AMENDMENT NO. 4 TO GUARANTY
AMENDMENT NO. 4 ("Amendment No. 4"), dated as of August 25, 1998,
from SILICON GRAPHICS, INC., a Delaware corporation (the "GUARANTOR"), to
VIRTUAL FUNDING, LIMITED PARTNERSHIP, a Delaware limited partnership (the
"Lessor").
WHEREAS, the Lessor and Silicon Graphics Real Estate, Inc. entered
into an Agreement for Lease dated as of November 18, 1993, as amended by
Amendment No. 1 to Agreement for Lease dated as of March 15, 1995; and
WHEREAS, the Lessor and Silicon Graphics Real Estate, Inc. entered
into a lease Agreement dated as of November 18, 1993, as amended by Amendment
No. 1 to Lease Agreement dated as of March 15, 1995 and Amendment No. 2 to Lease
Agreement dated as of July 1, 1996 (as amended, the "LEASE AGREEMENT"); and
WHEREAS, the Guarantor and the Lessor entered into a Guaranty, dated
as of November 18, 1993, as amended by Amendment No. 1 to Guaranty dated as of
March 15, 1995, Amendment No. 2 to Guaranty dated as of March 7, 1997 and
Amendment No. 3 to Guaranty dated as of May 29, 1998 (as amended, the
"Guaranty"); and
WHEREAS, the Lessor, with the consent of the Guarantor, assigned and
pledged to The Dai-Ichi Kangyo Bank, Limited, New York Branch, as collateral
agent (in such capacity, the "Agent") all of its rights, title and interest in,
to and under the Guaranty; and
WHEREAS, the Guarantor and the Lessor now desire to amend further the
Guaranty as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as follows:
1. Section 3 of the Guaranty is hereby amended by the addition of
the following to the second paragraph thereof, immediately prior to the last
sentence of said paragraph:
Accordingly, the Guarantor waives all rights and defenses that the
Guarantor may have because the Obligations are secured by real
property. This means, among other things: (i) the Lessor may collect
from the Guarantor without first foreclosing on any real or personal
property collateral pledged by the Guaranteed Subsidiaries; and (ii)
if the Lessor forecloses on any real property collateral pledged by
the Guaranteed Subsidiaries: (a) the amount of the debt may be reduced
only by the price for which the collateral is sold at the foreclosure
sale, even if the collateral is worth more than the sale price, and
(b) the Lessor may collect from the Guarantor even if the Lessor, by
foreclosing on the real property collateral, has destroyed any right
the Guarantor may have to collect from the Guaranteed Subsidiaries.
This is an unconditional and
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irrevocable waiver of any rights and defenses the Guarantor may have
because the Obligations are secured by real property. These rights and
defenses include, but are not limited to, any rights or defenses based
upon Section 580a, 580b, 580d or 726 of the California Code of Civil
Procedure.
2. Section 11(d) of the Guaranty is hereby amended by deleting the
last sentence thereof in its entirety and inserting in its place the following:
The Guarantor shall deliver to the Lessor promptly, and in any event
not more than 100 days after the end of each fiscal year of the
Guarantor, and in any event not more than 60 days after the end of
each fiscal quarter of the Guarantor (other than the last fiscal
quarter), a certificate of an appropriate officer of the Guarantor (a
"COMPLIANCE CERTIFICATE") setting forth the calculations and/or
information in respect of (1) the Guarantor's Consolidated Tangible
Net Worth as of the end of such fiscal period, determined in
accordance with this Section 11(d), (2) the Guarantor's Fixed Charge
Coverage Ratio (as defined in Section 11 (e)) as of the end of such
fiscal period, determined in accordance with Section 11 (e) hereof in
respect of the Measurement Period then ended and in respect of the
fiscal quarter then ended, (3) for so long as the Guarantor is
required to comply with the terms of Section 11 (f) hereof, the
Guarantor's Quick Ratio (as defined in Section 11(f) determined as of
the end of such fiscal quarter, in accordance with Section 11(f)
hereof, (4) for so long as the Guarantor is required to comply with
the terms of Section 11 (h) hereof, the Guarantor's Liquid Assets (as
defined in Section 11 (h)), determined as of the end of each such
fiscal quarter, in accordance with Section 11(h) hereof, (~) the
Guarantor's Operating Losses (as defined in Section 11 (i)) determined
at the end of each such fiscal quarter and (6) any purchases,
redemptions or acquisitions by Guarantor or any of its subsidiaries of
the capital stock of the Guarantor other than the type described in
clause (ii) of Section 11(h) hereof made during such fiscal period.
