Exhibit
4.5


 


SECURITY AGREEMENT


 


This SECURITY AGREEMENT, dated as of
December [    ], 2003 (as amended, supplemented,
amended and restated or otherwise modified from time to time, the “Agreement”),
is made by SILICON GRAPHICS, INC., a Delaware corporation (the “Grantor”),
in favor of U.S. BANK NATIONAL ASSOCIATION, in its capacity as Trustee and  for the benefit of the Noteholders (such
capitalized terms to have the meanings set forth in Article I).


 


W  I  T  N  E  S
S  E  T  H :


 


WHEREAS, the Grantor, Wells Fargo Foothill, Inc. (as
successor in interest to Foothill Capital Corporation), as Arranger and
Administrative Agent (and together with any successor(s) thereto in such
capacity, the “Administrative Agent”) and certain financial institutions
(collectively, the “Lender Group”), are parties to the Amended
and Restated Loan and Security Agreement, dated as of September 24, 2002
and amended on April 11, 2003 and September 17, 2003 (as further
amended, supplemented, amended and restated or otherwise modified from time to
time, the “Loan Agreement”), among the Grantor, its subsidiaries
signatory thereto, the Lender Group, the Administrative Agent and Bank of
America, N.A., as the Documentation Agent;


 


WHEREAS, the Grantor and U.S. Bank National
Association, as Trustee (in such capacity, the “Trustee”) are parties to
(i) that certain indenture, dated as of the date hereof (as amended,
supplemented, amended and restated or otherwise modified from time to time, the
“Secured
Convertible Note Indenture”), pursuant to which the Grantor is
issuing 6.50% Senior Secured Notes due 2009 (the “Secured Convertible Notes”),
and (ii) that certain Indenture, dated as of the date hereof (as amended,
supplemented, amended and restated or otherwise modified from time to time, the
“Secured
Note Indenture”, and, together with the Secured Convertible Note
Indenture, the “Indentures”), pursuant to which the Grantor is issuing 11.75%
Senior Secured Notes due 2009 (the “Secured Notes” and, together with the
Secured Convertible Notes, the “Notes”) in an aggregate principal amount of
up to $230,591,000;


 


WHEREAS, pursuant to the Indentures, the Grantor is
required to execute and deliver this Agreement;


 


WHEREAS, the Grantor, the Trustee and the
Administrative Agent have entered into an Intercreditor Agreement, dated as of
the date hereof (as further


 

















 


amended, supplemented,
amended and restated or otherwise modified from time to time, the “Foothill
Intercreditor Agreement”); and


 


WHEREAS pursuant to the terms of the Indentures and
subject to the terms of the Intercreditor Agreement, U.S. Bank National
Association, in its capacity as Trustee has agreed to accept the pledge and
assignment and the grant of a security interest in the Collateral under this
Agreement as security for the Notes.


 


NOW, THEREFORE, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and in order to
induce the Trustee to enter into the Indentures and to induce holders of the
Grantor’s 5.25% Senior Convertible Notes due 2004 (the “Old Notes”) to exchange the
Old Notes for the Notes, the parties hereto agree as follows:


 


ARTICLE I

DEFINITIONS


 


SECTION 1.1.  Certain Terms.  The following terms when used in this
Agreement, including its preamble and recitals, shall have the following meanings
(such definitions to be equally applicable to the singular and plural forms
thereof):


 


“Account
Debtor” means any Person who is or who may become obligated under,
with respect to, or on account of, any Account, General Intangible Collateral
or Negotiable Property Collateral.


 


“Accounts”
means all of the Grantor’s now owned or hereafter acquired right, title, and
interest with respect to “accounts” (as that term is defined in the Code), and
any and all supporting obligations in respect thereof, and as for which the
Account Debtor obligated thereon maintains its chief executive office in the
United States or is organized under the laws of the United States or any state
thereof.


 


“Additional
Documents” has the meaning set forth in Section 3.6.


 


“Administrative Agent” is defined in the
first recital to this Agreement and includes any successor thereto exercising
substantially the same rights and powers and any representative of lenders to
whom the Grantor has granted a Senior Priority Lien on the Collateral as
permitted under the Indentures .


 


“Agreement”
is defined in the preamble to this Agreement.


 


“Books”
means all of the Grantor’s now owned or hereafter acquired books and records
(including all of its Records indicating, summarizing, or


 


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evidencing its assets (including the Collateral) or liabilities, all of
its Records relating to its business operations or financial condition, and all
of its goods or General Intangibles related to such information), excluding (y)
books and records relating to (i) General Intangibles other than General
Intangibles described above in this definition or in clause (f) of the
definition of “Collateral” or (ii) Real Property, or (z) any of the foregoing
which is located outside of the United States.


