Exhibit 10.16

 

INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

 

                                This Intellectual Property Security Agreement
(the “Agreement”), is made as of November 9, 2001, by and among FOOTHILL CAPITAL
CORPORATION, a California corporation, as agent for the Lenders (“Agent”),
SILICON GRAPHICS, INC., a Delaware corporation (“Parent”), and SILICON GRAPHICS
FEDERAL, INC., a Delaware corporation (together with Parent, the “Borrowers”),
with refer­ence to the following facts:

 

                                A.            Each Borrower has adopted certain
trademarks and service marks, as identified herein and in Schedule A annexed
hereto and made a part hereof, and

 

                                B.            Each Borrower is the owner and
holder of certain patents, patent applications, inventions and trade secret
information, as identified herein and in Schedule B annexed hereto and made a
part hereof.

 

                                C.            Each Borrower is the owner of the
copyrights in certain works of authorship, as described herein and in Schedule C
annexed hereto and made a part hereof.

 

                                D.            Each Borrower, Agent,
Documentation Agent, and the Lenders party thereto have entered into that
certain Loan and Security Agreement dated as of April 10, 2001 (as from time to
time amended, modified or supplemented in accordance with its terms, the “Loan
Agreement”), pursuant to which the Lender Group has agreed to extend credit to
or for the account of Borrowers in the form of a revolving credit facility, and
each Borrower granted to Agent, for the benefit of the Lender Group, a security
interest in substantially all of each Borrower’s assets as security for all
obligations and liabilities of the Borrowers for payment and performance under,
arising out of or in connection with the Loan Documents (all of such obligations
and liabilities being hereinafter referred to as the “Obligations”). 
Capitalized terms which are used herein but not otherwise defined, shall have
the meaning ascribed to them in the Loan Agreement.

 

                                E.             To induce the Lender Group to
enter into an amendment to the Loan Agreement, and to continue to make advances
and otherwise extend credit to the Borrowers thereunder, each Borrower has
agreed to secure the payment and performance of the Obligations (as hereinafter
defined) and to accomplish same by executing and delivering to Agent, for the
benefit of the Lender Group, (i) this Agreement, (ii) the Security Interest in
Trademarks, (iii) the Security Interest in Patent Collateral, (iv)  the Security
Interest in Copyrights, (v) the Power of Attorney for Patent Collateral, (vi)
the Power of Attorney for Trademarks, (vii) the Power of Attorney for
Copyrights, and (viii) any and all other documents which Agent deems necessary
to protect Lender Group’s interests hereunder or with respect to the
Obligations.

 

                                F.             This Agreement is the
Intellectual Property Security Agreement as defined and described in the Loan
Agreement.

 

                                NOW, THEREFORE, IT IS AGREED that, for and in
consideration of the premises set forth above, the terms and conditions
contained herein, and other good  and

 

 

 

--------------------------------------------------------------------------------

 

valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and as collateral security for the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) of the Obligations,
each Borrower hereby grants to Agent, for the benefit of the Lender Group, a
continuing security interest in all of such Borrower’s right, title and interest
in and to the IP Collateral, except for the Excluded Intellectual Property
described in Schedule D annexed hereto and made a part hereof, including:

 

                                (a)           all of Borrower’s customer lists
and other records of such Borrower relating to the distribution of products
bearing, constituting or incorporating the Trademarks, Patent Collateral and
Copyrights; and

 

                                (b)           the proceeds and products, whether
tangible or intangible, of any of the foregoing, including (w) proceeds from any
claims by such Borrower against third parties for past, present or future
infringement of the Trademarks, Patent Collateral or Copyrights and any
royalties from licenses to third parties of the Trademarks, Patent Collateral or
Copyrights, (x) proceeds of insurance covering any or all of the foregoing, and
(y) any and all money, deposit accounts, or other tangible or intangible
property, solely to the extent, in the case of each of the foregoing clauses
(w), (x) and (y), resulting from the sale, exchange, collection, or other
disposition of any of the foregoing, or any portion thereof or interest therein,
and the proceeds thereof; provided, however, that the IP Collateral shall not
include such General Intangibles:  (i) which cannot be subject to a consensual
security interest in favor of Agent without the consent of the licensor or other
party thereto, (ii) as to which any such restriction described in clause (i) is
effective and enforceable under applicable law including Section 9318(4) of the
Code or, from and after the effective date thereof, Section 9408 of the revised
Article 9 of the Code, and (iii) to which such consent described in clause (i)
has not been obtained by the party granting the security interest.

