<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended DECEMBER 31, 1994
Commission File Number 1-10441
SILICON GRAPHICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-2789662
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2011 N. SHORELINE BOULEVARD, MOUNTAIN VIEW, CALIFORNIA 94043-1389
(Address of principal executive offices) (Zip Code)
(415) 960-1980
(Registrant's telephone number, including area code)
------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
As of January 31, 1995 there were 143,485,318 shares of Common Stock
outstanding.
<PAGE>
SILICON GRAPHICS, INC.
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements:
Consolidated Balance Sheet at
December 31, 1994 and June 30, 1994. . . . . . . . . . . . . . . 3
Consolidated Statement of Income for the
Three Months and Six Months Ended December, 1994 and 1993. . . . 4
Consolidated Statement of Cash Flows for the
Six Months Ended December 31, 1994 and 1993. . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . 6
Item 2: Management's Discussion and Analysis of
Results of Operations and Financial Condition. . . . . . . . . . 9-14
PART II - OTHER INFORMATION
Item 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Index of Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SILICON GRAPHICS, INC.
CONSOLIDATED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1994 1994
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 348,202 $ 310,767
Short-term marketable investments . . . . . . . . . . . . . . . . . 229,657 90,147
Accounts receivable, net. . . . . . . . . . . . . . . . . . . . . . 481,167 391,271
Inventories, net. . . . . . . . . . . . . . . . . . . . . . . . . . 202,798 164,319
Prepaid expenses and other current assets . . . . . . . . . . . . . 72,197 67,862
---------- ----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . 1,334,021 1,024,366
Other marketable investments . . . . . . . . . . . . . . . . . . . . . 113,244 186,836
Property and equipment:
Land and building . . . . . . . . . . . . . . . . . . . . . . . . . 33,424 28,980
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . 270,966 228,129
Furniture and fixtures. . . . . . . . . . . . . . . . . . . . . . . 58,955 50,806
Leasehold improvements. . . . . . . . . . . . . . . . . . . . . . . 53,830 58,066
---------- ----------
417,175 365,981
Accumulated depreciation and amortization . . . . . . . . . . . . . (216,919) (182,651)
---------- ----------
Net property and equipment. . . . . . . . . . . . . . . . . . . . 200,256 183,330
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146,912 124,251
---------- ----------
$1,794,433 $1,518,783
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . $ 144,760 $ 85,781
Accrued compensation. . . . . . . . . . . . . . . . . . . . . . . . 53,189 46,216
Income taxes payable. . . . . . . . . . . . . . . . . . . . . . . . 71,956 50,390
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . 92,248 80,457
Current portion of long-term debt and other . . . . . . . . . . . . 28,023 20,753
Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . . . 75,763 72,682
---------- ----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . 465,939 356,279
Long-term debt and other . . . . . . . . . . . . . . . . . . . . . . . 280,603 241,243
Stockholders' equity:
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . 33,996 33,996
Common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 139
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . 713,163 678,211
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 291,183 195,985
Accumulated translation adjustment and other. . . . . . . . . . . . 9,406 12,930
---------- ----------
Total stockholders' equity. . . . . . . . . . . . . . . . . . . . 1,047,891 921,261
---------- ----------
$1,794,433 $1,518,783
---------- ----------
---------- ----------
</TABLE>
SEE ACCOMPANYING NOTES
3
<PAGE>
SILICON GRAPHICS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
------------ ------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Product and other revenues . . . . . . . . . . . . . . . . . . . . . . $469,949 $330,923 $847,914 $595,923
Service revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,053 39,473 103,475 76,109
-------- -------- -------- --------
Total revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . 524,002 370,396 951,389 672,032
Costs and expenses:
Cost of product and other revenues. . . . . . . . . . . . . . . . . 221,015 160,223 397,135 286,689
Cost of service revenues. . . . . . . . . . . . . . . . . . . . . . 28,205 21,184 54,047 40,856
Research and development. . . . . . . . . . . . . . . . . . . . . . 57,363 42,560 110,590 81,585
Selling, general and administrative . . . . . . . . . . . . . . . . 135,665 96,131 250,374 179,630
-------- -------- -------- --------
Total costs and expenses. . . . . . . . . . . . . . . . . . . . . 442,248 320,098 812,146 588,760
-------- -------- -------- --------
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,754 50,298 139,243 83,272
Interest income and other income (expense), net. . . . . . . . . . . . (4,773) 1,616 (2,496) 2,128
-------- -------- -------- --------
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . 76,981 51,914 136,747 85,400
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . 23,094 15,574 41,024 23,320
-------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53,887 $ 36,340 $ 95,723 $ 62,080
-------- -------- -------- --------
-------- -------- -------- --------
Net income per common share. . . . . . . . . . . . . . . . . . . . . . $ 0.34 $ 0.24 $ 0.61 $ 0.41
-------- -------- -------- --------
-------- -------- -------- --------
Common shares and common share equivalents
used in the calculation of net income per
common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158,898 154,046 158,216 152,698
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
SEE ACCOMPANYING NOTES
4
<PAGE>
SILICON GRAPHICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
------------
1994 1993
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 95,723 $ 62,080
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . 49,219 38,456
Write-down of equity investment . . . . . . . . . . . . . . . . . . 7,333 0
Accrued interest on convertible subordinated debenture. . . . . . . 4,267 1,382
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 971 (246)
(Increase) decrease in assets:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . (89,896) (45,913)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . (38,479) (41,184)
Prepaid expenses and other current assets . . . . . . . . . . . . (3,676) (3,883)
Increase (decrease) in liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . 58,979 (1,338)
Accrued compensation. . . . . . . . . . . . . . . . . . . . . . . 6,973 (2,170)
Income taxes payable. . . . . . . . . . . . . . . . . . . . . . . 21,566 11,986
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . 6,542 11,877
Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . . 3,081 (1,212)
--------- ---------
Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . 26,880 (32,245)
--------- ---------
Net cash provided by operating activities . . . . . . . . . . . . 122,603 29,835
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . (55,202) (38,574)
Increase in other assets . . . . . . . . . . . . . . . . . . . . . . 3,058 (11,015)
Available-for-sale investments:
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . (168,915) (225,458)
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500 7,526
Maturities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,513 19,026
--------- ---------
Net cash used in investing activities . . . . . . . . . . . . . . . (117,046) (248,495)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock . . . . . . . . . . . . . . . . . . . . . . . . 34,426 22,569
Issuance of debt . . . . . . . . . . . . . . . . . . . . . . . . . . 1,641 202,161
Payments of debt principal . . . . . . . . . . . . . . . . . . . . . (3,664) (1,478)
Cash dividends - preferred stock . . . . . . . . . . . . . . . . . . (525) (525)
--------- ---------
Net cash provided by financing activities.. . . . . . . . . . . . 31,878 222,727
--------- ---------
Net increase in cash and cash equivalents. . . . . . . . . . . . . . 37,435 4,067
Cash and cash equivalents at beginning of period . . . . . . . . . . . 310,767 142,668
--------- ---------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . $ 348,202 $ 146,735
--------- ---------
--------- ---------
</TABLE>
SEE ACCOMPANYING NOTES
5
<PAGE>
SILICON GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. CONSOLIDATED FINANCIAL STATEMENTS
The unaudited results of operations for the interim periods shown herein
are not necessarily indicative of operating results for the entire fiscal year.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows for all periods presented have been made.