 


“Code” means the New York Uniform Commercial
Code, as in effect from time to time.


 


“Collateral”
means, except for the Excluded Intellectual Property, all of the Grantor’s now
owned or hereafter acquired right, title, and interest in and to each of the
following:


 


(a)                                  Accounts,


 


(b)                                 Books,


 


(c)                                  Equipment,


 


(d)                                 IP
Collateral,


 


(e)                                  Inventory,


 


(f)                                    Negotiable
Property,


 


(g)                                 money
of the Grantor that now or hereafter comes into the possession, custody or
control of the Trustee,


 


(h)                                 the
proceeds and products, whether tangible or intangible, of any of the foregoing
described in clauses (a) through (g) above, including (x) proceeds of
insurance covering any or all of the foregoing, and (y) any and all
Accounts, Books, Equipment, IP Collateral, General Intangibles, Inventory,
Investment Property, Negotiable Property, Real Property, money, deposit
accounts, or other tangible or intangible property, solely to the extent, in
the case of each of the foregoing clauses (x) and (y), resulting from the sale,
exchange, collection, or other disposition of any of the foregoing described in
clauses (a) through (g) above, or any portion thereof or interest therein, and
the proceeds thereof; provided, however, that Collateral shall not include (A)
such General Intangibles:  (i) which
cannot be subject to a consensual security interest in favor of Trustee 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 9-318(4) of the Code or
Section 9-408 of 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 and (B) any  property not subject to a Senior Priority
Lien, other


 


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than any such property that was, immediately prior to the discharge of
such Senior Priority Lien Obligations, subject to a Senior Priority Lien,
except to the extent that such property, or any portion thereof, was disposed
of in order to repay Senior Priority Lien Obligations.


 


“Collections”
means all cash, checks, notes, instruments, and other items of payment
(including insurance proceeds, proceeds of cash sales, rental proceeds, and tax
refunds) of Grantor, but excluding any of the foregoing directly arising out of
the disposition of Real Property or any patent, trademark or copyright of the
Grantor.


 


“Copyrights”
means all of the Grantor’s right, title and interest in and to copyrights in
works of authorship of any kind, and all registration applications,
registrations and recordings thereof in the Office of the United States
Register of Copyrights, Library of Congress, or in any similar office or agency
of any country or political subdivision thereof throughout the world, whether
now owned or hereafter acquired by such Grantor, including those described in
Schedule 5.16A annexed hereto and made a part hereof, together with all
extensions, renewals, reversionary rights, and corrections thereof and all
licenses thereof or pertaining thereto.


 


“Equipment”
means all of the Grantor’s now owned or hereafter acquired right, title, and
interest with respect to equipment, machinery, machine tools, motors,
furniture, furnishings, fixtures, vehicles (including motor vehicles), tools,
parts, spare parts, goods (other than consumer goods, farm products, or
Inventory), including all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing, in each
case to the extent that any of the foregoing is located anywhere within the
United States.


 


“Excluded
Intellectual Property” means each Patent, Trademark and Copyright
presently owned by the Grantor and listed on Schedule 5.16B.


 


“General
Intangibles” means all of the Grantor’s now owned or hereafter
acquired right, title, and interest with respect to general intangibles
(including payment intangibles, contract rights, rights to payment, rights
arising under common law, statutes, or regulations, choses or things in action,
goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, infringement claims, computer
programs, information contained on computer disks or tapes, software,
literature, reports, catalogs, money, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims), and any and all supporting
obligations in respect thereof, and any other personal property other than
goods, Accounts, Books, Inventory, Equipment Investment Property, and
Negotiable Property.


 


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“General
Intangibles Collateral” means that portion of the General
Intangibles which is included in the Collateral as proceeds of other
Collateral.


 


“Grantor” is defined in the preamble to this
Agreement.


 


“Intellectual Property Security Agreement”
means an intellectual property security agreement executed and delivered by the
Grantor and Trustee, the form and substance of which is satisfactory to the
Trustee.


 


“Intercreditor Agreement” means (i) the
Foothill Intercreditor Agreement defined in the fourth recital to this
Agreement and (ii) any agreement entered into among Grantor, the Trustee
and any lender or holder of Senior Priority Debt (or its representative) to
whom the Grantor has granted a senior security interest in the Collateral
pursuant of Section 4.06(e) of the Indentures.


 


“Inventory”
means all Grantor’s now owned or hereafter acquired right, title, and interest
with respect to inventory, including goods (and any software embedded therein
or otherwise included therewith and all rights to such software) held for sale
or lease or to be furnished under a contract of service, goods that are leased
by the Grantor as lessor, goods that are furnished by the Grantor under a
contract of service, and raw materials, work in process, or materials used or
consumed in the Grantor’s business, in each case to the extent that any of the
foregoing is located anywhere in the United States.