 

                                1.             Each Borrower hereby represents,
warrants, covenants and agrees as follows, except with respect to the Excluded
Intellectual Property:

 

                                                (a)           Each Borrower has
the sole, full and clear title to the Trademarks for the goods and services with
which the Trademarks are used (except for Permitted Liens and as provided in
paragraph 1(g) below and in Schedule A attached hereto).  The registrations of
the Trademarks are valid and subsisting and in full force and effect.  Each
Borrower has not granted a license or otherwise agreed to allow any third party
to use any Trademark (except in the ordinary course of business consistent with
such Borrower’s business judgment).  Each Borrower has used and will continue to
use for the duration of this Agreement standards of quality in the manufacture
of products sold under the Trademarks that are at least equal to those standards
in effect as of the date of this Agreement to the extent that the failure to do
so would cause a Material Adverse Change.

 

                                                (b)           Each Borrower
(either itself or through its licensees) will continue to use the Trademarks on
each and every trademark class of goods applicable to its current lines of goods
as reflected in its current catalogs, brochures and price lists in order to
maintain the Trademarks in full force and effect, in the ordinary course of
business, free from any claim of abandonment for nonuse and each Borrower will
not (and will not permit any licensee thereof to)

 

 

 

--------------------------------------------------------------------------------

 

do any act or knowingly omit to do any act whereby any Trademark may become
invalidated (except in the ordinary course of business consistent with such
Borrower’s business judgment).

 

                                                (c)           Each Borrower has
the sole, full and clear title to the Patent Collateral shown on Schedule B
hereto and such Patent Collateral is valid and subsisting and in full force and
effect and have not been adjudged or, to such Borrower’s knowledge, claimed
invalid or unenforceable in whole or in part (except for Permitted Liens and as
provided in paragraph l(g) below and in Schedule B attached hereto).  Each
Borrower has not granted a license or otherwise agreed to allow any third party
to use any Patent Collateral (except in the ordinary course of business
consistent with such Borrower’s business judgment).  Each Borrower (either
itself or through its licensees) shall mark products made and sold under the
Patent Collateral in accordance with the U.S. Patent Act and other applicable
laws.  Each Borrower shall preserve and maintain all rights of any kind in the
Patent Collateral, which, in each case, such Borrower believes in its reasonable
business judgment are in the best business interests of such Borrower.  Each
Borrower believes that none of the Patent Collateral has been abandoned or
dedicated and such Borrower will not do any act, or omit to do any act, nor
permit any licensee thereof to do any act whereby any Patent Collateral may
become abandoned or dedicated, except and to the extent Borrower believes in its
reasonable business judgment that such action or inaction is in the best
business interest of such Borrower including discretion to make Patent
Collateral available to the “open source community,” and shall notify Agent
immediately if it knows or has reason to believe that any material Patent
Collateral may become abandoned or dedicated.

 

                                                (d)           Each Borrower
(either itself or through its licensees) will place appropriate notice of
copyright on all copies embodying copyrighted works covered by the Copyright
which are publicly distributed and such Borrower will not (and will not permit
any licensee thereof to) do any act or knowingly omit to do any act whereby any
Copyright may become invalidated or dedicated to the public domain, except and
to the extent Borrower believes in its reasonable business judgment that such
action or inaction is in the best interest of such Borrower.