The unaudited consolidated financial statements included in this Form 10-Q
should be read in conjunction with the audited consolidated financial statements
and notes thereto for the fiscal year ended June 30, 1994.
2. CASH AND CASH EQUIVALENTS AND MARKETABLE INVESTMENTS
Effective July 1, 1994 the Company adopted Statement of Financial Accounting
Standards No. 115 (SFAS 115), "Accounting for Certain Investments in Debt and
Equity Securities". The cumulative effect as of July 1, 1994 of adopting SFAS
115 was immaterial.
Cash and cash equivalents consist of cash on deposit with banks and high quality
money market instruments with original maturities of 90 days or less. Cash
equivalents are classified as held-to-maturity and are therefore stated at cost,
which approximates fair value. Short-term marketable investments, classified as
available-for-sale, consist of high quality money market instruments with
original maturities greater than 90 days, but less than or equal to one year,
and are stated at fair market value as of December 31, 1994. Other marketable
investments, also classified as available-for-sale, consist primarily of high
quality debt securities with maturities greater than one year and less than
three years, and are stated at fair market value as of December 31, 1994. The
Company does not actively invest in marketable equity securities, but has from
time to time acquired positions in certain public companies in the ordinary
course of conducting its business. These equity investments are also included
in other marketable investments and are stated at fair market value. The cost
of securities when sold is based upon specific identification. The company
determined that the value of its investment in Control Data Systems Inc. was
permanently impaired and subsequently recognized an unrealized loss of $7.3
million related to the period ending December 31, 1994. This loss is included
in interest and other income (expense) in the Statement of Income. Unrealized
gains and losses (net of tax) on securities classified as available-for-sale are
included in Accumulated Translation Adjustment and Other in the Stockholders'
Equity section of the Balance Sheet.
The following tables detail the Company's marketable investments as of December
31, 1994 (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Balance Sheet Classification Cost Gains Losses Fair Value
- --------------------------- ---- ----- ------ ----------
<S> <C> <C> <C> <C>
Cash equivalents $294,087 $-- $ -- $294,087
Short-term marketable investments 231,947 -- (2,290) 229,657
Long term marketable investments 117,049 15 (3,820) 113,244
-------- --- ------- --------
Total marketable investments $643,083 $15 ($6,110) $636,988
-------- --- ------- --------
-------- --- ------- --------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Held-to-Maturity Investments Cost Gains Losses Fair Value
- ---------------------------- ---- ----- ------ ----------
<S> <C> <C> <C> <C>
U.S. commercial paper $124,709 $-- $-- $124,709
U.S. treasury securities and obligations
of U.S. government agencies 69,315 -- -- 69,315
Certificates of deposit and
Euro certificates of deposit 45,016 -- -- 45,016
Repurchase agreements 34,700 -- -- 34,700
Other Investments 20,347 -- -- 20,347
-------- --- --- --------
Total $294,087 $-- $-- $294,087
-------- --- --- --------
-------- --- --- ---------
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Available-for-Sale Investments Cost Gains Losses Fair Value
- ------------------------------ ---- ----- ------ ----------
<S> <C> <C> <C> <C>
U.S. treasury securities and obligations
of U.S. government agencies $225,859 $-- ($4,301) $221,558
U.S. corporate notes 38,102 -- (1,739) 36,363
U.S. commercial paper 33,320 -- (28) 33,292
Other investments 23,004 -- (30) 22,974
Floating rate notes 21,600 15 (12) 21,603
Equity investments 7,111 -- -- $7,111
-------- --- ------- --------
Total $348,996 $15 ($6,110) $342,901
-------- --- ------- --------
-------- --- ------- --------
</TABLE>
3. INVENTORIES
Inventories stated at the lower of cost (first-in, first-out) or market
consist of (in thousands):
<TABLE>
<CAPTION>
December 31, June 30,
1994 1994
---- ----
<S> <C> <C>
Raw material $ 26,683 $ 9,602
Work in process 60,845 48,680
Finished goods 16,547 17,829
Service & marketing 98,723 88,208
-------- --------
Total inventories, net $202,798 $164,319
-------- --------
-------- --------
</TABLE>
7
<PAGE>
4. PER SHARE DATA
Net income per share is computed using the weighted average number of
common shares and dilutive common share equivalents outstanding during the
period. Dilutive common share equivalents for the three month and six month
periods ended December 31, 1994 and 1993, consist of stock options (using the
treasury stock method or modified treasury stock method, as applicable) and the
Company's Series A convertible preferred stock on an as-if-converted basis. The
Company's zero-coupon convertible subordinated debenture due November 2013 is
not a common stock equivalent and therefore not included in the share count used
in calculating primary earnings per share.