3. Section 11(e) of the Guaranty is hereby amended by deleting
Section 11(e) in its entirety and inserting in its place the following:
(e) FIXED CHARGE COVERAGE RATIO. The Guarantor shall not permit, for
each Measurement Period set forth below, the Fixed Charge Coverage
Ratio to be less than the ratio set forth opposite such Measurement
Period:
Fixed Charge
Measurement Period Ending Coverage Ratio
------------------------- --------------
June 30, 1999 1.5 : 1.0
September 30, 1999 2.5 : 1.0
December 31, 1999 3.0 : 1.0
March 31, 2000 and each Measurement 3.5 : 1.0
Period thereafter
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For purposes hereof, the term "Fixed Charge Coverage Ratio" means, for
any Measurement Period, determined on a consolidated basis in
accordance with generally accepted accounting principles ("GMP"), the
ratio of (i) the sum of the Guarantor's earnings before interest
expense, rent expense, income taxes, depreciation, amortization and
non-recurring charges (i.e., restructuring and merger related charges)
for such Measurement Period, but including interest income for such
Measurement Period, TO (ii) all obligations of the Guarantor paid in
such Measurement Period in respect of interest expense and rent
expense. For purposes hereof, the term "Measurement Period" means,
with respect to any fiscal quarter of the Guarantor, the period of
four fiscal quarters ending on the last day of such fiscal quarter.
4. Section 11(g) of the Guaranty is hereby amended by deleting
Section 11(g) in its entirety and inserting in its place the following:
(g) COVENANT AMENDMENT. Notwithstanding anything to the contrary set
forth in Sections 11 (e), 11 (f) and 11 (h) hereof, (i) upon the
occurrence of two consecutive Measurement Periods for which the
Guarantor's Fixed Charge Coverage Ratio equals or exceeds 3.5:1.0 as
shown in the Compliance Certificates delivered in respect of such
Measurement Periods, then automatically without any further notice to
or by any party, (A) the terms and provisions of Section 11(f) hereof
shall immediately have no further force or effect, the Guarantor
having no further obligation to comply with the terms thereof and (B)
the required Fixed Charge Coverage Ratio for each remaining
Measurement Period set forth in Section 11(e) hereof shall immediately
be amended to be 3.5:1.0 and (ii) upon the occurrence of any one
Measurement Period for which the Guarantor's Fixed Charge Coverage
Ratio equals or exceeds 3.5:1.0, as shown in a Compliance Certificate
delivered in respect of such Measurement Period, then automatically
without any further notice to or by any party, the terms and
provisions of Section 11(h) hereof shall immediately have no further
force or effect, the Guarantor having no further obligation to comply
with the terms thereof.
5. Section 11(h) of the Guaranty is hereby renumbered as Section
11(k) and new Sections 11(h), 11(i) and 11(j) are hereby added to Section 11 of
the Guaranty as follows:
(h) MINIMUM LIQUID ASSETS. The Guarantor shall not permit its Liquid
Assets at any time to be less than $350 000,000. For purposes hereof,
the term "Liquid Assets" means, on a consolidated basis in accordance
with GMP, all of the Guarantor's unrestricted and unencumbered cash,
cash equivalents and short-term marketable investments (defined as
current assets in accordance with GMP) and other short-term marketable
investments.
(i) OPERATING LOSSES. The Guarantor shall not permit its Operating
Losses for each fiscal quarter ended on the date set forth below to
exceed
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the sum of (i) one-half of the Unused Allowances for such fiscal
quarter and (ii) the amount set forth opposite each such fiscal
quarter:
September 30, 1998 $150,000,000
December 31, 1998 $75,000,000
March 31, 1999 S25,000,000
For purposes hereof, the term "Operating Losses" means on a
consolidated basis, the operating losses of the Guarantor determined
in accordance with GMP and consistent with the calculation of
Operating Losses shown as a separate line item on the financial
statements and balance sheet previously delivered to the Banks (but in
any event, excluding those restructuring and merger related changes
shown as a separate line item on the income statement(s) of the
Guarantor previously delivered to the Banks). For purposes hereof,
"Unused Allowances" means (a) with respect to the fiscal quarter
ending September 30, 1998, 0 and (b) with respect to the fiscal
quarters ending December 31, 1998 and March 31, 1999, as of the last
day of each such fiscal quarter, the sum of the excess, if any, of the
Operating Loss limitation set forth in this Section 11(i) for each
fiscal quarter ending prior to such date over the actual Operating
Losses for the corresponding prior fiscal period.