 


“Investment
Property” means all of the Grantor’s now owned or hereafter acquired
right, title, and interest with respect to “investment property” as that term
is defined in the Code, and any and all supporting obligations in respect
thereof.


 


“IP
Collateral” means collectively, the Patent Collateral, Trademarks
and Copyrights.


 


“Junior
Priority Debt” means all indebtedness, liabilities and other
obligations of Grantor owing to Trustee, in respect of the Notes, whether now
existing or hereafter arising, and whether due or to become due, absolute or
contingent, liquidated or unliquidated, determined or underdetermined, including
all fees and all other amounts payable by Grantor to Trustee under or in
connection with any documents or instruments related thereto.


 


“Junior Priority Security Documents” means,
collectively, this Agreement, the Intellectual Property Security Agreement, and
all other security agreements, pledges, collateral assignments, mortgages or
other instruments evidencing or creating any security interests in favor of the
Trustee, for the benefit of the Noteholders, in all or any portion of the
Collateral, in each case, as


 


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amended, amended and restated, supplemented, replaced or otherwise
modified from time to time, in accordance with the terms thereof.


 


“Negotiable Property Collateral” means that
portion of the Negotiable Property which is included in the Collateral as
proceeds of other Collateral.


 


“Noteholder” means any holder of the Secured
Notes or Secured Convertible Notes.


 


“Noteholder Documents” means the Indentures,
the Notes, this Agreement, the other Junior Priority Security Documents and the
Intercreditor Agreement.


 


“Patent Collateral” means all of the
Grantor’s right, title and interest in and to all registrations and recordings
in the United States Patent and Trademark Office described in
Schedule 5.16A, together with all re-examinations, reissues,
continuations, continuations-in-part, divisions, improvements and extensions
thereof and all licenses thereof or pertaining thereto and all licenses of
patent rights to the Grantor now in effect or entered into during the term of
this Agreement and the rights to make, use and sell, and all other rights with
respect to, the inventions disclosed or claimed therein, all inventions,
designs, proprietary or technical information, know-how, other data or
information, software, databases, all embodiments or fixations thereof and
related documentation, all information pertaining to the foregoing having value
in connection with the Grantor’s business and all other trade secret pertaining
to the foregoing rights not described above.


 


“Person” means natural persons,
corporations, limited liability companies, limited partnerships, general
partnerships, limited liability partnerships, joint ventures, trusts, land
trusts, business trusts, or other organizations, irrespective of whether they
are legal entities, and governments and agencies and political subdivisions
thereof.


 


“Real Property” means any estates or
interests in real property now owned or hereafter acquired by the Grantor and
the improvements thereto.


 


“Record” means information that is inscribed
on a tangible medium or which is stored in an electronic or other medium and is
retrievable in perceivable form.


 


“Senior Priority Debt” means any
indebtedness incurred by the Grantor as permitted under Section 4.06(e) of
the Indentures that is secured by a security interest in the Collateral senior
to that granted to the Trustee on behalf of the Noteholders, including, but not
limited to indebtedness incurred under the Loan Agreement.


 


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“Trademarks” means all of the Grantor’s
right, title and interest in and to trademarks, trade names, trade styles,
service marks, logos, emblems, prints and labels, all elements of package or
trade dress of goods, and all general intangibles of like nature, now existing
or hereafter adopted or acquired by the Grantor, together with the goodwill of
the Grantor’s business connected with the use thereof and symbolized thereby,
and all registration applications, registrations and recordings thereof,
including, without limitation, registration applications, registrations and
recordings in the United States Patent and Trademark Office or in any similar
office or agency of the United States or in 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, whether
now owned or hereafter acquired by the Grantor, including those described in
Schedule 5.16A annexed hereto and made a part hereof, together with all
extensions, renewals and corrections thereof and all licenses thereof or
pertaining thereto.


 


“Trustee” means U.S. Bank National
Association and shall include any additional or successor representative of any
then outstanding Notes.


 


SECTION 1.2.  Definitions.  Unless otherwise defined herein or the
context otherwise requires, terms used in this Agreement, including its
preamble and recitals, have the meanings provided in the Indentures, or, if not
defined in the Indentures, the Intercreditor Agreement.


 


SECTION 1.3.  Code Definitions.  Unless otherwise defined herein, in the
Indentures or, if not defined in the Indentures, the Intercreditor Agreement,
or the context otherwise requires, terms for which meanings are provided in the
Code are used in this Agreement (whether or not capitalized herein), including
its preamble and recitals, with such meanings.


