Document:

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 PresidentExhibit 10.17

 

LOAN AGREEMENT

(Kinsen Shohi Taishaku Keiyaku Shosho)

LOAN AGREEMENT, dated as
of November 9, 2001, made by SILICON GRAPHICS, INC., a Delaware corporation (“SGI-US”),
and SILICON GRAPHICS WORLD TRADE B.V., a private limited company incorporated
in the Netherlands (“SGI-BV”), in favor of SGI JAPAN, LTD, a
Japanese corporation (“Lender”). 
SGI-US and SGI-BV are referred to herein individually as a “Borrower”
and collectively as the “Borrowers”.

RECITALS

A.            WHEREAS, Lender has
made advances to the Borrowers or their Affiliates and all of the obligations
relating to the repayment of such advances have been assumed by the Borrowers,
and Lender and the Borrowers desire to enter into this Agreement to evidence
the amounts owing by the Borrowers to Lender and to set forth the terms of
repayment and other applicable terms and conditions.

B.            WHEREAS, SGI-BV is
the record and beneficial owner of 40% of the issued and outstanding capital
stock of Lender, and pursuant to the Pledge Agreement dated the date hereof
(the “Pledge
Agreement”) by SGI-BV for the benefit of Lender and NEC Corporation
(“NEC”),
SGI-BV, in its capacity as pledgor thereunder (“Pledgor”) is pledging all of
its ownership interest in the shares of capital stock of Lender to Lender and
to NEC as collateral security for the obligations of the Borrowers under this
Agreement and the obligations of Pledgor and the Borrowers in respect of a
Buyback Event under the Stockholders’ Agreement, dated as of the date hereof
(the “Stockholders’
Agreement”) by and among the Borrowers, Lender, Silicon Graphics
World Trade Corporation, NEC and NEC Soft (“NEC Soft”).

NOW, THEREFORE, in
consideration of the premises, the Borrowers hereby agree with Lender, as
follows:

1.             The
Loan

The Borrowers hereby
acknowledge their joint and several obligation to pay to Lender an amount
determined as set forth on Schedule 1 attached hereto (the “Loan”),
together with interest thereon as provided herein, and all other amounts
payable to Lender from time to time hereunder.

2.             Repayment

The Borrowers jointly and
severally agree to repay the entire principal amount of the Loan in accordance
with the amortization schedule set forth on Schedule 2 attached hereto (the “Amortization
Schedule”) or, if any payment date set forth on the Amortization
Schedule is not a Business Day, on the next succeeding Business Day to occur
after such payment date; provided, however, that the entire
unpaid principal balance of the Loan shall be due and payable in full on the
Maturity Date.  Notwithstanding anything
herein to the contrary, the entire unpaid principal balance of the Loan, and
any accrued and unpaid interest thereon, shall be immediately

 

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due and payable
upon the earlier to occur of (i) the Maturity Date and (ii) the acceleration of
the Loan pursuant to Section 8 hereof. 
As used herein, “Maturity Date” means December 31, 2004.

3.             Interest

(a)           The
principal amount of the Loan remaining unpaid from time to time shall bear
interest (i) from the date hereof until the Interim Period End Date, at a rate
of two and seven one-hundredths percent (2.07%) per annum (the “Interim
Interest Rate”) and (ii) from the Interim Period End Date, until
paid in full, at a rate of ten percent (10%) per annum (the “Interest
Rate”).  All interest on this
Loan shall be calculated on the basis of a 365 day year and the actual number
of days elapsed.  Accrued
interest on all amounts outstanding hereunder shall be payable on each March
31, June 30, September 30 and December 31 of each year, commencing on March 31,
2002 or, if any such date is not a Business Day, on the next succeeding
Business Day to occur after such date. 
The Borrowers agree to pay all outstanding amounts of interest on the
Maturity Date.

(b)           If
an Event of Default shall occur, then, in lieu of interest payable under
Section 3(a), interest shall accrue on the unpaid principal amount of the Loan
and, to the extent permitted by law, on any other amount due under this
Agreement, from and including the date such Event of Default occurred until
such Event of Default is cured or waived in writing by Lender or all past due
payments are made, at a rate per annum equal to two percent (2%) per annum
above the Applicable Interest Rate. 
Accrued interest payable under this Section 3(b) shall be payable on
demand of Lender.

(c)           Notwithstanding
anything herein to the contrary, the interest payable by the Borrowers with
respect to the Loan shall not exceed the maximum amount permitted by applicable
law and, to the extent that any payments in excess of such permitted amount are
received by Lender, such excess shall be considered payments in respect of the
principal amount of the Loan.

4.             Payments

Principal amount of the
Loan and interest hereunder shall be payable to Lender without set-off or
counterclaim in lawful money of Japan in immediately available funds to the
bank account of Lender as notified in writing to the Borrowers.

5.             Prepayment

(a)           At
their option, the Borrowers may prepay the Loan together with accrued and
unpaid interest thereon in whole or in part at any time (the “Optional
Redemption”).  If the
Borrowers exercise such Optional Redemption, there shall be no prepayment
penalty or premium.  Unless otherwise
agreed by the Borrowers, all prepayments shall be applied to reduce scheduled
payments of the principal amount of the Loan in order of stated maturity.

 

3

 

(b)           The Borrowers shall prepay the Loan
in full together with all accrued and unpaid interest thereon prior to or
concurrently with the consummation of any SGI Change of Control (as defined in
the Stockholders’ Agreement).

(c)           Any
amounts required to be paid by Borrowers pursuant to Borrowers’ guarantee of
the Existing Loans shall be deemed to be a prepayment on the Loan pursuant to
this Section 5.  In addition, so long as
Borrowers’ guarantee of the Existing Loans remains in effect, Borrowers may
elect, upon written notice to Lender, to effect prepayments under Section 5(a)
or 5(b) by making a prepayment in respect of the Existing Loans directly to the
lenders under the Existing Loans (the “Bank Lenders”); provided, that
prepayments are then permitted pursuant to the terms of the Existing Loans, and
subject to the condition that concurrently with any such prepayment to the Bank
Lenders, Borrowers shall pay to the Bank Lenders the full amount of any
penalties or other charges payable in connection with such prepayment (it being
understood that the amount of any such penalties or charges shall be excluded
from the calculation of the amount to be applied in prepayment of the principal
of and interest on the Loan).

6.             Representations
and Warranties

The Borrowers hereby
jointly and severally represent and warrant to Lender as follows:

(a)           Organization;
Power and Authority.  Each
Borrower is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has all requisite
corporate power and lawful authority to own, lease and operate its properties
and to carry on its business as now being and heretofore conducted.  Each Borrower is duly qualified or otherwise
authorized to transact business and is in good standing under the laws of all
other jurisdictions that require such qualification or authorization, except
where the failure to so qualify or be authorized could not reasonably be
expected to have a Material Adverse Effect.

(b)           Authorization,
etc.  Such Borrower has all
necessary corporate power and authority required to enter into, execute and
deliver this Agreement and to perform fully such Borrower’s obligations
hereunder.  This Agreement has been duly
authorized by all necessary corporate action on the part of each Borrower, and
constitutes a legal, valid and binding obligation of such Borrower enforceable
against such Borrower in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors’ rights generally.

(c)           Compliance
with Laws, Other Instruments, etc. 
The execution, delivery and performance by each Borrower of this
Agreement will not (i) violate any provision of the Certificate or
Articles of Incorporation or other material organizational instruments of such
Borrower, (ii) require such Borrower to obtain any consent, approval,
authorization or action of, or make any filing with or give any notice to, any
Governmental Authority or any other Person, other than consents, approvals,
authorizations or actions already obtained or taken (iii) violate, conflict
with or result in the breach of any of the terms and conditions of, result in a
material modification of the effect of, or otherwise cause the termination or
give any contracting party the right to terminate, or constitute (or with
notice or lapse of time or both constitute) a default

 

4

 

under, any material contract, agreement, indenture, note, bond, loan,
instrument, lease, conditional sale contract, mortgage, license, franchise,
commitment or other binding arrangement to which such Borrower is a party or by
or to which such Borrower or any of its properties is or may be bound or
subject, or result in the creation of any Lien upon any of the properties of
such Borrower, (iv), violate any order, judgment, injunction, award, decree or
ruling of any nature of any Governmental Authority, or any law, statute, code,
ordinance, regulation or other requirement of any Governmental Authority,
applicable to such Borrower.

 

7.             Covenants

In addition to the other
undertakings herein contained, the Borrowers hereby covenant to Lender that so
long as any amount payable hereunder is outstanding the Borrowers shall perform
the following obligations:

(a)           Compliance
with Law.  Each Borrower will
comply with all laws, ordinances or governmental rules or regulations to which
it is subject, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of its properties or to the conduct of its
businesses, in each case to the extent necessary to ensure that non-compliance
with such laws, ordinances or governmental rules or regulations or failures to
obtain or maintain in effect such licenses, certificates, permits, franchises
and other governmental authorizations could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

(b)           Existence.  Each Borrower shall at all times preserve
and keep in full force and effect its corporate existence.