5. SUBSEQUENT EVENTS
On February 7, 1995 the Company announced that it has entered into
definitive merger agreements with Alias Research Inc. and Wavefront
Technologies, Inc. Under the terms of the agreements, Alias stockholders will
receive the equivalent of 0.90 shares of Silicon Graphics' common stock for
each share of Alias common stock owned. Wavefront stockholders will receive
0.49 shares of Silicon Graphics' common stock for each share of Wavefront
common stock owned. The transaction is expected to be tax-free for U.S.
purposes for Wavefront stockholders. In the case of Alias, which is an Ontario,
Canada corporation, the share exchange is expected to be tax-free for Canadian
resident stockholders but taxable for U.S. stockholders. Completion of the
transactions are subject to customary conditions, including approval of Alias'
and Wavefront's stockholders, and required governmental approvals. The closing
of each agreement is also conditioned on the concurrent closing of the other
agreement. The mergers, which are expected to close by June 30, 1995, are
expected to be accounted for on a pooling of interests basis. For additional
information, see the Company's Form 8-K filed on February 13, 1995 and the
exhibits thereto.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Silicon Graphics uses a financial target model to develop its annual operating
plans and to evaluate investment alternatives, business proposals and operations
throughout the fiscal year. This model expresses the Company's current
objectives for gross margins, spending, and operating profit as a percentage of
net revenues. The model also incorporates target ranges for the allocation of
spending between research and development, and selling, general and
administrative expenses.
The Company's current model includes the following financial targets (as a
percentage of net revenues):
Gross margin 50% - 52%
Research and development 11% - 13%
Selling, general and administrative 26% - 28%
---------
Operating margin 11% - 13%
The financial target model reflects a number of assumptions. In particular, the
gross margin target range reflects assumptions about the Company's pricing,
manufacturing costs and volumes, and the mix of products, distribution channels
and geographic distribution. The spending ranges were established based on the
Company's beliefs about the levels of research and development necessary to
develop leading-edge products for its markets, the levels of sales and marketing
expenses appropriate to support its channels of distribution and the levels of
general and administrative spending appropriate for the size and nature of the
business. Many other factors affect the Company's financial performance and may
cause the Company's future results to be markedly outside of the ranges
reflected in the target model.
The financial target model is one management tool that the Company uses to run
its business and measure its performance. IT IS NOT A PROJECTION OF FUTURE
RESULTS. The actual results for any particular period, including the current
quarter, may vary substantially from the model for numerous reasons including
but not limited to the Company's ability to attain planned revenue growth. See
"Factors That May Affect Future Results." Also, in certain periods the Company
may intentionally operate outside the model. In addition, the financial target
model itself is subject to revision from time to time to reflect new strategies,
competitive changes or other developments.
The financial target model is described above to provide a framework for the
Company's discussion and analysis of its results of operations. The Company does
not intend to provide updated information about its planning model or its
performance relative to the model in any period, other than in the context of
management's discussion and analysis in the Company's Form 10-Q.
9
<PAGE>
The following table sets forth, for the periods indicated, certain income and
expense items as a percentage of net revenues:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Dec 31, Dec 31, Dec 31, Dec 31,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Product and other revenues . . . . . . . . . . . . . . 89.7% 89.3% 89.1% 88.7%
Service revenues . . . . . . . . . . . . . . . . . . . 10.3 10.7 10.9 11.3
------ ------ ------ ------
Total revenues . . . . . . . . . . . . . . . . . . . . 100.0 100.0 100.0 100.0
Cost of product and other revenues . . . . . . . . . . 42.2 43.3 41.7 42.7
Cost of service revenues . . . . . . . . . . . . . . . 5.4 5.7 5.7 6.1
------ ------ ------ ------
Gross margin . . . . . . . . . . . . . . . . . . . . . 52.4 51.0 52.6 51.3
Research and development expense . . . . . . . . . . . 10.9 11.5 11.6 12.1
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . . . 25.9 26.0 26.3 26.7
------ ------ ------ ------
Operating income . . . . . . . . . . . . . . . . . . . 15.6 13.6 14.6 12.4
Interest income and other, net . . . . . . . . . . . . (0.9) 0.4 (0.3) 0.3
------ ------ ------ ------
Income before income taxes . . . . . . . . . . . . . . 14.7 14.0 14.4 12.7
Provision for income taxes . . . . . . . . . . . . . . 4.4 4.2 4.3 3.5
Net Income . . . . . . . . . . . . . . . . . . . . . . 10.3% 9.8% 10.1% 9.2%
------ ------ ------ ------
<FN>
PERCENTAGES MAY NOT ADD DUE TO ROUNDING.
</TABLE>
The following table sets forth, for the periods indicated, growth rates for
certain income and expense items:
<TABLE>
<CAPTION>
Increase/(Decrease)for the
Three Months Ended December 31, 1994
------------------------------------
vs Prior Qtr vs Prior Year Qtr
------------ -----------------
<S> <C> <C>
Product and other revenues . . . . . . . . 24% 42%
Service revenues . . . . . . . . . . . . . 9% 37%
Total revenues . . . . . . . . . . . . . . 23% 41%
Gross profit . . . . . . . . . . . . . . . 22% 45%
Research and development. . . . . . . . . 8% 35%
Selling, general and administrative. . . . 18% 41%
Net income . . . . . . . . . . . . . . . . 29% 48%
Earnings per share . . . . . . . . . . . . 26% 42%
</TABLE>
10
<PAGE>
OPERATING RESULTS: Revenue growth resulted principally from increased unit
shipments in all major regions worldwide and increased service revenues from a
larger installed base of products under contract. Compared to last year's
quarter, revenue was positively affected by improvement in the European and
Japanese economies. The Company experienced strong demand across its lines of
computer system products, which range from the desktop to supercomputing.
For the three months ended December 31, 1994, the Company exceeded its
gross margin model. The increase in gross margin for the three month period
compared to the prior year was primarily a result of an increased portion of
international business, a weaker U.S. dollar, and an increase in manufacturing
efficiencies due to higher volumes. For the six months ended December 31, 1994,
the Company exceeded its gross margin model. The increase in gross margin for
the six month period compared to the prior year was primarily a result of an
increased portion of international business, manufacturing efficiencies due to
higher volumes, and a shift in mix toward more fully-configured products within
the Company's product lines. The Company has been operating outside of its
target model as a result of several factors, which include an extremely positive
business climate, and particularly strong product line offerings.