 


ARTICLE II

SECURITY INTEREST


 


SECTION 2.1.  Grant of Security Interest.  The Grantor hereby grants to the Trustee,
for the benefit of each Noteholder, a continuing security interest in all of
the Grantor’s right, title and interest in all currently existing and hereafter
acquired or arising Collateral.


 


SECTION 2.2.  Security for Noteholder Claims.  This Security Agreement and the Collateral
in which the Trustee is granted a security interest hereunder secures the
payment of the Junior Priority Debt.


 


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SECTION 2.3.  Grantor Remains Liable.  Anything herein to the contrary notwithstanding,


 


(a)                                  the
Grantor will remain liable under the contracts and agreements included in the
Collateral to the extent set forth therein, and will perform all of its duties
and obligations under such contracts and agreements to the same extent as if
this Agreement had not been executed;


 


(b)                                 the
exercise by the Trustee of any of its rights hereunder will not release the
Grantor from any of its duties or obligations under any such contracts or
agreements included in the Collateral; and


 


(c)                                  none
of the Trustee or any Noteholder will have any obligation or liability under
any contracts or agreements included in the Collateral by reason of this
Agreement, nor will the Trustee or any Noteholder be obligated to perform any
of the obligations or duties of the Grantor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.


 


ARTICLE III

COVENANTS


 


The Grantor covenants and agrees that, at all times
prior to the discharge of the Indentures or earlier release of Liens on all
Collateral pursuant to Section 6.10 of this Agreement, the Grantor
will perform, comply with and be bound by the obligations set forth in the
Indentures and as follows:


 


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SECTION 3.1.  Senior Priority Debt.  The Grantor shall furnish to the Trustee, as
long as any Senior Priority Debt is outstanding, with copies of all agreements
or instruments evidencing or governing the Senior Priority Debt, including
copies of all schedules thereto relating to the Collateral, and all amendments,
restatements, modifications, renewals, extensions or replacements thereof ;
provided that documents reflecting modifications or other alterations to such
agreements need only be provided to Trustee to the extent that they relate to or
affect the Collateral.  Such documents
shall be furnished to Trustee within five Business Days of the execution of
such documents.


 


SECTION 3.2.  Collateral Reporting.  The Grantor shall furnish to the Trustee (i)
as long as any Senior Priority Debt is outstanding, copies of any statements,
schedules and reports relating to and describing the Collateral that it is
required to furnish to holders of Senior Priority Debt and (ii) thereafter,
such statements and schedules identifying and describing the Collateral and
such other reports in connection with the Collateral as Trustee shall
reasonably request.


 


SECTION 3.3.  Intellectual Property; IP Collateral.  The Grantor shall enter into and comply with
the Intellectual Property Security Agreement in the form of Exhibit A hereto,
with respect to all of the IP Collateral owned on the date hereof, and shall
execute and deliver to the Trustee any other document requested by the Trustee
required to acknowledge or register or perfect the Trustee’s interest in the
United States in any part of such IP Collateral.


 


SECTION 3.4.  Assignment of Proceeds.  The Grantor shall execute and deliver to the
Trustee any and all additional documents that the Trustee may reasonably
request, in form and substance reasonably satisfactory to the Trustee,
providing for the assignment of all proceeds to the Trustee arising from any
license or royalty agreement entered into by the Grantor with respect to
Grantor’s General Intangibles.


 


SECTION 3.5.  Collection of Accounts, etc.  At any time after the Trustee has received notice of full and
indefeasible payment of all Senior Priority Debt, and after occurrence and
during the continuation of an Event of Default under the Indentures, the
Trustee may (i) notify Account Debtors of Grantor that the Accounts,
Negotiable


 


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Property Collateral and General Intangibles Collateral have been
assigned to or that the Trustee has a security interest therein, or
(ii) collect the Accounts, Negotiable Property Collateral and General
Intangibles Collateral directly.


 


SECTION 3.6.  Further Assurances.  At any time upon the request of the Trustee,
Grantor shall execute and deliver to the Trustee, any and all financing
statements, original financing statements in lieu of continuation statements,
fixture filings, security agreements, pledges, assignments, endorsements of
certificates of title, and all other documents (the “Additional Documents”) that
the Trustee may reasonably request, in form and substance reasonably satisfactory
to the Trustee, to perfect and continue perfected or better perfect the
Trustee’s Liens in the Collateral (whether now owned or hereafter arising or
acquired).  To the maximum extent
permitted by applicable law, Grantor authorizes the Trustee to execute any such
Additional Documents in Grantor’s name and authorizes the Trustee to file such
executed Additional Documents in any appropriate filing office.