(c)           Information.  The Borrowers shall deliver to Lender:

(i)            if
and when filed and within 5 days of filing, Form 10-Q quarterly reports, Form
10-K annual reports, Form 8-K current reports or comparable annual or periodic
reports and any other filings made by either Borrower with the U.S. Securities
and Exchange Commission or comparable regulatory body of any other jurisdiction;

(ii)           any
other information that is provided by either Borrower to its shareholders
generally, promptly upon delivery;

(iii)          as
soon as either Borrower has knowledge of any event or condition that
constitutes an Event of Default hereunder or a default or event of default
under the Foothill Loan and Security Agreement or other agreement evidencing,
securing or otherwise relating to Indebtedness of either Borrower in an amount
exceeding $25 million, notice thereof and a statement of the curative action
that the Borrowers propose to take with respect thereto; and

(iv)          Upon
request of Lender, any other report reasonably requested relating to the
financial condition of either Borrower.

(d)           Additional
Indebtedness.  SGI-US shall not create, incur, assume, permit,
guarantee or otherwise become or remain, directly or indirectly, liable with
respect to any

 

5

 

Indebtedness or permit any Subsidiary to do the
same, except such Indebtedness the amount of which does not, in the aggregate,
exceed $414,983,000; provided, that with respect to Indebtedness
outstanding on the date hereof and denominated in non-U.S. currency, any
increase in the dollar value of such Indebtedness that is attributable to
currency exchange fluctuations shall be excluded for the purpose of this
provision.

 

(e)           Liens.  SGI-US shall not create, incur, assume,
permit to exist, directly or indirectly, any Lien on or with respect to any of
its assets, of any kind, whether now owned or hereafter acquired, or any income
or profits therefrom, or permit any Subsidiary to do the same except: (i) Liens
under the Foothill Loan Documents and any refinancings, renewals or extensions
thereof; (b) any Lien of a type that is expressly permitted by the terms of the
Foothill Loan Documents or, if the Foothill Loan Documents are refinanced,
renewed or extended, by the terms of such refinancing, renewal or extension
thereof (in each case, without regard to any waiver of such terms by the
lenders); and (c) if the Foothill Loan Documents or any refinancing, renewal or
extension thereof terminate and are no longer in effect, any Lien of a type
that would have been permitted if created during the effectiveness of the
Foothill Loan Documents or such refinancing, renewal or extension.

(f)            Reorganization,
Recapitalization, Reclassification, Liquidation.  SGI-US shall not and shall not permit SGI-BV
to (i) enter into any reorganization or recapitalization, except for
transactions that do not materially diminish Lender’s rights and protections
under this Agreement, and that do not result in a deterioration in the credit
quality of the Borrowers taken as a whole or expose the Lender to additional
credit risk, (ii) reclassify its capital stock other than pursuant to the terms
thereof, or (iii) liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution).

(g)           Distributions.  Neither SGI-US nor (unless SGI-BV is at the
time a direct or indirect wholly owned subsidiary of SGI-US) SGI-BV shall make
any distribution or declare and pay any dividends (in cash or other property,
other than common stock and other than the distribution to shareholders of
interests in SGI’s Alias/Wavefront business) on, or purchase, acquire, redeem
or retire any of such Borrower’s capital stock, of any class, whether now or
hereafter outstanding.

(h)           Further
Documents.  Each Borrower
shall execute all such other documents and instruments and do all such other
acts and things as Lender may from time to time reasonably require to carry out
the transactions contemplated herein.

8.             Events
of Default

Except upon the
occurrence of an event under (d), (e) or (g) below, whereupon the Loan and all
accrued and unpaid interest thereon shall become immediately due and payable
without notice or declaration by Lender, Lender may, by written notice to the
Borrowers, declare the Loan immediately due and payable, whereupon the Loan,
all accrued and unpaid interest thereon, and all other sums due hereunder shall
become immediately due and payable without protest, presentment, demand or
notice (except the notice referred to above in this Section 8) or without
petition to any court, all of which are expressly waived by the Borrowers, if
any of the following events (each an “Event of Default”) shall occur:

 

6

 

(a)           principal
amount of the Loan or interest due under this Agreement shall not be paid as
and when due, whether at maturity, by acceleration or otherwise; or

(b)           any
representation by the Borrowers herein or by Pledgor in the Pledge Agreement
shall prove to be false or incorrect in any material respect as of the date
made; or

(c)           Either
Borrower shall default in any material respect in the due performance of any
term or covenant of this Agreement or Pledgor shall default in any material
respect in the due performance of any term or covenant of the Pledge Agreement
(which is not the subject of another subsection of this Section 8) which
default, if remediable, shall continue unremedied for a period of thirty (30)
days after the earlier of (i) the day an officer of either Borrower or Pledgor
obtains actual knowledge of such default, and (ii) the day Lender gives written
notice of such default to the Borrowers (any such written notice to be
identified as a “notice of default” and to refer specifically to this paragraph
(c) of this Section 8); or

(d)           Either
Borrower shall (i) apply for or consent to the appointment of a receiver,
trustee or liquidator for itself or any of its assets or properties,
(ii) admit in writing its inability to pay its debts as they mature,
(iii) make a general assignment for the benefit of creditors,
(iv) file a voluntary petition in bankruptcy, or a petition or an answer
seeking reorganization or an arrangement with creditors or to take advantage of
any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution
or liquidation law or statute, or any answer admitting the material allegations
of a petition filed against it in any proceeding under any such law or action
shall be taken by Borrower for the purpose of effecting any of the foregoing,
(v) have commenced against it any case, proceeding or other action of a
nature described in (i) through (iv) above which remains undismissed for a
period of sixty (60) days, (vi) be adjudicated a bankrupt or insolvent,
including by entry of an order in any case, proceeding or other action of a
nature described in (i) through (iv) above or (vii) take or be subject to any
action similar to those specified in clauses (i) through (vi) in any
jurisdiction; or

(e)           an
order, judgment or decree shall be entered with respect to either Borrower or
all or a substantial part of the assets of such Borrower, appointing a
receiver, trustee or liquidator of such Borrower, or any similar order,
judgment or decree shall be entered or appointment made in any jurisdiction,
and such order, judgment or decree or appointment shall continue unstayed and
in effect for a period of sixty (60) days; or

(f)            a
final judgment or judgments for the payment of money aggregating in excess of
US$25,000,000 are rendered against either Borrower and which judgments are not,
within sixty (60) days after entry thereof, bonded, discharged or stayed
pending appeal, or are not discharged within sixty (60) days after the
expiration of such stay; or

(g)           (i)
either Borrower shall fail to pay when due, or within any applicable period of
grace, any payment in respect of any obligation for borrowed money or other
Indebtedness in an amount greater than $25 million, or (ii) any Indebtedness of
such Borrower in an amount greater than $25 million shall be declared due and
payable, or required to be prepaid other than by a regularly scheduled required
prepayment, prior to the stated maturity thereof.

 

7

 

(h)           this Agreement or the Pledge Agreement shall for any
reason, fail or cease to create a valid and perfected, first priority Lien on
and security interest in and to the Collateral.

(i)            any
material provision of this Agreement or the Pledge Agreement shall at any time
for any reason be declared null and void, or the validity or enforceability
thereof shall be contested by the Borrowers in a proceeding commenced by either
Borrower, or by any Governmental Authority having jurisdiction over either
Borrower, seeking to establish the invalidity or unenforceability thereof.

9.             Application
of Payments

Each payment or
prepayment received by Lender hereunder, except as expressly set forth herein,
shall be applied, first, to the payment of accrued interest on the Loan to the
date of such payment and second, to the payment of the principal amount of the
Loan.

10.          Additional
Definitions

As used herein, the
following terms have the respective meanings set forth below:

“Affiliate” or “Affiliates”
means, with respect to any Person, at any time, any other Person that, directly
or indirectly through one or more intermediaries controls, or is controlled by
or is under common control with such Person. 
For the purpose of this definition, “control” (including the terms
“controlling”, “controlled by” and “under common control with”), as used with
respect to any Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by contract, agency
or otherwise.

“Applicable Interest Rate”
means, prior to the Interim Period End Date, the Interim Interest Rate and,
after the Interim Period End Date, the Interest Rate.

“Business Day” means any day
other than a Saturday, Sunday or other day on which commercial banks in Tokyo,
Japan or the City of New York are authorized or required by law or executive
order to close.

“Existing Loans” means the
loans made pursuant to (i) the Banking Transaction Contract, dated February 21,
1992, between Sumitomo Mitsui Banking Corporation (as the successor to The
Sumitomo Bank, Limited) and Lender and (ii) the Loan Agreement, dated December
20, 1996, between The Dai-Ichi Kangyo Bank, Ltd. and Lender.