The Company's operating margin for the second quarter of fiscal 1995 was
15.6% of net revenues and is above both the target range of 11% - 13% and the
13.6% recorded in the comparable quarter of fiscal 1994. The Company's
operating expenses as a percentage of revenue were at the low-end of the model
range. As a result of the positive business climate that the Company is
experiencing, the Company is implementing a variety of incremental spending
programs, including sales and marketing initiatives and expanded research and
development programs, that are designed to improve the Company's long-term
growth prospects and market position. These programs could reduce gross margins
and increase operating expenses as a percentage of revenue compared to the
levels experienced in the second quarter of fiscal 1995. However, the Company
believes that spending growth may continue to lag revenue growth, and therefore
the Company may operate above the operating margin range during the remainder of
fiscal 1995.
REVENUE BY GEOGRAPHY: The Company's North American business revenue
increased 31% over the year ago quarter. European and Pacific revenues were
each up 54% from the same quarter a year ago. The Company experienced
improvement in all major European economies, with the exception of Italy.
Revenue from Japan represented approximately 12% of total revenues for the
quarter, compared to approximately 11% in the prior year's comparable quarter.
The Company believes that the Japanese economy is slowly recovering from a
recession. The change in geographical mix is largely due to relative strength
the Company experienced in its European business. The Company noted the same
trends for the six months ended December 31, 1994.
<TABLE>
<CAPTION>
Three Months Six Months
Ended Dec 31, Ended Dec 31,
------------- Year over Year ------------- Year over Year
1994 1993 Increase 1994 1993 Increase
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
(in millions)
North America (U.S. and Canada) $261 $199 31% $505 $376 34%
Europe 165 107 54% 265 172 54%
Pacific (including Latin America) 98 64 54% 182 124 46%
---- ---- --- ---- ---- ---
Total Revenue $524 $370 41% $952 $672 42%
---- ---- --- ---- ---- ---
---- ---- --- ---- ---- ---
<CAPTION>
Three Months Ended Dec 31, Six Months Ended Dec 31,
-------------------------- ------------------------
(as a percentage of total revenue) 1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
North America 50% 54% 53% 56%
Europe 32% 29% 28% 26%
Pacific 18% 17% 19% 18%
</TABLE>
11
<PAGE>
REVENUE BY PRODUCT LINE: The Company's product and other revenues are
derived primarily from shipment of computer system products, with subsystem and
software revenues, license fees, and non-recurring engineering (NRE) contract
payments comprising the remainder. NRE contract payments are generally
recognized upon the completion of contract requirements or milestones, and the
expenses related to these efforts are included in research and development
expense.
The mix between high-end and low-end systems has remained relatively
constant as the Company continues to develop and deliver a wide range of
products to a broadening marketplace.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
Dec 31, Dec 31, Dec 31, Dec 31,
(as a percent of shipment revenue, excluding other revenue) 1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
High-end products (Challenge-TM-, POWER Challenge-TM-, Onyx-TM-) 39% 37% 40% 40%
Low-end products (Indy-TM-, IRIS Indigo-REGISTRATION MARK-, Indigo2-TM-) 61% 63% 60% 60%
</TABLE>
OTHER RESULTS: Interest income and other income (expense), net for the
quarter and the six months ended December 31, 1994 was an expense due to a $7.3
million revaluation of the Company's long-term investment in Control Data
Systems, Inc. ("CDSI") to reflect the market value of the securities at
December 31, 1994. On February 10, 1995, CDSI agreed to repurchase the
Company's CDSI stock. Net interest income and other for the quarter was $4.8
million, and $2.5 million for the six month period, reflecting an improvement
over the prior year periods due to increased interest income as a result of
higher invested cash balances net of borrowings, and higher interest earned on
investments.
TAXES: The Company's combined federal, state and foreign effective income
tax rate for the three month and six month periods ended December 31, 1994 was
30% and was calculated based on an estimated annual effective tax rate applied
to income before income taxes. The tax rate for the same periods of the prior
fiscal year was 30% and 27%, respectively, the latter of which was comprised of
an estimated annual tax rate of 30% and a non-recurring benefit from the Revenue
Reconciliation Act of 1993 in the amount of $2.3 million. The Company does not
provide for U.S. federal income taxes on undistributed earnings of foreign
subsidiaries which it intends to permanently reinvest in those operations.
Based on the Company's plans, it believes that current levels of taxable
income, adjusted for non-recurring items, will be sufficient to realize the
deferred tax assets. Accordingly, the Company has determined that no valuation
allowance for deferred tax assets is required to reduce such assets to an amount
which is more likely than not to be realized either through carrybacks, or by
offsetting deferred tax liabilities or future taxable income.
FINANCIAL CONDITION
During the six months ended December 31, 1994, the Company's cash and cash
equivalents, short term marketable investments and other marketable investments
increased by $103 million. This increase was primarily due to positive cash
flow from operating activities of $123 million, as well as $34 million generated
from sales of stock through the Company's employee stock option plans and the
Employee Stock Purchase Plan, which was partially offset by $55 million of
capital expenditures. Long-term debt and other at December 31, 1994 increased
to reflect future payments associated with the acquisition of intellectual
property rights. These liabilities will be discharged over eight years and are
not expected to be material to the cash flow in any fiscal period.
12
<PAGE>
As of December 31, 1994, the Company's principal sources of liquidity
included cash and cash equivalents, short-term marketable investments and other
marketable investments of $691 million and up to $20 million available under a
committed line of credit. These resources, and others available to the Company,
should be adequate to fund the Company's projected cash needs beyond fiscal
1995. The Company believes that the level of financial resources is an
important competitive factor in the computer industry, and accordingly, may
elect to raise additional capital in anticipation of future needs.
FACTORS THAT MAY AFFECT FUTURE RESULTS
As is true for technology companies generally, Silicon Graphics operates in
a rapidly changing environment that involves a number of risks, some of which
are beyond the Company's control. The following discussion highlights some of
these risks.
PERIOD TO PERIOD FLUCTUATIONS: The Company has experienced substantial
revenue growth in recent years, and it plans its operating expenses, many of
which are relatively fixed in the short term, on the basis that its revenues
will continue to grow. As a result it may not be possible for management to
quickly adjust expense levels in response to revenue shortfalls. Further,
because of short delivery cycles the Company generally does not have a large
order backlog, which makes the forecasting of revenue inherently less certain.