 

                                                (e)           Each Borrower will
promptly perform all acts and execute all documents, including, without
limitation, grants of security in forms acceptable to Agent and suitable for
recording with (i) the United States Patent and Trademark Office and the United
States Register of Copyrights, and (ii) the appropriate offices and agencies of
foreign jurisdictions reasonably requested by Agent at any time to evidence,
perfect, maintain, record or enforce Lender Group’s security interest in the IP
Collateral or otherwise in furtherance of the provisions of this Agreement. 
Each Borrower hereby authorizes Agent to execute and file one or more financing
statements (and any similar documents) or copies thereof or of this Agreement
with respect to the IP Collateral signed only by Agent (with a copy sent to the
applicable Borrower).

 

                                                (f)            In the event that
either Borrower, either itself or through any subsidiary, affiliate, agent,
employee, licensee or designee, shall file an application for the registration
of any trademark with the United States Patent and Trademark Office, or any
similar office of the United States or in any office of the Secretary of State
(or equivalent) of any state

 

 

--------------------------------------------------------------------------------

 

thereof, or for the registration of any copyright with the United States
Register of Copyrights, or for the registration of any Trademark or Copyright in
any similar office or agency of any country or political subdivision thereof
throughout the world, or shall obtain registration of any Trademark or Copyright
previously applied for, or shall adopt, acquire or obtain rights to any new
trademark, or work for which a copyright application has been or is expected to
be filed, the applicable Borrower shall (i) inform Agent of any such event or
action in annual reports which Borrowers are required to deliver to Agent
pursuant to the Loan Agreement and, (ii) execute and deliver any and all
assignments, agreements, instruments, documents and papers as are necessary or
appropriate or as Agent may reasonably request to evidence Lender Group’s
security interest in such Trademark, or Copyright and the goodwill and general
intangibles of Borrowers relating thereto or represented thereby.   Each
Borrower hereby constitutes Agent, or its agent, its attorney-in-fact to execute
and file all such writings for the foregoing purposes, all acts of such attorney
being hereby ratified and confirmed; such power being coupled with an interest
is irrevocable until the Obligations are indefeasibly paid in full.  Each
Borrower authorizes the amendment of the schedules hereto to include any future
Trademark, or Copyright registrations or applications which may be acquired or
made by such Borrower.

 

                                                (g)           Each Borrower has
the authority, right and power to enter into this Agreement and to perform its
terms and to grant the security interest herein granted, and has not entered and
will not enter into any oral or written agreements which would prevent such
Borrower from complying with the terms hereof, provided, however, each Borrower
may enter into or maintain in effect such license agreements with respect to the
IP Collateral as such Borrower believes in its reasonable business judgment are
in the best interest of such Borrower’s business.  The IP Collateral is not, to
either Borrower’s knowledge, now, and at all times will not be, subject to any
liens (other than “Permitted Liens”), charges, mortgages, assignments, security
interests, claims, shop rights, covenants not to sue third persons, or
encumbrances of any nature whatsoever, except in favor of Agent, for the benefit
of the Lender Group; provided, however, each Borrower may enter into such
non-exclusive license agreements with respect to the IP Collateral as such
Borrower believes in its reasonable business judgment are in the best interest
of such Borrower’s business.  To the best knowledge of each Borrower, none of
the IP Collateral is subject to any claims of any other party, except as may be
indicated on Schedules A, B and C to this Agreement.

 

                                                (h)           Except for
Permitted Liens and to the extent that Agent, upon prior written notice from
Borrowers, shall consent, no Borrower will assign, sell, mortgage, lease,
transfer, pledge, hypothecate, grant a security interest in or lien upon,
encumber, grant an exclusive license, or otherwise dispose of any of the IP
Collateral except as permitted herein, and nothing in this Agreement shall be
deemed a consent by Agent to any such action except as expressly permitted
herein.

 

                                                (i)            As of the date
hereof no Borrower has any Trademarks, Patent Collateral or Copyrights
registered, or which are the subject of any pending trademark or copyright
application, in the United States Patent and Trademark Office, or any similar
office of the United States or in any office of the Secretary of State (or
equivalent) of any state thereof, or the United States Register of Copyrights,
or in any similar office or agency of any country or

 

 

--------------------------------------------------------------------------------

 

political subdivision thereof throughout the world, other than those identified
in Schedules A, B and C hereto.