“Foothill Loan and Security Agreement”
means the Loan and Security Agreement, dated as of April 10, 2001, by and among
SGI-US, each of SGI-US’s subsidiaries signatory thereto, the lenders party
thereto, Foothill Capital Corporation, as arranger and administrative agent,
and Bank of America, N.A., as documentation agent.

“Foothill Loan Documents”
means the Foothill Loan and Security Agreement and the other Loan Documents
referred to therein, as the same may be supplemented, amended or otherwise
modified from time to time.

 

8

 

“GAAP” means generally
accepted accounting principles as in effect from time to time in the United
States, consistently applied.

“Governmental Authority” means
the government of any nation, state, city, locality or other political
subdivision thereof, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or capital
ownership or otherwise, by any of the foregoing.

“Indebtedness” of a Borrower
means (a) all obligations of such Borrower for borrowed money, including
pursuant to the Foothill Loan Documents and any refinancings, renewals or
extensions thereof, (b) all obligations of such Borrower evidenced by bonds,
debentures, notes or other similar instruments and all reimbursement or other
obligations of such Borrower in respect of letters of credit (other than
letters of credit issued in connection with transactions in the ordinary course
of such Borrower’s business), bankers acceptances, interest rate swaps or other
financial products, (c) all obligations of such Borrower under any lease that
is required to be capitalized for financial reporting purposes under GAAP, (d)
all obligations or liabilities of others secured by a Lien on any asset of such
Borrower, irrespective of whether such obligation or liability is assumed, (e)
all obligations of such Borrower for the deferred purchase price of assets
(other than trade debt incurred in the ordinary course of such Borrowers’
business and repayable in accordance with customary trade practices), and (f)
any obligation of a Borrower guaranteeing or intended to guarantee (whether
directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with
recourse to such Borrower) any obligation of any other Person.

“Interim Period End Date”
means the earlier to occur of (i) the effective date of any refinancing or
extension of the Existing Loans and (ii) December 20, 2001.

“Lien” means any mortgage,
pledge, hypothecation, assignment, deposit arrangement, encumbrance, statutory
or other lien, charge or other security interest or any preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement and any financing lease having substantially the same
economic effect as any of the foregoing).

“Material Adverse Effect”
means a material adverse effect on (a) the properties, business, results of
operations or financial condition of either Borrower or (b) the ability of
either Borrower to perform its obligations under this Agreement and the Pledge
Agreement, or (c) the validity or enforceability of this Agreement and the
Pledge Agreement.

“Person” means any individual,
corporation, partnership, limited liability company, firm, joint venture,
association, joint-stock company, trust, unincorporated organization,
Governmental Authority or other entity.

“Stock Purchase Agreement” means the Stock Purchase Agreement dated as of
October 26, 2001, among the Borrowers, Silicon Graphics World Trade
Corporation, NEC Corporation and NEC Soft, Ltd.

 

9

 

“Subsidiary” means, with
respect to any Person, a corporation or other entity in which such Person
directly or indirectly owns or has the power to vote shares of any capital
stock or other ownership interests having the power to elect a majority of the
directors (or other persons performing similar functions) of such corporation
or other entity.

11.          Unconditional
Obligations

Except as expressly set
forth herein, the obligations of the Borrowers hereunder are unconditional and
no reference to any other document or agreement herein is intended or shall be
deemed to render the Borrowers’ obligations hereunder conditional.  The illegality or unenforceability of, or
the default by any party under, any other document or agreement referred to
herein shall not constitute a defense to any claim by Lender for the payment of
principal, interest or any other amount hereunder.

12.          Modification
in Event of Extension of Existing Loans

From and after the date
hereof, SGI-US shall use commercially reasonable efforts to negotiate an
extension of the term of the Existing Loans for a period beyond the current due
date of December 20, 2001 until at least December 20, 2004, without the
provision of a guarantee or other form of credit support from NEC or any of its
Affiliates.  If SGI-US is able to obtain
such an extension on terms and conditions reasonably satisfactory to Lender and
NEC, and without the provision of a guarantee or other form of credit support
from NEC or any of its Affiliates, then the terms and conditions of this
Agreement shall be amended to correspond, as nearly as practicable, to the
terms and conditions of such extension (including provisions as to maturity,
interest rate and payment, defaults and events of default, representations and
warranties and covenants); provided, however, that (1) the
Maturity Date will in no event be extended beyond December 20, 2006, and (2)
the obligations of Lender hereunder shall continue to be secured by the
Collateral (as defined in the Pledge Agreement) pursuant to the terms of the
Pledge Agreement, subject only to such modifications thereto as Lender and NEC
may in their discretion agree.

13.          Further
Payment by Lender

If the Existing Loans are
extended beyond December 20, 2001, unless and until SGI-US is relieved of
its obligation to guarantee the entire amount of the Existing Loans in
connection with or following such extension, then:

(a)           if
the initial principal amount of the Loan is less than ¥6 billion, the
Lender will, on or before February 28, 2002, to the extent it is able to do so
under the terms of the Existing Loans, as extended, without incurring any
prepayment penalties or other charges, make a payment under the Existing Loans
so that, after such payment, the principal balance outstanding under the
Existing Loans will, at such time, be no greater than the principal balance
outstanding under the Loan; provided, that the Lender shall have no
obligation to make the payment contemplated under this Section 13(a) if,
in the Lender’s reasonable judgment, the working capital reserves of the Lender
after such payment would be inadequate; and

 

10

 

(b)           At
any time that the Borrowers (i) make a scheduled payment of the principal
amount outstanding under the Loan pursuant to Section 2 or (ii) make
a prepayment of the principal amount outstanding under the Loan pursuant to
Section 5(a) or (b), the Lender will, to the extent it is able to do so under
the terms of the Existing Loans, as extended, without incurring any prepayment
penalties or other charges, make a payment under the Existing Loans so that,
after such payment, the principal amount outstanding under the Existing Loans
will, at such time, be no greater than the principal amount outstanding under
the Loan; provided, that the Lender shall not be required to make any
payment under the Existing Loans pursuant to this Section 13(b) in excess of
the amount of the prepayment received from the Borrowers.

14.          Indemnification

The Borrowers shall
jointly and severally pay, indemnify, and hold Lender harmless from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including attorneys’ fees and expenses) or
disbursements of any kind or nature whatsoever (“Losses”) arising out of or in
connection with (a) the enforcement of any rights of Lender under this
Agreement or the Pledge Agreement, and (b) any claim (whether or not asserted
in any legal proceeding), litigation, investigation, arbitration or proceeding
relating to this Agreement or the Pledge Agreement (collectively, “indemnified
liabilities”); provided, that the Borrowers shall have no
obligation hereunder to Lender with respect to indemnified liabilities arising
from the gross negligence or willful misconduct of Lender.  The agreements in this section shall survive
for twenty-four (24) months after repayment of the Loan and all other amounts
payable hereunder.

15.          Severability

If any provision or any
portion of any provision of this Agreement shall be held invalid or
unenforceable, the validity and enforceability of the remaining portion of such
provision and the remaining provisions of this Agreement, and the application
thereof to any other Person or circumstance, shall not be affected thereby.

16.          Governing
Law

This Agreement shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of Japan.

17.          Submission
to Jurisdiction

The parties hereby
irrevocably submit to the exclusive jurisdiction of the Tokyo District Court in
any action or proceeding arising out of or relating to this Agreement, and each
party hereto hereby irrevocably agrees that all claims in respect of such
action or proceeding may be heard and determined in such court.  Each party hereby irrevocably waives, to the
fullest extent that it may legally do so, the defense of an inconvenient forum
to the maintenance of such action or proceeding.  Each party irrevocably consents to the service of any and all
process in any action or proceeding by the mailing or delivery of copies of
such process to it at the office of such party set forth for notices
hereunder.  Each party agrees that a
final judgment in any such

 

11

 

action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.

18.          Delay,
Amendment and Waiver

(a)           Lender
shall not by any act (except by a written instrument signed by Lender), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Event of Default or in any breach of any
of the terms and conditions hereof.  No
failure to exercise, nor any delay in exercising, on the part of Lender, any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy.  A waiver by Lender of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which Lender would otherwise have on any future occasion.  The remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any  remedies that may be available to Lender at
law, in equity or otherwise.

(b)           Any
amendment, supplement or modification of or to any provision of this Agreement,
any waiver of any provision of this Agreement, and any consent to any departure
by any party from the terms of any provision of this Agreement, shall be effective
only if it is made or given in writing and signed by each of the parties
hereto. Any such amendment, supplement, modification, waiver or consent shall
be binding upon the parties hereto.

19.          Notices

All notices and other
communications pursuant to this Agreement shall be delivered personally,
delivered by facsimile or air-mailed by certified or registered mail, postage
prepaid, return receipt requested, to the parties, their successors in interest
or their assignees at the following address or at such other addresses as the
parties may designate by written notice in the manner as aforesaid:

 

12

 

If to the
Borrowers, to:

Silicon Graphics, Inc.