This uncertainty is compounded because each quarter's revenue results
predominantly from orders received and shipments made during the last month of
the quarter, with a disproportionate amount occurring in the latter half of that
month. This pattern sharply limits the Company's ability to react to revenue
shortfalls within a particular quarter. Accordingly, even relatively minor
shipment disruptions, which could result from factors such as supply
constraints, delays in the availability of new products, an unanticipated change
in product mix, transit interruptions or natural disasters, may cause a
particular period's results to be substantially below expectations.
The Company's results have followed a seasonal pattern, with relatively
strong second and fourth fiscal quarters and weaker first and third fiscal
quarters, reflecting the buying patterns of the Company's customers. A variety
of other factors may cause period-to-period fluctuations in revenues and
profitability, including changes in the mix of high-end and desktop products,
the mix of configurations within a product line, the geographic mix of sales,
the mix between direct and indirect channels of distribution, the level of the
Company's product discounts, and the percentage of revenues derived from service
or NRE during any fiscal period.
Additionally, because approximately half of the Company's revenue is
derived from sales outside the United States, and many key components for its
products are produced outside the United States, the Company's results could be
negatively affected by such factors as changes in foreign currency exchange
rates, trade protection measures, generally longer accounts receivable
collection patterns, and changes in regional or worldwide economic or political
conditions, or natural disasters. The Company's sales to foreign customers are
subject to export regulations, with sales of some of the Company's high-end
products requiring clearance and export licenses from the U.S. Department of
Commerce. The Company's export sales would be adversely affected if such
regulations were tightened, or if they are not modified over time to reflect the
increasing performance of the Company's products.
Sales in foreign countries are generally priced in local currencies and
therefore are subject to the effects of currency exchange fluctuations. Changes
in foreign currency exchange rates can have either a positive or negative effect
on revenue and/or income in any given period. The Company attempts to reduce
the impact of currency fluctuations on net income primarily through the use of
forward exchange contracts and foreign currency options that hedge foreign
currency denominated receivables between the parent and its international
subsidiaries. The Company has generally not hedged capital expenditures,
investments in subsidiaries, inventory purchases or the anticipated sales or net
income of its international subsidiaries, although it periodically evaluates its
hedging practices.
13
<PAGE>
The Company's stock price, like that of other technology companies, is
subject to significant volatility. If revenues or earnings in any quarter fail
to meet expectations of the investment community, there could be an immediate
impact on the Company's stock price. In addition, the Company's stock price may
be affected by broader market trends that may be unrelated to the Company's
performance.
PRODUCT DEVELOPMENT AND INTRODUCTION: The Company has achieved revenue
growth and profitability that are well above average within the computer
industry because it has been able to develop and rapidly bring to volume
production highly differentiated, technologically complex and innovative
products. The Company's future results depend on its ability to sustain this
competitive advantage. The Company continues to introduce new products,
including products that will replace products in the Company's current product
offering. A number of risks are inherent in this process.
The process of developing new technology and incorporating it in the
Company's products is increasingly complex and uncertain, which raises the
potential for delays in new product introduction. The introduction of a new
computer system requires close collaboration and continued technological
advancement involving multiple hardware and software design and manufacturing
teams within the Company as well as teams at outside suppliers of key components
such as semiconductor and storage products. The failure of any one of these
elements could cause the Company's new products to fail to meet specifications
or to miss the aggressive timetables that the Company establishes. As the
variety and complexity of the Company's product offering increases, the process
of planning production and inventory levels also becomes more difficult.
The Company generally has derived a substantial portion of its revenues in
any fiscal period from its most recently introduced products. The Company's
results could be adversely affected by such factors as development or
manufacturing delays, variations in product costs, and delays in customer
purchases of existing products in anticipation of the introduction of new
products.
The Company's customers require applications software that addresses their
needs. The Company develops very limited applications software, and thus relies
on the availability of key third-party applications software addressing a wide
range of customer requirements. The Company actively manages programs to
promote the development of such applications, but there can be no assurance that
all competitively important applications will be available for the Company's
systems.
DEVELOPMENT AND ACCEPTANCE OF MIPS- REGISTRATION MARK - RISC ARCHITECTURE:
All of the Company's system products incorporate microprocessors based upon the
Company's MIPS RISC microprocessor architecture. The Company licenses the
manufacturing and distribution rights to these microprocessors to selected
semiconductor manufacturing companies (the "Semiconductor Partners"). The
Company and its Semiconductor Partners generally have jointly funded the
development of new MIPS RISC microprocessors, including the recently announced
R10000-TM- microprocessor. Changes in the timing, level or availability of such
funding could adversely affect the continued development of the MIPS RISC
architecture or increase the portion of the development budget that is borne by
the Company. The Company believes that the continued development and broad
acceptance of the MIPS architecture are critical to its future success.
NEW VENTURES: The Company has entered into several ventures with other
companies to address new and emerging markets, including ventures with Time-
Warner Cable, Nintendo Co., Ltd. and AT&T Corp. While the Company believes that
these new ventures are strategically important, there are substantial
uncertainties associated with the development of new products and technologies
for evolving markets. The success of these ventures will be determined not only
by the Company's efforts, but also by those of its venture partners. Initial
timetables for the development and introduction of new technologies, products or
services may not be achieved, and price/performance targets may not prove
feasible. External factors, such as the development of competitive alternatives
or government regulation, may cause new markets to evolve in an unanticipated
direction.
14
<PAGE>
COMPETITION: The computer industry is highly competitive and is
characterized by rapid technological advances in both hardware and software
development, which result in steadily improving price/performance and shortening
product life cycles. As the segments in which the Company operates continue to
grow faster than the industry as a whole, the Company is experiencing an
increase in competition, and it expects this trend to continue. Many of the
Company's competitors have substantially greater technical, marketing and
financial resources than the Company, as well as a larger installed base of
customers and a wider range of general purpose applications software available
for their platforms. The strong competition faced throughout the Company's
product line can result in significant discounting of sales prices which would
decrease the Company's gross margins.
BUSINESS DISRUPTION: The Company's corporate headquarters, including its
research and development operations and most of its manufacturing facilities,
are located in the Silicon Valley area of Northern California, a region known
for seismic activity. Operating results could be materially affected by a
significant earthquake. The Company is predominantly self-insured for losses
and business interruptions of this kind.