 


SECTION 3.7.  Trustee Appointed Attorney-in-Fact.  The Grantor hereby irrevocably appoints the
Trustee the Grantor’s attorney-in-fact, with full authority in the place and
stead of the Grantor and in the name of the Grantor or otherwise, to (a) if
Grantor refuses to, or fails timely to execute and deliver any of the documents
described in Section 3.6, sign the name of Grantor on any of the
documents described in Section 3.6, (b) at any time that an Event
of Default has occurred and is continuing, sign Grantor’s name on any invoice
or bill of lading relating to the Collateral, drafts against Account Debtors,
or notices to Account Debtors, (c) send requests for verification of Accounts; provided,
however, that so long as no Event of Default has occurred which is
continuing, Trustee will coordinate any such verification activities with
Grantor, (d) endorse Grantor’s name on any Collection item that may come into
the Trustee’s possession, (e) at any time that an Event of Default has occurred
and is continuing, make, settle, and adjust all claims under such Grantor’s
policies of insurance and make all determinations and decisions with respect to
such policies of insurance, and (f) at any time that an Event of Default has
occurred and is continuing, settle and adjust disputes and claims respecting
the Accounts, General Intangibles Collateral or Negotiable Property Collateral
directly with Account Debtors, for amounts and upon terms that Trustee
determines to be reasonable, and Trustee may cause to be executed and delivered
any documents and releases that Trustee determines to be necessary.


 


The
Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section 3.7 is irrevocable and coupled with an
interest.


 


SECTION 3.8.  Disposition of Collateral. 
Subject to the terms of agreements and instruments governing the Senior
Priority Debt, Grantor may sell, exchange, assign, lease, license or otherwise
dispose of any of the Collateral; and


 


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concurrently with any such sale or other disposition, the liens granted
under this Agreement on the assets sold or disposed of (but not in any proceeds
arising from such sale or disposition) will cease immediately without any
action by the Trustee or any other secured party.  The Trustee will, at the Grantor’s expense, execute and deliver
to Grantor such documents as Grantor shall reasonably request to evidence the
fact that any asset so sold or disposed of is no longer subject to the security
interest created by the Junior Priority Security Documents.


 


ARTICLE IV

SUCCESSOR TRUSTEE


 


(a)                                  The
Trustee has been appointed to act as such pursuant to the Noteholder Documents,
with such powers, rights and obligations as are expressly delegated to it by
the terms of such Noteholder Documents. 
The Trustee may, subject to the terms of the Intercreditor Agreement,
resign its position hereunder and under the Indentures by notifying the Grantor
in accordance with the procedures set forth in Section 7.08 of  the Indentures and a successor Trustee will
be appointed in accordance with the procedures set forth in the Indentures;
provided that, if  Trustee resigns or is
removed from its position pursuant to Section 7.08 of the Indentures, then
it will also be deemed to have resigned as Trustee under this Agreement;


 


(b)                                 Upon
the acceptance of its appointment as Trustee hereunder and under the
Indentures, (i) a successor Trustee shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Trustee, and the retiring Trustee shall be discharged from its duties and
obligations hereunder, and (ii) the retiring Trustee shall promptly
transfer all Collateral within its possession or control to the possession or
control of the successor Trustee and shall execute and deliver such notices,
instructions and assignments as may be necessary or desirable to transfer the
rights of the Trustee in respect of the Collateral to the successor Trustee.


 


ARTICLE V

REMEDIES


 


SECTION 5.1.  Certain Remedies.  Subject to the Intercreditor Agreement, if
any Event of Default under the Indentures shall have occurred and be
continuing, the Trustee may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to it,
all the


 


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rights and remedies of a secured party on default under the Code
(whether or not the Code applies to the affected Collateral) and also may


 


(a)                                  without
notice to or demand upon Grantor, make such payments and do such acts as
Trustee considers necessary or reasonable to protect its security interests in
the Collateral.  Grantor agrees to assemble the Collateral if Trustee so
requires, and to make the Collateral available to Trustee at a place that
Trustee may designate which is reasonably convenient to both parties. 
Grantor authorizes Trustee to enter the premises where the Collateral is
located, to take and maintain possession of the Collateral, or any part of it,
and to pay, purchase, contest, or compromise any Lien that in Grantor’s
determination appears to conflict with the Trustee’s Liens (other than the
Liens securing Senior Priority Debt) and to pay all expenses incurred in
connection therewith.  With respect to any of Grantors’ owned or leased
premises, Grantor hereby grants Trustee a license to enter into possession of
such premises and to occupy the same, without charge, in order to exercise the
Noteholder’s rights or remedies provided herein, at law, in equity, or
otherwise;


 