1600 Amphitheatre Parkway

Mountain View, CA 94043-1351

Telephone:  +1 (650) 933-3009

Facsimile:  +1 (650) 933-0298

Attention: Sandra Escher, Senior Vice President  
                 and General Counsel

with a copy to:

 

Davis Polk & Wardwell 

1600 El Camino Real

Menlo Park, CA 94025

Telephone: +1 (650) 752-2003

Facsimile:  +1 (650) 752-2112

Attention:

 

If to Lender, to:

 

SGI Japan, Ltd.

Yebisu Garden Place Tower

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6031, Japan

Telephone:  +81 (3) 5488-7300

Facsimile:  +81 (3) 5420-7020

Attention:  Norio Izumi, President

 

with a copy to:

 

SGI Japan, Ltd.

Yebisu Garden Place Tower

4-20-3 Ebisu Shibuya-ku

Tokyo 150–6031, Japan

Telephone:  +81 (3) 5488-6996

Facsimile:  +81 (3) 5420-1867

Attention:  Hisao Hattori, Legal Manager

A notice shall be deemed
given when delivered, in the case of personal delivery or delivery by
facsimile, or seven (7) Business Days after mailing in the manner
prescribed herein.

20.          Entire
Agreement

This Agreement and the
Exhibits hereto contain the entire agreement among the parties hereto regarding
the matters described herein and supersede all previous and contemporaneous

 

13

 

oral and written
discussions and all prior agreements and understandings among the parties
regarding such matters.

21.          Specific
Performance

Without limiting the
rights of each party hereto to pursue all other legal and equitable rights
available to such party for the other party’s failure perform its obligations
under this Agreement, the parties hereto acknowledge and agree that the remedy
at law for any failure to perform their obligations hereunder would be
inadequate and that each of them, respectively, shall be entitled to specific
performance, injunctive relief or other equitable remedies in the event of any
such failure.

22.          Successors
and Assigns

This Agreement shall be
binding upon Borrower and its successors and permitted assigns  and shall inure to the benefit of Lender and
its successors and assigns.  Neither
Borrower may assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of Lender.  Lender may sell, assign or transfer this
Agreement or any of its rights hereunder to NEC or any of its Affiliates
without any requirement of consent by the Borrowers.

23.          Counterparts

                This Agreement may
be executed in several counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument.

 

24.          Expenses

Except as otherwise
specifically provided herein, the parties to this agreement shall bear their
respective expenses incurred in connection with the negotiation, preparation, execution
and performance of this Agreement, including all fees and expenses of agents,
representatives, counsel and accountants.

25.          Descriptive
Headings

The headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. 

 

 

IN WITNESS WHEREOF, the
parties have caused this Agreement to be executed and delivered on the date
first written above.

 

	
   

  	
  BORROWERS:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SILICON GRAPHICS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/  JEFFREY V. ZELLMER

  
	
   

  	
   

  	
  Name:  Jeffrey V. Zellmer

  
	
   

  	
   

  	
  Title:  Sr. Vice President and
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SILICON GRAPHICS WORLD TRADE B.V.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/  SANDRA ESCHER

  
	
   

  	
   

  	
  Name:  Sandra Escher

  
	
   

  	
   

  	
  Title:  Sr. Vice President and
  General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  SGI JAPAN, LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/  NORIO IZUMI

  
	
   

  	
   

  	
  Name:  Norio Izumi

  
	
   

  	
   

  	
  Title:  President

  
				

 

 

Schedule 1

 

Principal Amount of the Loan

 

 

The principal amount of the Loan shall be an amount equal to the lesser
of (1) ¥6 billion and (2)  the amount of
Advanced Payments appearing on the Closing Cash/Debt Statement (as defined in
the Stock Purchase Agreement).

 

 

 

 

 

Schedule 21

Amortization
Schedule

	
  Payment Date

  	
   

  	
  Payment Amount

  
	
   

  	
   

  	
   

  
	
  March 31, 2002

  	
   

  	
  ¥0

  
	
   

  	
   

  	
   

  
	
  June 30, 2002

  	
   

  	
  ¥0

  
	
   

  	
   

  	
   

  
	
  September 30, 2002

  	
   

  	
  ¥301,400,533

  
	
   

  	
   

  	
   

  
	
  December 31, 2002

  	
   

  	
  ¥500,000,000

  
	
   

  	
   

  	
   

  
	
  March 31, 2003

  	
   

  	
  ¥500,000,000

  
	
   

  	
   

  	
   

  
	
  June 30, 2003

  	
   

  	
  ¥500,000,000

  
	
   

  	
   

  	
   

  
	
  September 30, 2003

  	
   

  	
  ¥500,000,000

  
	
   

  	
   

  	
   

  
	
  December 31, 2003

  	
   

  	
  ¥500,000,000

  
	
   

  	
   

  	
   

  
	
  March 31, 2004

  	
   

  	
  ¥500,000,000

  
	
   

  	
   

  	
   

  
	
  June 30, 2004

  	
   

  	
  ¥500,000,000

  
	
   

  	
   

  	
   

  
	
  September 30, 2004

  	
   

  	
  ¥500,000,000

  
	
   

  	
   

  	
   

  
	
  December 31, 2004

  	
   

  	
  ¥500,000,000

  

 

 

 

 

 

 

 

 

 

 

 

	
  1

  	
   

  	
  Subject to adjustment pursuant to
  Section 7.7(c) of the Stock Purchase Agreement upon completion of all
  closing adjustments contemplated by Section 2.3 of  the Stock Purchase Agreement.

  

 

 

 

 

 

This Amortization Schedule is hereby accepted and agreed on this ___
day of ____, 2001 by each of the following:

 

 

	
   

  	
  BORROWERS:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SILICON GRAPHICS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SILICON GRAPHICS WORLD TRADE B.V.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  SGI JAPAN, LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
				

 

 

 

 

PLEDGE AGREEMENT

PLEDGE AGREEMENT, dated
as of November 9, 2001, made by SILICON GRAPHICS WORLD TRADE B.V., a private
limited company incorporated in the Netherlands (“Pledgor”), in favor of SGI
JAPAN, LTD., a Japanese corporation (“Lender”), and NEC Corporation, a Japanese
corporation (“NEC”).  Lender and NEC
are sometimes referred to herein individually as a “Pledgee” and together as the
“Pledgees.”

RECITALS

A.            WHEREAS, Lender has
made advances to Pledgor and Silicon Graphics, Inc. (“SGI-US” and, together with
Pledgor, the “Borrowers”) or their Affiliates and all of the obligations
relating to the repayment of such advances have been assumed by the Borrowers,
and Lender and the Borrowers have entered into a Loan Agreement dated as of the
date hereof (the “Loan Agreement”) to evidence the amounts
owing by the Borrowers to Lender.

B.            WHEREAS, pursuant to
the Stock Purchase Agreement dated as of October 26, 2001 (“Stock
Purchase Agreement”) by and among NEC, NEC Soft, Ltd. (“NEC Soft”),
the Borrowers and Silicon Graphics World Trade Corporation (“SGWTC”),
NEC and NEC Soft have purchased from Pledgor shares of capital stock of Lender
representing in the aggregate 60% of the outstanding capital stock of Lender.

C.            WHEREAS, Pledgor is
the legal and beneficial owner of 40% of the issued and outstanding capital
stock of Lender.

D.            WHEREAS, pursuant to
a Stockholders’ Agreement dated as of the date hereof (the “Stockholders’
Agreement”) by and among the Borrowers, Lender, SGWTC, NEC and NEC
Soft, Pledgor has agreed that Lender and/or NEC (or NEC’s designee) shall have
the right, upon the occurrence of a Buyback Event (as defined herein), to
purchase all of the Pledged Stock (as defined herein) on the terms and
conditions described in the Stockholders’ Agreement.

E.             WHEREAS, it is a
condition precedent to the consummation of the transactions contemplated by the
Stock Purchase Agreement that the Borrowers shall have entered into the
Stockholders’ Agreement, that the Borrowers shall have executed and delivered
the Loan Agreement, and that Pledgor shall have secured payment of Borrowers’
obligations to Lender under the Loan Agreement and the obligations of the SGI
Entities (as defined herein) under the Stockholders’ Agreement in respect of a
Buyback Event by executing this Agreement.

F.             WHEREAS, Pledgor is
an indirect wholly-owned subsidiary of SGI-US, and it is to the advantage of
Pledgor that Lender and NEC consummate the transactions contemplated by the
Stock Purchase Agreement, the Stockholders’ Agreement and the Loan Agreement.

 

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G.            WHEREAS, Pledgor is
the legal and beneficial owner of the shares of Pledged Stock (as hereinafter
defined).