15
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
* 2.1 Agreement and Plan of Merger and Reorganization, dated as of
February 6, 1995, among Silicon Graphics, Inc., S Acquisition
Corporation and Wavefront Technologies, Inc.
* 2.2 Agreement and Plan of Acquisition and Arrangement dated as of
February 6, 1995 by and among Silicon Graphics, Inc.,
1103707 Ontario Inc., Silicon Graphics Manufacturing S.A. and
Alias Research Inc.
10.61 Credit Agreement dated December 31, 1994 between the Company and
Bank of America, National Trust and Savings Association.
10.69 Employment Agreement dated February 1, 1995 between the Company
and Thomas A. Jermoluk.
11.1 Statement of Computation of Common Shares and Common Share
Equivalents.
27.1 Financial Data Schedule.
* 99.1 Press Release dated February 7, 1995.
* Incorporated by reference to the similarly numbered exhibits to
Registrant's Current Report on Form 8-K filed February 13, 1995.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: February 13, 1995 SILICON GRAPHICS, INC.
a Delaware corporation
By: Stanley J. Meresman
------------------------------
Stanley J. Meresman
Senior Vice President, Finance
and Chief Financial Officer
(Principal Financial Officer)
By: Dennis P. McBride
------------------------------
Dennis P. McBride
Vice President, Controller
(Principal Accounting Officer)
By: Tom Oswold
------------------------------
Tom Oswold
Vice President, Finance
and Treasurer
17
<PAGE>
SILICON GRAPHICS, INC.
INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
* 2.1 Agreement and Plan of Merger and Reorganization, dated as of
February 6, 1995, among Silicon Graphics, Inc., S Acquisition
Corporation and Wavefront Technologies, Inc.
* 2.2 Agreement and Plan of Acquisition and Arrangement dated as of
February 6, 1995 by and among Silicon Graphics, Inc.,
1103707 Ontario Inc., Silicon Graphics Manufacturing S.A. and
Alias Research Inc.
10.61 Credit Agreement dated December 31, 1994 between the Company and
Bank of America, National Trust and Savings Association.
10.69 Employment Agreement dated February 1, 1995 between the Company
and Thomas A. Jermoluk.
11.1 Statement of Computation of Common Shares and Common Share
Equivalents.
27.1 Financial Data Schedule.
* 99.1 Press Release dated February 7, 1995.
- ---------------
* Incorporated by reference to the similarly numbered exhibits to Registrant's
Current Report on Form 8-K filed February 13, 1995.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
DATED AS OF DECEMBER 31, 1994
BETWEEN
SILICON GRAPHICS, INC.
AND
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I DEFINITIONS................................................... 1
1.01 Defined Terms.................................................. 1
1.02 Other Interpretive Provisions.................................. 14
(a) Defined Terms............................................ 14
(b) The Agreement............................................ 14
(c) Certain Common Terms..................................... 14
(d) Performance; Time........................................ 14
(e) Contracts................................................ 14
(f) Laws..................................................... 15
(g) Captions................................................. 15
(h) Independence of Provisions............................... 15
1.03 Accounting Principles.......................................... 15
ARTICLE II THE CREDIT FACILITY........................................... 15
2.01 Amount and Terms of the Credit Facility........................ 15
(a) Committed Revolving Loans................................ 15
(b) Discretionary Revolving Loans and
Acceptances.............................................. 16
2.02 Loan Accounts.................................................. 16
2.03 Procedure for Borrowing........................................ 17
2.04 Local Currency Loans........................................... 18
2.05 Conversion and Continuation Elections.......................... 19
2.06 Bankers' Acceptances........................................... 20
2.07 Voluntary Termination or Reduction of Revolving Commitment..... 21
2.08 Optional Prepayments........................................... 21
2.09 Repayment and Mandatory Prepayment............................. 22
2.10 Interest....................................................... 22
2.11 Facility Fee................................................... 23
2.12 Computation of Fees and Interest............................... 23
2.13 Payments by the Company or Other Borrowing Entities............ 23
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY..................... 24
3.01 Taxes.......................................................... 24
3.02 Illegality..................................................... 25
3.03 Increased Costs and Reduction of Return........................ 25
3.04 Funding Losses................................................. 26
3.05 Inability to Determine Rates................................... 27
3.06 Certificate of Bank............................................ 28
3.07 Survival....................................................... 28
<PAGE>
Section Page
- ------- ----
ARTICLE IV CONDITIONS PRECEDENT.......................................... 28
4.01 Conditions of Initial Extension of Credit to the Company....... 28
(a) Credit Agreement........................................ 28
(b) Resolutions; Incumbency................................. 28
(c) Payment of Fees......................................... 28
(d) Certificate............................................. 28
(e) Financial Statements.................................... 29
(f) Other Documents......................................... 29
4.02 Conditions to All Borrowings of Revolving Loans by the Company. 29
(a) Notice of Borrowing..................................... 29
(b) Continuation of Representations and
Warranties.............................................. 29
(c) No Existing Default..................................... 29
(d) Authorized and Executed Agreements...................... 29
4.03 Conditions to All Issuances of Acceptances for the Account of
the Company.................................................... 29
(a) Acceptance Documentation................................ 30
(b) Continuation of Representations and
Warranties.............................................. 30
(c) No Existing Default..................................... 30
(d) Authorized and Executed Agreements...................... 30
4.04 Conditions to All Extensions of Credit to Other Borrowing
Entities and to Local Currency Loans to the Company............ 30
(a) Credit Documentation.................................... 30
(b) Guaranties, Etc......................................... 31
(c) Compliance with Conditions Precedent.................... 31
(d) Other Evidence.......................................... 31
ARTICLE V REPRESENTATIONS AND WARRANTIES................................ 31
5.01 Organization................................................... 31
5.02 Corporate Authorization; No Contravention...................... 31
5.03 Governmental Authorization..................................... 32
5.04 Binding Effect................................................. 32
5.05 Litigation..................................................... 32
5.06 No Default..................................................... 32
5.07 ERISA Compliance............................................... 32
5.08 Use of Proceeds; Margin Regulations............................ 33
5.09 Title to Properties............................................ 33
5.10 Taxes.......................................................... 33
5.11 Financial Condition............................................ 33
5.12 Environmental Matters.......................................... 34
5.13 Regulated Entities............................................. 34
