, subject to no other Lien or adverse
claim;


(h) This Agreement has been duly authorized, executed and
delivered by Pledgor and constitutes a legal, valid and binding
obligation of the Pledgor enforceable against Pledgor in accordance
with its terms, subject to the effects of applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting
creditors' rights generally and equitable principles of general
applicability;


(i) Except as specified on Schedule I hereto, the Pledged
Interests constitute 100% of the issued and outstanding shares of
capital stock or other equity interests of each Pledged Entity.


3 4
The representations and warranties set forth in this Section 5 shall survive the execution and delivery of this Agreement.


SECTION 6. COVENANTS. The Pledgor covenants and agrees that until the full and complete satisfaction of the Secured Obligations (the "Termination Date"):


(a) Pledgor will not sell, assign, transfer, pledge, or
otherwise encumber any of its rights in or to the Pledged Collateral,
or grant a Lien in the Pledged Collateral except in favor of C-Cube;


(b) Pledgor will, at its expense, promptly execute,
acknowledge and deliver all such instruments and take all such actions
as C-Cube from time to time may reasonably request in order to ensure
to C-Cube the benefits of the Liens in and to the Pledged Collateral
intended to be created by this Agreement, including the filing of any
necessary Uniform Commercial Code financing statements, which may be
filed by C-Cube with or (to the extent permitted by law) without the
signature of Pledgor, and will cooperate with C-Cube, at Pledgor's
expense, in obtaining all necessary approvals and making all necessary
filings under federal, state, local or foreign law in connection with
such Liens or any sale or transfer of the Pledged Collateral;


(c) Pledgor has and will defend the title to the Pledged
Collateral and the Liens of C-Cube, the Pledged Collateral against the
claim of any Person and will maintain and preserve such Liens; and


(d) Pledgor will, upon obtaining ownership of any additional
capital stock of, or equity interest in, a Pledged Entity or capital
stock or other equity interest in any other Subsidiary, promptly (and
in any event within three (3) Business Days) deliver to C-Cube, duly
executed by Pledgor, in substantially the form of Schedule II hereto (a
"Pledge Amendment") in respect of any such additional capital stock or
equity interest, pursuant to which Pledgor shall pledge to C-Cube all
of such additional capital stock or ownership interest. Pledgor hereby
authorizes C-Cube to attach each Pledge Amendment to this Agreement and
agrees that all Pledged Interests listed on any Pledge Amendment
delivered to C-Cube shall for all purposes hereunder be considered
Pledged Collateral; provided, however, that it is understood and agreed
the security interest in the Pledged Collateral described in Section 2
hereof shall in no way be limited or impaired by the failure of the
Pledgor to execute and deliver any Pledge Amendment.


SECTION 7. Pledgor'S Rights. As long as no Event of Default shall have occurred and be continuing:


(a) The Pledgor shall have the right, from time to time, to
vote and give consents with respect to the Pledged Collateral, or any
part thereof, for all purposes not inconsistent with the provisions of
this Agreement, the Note, or the Guaranty; provided, however, that no
vote shall be cast, and no consent shall be given or action taken,
which


4 5
would have the effect of impairing the position or interest of C-Cube
in respect of the Pledged Collateral or which would authorize, effect
or consent to:


(i) the dissolution or liquidation, in whole or in
part, of a Pledged Entity;


(ii) the consolidation or merger of a Pledged Entity
with any other Person;


(iii) the sale, disposition or encumbrance of all or
substantially all of the assets of a Pledged Entity;


(iv) any change in the authorized number of shares,
ownership interests, the stated capital or the authorized
share capital of a Pledged Entity or the issuance of any
additional shares of its capital stock or any other ownership
or equity interest therein except to the extent the same are
pledged pursuant to Section 6 hereof; or


(v) the alteration of the voting rights with respect
to the capital stock or ownership interest of a Pledged
Entity; and


(b) (i) The Pledgor shall be entitled, from time to time, to
receive and retain for its own use all cash dividends, interest and
other distributions paid in respect of the Pledged Interests to the
extent not in violation of the Note other than any and all: (A)
dividends, interest and other distributions paid or payable other than
in cash in respect of any Pledged Collateral, and any cash or other
property received, receivable or otherwise distributed in exchange for,
any Pledged Collateral; and (B) dividends and other distributions paid
or payable in cash in respect of any Pledged Interests in connection
with a partial or total liquidation or dissolution or in connection
with a reduction of capital, capital surplus or paid-in capital of a
Pledged Entity paid, payable or otherwise distributed, in respect of
principal of, or in redemption of, or in exchange for, any Pledged
Collateral; provided, however, that until actually paid all rights to
such distributions shall remain subject to the Lien created by this
Agreement; and


(ii) all dividends and interest (other than such cash
dividends, interest and other distributions as are permitted to be
received and retained by the Pledgor in accordance with clause (i)
above) and all other distributions in respect of any of the Pledged
Interests or Pledged Indebtedness, whenever paid or made, shall be
delivered to C-Cube to hold as Pledged Collateral and shall, if
received by Pledgor, be received in trust for the benefit of C-Cube, be
segregated from the other property or funds of Pledgor, and be
forthwith delivered to C-Cube as Pledged Collateral in the same form as
so received (with any necessary indorsement).


SECTION 8. DEFAULTS AND REMEDIES; PROXY.


5 6
(a) Upon the occurrence and during the continuation of an
Event of Default (as defined in the Guaranty), in addition to all of
the rights (and without limiting any such right) of a secured party
under applicable law, including, without limitation, under the
...