NOW, THEREFORE, in
consideration of the premises, Pledgor hereby agrees with the Pledgees, as
follows:

AGREEMENT

1.             Definitions

1.1           Defined
Terms.

(a)           Unless
otherwise defined herein, terms defined in the Loan Agreement and used herein
shall have the meanings given to them in the Loan Agreement.

(b)           The
following terms shall have the following meanings:

“Agreement” means this Pledge
Agreement, as the same may be amended, supplemented or otherwise modified from
time to time.

“Appraiser” means an
internationally recognized investment banking firm that is experienced in the
valuation of corporations in Japan engaged in the business conducted by Lender.

“Borrowers’ Loan Obligations”
means the unpaid principal and interest on the Loan and all other present and
future obligations and liabilities (whether for principal, interest,
indemnities, fees, expenses or otherwise) of the Borrowers under the Loan
Agreement (including, without limitation, interest accruing at the then
applicable rate provided in the Loan Agreement after the filing of any petition
in bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to either Borrower whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding), whether due or to
become due, mature or unmatured, liquidated or unliquidated, or contingent or
noncontingent.

“Buyback Event” means a Buyback
Event as such term is defined in the Stockholders’ Agreement.

“Collateral” means the Pledged
Stock and all Proceeds.

“Collateral Account” means any
account established to hold money Proceeds, maintained under the sole dominion
and control of NEC for the benefit of the Pledgees, subject to application by
NEC only as provided in Section 4(b).

“Event of Default” means an
Event of Default as such term is defined in the Loan Agreement.

 

3

 

“Governmental Authority” shall
mean the government of any nation, state, city, locality or other political
subdivision thereof, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or capital
ownership or otherwise, by any of the foregoing.

“Issuer” means Lender in its
capacity as the issuer of the Pledged Stock.

“Obligations” means
(1) all of the Borrowers’ Loan Obligations and (2) the obligations of
Pledgor to transfer the Pledged Stock to Lender and/or to NEC (or NEC’s
designee) upon the occurrence of a Buyback Event in accordance with the terms
and subject to the conditions set forth in the Stockholders’ Agreement.

“Person” means any individual,
corporation, partnership, limited liability company, firm, joint venture,
association, joint-stock company, trust, unincorporated organization,
Governmental Authority or other entity.

“Pledged Stock” means all
shares of capital stock of Issuer owned by Pledgor, including the shares of
capital stock of Issuer listed on Schedule 1 hereto, together with all
stock certificates, options or rights of any nature whatsoever that may be
issued or granted by Issuer to Pledgor in respect of the Pledged Stock while
this Agreement is in effect.

“Proceeds” means all property
(a) acquired upon the sale, lease, license, exchange or other disposition
of the Pledged Stock, (b) collected on, or distributed on account of, the
Pledged Stock, and (c) consisting of any claims, rights or insurance
proceeds arising out of the Pledged Stock; and Proceeds shall, in any event,
include, without limitation, all dividends or other income from the Pledged
Stock, collections thereon or distributions with respect thereto.

“Secured Obligations” means
the collective reference to (1) the Obligations and (2) all
obligations and liabilities of Pledgor which may arise under or in connection
with this Agreement, whether on account of reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation, all
fees and disbursements of counsel to Lender that are required to be paid by
Pledgor pursuant to the terms of this Agreement).

“SGI Entities” means the SGI
Entities as such term is defined in the Stockholders’ Agreement.

(c)           The
words “hereof,” “herein” and “hereunder” and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and section and paragraph references
are to this Agreement unless otherwise specified.

(d)           The
meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms.

 

4

 

2.             Grant
of Pledge

Pledgor hereby grants to
the Pledgees first priority pledges (shichi-ken) in the Collateral (including
the Pledged Stock), as collateral security for the prompt and complete payment
and performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Secured Obligations and hereby delivers to NEC the share
certificates representing all the Pledged Stock, which NEC shall hold on behalf
of the Pledgees.

3.             Representations
and Warranties

Pledgor represents and
warrants that:

(a)           Pledgor’s
exact legal name and jurisdiction of organization are as set forth on page one
hereof.  Pledgor has the power and
authority and the legal right to execute and deliver, to perform its
obligations under, and to grant the pledges in the Collateral pursuant to, this
Agreement and has taken all necessary action to authorize its execution,
delivery and performance of, and grant of the pledges in the Collateral
pursuant to, this Agreement.

(b)           This
Agreement constitutes a legal, valid and binding obligation of Pledgor,
enforceable in accordance with its terms, and upon delivery to NEC of the stock
certificates evidencing the Pledged Stock, the pledges created pursuant to this
Agreement will constitute valid, first priority pledges in the Collateral,
enforceable in accordance with its terms against all creditors of Pledgor and
any Persons purporting to purchase any Collateral from Pledgor.

(c)           The
execution, delivery and performance of this Agreement will not violate any
provision of any requirement of law or any contractual obligation of,
applicable to or binding on Pledgor and will not result in the creation or
imposition of any Lien on any of the properties or revenues of Pledgor pursuant
to any such requirement of law or contractual obligation, except the pledges created
by this Agreement.

(d)           No
consent or authorization of, filing with, or other act by or in respect of, any
arbitrator, court or Governmental Authority and no consent of any other Person
(including, without limitation, any stockholder or creditor of Pledgor), is
required in connection with the execution, delivery, performance, validity or
enforceability of this Agreement.

(e)           No
litigation, investigation or proceeding of or before any arbitrator, court or
Governmental Authority is pending or, to the knowledge of Pledgor, threatened
by or against Pledgor or against any of its properties or revenues with respect
to this Agreement or any of the transactions contemplated hereby.

(f)            All
the shares of the Pledged Stock have been duly and validly issued and are fully
paid and nonassessable.

 

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(g)           Pledgor
is the record and beneficial owner of, and has good and marketable title to,
the Pledged Stock, free of any and all Liens or options in favor of, or claims
of, any other Person, except the pledges created by this Agreement.

4.             Covenants

Pledgor covenants and
agrees with the Pledgees from and after the date of this Agreement until this
Agreement is terminated and the pledges created hereby are released:

(a)           If
Pledgor shall, as a result of its ownership of its Pledged Stock or otherwise,
become entitled to receive or shall receive any stock certificate (including,
without limitation, any certificate representing a stock dividend or a
distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization),
option or rights, whether in addition to, in substitution of, as a conversion
of, or in exchange for any shares of the Pledged Stock, or otherwise in respect
thereof, Pledgor shall accept the same as the agent of the Pledgees, hold the
same in trust for the Pledgees and deliver the same forthwith to NEC on behalf
of the Pledgees in the exact form received, duly endorsed by Pledgor to NEC, if
required, and if NEC so requests, to be held by NEC, on behalf of the Pledgees,
subject to the terms hereof, as additional collateral security for the Secured
Obligations.  Any sums paid upon or in
respect of the Pledged Stock upon the liquidation or dissolution of Issuer
shall be paid over to NEC to be held by it hereunder for the benefit of the
Pledgees as additional collateral security for the Secured Obligations, and in
case any distribution of capital shall be made on or in respect of any Pledged
Stock or any property shall be distributed upon or with respect to any Pledged
Stock pursuant to the recapitalization or reclassification of the capital of
Issuer or pursuant to the reorganization thereof, the property so distributed
shall, subject to Section 10(b), be delivered to NEC to be held by it hereunder
for the benefit of the Pledgees as additional collateral security for the
Secured Obligations.  Subject to Section
10(b), if any sums of money or property so paid or distributed in respect of
any Pledged Stock shall be received by Pledgor, Pledgor shall, until such money
or property is paid or delivered to NEC on behalf of the Pledgees, hold such
money or property in trust for the Pledgees, segregated from other funds of
Pledgor, as additional collateral security for the Secured Obligations.

(b)           All
money Proceeds received by NEC hereunder shall be held by NEC in a Collateral
Account for the benefit of the Pledgees, and while so held shall continue to be
held as collateral security for all the Secured Obligations, until applied in
accordance with the following provisions of this Section 4(b).  All money Proceeds received by NEC and
deposited in a Collateral Account as provided herein, and all money Proceeds
received by Pledgor and held in trust for Pledgees, shall promptly be applied
to the prepayment of the principal amount of the Loan as provided in Section
5(a) of the Loan Agreement, unless an Event of Default has occurred or is
continuing, in which case the provisions of Section 6(b) of this Agreement
shall apply.

(c)           Without
the prior written consent of NEC on behalf of the Pledgees, Pledgor will not
(1) sell, assign, transfer, exchange, or otherwise dispose of, or

 

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grant any option with respect to, the Collateral, (2)
create, incur or permit to exist any Lien or option in favor of, or any claim
of any Person with respect to, any of the Collateral, or any interest therein,
except for the pledges created by this Agreement or (3) enter into any
agreement or undertaking restricting the right or ability of Pledgor or any
Pledgee to sell, assign or transfer any of the Collateral.