 

                                                (j)            Each Borrower
will in its business judgment take commercially reasonable steps in any
proceeding before the United States Patent and Trademark Office, United States
Register of Copyrights or similar office or agency of the United States or any
office of the Secretary of State (or equivalent) of any state thereof, or in any
similar office or agency of any country or political subdivision thereof
throughout the world, to maintain each trademark or copyright registration
application and registration of the IP Collateral, including, without
limitation, filing of renewals, extensions, affidavits of use and
incontestability, and opposition, interference and cancellation proceedings. 
Each Borrower shall notify Agent promptly in writing if any registration
application or registration relating to any IP Collateral may become abandoned
or dedicated or subject to an adverse final determination in any proceeding in
the United States Patent and Trademark Office or United States Register of
Copyrights or in any similar office or agency of any country or political
subdivision thereof throughout the world or in any court regarding such
Borrower’s ownership of such Patent Collateral or Trademark, its right to
register same, or to keep or maintain the validity of same.

 

                                                (k)           In the event that
any Borrower acquires actual knowledge that any Trademark, Patent Collateral or
Copyright is infringed, misappropriated or diluted by a third party, such
Borrower shall promptly sue for infringement, misappropriation and/or dilution
and to obtain injunctive relief and recover damages therefor, unless such
Borrower shall determine in its reasonable business judgment that such suit is
not in the best interest of such Borrower’s business, and the applicable
Borrower shall take such other actions reasonably required to protect such
Trademark, Patent Collateral or Copyright as such Borrower shall deem
appropriate in its reasonable business judgment under the circumstances.  Upon
and during the continuance of an Event of Default, Agent shall have the right,
but in no way shall be obligated, to bring suit in its own name to enforce the
Trademarks, Patent Collateral and Copyrights and any licenses thereunder, in
which event the applicable Borrower shall, at the request of Agent, do any and
all lawful acts requested by Agent and execute any and all documents required by
Agent to aid such enforcement, and the applicable Borrower shall, upon demand,
promptly reimburse and indemnify Lender Group for all costs and expenses
incurred in such enforcement.

 

                                2.             Upon the occurrence and during
the continuance of an Event of Default, Agent may, except with respect to the
Excluded Intellectual Property and except to the extent otherwise expressly
provided or required below, do any one or more of the following, all of which
are authorized by each Borrower, in addition to all other rights and remedies
provided for in the Loan Documents, all such rights and remedies being
cumulative, not exclusive, and enforceable alternatively, successively or
concurrently, without (except as provided herein or in the other Loan Documents)
notice to, or consent by, either Borrower:

 

                                                (a)           Agent may (without
assuming any obligations or liability thereunder), at any time, enforce (and
shall have the exclusive right to enforce) against any licensee or sublicensee
all rights and remedies of the applicable Borrower in, to and under any one or
more license agreements with respect to the IP Collateral, and take or refrain
from taking any action under any thereof, and each Borrower hereby releases
Lender Group from, and agrees

 

 

--------------------------------------------------------------------------------

 

to hold Lender Group free and harmless from and against any claims arising out
of, any action taken or omitted to be taken with respect to any such license
agreement;

 

                                                (b)           Agent, for the
benefit of the Lender Group, may, at any time and from time to time, upon ten
(10) days’ prior notice to Borrowers, assign, sell, or otherwise dispose of the
IP Collateral or any of it, either with or without special or other conditions
or stipulations, with power to buy the IP Collateral or any part of it, and do
all other acts and things for completing the assignment, sale or disposition
which Agent shall, in its sole discretion, deem appropriate or proper;

 