(b)                                 Trustee may (a) notify Account Debtors
of Grantor that the Accounts, General Intangibles Collateral and Negotiable
Property Collateral of Grantor have been assigned to Trustee or that Trustee
has a security interest therein, or (b) collect such Accounts, General
Intangibles Collateral and Negotiable Property Collateral directly and charge
the collection costs and expenses to the Grantor.  Grantor agrees that it
will hold in trust for Trustee any Collections that it receives and immediately
will deliver said Collections to Trustee in their original form as received by
Grantor;


 


(c)                                  hold, as cash collateral, any and all
balances and deposits of Grantor held by the Trustee to secure the full and
final repayment of all of the Junior Priority Debt;


 


(d)                                 ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Collateral.  Grantor hereby grants to Trustee a
license or other right to use, without charge, Grantor’s software (including
all rights thereto as owner or licensee thereof), labels, patents, copyrights,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any property of a similar nature, as it pertains to the Collateral, in
completing production of, advertising for sale, and selling any Collateral and
Grantor’s rights under all licenses and all franchise agreements shall inure to
the Trustee and the Noteholders’ benefit;


 


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(e)                                  sell the Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for
cash or on terms, in such manner and at such places (including Grantors’
premises) as Trustee determines is commercially reasonable.  It is not
necessary that the Collateral be present at any such sale;


 


(f)                                    Trustee shall give notice of the disposition
of the Collateral as follows:


 


(i)                                     Trustee
shall give Grantor a notice in writing of the time and place of public sale,
or, if the sale is a private sale or some other disposition other than a public
sale is to be made of the Collateral, the time on or after which the private
sale or other disposition is to be made; and


 


(ii)                                  The
notice shall be personally delivered or mailed, postage prepaid, to Grantor as
provided in Section 6.4, at least 10 days before the earliest time
of disposition set forth in the notice; no notice needs to be given prior to
the disposition of any portion of the Collateral that is perishable or
threatens to decline speedily in value or that is of a type customarily sold on
a recognized market;


 


(g)                                 Trustee,
on behalf of the Noteholders may credit bid and purchase at any public sale;


 


(h)                                 Trustee
may seek the appointment of a receiver or keeper to take possession of all or
any portion of the Collateral or to operate same and, to the maximum extent
permitted by law, may seek the appointment of such a receiver without the
requirement of prior notice or a hearing;


 


(i)                                     The
Trustee and Noteholders shall have all other rights and remedies available to
them at law or in equity pursuant to any other Noteholder Documents; and


 


(j)                                     Any
deficiency that exists after disposition of the Collateral as provided above
will be paid immediately by Grantor.  Any excess will be returned, without
interest and subject to the rights of third Persons, by Trustee to Grantor.


 


SECTION 5.2.  Remedies Cumulative.  The rights and remedies of the Trustee under
this Agreement, the other Noteholder Documents and all other agreements are
cumulative.  The Trustee shall have all
other rights and remedies not inconsistent with the Noteholder Documents as
provided under the Code, by law, or in equity. 
No exercise by the Trustee of one right or remedy shall be


 


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deemed an election, and no waiver by the Trustee of any Event of
Default shall be deemed a continuing waiver. 
No delay by the Trustee shall constitute a waiver, election, or
acquiescence by it.


 


SECTION 5.3.  Expenses.  The Grantor will, upon demand, pay to the Trustee the amount of
any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the Trustee
may incur in connection with (i) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
of the Collateral and (ii)  the exercise or enforcement of any of the
rights of the Trustee or the Noteholders under the Noteholder Documents.


 


ARTICLE VI

MISCELLANEOUS PROVISIONS


 


SECTION 6.1.  Relationship of this Agreement with Loan
Agreement and Intercreditor Agreement. 
Notwithstanding anything herein to the contrary, the lien and security
interest granted to the Trustee pursuant to this Agreement and the exercise of
any right or remedy by the Trustee hereunder are subject to the provisions of
the Intercreditor Agreement and the agreements evidencing Senior Priority Debt
(including, without limitation, the Loan Agreement) during such periods as the
Intercreditor Agreement is in effect and any Senior Priority Debt is
outstanding.  In the event of any
conflict between the terms of the Intercreditor Agreement or the agreements
evidencing Senior Priority Debt (including, without limitation, the Loan
Agreement) and this Agreement, the terms of the Intercreditor Agreement or
agreements evidencing Senior Priority Debt (including, without limitation, the
Loan Agreement), as applicable, shall govern.


 


SECTION 6.2.  Binding on Successors, Transferees and
Assigns; Assignment.  This Agreement
shall be binding upon the Grantor and its successors, transferees and assigns
and shall inure to the benefit of and be subject to the terms of the Noteholder
Documents, enforceable by the Trustee and each Noteholder (subject to the
limitations set forth in the applicable Noteholder Documents) and their
respective successors, transferees and assigns.