(d)           Pledgor
shall maintain the pledges created by this Agreement as first priority pledges
and shall defend such pledges against claims and demands of all Persons
whomsoever.  At any time and from time
to time, upon the written request of NEC on behalf of the Pledgees, and at the
sole expense of Pledgor, Pledgor shall promptly and duly execute and deliver
such further instruments and documents and take such further actions as NEC may
reasonably request for the purposes of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted.  If any amount payable under or in connection
with any of the Collateral shall be or become evidenced by any promissory note,
other instrument or chattel paper, such note, instrument or chattel paper shall
be immediately delivered to NEC for the benefit of the Pledgees, duly endorsed
in a manner satisfactory to the Pledgees, to be held as Collateral pursuant to
this Agreement.

(e)           Pledgor
shall pay, and save each Pledgee harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all stamp, excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral or in connection with any of the transactions
contemplated by this Agreement.

5.             Cash
Dividends; Voting Rights

Unless an Event of
Default shall have occurred and is continuing, Pledgor shall be permitted to
receive all cash dividends paid in the normal course of business of Issuer in
respect of the Pledged Stock and Pledgor shall be permitted to exercise all
voting and corporate rights with respect to the Pledged Stock; provided,
however, that no vote shall be cast or corporate right exercised or
other action taken which would be inconsistent with or result in any violation
of any provision of this Agreement or the Loan Agreement or the Stockholders’
Agreement.

6.             Remedies
for Event of Default

(a)           If
an Event of Default shall have occurred and is continuing, (i) NEC on
behalf of the Pledgees shall have the right to receive any and all cash
dividends paid in respect of any of the Pledged Stock and make application
thereof to the Secured Obligations in such order as NEC may determine and
(ii) any shares of the Pledged Stock may, at NEC’s election, be registered
in the name of NEC or its nominee, and NEC or its nominee, on behalf of the
Pledgees, may thereafter exercise (1) all voting, corporate and other rights
pertaining to such shares of the Pledged Stock at any meeting of shareholders
of Issuer or otherwise and (2) any and all rights of conversion, exchange,
subscription and any other rights, privileges or options pertaining to such
shares of the Pledged Stock as if it were the absolute owner thereof
(including, without limitation, the

 

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right to exchange at its discretion any and all of the
Pledged Stock upon the merger, consolidation, reorganization, recapitalization
or other fundamental change in the corporate structure of Issuer, or upon the
exercise by Pledgor or the Pledgees of any right, privilege or option pertaining
to such shares of the Pledged Stock, and in connection therewith, the right to
deposit and deliver any and all of the Pledged Stock with any committee,
depositary, transfer agent, registrar or other designated agency upon such
terms and conditions as NEC on behalf of the Pledgees may determine), all
without liability except to account for property actually received by it.  However, no Pledgee shall have any duty to
Pledgor to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.

(b)           If
an Event of Default shall have occurred, at the election of NEC on behalf of Lender,
Lender may apply all or any part of Proceeds held in any Collateral Account in
payment of the obligations of  Pledgees
under this Agreement and the Loan Agreement, as provided in Section 6(d) below.

(c)           If
an Event of Default shall have occurred, NEC may, on behalf of Lender,
exercise, in addition to all other rights and remedies granted in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Secured Obligations, all rights and remedies of Lender.  Without limiting the generality of the
foregoing, NEC on behalf of Lender, without demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law) to or
upon Pledgor or any other Person, may in such circumstances collect, receive,
appropriate and realize upon all or any of the Collateral, and/or may sell,
assign, give option or options to purchase or otherwise dispose of and deliver
all or any of the Collateral (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, in the over-the-ounter
market, at any exchange, broker’s board or office of NEC or elsewhere upon such
terms and conditions as it may deem advisable and at such prices as it may deem
best, for cash or on credit or for future delivery without assumption of any
credit risk.  NEC shall have the right
upon any such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in Pledgor, which
right or equity is hereby waived or released. 
Pledgor recognizes that Lender may be unable to effect a public sale of
any or all of the Pledged Stock, by reason of certain prohibitions contained in
applicable securities laws or otherwise, and may be compelled to resort to one
or more private sales thereof to a limited group of purchasers.

(d)           The
Proceeds and the proceeds of any such collection, recovery, receipt,
appropriation, realization or sale of any of the Collateral by NEC pursuant to
the terms hereof after an Event of Default shall be applied as follows:

FIRST: 
To the payment of the costs and expenses associated therewith, including
the out-of-pocket expenses of NEC and the reasonable fees and out-of-pocket
expenses of counsel employed by NEC in connection therewith;

SECOND: 
To the payment of all amounts then owing to Lender under the Loan
Agreement, in the order provided in the Loan Agreement;

 

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THIRD: 
To the payment of all remaining amounts then owing to in respect of the
Secured Obligations; and

FOURTH: 
The balance (if any) of the proceeds shall be paid to the Pledgor or its
successors or assigns.

7.             Realization
Events

(a)           If
Lender or NEC (on behalf of Lender), in the exercise of its rights and remedies
hereunder, elects (i) to receive, appropriate or otherwise realize upon all or
any of the Pledged Stock (a “Realization”) or (ii) to sell, assign or
otherwise transfer and  deliver the
Pledged Stock in one or more parcels at public or private sale or sales (a “Sale”),
NEC (on behalf of Lender) shall first send a written notice to Pledgor (a “Proposal
Notice”) that shall state: (i) the maximum
number of shares subject to the Realization or Sale (each, a “Realization
Event”) (the “Subject Shares”); and (ii) the
purchase price per share proposed to be realized or paid for the Subject Shares
(the “Proposed
Realization Price”).

(b)           Within
fifteen (15) days after delivery of the Proposal Notice pursuant to
Section 7(a) (the “Request Period”), Pledgor shall have the
right to request that the Fair Value (as hereinafter defined) of the Subject
Shares be determined by an Appraiser in accordance with the procedure set forth
in Section 7(c).  The right of Pledgor
to request that a determination of Fair Value be made with respect to the
Subject Shares under this Section 7(b) shall be exercisable by delivering
written notice of the exercise thereof (a “Valuation Request Notice”) to each of
Lender and NEC, prior to the expiration of the Request Period.  The failure of Pledgor to deliver notice to
each of Lender and NEC within the Request Period shall be deemed to be a waiver
of Pledgor’s rights under this Section 7(b); provided, that Pledgor may
waive its rights under this Section 7(b) prior to the expiration of the
Request Period by giving written notice to each of Lender and NEC.

(c)           If
Pledgor delivers a Valuation Request Notice within the Request Period, and
Lender or NEC (on behalf of Lender), elects to proceed with the Realization
Event, NEC (on behalf of Lender) shall cause the Fair Value of the Subject
Shares to be determined by an Appraiser (appointed pursuant to the provisions
of Section 7(d)).  For purposes of this
Section 7, the “Fair Value” of the Subject Shares means the
fair market value of each Subject Share that would be paid by a willing buyer
to a willing seller in an arms’ length negotiation, neither being under any
compulsion to buy or to sell, and both having reasonable knowledge of all
relevant facts and taking into account all relevant circumstances and
information, including Issuer’s historical operating results and reasonable
good faith projections for future periods. 
The Appraiser shall conduct its determination of Fair Value as promptly
as practicable.

(d)           If
Pledgor delivers a Valuation Request Notice within the Request Period, and
Lender or NEC (on behalf of Lender), elects to proceed with the Realization
Event, as soon as reasonably practicable following delivery of the Valuation
Request Notice NEC (on behalf of Lender) shall, by delivery of written notice
to Pledgor (the

 

9

 

“Appraiser Notice”), propose three (3)
potential Appraisers to Pledgor; provided, that any Person who has been
engaged by NEC for any purpose during the one (1) year period preceding
delivery of the Appraiser Notice shall not be proposed as a potential Appraiser
by NEC.  Within ten (10) days of the
delivery of the Appraiser Notice, Pledgor shall have the right, by written
notice to each of Lender and NEC (the “Response Notice”), to choose one of the
potential Appraisers proposed by NEC in the Appraiser Notice as the Appraiser
to determine Fair Value of the Subject Shares. 
If Pledgor fails to timely deliver a Response Notice, then NEC shall
choose one of the potential Appraisers proposed by NEC in the Appraiser Notice
as the Appraiser to determine Fair Value of the Subject Shares.  Notwithstanding the foregoing, NEC may
deliver an Appraiser Notice at any time after its delivery of a Proposal Notice
(including before Pledgor has delivered a Valuation Notice), in which case
Pledgor shall be required to deliver its Response Notice within ten (10) days
following the delivery by NEC of its Appraiser Notice, provided that Pledgor
shall not be required to deliver its Response Notice unless and until it
delivers a Valuation Request Notice.