                                                (c)           In addition to the
foregoing, in order to implement the assignment, sale, license or other disposal
of any of the IP Collateral pursuant to subparagraphs 2(b) hereof, Agent may, at
any time, pursuant to the authority granted in the Powers of Attorney described
in paragraph 3 hereof (such authority becoming effective upon an Event of
Default), execute and deliver on behalf of any Borrower one or more instruments
of assignment sale, license or other disposition of the IP Collateral.  Each
Borrower agrees to pay when due all reasonable costs incurred in any such
transfer of the IP Collateral, including any taxes, fees and reasonable
attorneys’ fees, and all such costs shall be added to the Obligations.  Agent
may apply the proceeds actually received from any such license, assignment, sale
or other disposition in accordance with paragraph (d) of this Section 2; and
each Borrower shall remain liable and will pay Agent on demand any deficiency
remaining, together with interest thereon at a rate equal to the rate then
payable on the Obligations and the balance of any expenses unpaid.  Nothing
herein contained shall be construed as requiring Agent to take any such action
at any time; and

 

                                                (d)           Except as
otherwise herein expressly provided, the proceeds of any collection, sale or
other realization of all or any part of the IP Collateral pursuant hereto, shall
be applied to the Obligations until the Obligations shall have been paid in full
in cash.  The application of proceeds hereunder to the Obligations shall be made
pro-rata to the holders of such Obligations based on the aggregate outstanding
principal amount of such Obligations held by such holders or as otherwise
provided in the Loan Agreement.

 

                                3.             The following documents will be
concurrently executed and delivered to Agent as conditions precedent to the
execution and delivery of this Agreement:

 

                                                (a)           Three original
Powers of Attorney,  in the form of Exhibit A, Exhibit B, and Exhibit C hereto,
respectively, executed by Borrowers, for the implementation of any assignment,
sale or other disposition of the Trademarks, Patent Collateral or Copyrights,
respectively, pursuant to paragraphs 2(a) and (b) hereof;

 

                                                (b)           An opinion from
Brobeck, Phleger & Harrison, LLP in form and substance satisfactory to Agent.

 

                                4.             No provision hereof shall be
modified, altered or limited except by a written instrument expressly referring
to this Agreement and executed by the party to be charged.  The execution and
delivery of this Agreement has been properly authorized by the board of
directors of each Borrower and by any necessary vote or consent of stockholders
thereof.  This

 

 

--------------------------------------------------------------------------------

 

Agreement shall be binding upon the successors, permitted assigns or other legal
representatives of each Borrower, and shall, together with the rights and
remedies of the Lender Group hereunder inure to the benefit of the Lender Group,
its successors, permitted assigns or other legal representatives.  This
Agreement, the Obligations and the IP Collateral, except for the Excluded
Intellectual Property, shall be governed in all respects by the laws of the
United States and the laws of the State of California.  If any term of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity of
all other terms hereof shall in no way be affected thereby.  The obligations of
Borrowers hereunder are joint and several.

 

                                5.             This Agreement shall continue to
be effective and shall be reinstated in the event that at any time after the
Obligations have been paid in full, any payment of the Obligations is rescinded
or must otherwise be restored or returned by the Lender Group.

 

                                6.             Upon payment and performance in
full in cash by Borrowers of all of the Obligations (other than indemnification
obligations for which no claim has been made) and upon the termination of the
Loan Agreement, this Agreement shall terminate and Agent shall execute, file and
record in each office in which any financing statement or assignment relative to
the IP Collateral, or any part thereof, shall have been filed, a termination
statement, assignment or other appropriate instrument releasing its interest
therein, all without recourse to or warranty by the Lender Group and at the sole
cost and expense of the Borrowers.

 

                                7.             This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.

 

                                IN WITNESS WHEREOF, the undersigned have caused
this Agreement to be duly executed and delivered on the day and year first above
written.

 

SILICON GRAPHICS, INC.,

a Delaware corporation

 

 

By:  /s/  Jean Furter

Its:   Vice President and Treasurer

 

SILICON GRAPHICS FEDERAL, INC.,

a Delaware corporation

 

 

By:  /s/  Jeffrey Zellmer

Its:  Vice President

 

FOOTHILL CAPITAL CORPORATION,

a California corporation, as Agent and as a Lender

 

FOOTHILL CAPITAL CORPORATION,

a California corporation, as Agent and as a Lender

 

By:   /s/  Teresa M. Bolick

Its:    Vice President

 

 

 

 

--------------------------------------------------------------------------------