 


SECTION 6.3.  Amendments, etc.  Subject to the Intercreditor Agreement, no
amendment to or waiver of any provision of this Agreement, nor consent to
any departure by the Grantor from its obligations under this Agreement, shall
in any event be effective unless the same shall be in writing and signed by the
Trustee and is permitted by Section 13 of the Intercreditor
Agreement and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it is given.


 


14

















 


SECTION 6.4.  Notices.  All notices and other communications provided to any party under
this Agreement shall be in writing (including facsimile communication) and
mailed, telecopied or delivered to the appropriate party at the address or
facsimile number of such party set forth in or specified pursuant to the
Indentures.  All such notices and other
communications, when mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed given
when received; any such notice or communication, if transmitted by facsimile,
shall be deemed given when transmitted and electronically confirmed.


 


SECTION 6.5.  No Waiver.  No failure on the part of the Trustee or any Noteholder to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other right.


 


SECTION 6.6.  Captions.  Section captions used in this Agreement are for convenience
of reference only, and shall not affect the construction of this Agreement.


 


SECTION 6.7.  Severability.  Wherever possible each provision
of this Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.


 


SECTION 6.8.  Governing Law, Entire Agreement, etc.  THIS AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK,
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.


 


SECTION 6.9.  Counterparts.  This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.  Delivery of an executed
counterpart of a signature page to this Agreement by facsimile shall be
effective as delivery of a manually executed counterpart of this Agreement.


 


SECTION 6.10.  Release of Liens.  The security interests granted hereunder in
any Collateral shall be released by the Trustee in the manner, at the


 


15

















 


times and to the extent specified in Section 3 or
Section 5(b) of the Intercreditor Agreement or as may be permitted by the
Indentures and any other Noteholder Documents. 
In addition, upon the discharge of the Indentures, the security
interests granted hereunder shall automatically terminate.  Upon any such release or termination, the
Trustee will, at the Grantor’s sole expense, deliver to the Grantor all
Collateral held by the Trustee hereunder in which the security interest granted
hereunder is released or terminated, and execute and deliver to the Grantor
such documents as the Grantor shall reasonably request to evidence such release
or termination.


 


[THE REMAINDER OF PAGE IS INTENTIONALLY LEFT BLANK.]


 


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IN WITNESS WHEREOF, each of the parties
hereto has caused this Agreement to be duly executed and delivered by its
officer thereunto duly authorized as of the date first written above.


 


	
   

  	
  SILICON GRAPHICS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  U.S. BANK NATIONAL

  ASSOCIATION,

  
	
   

  	
  as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


17

















 


Exhibit
A


 


INTELLECTUAL
PROPERTY SECURITY AGREEMENT


 


This Intellectual Property Security Agreement
(the “Agreement”),
is made as of December      , 2003, by and among
U.S. BANK NATIONAL ASSOCIATION, as trustee for the Noteholders (“Trustee”),
SILICON GRAPHICS, INC., a Delaware corporation (the “Grantor”), with reference to
the following facts:


 


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


 


B.             The Grantor 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.             The Grantor 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.


 


WHEREAS, the Grantor and U.S. Bank National
Association, as Trustee are parties to (1) certain  indentures, pursuant to which the Grantor is issuing notes in an
aggregate principal amount of up to $230,591,000 (the “Notes”) and (2) a security
agreement (the “Security Agreement”) dated as of the date hereof, pursuant to
which Grantor has granted the Trustee a security interest in certain
collateral, including the intellectual property collateral set forth in
Schedules A, B and C hereto (the “ IP Collateral”);


 


WHEREAS, pursuant to the Security Agreement,
the Grantor is required to execute and deliver this Agreement;


 


WHEREAS, the Grantor, the Trustee and the
Wells Fargo Foothill, Inc. have entered into an Intercreditor Agreement, dated
as of the date hereof setting forth the relative priorities of the parties’
security interests in the IP Collateral and other collateral in which the
Trustee has been granted a security interest pursuant to the Security
Agreement; and


 


WHEREAS, pursuant to the terms of the
Indentures and the Security Agreement and subject to the terms of the
Intercreditor Agreement, U.S. Bank National Association, in its capacity as
Trustee has agreed to accept the pledge and assignment and the grant of a security
interest in the IP Collateral under this Agreement as security for the Notes.


 


NOW, THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and in order to induce the Trustee to enter into the Indentures and to induce
holders of the Grantor’s 5.25% Senior Convertible Notes due 2004 (the “Old Notes”)
to exchange the Old Notes for the Notes, the parties hereto agree as follows:


 


D.            This Agreement is the
Intellectual Property Security Agreement as defined and described in the
Security Agreement.  Capitalized terms
used herein and not otherwise defined shall have the meaning set forth in the
Security Agreement.