(e)           Lender
or NEC (on behalf of Lender), shall be entitled to proceed with the Realization
Event; provided, that: (i) if Pledgor has delivered a Valuation Request
Notice within the Request Period pursuant to Section 7(b), the price per share
to be realized or paid is no less than the Fair Value thereof as determined by
the Appraiser and the Realization Event is consummated (or, in the case of a
Sale, such sale is made pursuant to a contract entered into) within one hundred
eighty (180) days after the date on which Fair Value is determined; or (ii) if
Pledgor does not exercise its right to request that a determination of Fair
Value be made with respect to the Subject Shares under Section 7(b) within the
Request Period, the price per share to be realized or paid is no less than the
Proposed Realization Price and the Realization Event is consummated (or, in the
case of a Sale, such Sale is made pursuant to a contract entered into) within
one hundred eighty (180) days after the date of delivery by NEC of the Proposal
Notice.

(f)            Pledgor
shall be responsible for any fees and expenses of the Appraiser unless
the Fair Value per share of the Pledged Stock determined by the Appraiser
exceeds the Proposed Realization Price by an amount greater than five percent
(5%) of the Proposed Realization Price, in which case Pledgor and Lender shall
each pay one half of any fees and expenses of the Appraiser.  Unless Pledgor has paid, or provided
adequate security or other assurances of payment satisfactory to NEC in respect
of, the Appraiser’s fees and expenses for which it is responsible under this
Section 7(f) prior to the consummation of the Realization Event, then NEC shall
be entitled to deduct  the amount for
which Pledgor is responsible from the aggregate price realized or received by
Lender upon consummation of the Realization Event.

(g)           Pledgor
further agrees to use its best efforts to do or cause to be done all such other
acts as may be necessary to make such Realization Event pursuant to this
Section 7 valid and binding and in compliance with any and all other
applicable requirements of law.  Pledgor
further agrees that a breach of any of the covenants contained in this
Section 7 will cause irreparable injury to the Pledgees, that the Pledgees
have no adequate remedy at law in respect of such breach and, as a consequence,
that each and every covenant contained in this Section 7 shall be
specifically enforceable

 

10

 

against Pledgor, and Pledgor hereby waives and agrees
not to assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred.

(h)           Notwithstanding any other provision contained in
this Agreement, this Section 7 shall not apply to any Realization Event if (i)
the Issuer’s common stock is  publicly
traded; and (ii) the purchase price per share realized or paid pursuant to such
Realization Event, at the time of closing of the Realization or Sale (as the
case may be), is not less than the 30-day average of the closing price of the
Issuer’s common stock on the principal securities market on which such stock is
traded.

8.             Remedies
for Buyback Event

If a Buyback Event shall
have occurred, Lender and/or NEC (or its designee) shall have the right to
purchase the Pledged Stock then in possession of NEC, in accordance with the
Stockholders’ Agreement.  Upon exercise
of such right and payment for the Pledged Stock as provided in the
Stockholders’ Agreement, Lender or NEC (or its designee), as applicable, (i) shall
become the absolute owner of the Pledged Stock (which shall no longer be
subject to the pledges created by this Agreement), without any further action
on the part of Pledgor and (ii) shall be entitled to hold the share
certificates representing the Pledged Stock as the owner thereof and to register
its name as the owner of the Pledged Stock, and to enjoy all the rights and
benefits of the owner of the Pledged Stock.

9.             Defenses
of Pledgor

To the extent permitted
by applicable law, Pledgor waives all defenses, claims, damages and demands it
may acquire against the Pledgees or either of them arising out of the exercise
by it of any rights hereunder.  If any
notice of a proposed sale or other disposition of Collateral shall be required
by law, such notice shall be deemed reasonable and proper if given at least 15
days before such sale or other disposition.

10.          Priority
of Borrower’s Loan Obligations

(a)           As
between NEC and Lender only, NEC and Lender agree that the Collateral shall
secure all of the Secured Obligations; provided, that, in the event of
the occurrence of a Buyback Event which occurrence also constitutes an Event of
Default and shall entitle NEC and Lender to exercise their remedies hereunder,
NEC and Lender agree that (i) the Borrowers’ Loan Obligations shall be entitled
to a first priority security interest in the Collateral, superior and prior to
the rights of NEC with respect thereto, which rights of NEC to any and all
Collateral shall be subject to the prior interest of Lender; (ii) NEC shall not
be entitled to purchase the Pledged Stock under the Stockholders’ Agreement and
to receive in respect of the Secured Obligations held by it, any of the
Proceeds or proceeds of any Collateral received as a result of the enforcement
of rights pursuant to this Agreement until all Borrowers’ Loan Obligations have
been paid in full; and (iii) Lender shall have sole and exclusive right to
exercise the remedies set forth hereunder and to apply any Proceeds and
proceeds received in repayment of the

 

11

 

Borrowers’ Loan Obligations until the Borrower’s Loan
Obligations have been paid in full. 
This Section 10(a) shall apply unless NEC and Lender agree to a
different priority, in which case the rights of NEC shall have such priorities
and may be exercisable in any order NEC and Lender may agree.

(b)           In
the event that all Borrowers’ Loan Obligations have been paid in full but the
obligations of the SGI Entities under the Stockholders’ Agreement in respect of
a Buyback Event are still outstanding, NEC shall pay the balance of all money
Proceeds in the Collateral Account and shall deliver all other property held as
Collateral other than the Pledged Stock to the Pledgor or its successors or
assigns and, except for property consisting of the Pledged Stock, Pledgor shall
no longer be required to hold money or property paid or distributed in respect
of the Pledged Stock in trust for the Pledgees or pay or deliver such money or
property to NEC on behalf of the Pledgees as required under Section 4(a).

11.          Irrevocable
Authorization and Instruction to the Pledgees

Pledgor hereby authorizes
and instructs Issuer to comply with any instruction received by it from NEC in
writing without any other or further instructions from Pledgor, and Pledgor
agrees that Issuer shall be fully protected in so complying.  Without limitation to the foregoing, Pledgor
acknowledges that the Issuer shall comply with any instructions received from
NEC for registration pursuant to Article 209 of the Commercial Code of Japan,
and Issuer agrees to register NEC as pledgee of the shares of Pledged Stock in
its register of shareholders and record NEC as pledgee on the share certificate
representing such shares.

12.          No
Subrogation

Notwithstanding anything
to the contrary in this Agreement, Pledgor hereby irrevocably waives all rights
which may have arisen in connection with this Agreement to be subrogated to any
of the rights (whether contractual, under applicable laws or otherwise) of the
Pledgees against Issuer, the Borrowers or against any collateral security or
right of offset held by either of the Pledgees for the payment of Borrowers’
Loan Obligations.  Pledgor hereby
further irrevocably waives all contractual, statutory or other rights of
reimbursement, contribution, exoneration or indemnity (or any similar right)
from or against Issuer, the Borrowers or any other Person which may have arisen
in connection with this Agreement.  So
long as Borrowers’ Loan Obligations remain outstanding, if any amount shall be
paid by or on behalf of Issuer to Pledgor on account of any of the rights
waived in this paragraph, such amount shall be held by Pledgor in trust,
segregated from other funds of Pledgor, and shall, forthwith upon receipt by
Pledgor, be turned over to NEC for the benefit of the Pledgees in the exact
form received by Pledgor (duly indorsed by Pledgor to NEC, if required), to be
applied against the Secured Obligations, whether matured or unmatured, in such
order as NEC may determine.  The
provisions of this paragraph shall survive the term of this Agreement and the
payment in full of the Secured Obligations.

 

12

 

13.          Amendments,
etc. with respect to the Obligations; Waiver of Rights

The obligations of the
Pledgor and the pledge of the Collateral hereunder shall remain in full force
and effect without regard to, and shall not be impaired by (a) any exercise or
nonexercise, or any waiver, by NEC on behalf of the Pledgees, or by any
Pledgee, of any right, remedy, power or privilege under or in respect of any of
the Obligations or any security thereof (including this Agreement); (b) any
amendment to the Loan Agreement or the Stockholders’ Agreement or any of the
Obligations or any instrument (other than this Agreement) securing any of the
Obligations; or (c) the taking of additional security for, or any other
assurances of payment or performance of, any of the Obligations or the release
or discharge or termination of any security or other assurances of payment or
performance for any of the Obligations; whether or not the Pledgor shall have
notice or knowledge of any of the foregoing. The prior recourse by NEC on
behalf of the Pledgees, or by any Pledgee, to any part or all of the Collateral
shall not constitute a condition of any demand, suit or proceeding for payment
or collection of any of the Obligations. Neither of the Pledgees shall have any
obligation to protect, secure, perfect or insure any other Lien at any time
held by it as security for the Obligations or any property subject thereto.

14.          NEC’s
Appointment as Attorney-in-fact

(a)           Effective
upon the occurrence and during the continuance of an Event of Default and/or
Buyback Event, Pledgor hereby irrevocably constitutes and appoints NEC and any
officer or agent of NEC, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of Pledgor and in the name of Pledgor or in NEC’s own name, from time
to time in NEC’s discretion, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purposes of this Agreement, including, without limitation, any financing
statements, endorsements, assignments or other instruments of transfer.