5.14 No Burdensome Restrictions..................................... 35
5.15 Labor Relations................................................ 35
<PAGE>
Section Page
- ------- ----
5.16 Copyrights, Patents, Trademarks and Licenses, Etc.............. 35
5.17 Subsidiaries................................................... 35
5.18 Insurance...................................................... 35
5.19 Full Disclosure................................................ 35
ARTICLE VI AFFIRMATIVE COVENANTS.......................................... 36
6.01 Financial Statements........................................... 36
6.02 Certificates; Other Information................................ 37
6.03 Notices........................................................ 37
6.04 Preservation of Corporate Existence, Etc....................... 38
6.05 Maintenance of Property........................................ 39
6.06 Insurance...................................................... 39
6.07 Payment of Obligations......................................... 39
6.08 Compliance with Laws........................................... 39
6.09 Inspection of Property and Books and Records................... 40
6.10 Environmental Laws............................................. 40
6.11 Use of Proceeds................................................ 40
6.12 Compliance with ERISA.......................................... 40
ARTICLE VII NEGATIVE COVENANTS......................................... 41
7.01 Limitation on Liens............................................ 41
7.02 Disposition of Assets.......................................... 42
7.03 Consolidations, Mergers, Joint Ventures and Acquisitions....... 42
7.04 Transactions with Affiliates................................... 43
7.05 Use of Proceeds................................................ 43
7.06 Compliance with ERISA.......................................... 43
7.07 Restricted Payments............................................ 44
7.08 Tangible Net Worth............................................. 44
7.09 Accounting Changes............................................. 45
ARTICLE VIII EVENTS OF DEFAULT.......................................... 45
8.01 Event of Default............................................... 45
(a) Non-Payment............................................. 45
(b) Representation or Warranty.............................. 45
(c) Specific Defaults....................................... 45
(d) Other Defaults.......................................... 45
(e) Cross-Default........................................... 45
(f) Insolvency; Voluntary Proceedings....................... 46
(g) Involuntary Proceedings................................. 46
(h) ERISA................................................... 47
(i) Monetary Judgments...................................... 47
(j) Non-Monetary Judgments.................................. 47
(k) Material Adverse Effect................................. 47
(l) Guaranty................................................ 47
(m) Change of Control....................................... 47
<PAGE>
Section Page
- ------- ----
8.02 Remedies....................................................... 47
8.03 Rights Not Exclusive........................................... 48
ARTICLE IX MISCELLANEOUS................................................. 48
9.01 Amendments and Waivers......................................... 48
9.02 Notices........................................................ 48
9.03 No Waiver; Cumulative Remedies................................. 49
9.04 Costs and Expenses............................................. 49
9.05 Indemnity...................................................... 50
9.06 Marshalling; Payments Set Aside................................ 50
9.07 Successors and Assigns......................................... 51
9.08 Assignments, Participations, Etc............................... 51
9.09 Set-off........................................................ 52
9.10 Automatic Debits of Fees....................................... 53
9.11 Counterparts................................................... 53
9.12 Severability................................................... 53
9.13 No Third Parties Benefited..................................... 53
9.14 Time........................................................... 54
9.15 Governing Law and Jurisdiction................................. 54
9.16 Arbitration; Reference......................................... 54
(a) Mandatory Arbitration.................................... 54
(b) Judicial Reference....................................... 55
(c) Provisional Remedies, Self-Help and
Foreclosure............................................. 55
9.17 Entire Agreement............................................... 55
9.18 Interpretation................................................. 55
9.19 Obligations of Other Borrowing Entities........................ 55
SCHEDULES
Schedule 5.11 Permitted Liabilities
Schedule 5.12 Environmental Matters
Schedule 5.17 Subsidiaries and Equity Investments
Schedule 7.01 Permitted Liens
EXHIBITS
Exhibit A Notice of Borrowing
Exhibit B Notice of Conversion/Continuation
Exhibit C Form of Guaranty
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of December 31, 1994, between
SILICON GRAPHICS, INC., a Delaware corporation (the "Company"), and Bank of
America National Trust and Savings Association (together with its successors and
assigns, the "Bank").
WHEREAS, the Bank has agreed to make available to the Company a revolving
credit facility upon the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 DEFINED TERMS. In addition to the terms defined elsewhere in this
Agreement, the following terms have the following meanings:
"ACCEPTANCE" has the meaning specified in subsection 2.06(a).
"ACQUIREE" has the meaning specified in Section 7.03.
"ACQUISITION" means any transaction or series of related
transactions for the purpose of or resulting in (a) the acquisition,
directly or indirectly, of all or substantially all of the assets of a
Person, or of any business or division of a Person, (b) the acquisition,
directly or indirectly, of in excess of 50% of the capital stock,
partnership interests or equity of any Person or otherwise causing any
Person to become a Subsidiary of the Company, or (c) a merger or
consolidation or any other combination with another Person (other than a
Person that is a Subsidiary of the Company) provided that the Company or
the Company's Subsidiary is the surviving entity.
"AFFILIATE" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or
indirectly, the
1
<PAGE>
power to direct or cause the direction of the management and policies of
the other Person, whether through the ownership of voting securities, by
contract or otherwise. Without limitation, any director, executive
officer or beneficial owner of 5% or more of the equity of a Person shall
for the purposes of this Agreement, be deemed to control the other Person.
In no event shall the Bank be deemed an "Affiliate" of the Company or of
any Subsidiary of the Company.
"AGREEMENT" means this Credit Agreement, as amended, supplemented
or modified from time to time in accordance with the terms hereof.
"APPLICABLE MARGIN" means
(i) with respect to Base Rate Loans, 0.00%;
(ii) with respect to CD Rate Loans, 0.30%; and
(iii) with respect to Offshore Rate Loans, 0.30%.
"ASSIGNEE" has the meaning specified in Section 9.08.
"ASSIGNMENT AND ACCEPTANCE" has the meaning specified in Section
9.08.
"ATTORNEY COSTS" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the allocated
reasonable cost of internal legal services and all reasonable
disbursements of internal counsel.
"BANK" has the meaning specified in the introductory paragraph
hereof.
"BANK AFFILIATE" means a Person engaged primarily in the business
of commercial banking and that is a Subsidiary of the Bank or of a Person
of which the Bank is a Subsidiary.