(j) MORTGAGES. On or before December 31, 1998, the Guarantor
shall:
(i) cause the Lessee to execute, deliver and cause the recording of
a [memorandum of lease and leasehold deed of trust and security
agreement] in form and substance reasonably satisfactory to the
Lessor and the Agent encumbering the Lessee's leasehold
interests arising under the Lease Agreement in respect of each
Property subject to the Lease Agreement;
(ii) cause the delivery to the Lessor of a title insurance policy or
endorsement to the Lessor's existing title insurance policy in
form and substance satisfactory to the Lessor; and
(iii) cause the delivery of an opinion of counsel to the Lessee and
the Guarantor in form and substance satisfactory to the Company
and the Agent regarding such makers as the Company may request.
6. The Guarantor hereby agrees to deliver to the Lessor on the
date hereof a certificate dated the date of this Amendment No. 4, from the
Secretary or Assistant Secretary of the Guarantor certifying (i) as to the
incumbency and signature of each officer of the Guarantor authorized to execute
and deliver this Amendment No. 4, (ii) that attached thereto are true and
complete copies of the Restated Certificate of Incorporation and By-Laws of the
Guarantor as in full force and effect on the date of this Amendment No. 4 and
(iii) that attached thereto is a true and complete copy of the resolutions of
the Board of Directors of the Guarantor authorizing the execution, delivery and
performance of this Amendment No. 4 and the transactions contemplated hereby,
together with a certificate of another officer of the Guarantor as to the
incumbency and signature of such Secretary or Assistant Secretary.
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7. The Guarantor hereby represents and warrants that each of the
representations and warranties made in Section 4 of the Guaranty (as amended by
this Amendment No. 4) are Accurate and Complete with the same force and effect
as though made on and as of the date of this Amendment No. 4, except to the
extent that any such representations or warranties expressly relate to an
earlier date, in which case, such representations and warranties were Accurate
and Complete on and as of such earlier date.
For purposes of this paragraph, the term "Accurate and Complete"
means, when referring to any representation or warranty, that such
representation and warranty is true in all material respects and that the
Guarantor has not failed to disclose to the Lessor in writing any fact which if
not disclosed to the Lessor would make the facts actually stated materially
misleading.
8. The Lessor hereby waives, with the consent of the Agent on
behalf of the Majority Banks, compliance by the Guarantor with the Fixed Charge
Coverage Ratio as of June 30, 1998 and any Potential Default or Event of Default
(as defined in the Lease Agreement) arising out of such non-compliance.
9. The Guarantor agrees to pay or cause to be paid to the Lessor
all costs and expenses incurred by the Lessor (including the fees and expenses
of its counsel and the costs and expenses incurred by The Dai-Ichi Kangyo Bank,
Limited, as agent for the Lessor's lenders) in connection with the preparation,
execution and delivery of this Amendment No. 4 and the other documents to be
executed and delivered in connection herewith.
10. Except as expressly modified and amended hereby, the Guaranty
remains unchanged and in full force and effect in all respects. As expressly
modified and amended hereby, the Guarantor hereby affirms the Guaranty in all
respects.
11. THIS AMENDMENT NO. 4 SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
12. This Amendment No. 4 may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but one
and the same Amendment No. 4.
[signatures begin on next page]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment No. 4 to be executed as of the date first above written.
SILICON GRAPHICS, INC.,
as Guarantor
By: /s/ Xxxxx Xxxx
---------------------------------------
Name: Xxxxx Xxxx
Title: Senior Vice President,
Chief Financial Officer
By: /s/ Xxxxxx Xxxxxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Vice President, Treasurer
Acknowledged and Agreed:
VIRTUAL FUNDING, LIMITED PARTNERSHIP
By: Virtual Capital, Inc.,
General Partner
By:
----------------------------
Name:
Title:
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