(b)           Pledgor
hereby ratifies all that said attorneys shall lawfully do or cause to be done
pursuant to the power of attorney granted in Section 14(a).  All powers, authorizations and agencies
contained in this Agreement are coupled with an interest and are irrevocable
until this Agreement is terminated and the security interests created hereby
are released.

15.          Duty
of Pledgees

Each Pledgee’s sole duty
with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession shall be to deal with it in the same manner as
such Pledgee deals with similar securities and property for its own account,
except that no Pledgee shall have any obligation to invest funds held in any
Collateral Account and may hold the same as demand deposits.  None of the Pledgees, nor any of their
respective respective directors, officers, employees or agents shall be liable
for failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under

 

13

 

any obligation to sell or
otherwise dispose of any Collateral upon the request of Pledgor or any other
Person or to take any other action whatsoever with regard to the Collateral or
any part thereof.

16.          Independent
Relationship

This Agreement is entered
into solely for the purposes set forth in the Recitals above, and, except as is
expressly provided otherwise herein, no party to this Agreement assumes any
responsibility to any other party to advise such other party of information
known to such party regarding the financial condition of the Pledgor or the
Borrowers or regarding the Collateral or of any other circumstances bearing
upon the risk of nonpayment of the obligations of the Pledgor to the parties
hereto.  Each party shall be responsible
for managing its relation with the Pledgor and no party shall be deemed the
agent of any other party for any purpose. 
Each Pledgee may alter, amend, supplement, release, discharge or
otherwise modify any terms of its respective Obligations, without notice to or
consent of the other.  Each Pledgee
agrees for itself and its successors and assigns, not to contest in any proceeding
the priority, validity or enforceability of the Liens held by a Pledgee in the
Collateral or the Obligations or the provisions of this Agreement.

17.          Severability

If any provision or any
portion of any provision of this Agreement shall be held invalid or
unenforceable, the validity and enforceability of the remaining portion of such
provision and the remaining provisions of this Agreement, and the application
thereof to any other Person or circumstance, shall not be affected thereby.

18.          Governing
Law

This Agreement shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of Japan.

19.          Submission
to Jurisdiction

The parties hereby
irrevocably submit to the exclusive jurisdiction of the Tokyo District Court in
any action or proceeding arising out of or relating to this Agreement. Each
party hereby irrevocably waives, to the fullest extent that it may legally do
so, the defense of an inconvenient forum to the maintenance of such action or
proceeding.  Each party irrevocably
consents to the service of any and all process in any action or proceeding by
the mailing or delivery of copies of such process to it at the office of such
party set forth for notices hereunder. 
Each party agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.

 

14

 

20.          Delay,
Amendment and Waiver

(a)           The
Pledgees shall not by any act (except by a written instrument signed by the
Pledgees), delay, indulgence, omission or otherwise be deemed to have waived
any right or remedy hereunder or to have acquiesced in any Event of Default or
in any breach of any of the terms and conditions hereof.  No failure to exercise, nor any delay in
exercising, on the part of the Pledgees, any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy.  A waiver by  the Pledgees
of any right or remedy hereunder on any one occasion shall not be construed as
a bar to any right or remedy which the Pledgees would otherwise have on any future
occasion.  The remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive
of any remedies that may be available to the Pledgees at law, in equity or
otherwise.

(b)           Any
amendment, supplement or modification of or to any provision of this Agreement,
any waiver of any provision of this Agreement, and any consent to any departure
by any party from the terms of any provision of this Agreement, shall be
effective only if it is made or given in writing and signed by each of the
parties hereto.  Any such amendment,
supplement, modification, waiver or consent shall be binding upon the parties
hereto.

21.          Notices

All notices and other
communications pursuant to this Agreement shall be delivered personally,
delivered by facsimile or air-mailed by certified or registered mail, postage
prepaid, return receipt requested, to the parties, their successors in interest
or their assignees at the following address or at such other addresses as the
parties may designate by written notice in the manner as aforesaid:

If to the Pledgor,
to:

Silicon Graphics
World Trade B.V.

c/o Silicon Graphics, Inc. 

1600 Amphitheatre Parkway

Mountain View, CA 94043-1351 

USA

Telephone:      +1 (650) 933-3009

Facsimile:                          +1 (650) 933-0298

Attention:        Sandra Escher, Senior
Vice President

                                                                              and General Counsel

with a copy to:

 

15

 

Davis Polk & Wardwell

1600 El Camino Real

Menlo Park, CA 94025

USA

Telephone:      +1 (650) 752-2003

Facsimile:                          +1 (650) 752-2112

Attention:        William M. Kelly

If to
the Pledgees, to:

NEC
Corporation

7-1, Shiba 5-chome

Minato-ku, Tokyo 108-8001

Japan

Telephone:      +81 (3) 3798-6119

Facsimile:                          +81 (3) 3798-9564

Attention:        Kounosuke Kashima,
Associate Senior

                                                                              Manager Vice President and Executive General

and
to:

SGI
Japan, Ltd.

Yebisu Garden Place Tower

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6031, Japan

Telephone:      +81 (3) 5488-7300

Facsimile:                          +81 (3) 5420-7020

Attention:        Norio Izumi, President

with
copies to:

SGI
Japan, Ltd.

Yebisu Garden Place Tower

4-20-3 Ebisu Shibuya-ku

Tokyo 150-6031, Japan

Telephone:      +81 (3) 5488-6996

Facsimile:                          +81 (3) 5420-1867

Attention:        Hisao Hattori, Legal
Manager

and to:

Paul,
Weiss, Rifkind, Wharton & Garrison

2-2, Uchisaiwai-cho 2-chome

Chiyoda-ku, Tokyo 100-0011

Telephone:      +81 (3) 3597-8101

16

 

Facsimile:                          +81 (3) 3597-8120

Attention:        Lisa Yano

A notice shall be deemed
given when delivered, in the case of personal delivery or delivery by
facsimile, or seven (7) business days after mailing in the manner
prescribed herein.

22.          Entire
Agreement

This Agreement and the
Exhibits hereto contain the entire agreement among the parties hereto regarding
the matters described herein and supersede all previous and contemporaneous
oral and written discussions and all prior agreements and understandings among
the parties regarding such matters.

23.          Specific
Performance

Without limiting the
rights of each party hereto to pursue all other legal and equitable rights
available to such party for the other party’s failure perform its obligations
under this Agreement, the parties hereto acknowledge and agree that the remedy
at law for any failure to perform their obligations hereunder would be
inadequate and that each of them, respectively, shall be entitled to specific
performance, injunctive relief or other equitable remedies in the event of any
such failure.

24.          Successors
and Assigns

This Agreement shall be
binding upon Pledgor and its successors and permitted assigns and shall inure
to the benefit of the Pledgees and their respective successors and
assigns.  Pledgor may not assign this
Agreement or any of its rights or obligations hereunder without the prior
written consent of NEC on behalf of the Pledgees. The Pledgees may sell, assign
or transfer this Agreement or any of their respective rights hereunder without
any requirement of consent by Pledgor.

25.          Counterparts

This Agreement may be
executed in several counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument.

26.          Expenses

Except as otherwise
specifically provided herein, the parties to this agreement shall bear their
respective expenses incurred in connection with the negotiation, preparation,
execution and performance of this Agreement, including all fees and expenses of
agents, representatives, counsel and accountants.

 

17

 

27.          Descriptive
Headings

The headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.

 

18

 

IN WITNESS WHEREOF, the
undersigned has caused this Agreement to be duly executed and delivered as of
the date first above written.

	
   

  	
  PLEDGOR:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SILICON GRAPHICS WORLD

  
	
   

  	
  TRADE B.V.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  SANDRA ESCHER

  
	
   

  	
   

  	
  Name:  Sandra Escher

  
	
   

  	
   

  	
  Title:  Sr. Vice President and
  General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PLEDGEES:

  
	
   

  	
   

  
	
   

  	
  SGI JAPAN, LTD

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  NORIO IZUMI

  
	
   

  	
   

  	
  Name:  Norio Izuma

  
	
   

  	
   

  	
  Title:  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NEC CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  TAKASHI
  MIMURA

  
	
   

  	
   

  	
  Name: 
  Takashi Mimura

  
	
   

  	
   

  	
  Title: 
  Department Manager

  
	
   

  	
   

  	
  Company Planning Department

  
	
   

  	
   

  	
  Company Planning Office

  
				

 

 

 

 

 

SCHEDULE
1

TO
PLEDGE AGREEMENT

DESCRIPTION
OF PLEDGED STOCK

 

 

	
  Class of
  Stock

  	
   

  	
  Certificate
  Number

  	
   

  	
  Number of
  shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common stock

  	
   

  	
  H001

  	
   

  	
  3,260,000

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00043-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00043-of-00352.parquet"}]]