 


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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 Notes, the Grantor hereby grants to Trustee,
subject to the Intercreditor Agreement and any other agreement or instrument
evidencing Senior Priority Debt, for the benefit of the Noteholders, a
continuing security interest in all of the Grantor’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 the Grantor’s customer
lists and other records of the Grantor 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 the Grantor 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 (A) such General Intangibles: (i) which cannot be subject to
a consensual security interest in favor of Trustee 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 and (B) any property not subject to a
Senior Priority Lien, other than any such property that was, immediately prior
to the discharge of such Senior Priority Lien Obligations, subject to a Senior
Priority Lien, except to the extent that such property, or any portion thereof,
was disposed of in order to repay Senior Priority Lien Obligations.


 


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


 


(a)                        The Grantor will promptly
perform all acts and execute all documents, including, without limitation,
grants of security in forms acceptable to Trustee 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 the Trustee at any time to
evidence, perfect, maintain, record or enforce Noteholders’ security interest
in the IP Collateral or otherwise in furtherance of the provisions of this
Agreement.  The Grantor hereby
authorizes the Trustee to execute and file one or


 


A-2

















 


more financing statements (and any similar
documents) or copies thereof or of this Agreement with respect to the IP
Collateral signed only by Trustee (with a copy sent to the Grantor).


 


(b)                       In the event that either the
Grantor, either itself or through any subsidiary, affiliate, trustee, 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 Grantor shall
(i) inform the Trustee of any such event or action in reports which the Grantor
is required to deliver to Trustee pursuant to the Security Agreement and, (ii)
execute and deliver any and all assignments, agreements, instruments, documents
and papers as are necessary or appropriate or as the Trustee may reasonably request
to evidence the Noteholders’ security interest in such Trademark, or Copyright
and the goodwill and general intangibles of the Grantor’s relating thereto or
represented thereby.  The Grantor hereby
constitutes the Trustee, or its Trustee, 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 Notes are paid in full.  The Grantor authorizes the amendment of the schedules hereto to
include any future Trademark, or Copyright registrations or applications which
may be acquired or made by the Grantor.


 


2.               Upon the occurrence
and during the continuance of an Event of Default (as defined in the Indentures),
the Trustee may, subject to the Intercreditor Agreement and 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 the Grantor, in addition to all other rights and
remedies provided for in the Security Agreement, all such rights and remedies
being cumulative, not exclusive, and enforceable alternatively, successively or
concurrently, without (except as provided herein or in the Security Agreement)
notice to, or consent by the Grantor:


 


(a)                        Trustee 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 Grantor 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 the Grantor hereby releases Noteholders from, and agrees
to hold the Noteholders 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;


 


A-3

















 


(b)                       The Trustee, for the benefit of
the Noteholders, may, at any time and from time to time, upon ten (10) days’
prior notice to the Grantor, 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
Trustee 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, the Trustee 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 the Grantor one or more instruments
of assignment sale, license or other disposition of the IP Collateral.  The Grantor 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.  The Trustee 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 the Grantor shall remain liable and
will pay the Trustee on demand any deficiency remaining, together with interest
thereon at a rate equal to the rate then payable on the Notes and the balance
of any expenses unpaid.  Nothing herein
contained shall be construed as requiring the Trustee 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 Notes until the Notes shall have been paid in full in cash.  The application of proceeds hereunder to the
Notes shall be made by the Trustee in accordance with the provisions of
Article 6 of the Indentures.


 


3.               The following
documents will be concurrently executed and delivered to the Trustee 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 the Grantor, 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;


 


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.  This Agreement shall be binding upon the
successors, permitted assigns or other legal representatives of the Grantor,
and shall, together with the rights and remedies of the Noteholders hereunder
inure to the benefit of the Noteholders, its successors, permitted assigns or
other legal representatives.  This
Agreement 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 New York.  If any term
of this


 


A-4

















 


Agreement shall be held to be invalid,
illegal or unenforceable, the validity of all other terms hereof shall in no
way be affected thereby.


 


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


 


6.               Upon payment and
performance in full in cash by the Grantor of all of the obligations with
respect to the Notes under the Indentures (other than indemnification
obligations for which no claim has been made) and upon the termination of the
Indentures, this Agreement shall terminate and the Trustee 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 Noteholders and at
the sole cost and expense of the Grantor.


 


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:

  	
   

  	
   

  	
   

  
	
  Its:

  	
  Vice President and Treasurer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  US BANK NATIONAL ASSOCIATION,

  	
   

  
	
  a California corporation, as Trustee

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
  Its:

  	
   

  
				



 


A-5