"BANKRUPTCY CODE" means the Federal Bankruptcy Reform Act of 1978
(11 U.S.C. Section 101, ET SEQ.).
"BASE RATE" means, for any day, the higher of: (a) 0.50% per
annum above the latest Federal Funds Rate; and (b) the rate of interest
publicly announced from time to time by the Bank in San Francisco,
California, as its "reference rate." The "reference rate" is a rate set
by the Bank based upon various factors including the Bank's costs and
desired return, general economic conditions and other factors, and
2
<PAGE>
is used as a reference point for pricing some loans, which may be priced
at, above, or below such announced rate. Any change in the reference rate
announced by the Bank shall take effect at the opening of business on the
day specified in the public announcement of such change.
"BASE RATE LOAN" means a Loan that bears interest based on the
Base Rate.
"BORROWING" means a borrowing hereunder consisting of a Loan of a
single type made to the Company or any Other Borrowing Entity on a given
day by the Bank pursuant to Article II and, other than in the case of Base
Rate Loans, having a single Interest Period.
"BUSINESS DAY" means any day other than a Saturday, Sunday or
other day on which commercial banks in San Francisco are authorized or
required by law to close and, if the applicable Business Day relates to
any Offshore Rate Loan, means such a day on which dealings are carried on
in the applicable offshore dollar (or other applicable currency) interbank
market.
"CAPITAL ADEQUACY REGULATION" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law, in
each case, regarding capital adequacy of any bank or of any corporation
controlling a bank.
"CAPITAL LEASE" has the meaning specified in the definition of
Capital Lease Obligations.
"CAPITAL LEASE OBLIGATIONS" means all monetary obligations of the
Company or any of its Subsidiaries under any leasing or similar
arrangement which, in accordance with GAAP, is classified as a capital
lease ("Capital Lease").
"CD RATE" means, for each Interest Period in respect of a CD Rate
Loan, the rate of interest (rounded upward to the nearest 1/100th of 1%)
determined pursuant to the following formula:
CD Rate = Certificate of Deposit Rate + Assessment
--------------------------- Rate
1.00 - Reserve Percentage
Where:
3
<PAGE>
"Assessment Rate" means the maximum net annual assessment rate
(whether or not applicable to the Bank) determined by the Bank to be
in effect on the first day of such Interest Period payable by banks
to the Federal Deposit Insurance Corporation, or any successor, for
insuring time deposits made in dollars at the offices of banks in the
United States.
"Certificate of Deposit Rate" means for any Interest Period for
CD Rate Loans the rate of interest per annum determined by the Bank
to be the arithmetic mean (rounded upward to the nearest 1/100th of
1%) of the rates notified to the Bank as the rates of interest bid by
two or more certificate of deposit dealers of recognized standing
selected by the Bank for the purchase at face value of dollar
certificates of deposit issued by major United States banks, for a
maturity comparable to such Interest Period and in the approximate
amount of the CD Rate Loans to be made, at the time selected by the
Bank on the first day of such Interest Period.
"Reserve Percentage" means for any Interest Period for CD Rate
Loans the maximum reserve percentage (expressed as a decimal, rounded
upward to the nearest 1/100th of 1%), as determined by the Bank, in
effect on the first day of such Interest Period (including any
ordinary, marginal, emergency, supplemental, special and other
reserve percentages) prescribed by the Federal Reserve Board for
determining the maximum reserves to be maintained by member banks of
the Federal Reserve System with deposits exceeding $1,000,000,000 for
new non-personal time deposits for a period comparable to such
Interest Period and in an amount of $100,000 or more.
"CD RATE LOAN" means a Loan that bears interest based on the CD
Rate.
"CLOSING DATE" means the date on which all conditions precedent
set forth in Section 4.01 are satisfied or waived by the Bank.
"CODE" means the Internal Revenue Code of 1986 and any regulations
promulgated thereunder.
"COMPANY" has the meaning specified in the introductory paragraph
hereof.
4
<PAGE>
"CONTRACTUAL OBLIGATIONS" means, as to any Person, any provision of
any security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other instrument, document
or agreement to which such Person is a party or by which it or any of its
property is bound.
"CONVERSION DATE" means any date on which the Company elects to
convert a Base Rate Loan to an Offshore Rate Loan or a CD Rate Loan; a CD
Rate Loan to an Offshore Rate Loan or a Base Rate Loan; or an Offshore Rate
Loan to a CD Rate Loan or a Base Rate Loan.
"DEFAULT" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured or otherwise
remedied) constitute an Event of Default.
"DOLLARS", "dollars" and "$" each mean lawful money of the
United States.
"DOMESTIC LENDING OFFICE" means, with respect to the Bank, the
office of the Bank designated as such in the signature pages hereto or such
other office of the Bank as it may from time to time specify to the
Company.
"ENVIRONMENTAL LAWS" means any and all federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements, or
governmental restrictions relating to the environment or the release of any
materials into the environment, including but not limited to those related
to hazardous substances or wastes, air emissions and discharges to waste or
public systems.
"EQUIVALENT AMOUNT" means the equivalent in Dollars of a Local
Currency or Offshore Currency, calculated at the spot rate for the purchase
of such Local Currency or Offshore Currency (as applicable) with Dollars
quoted by the Bank's Grand Cayman Branch, Grand Cayman, B.W.I., at
approximately 10:00 a.m. (San Francisco time) two Business Days prior to
the relevant date of any calculation.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and regulations promulgated thereunder.
"EURODOLLAR RESERVE PERCENTAGE" has the meaning specified in the
definition of "Offshore Rate".
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"EVENT OF DEFAULT" means any of the events or circumstances
specified in Section 8.01.
"EXCHANGE ACT" means the Securities and Exchange Act of 1934 and
regulations promulgated thereunder.
"FEDERAL FUNDS RATE" means, for any period, the rate set forth in
the weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)". If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for
U.S. Government Securities, or any successor publication, published by the
Federal Reserve Bank of New York (including any such successor, the
"Composite 3:30 p.m. Quotation") for such day under the caption "Federal
Funds Effective Rate". If on any relevant day the appropriate rate for
such previous day is not yet published in either H.15(519) or the Composite
3:30 p.m. Quotations, the rate for such day will be the arithmetic mean of
the rates for the last transaction in overnight Federal funds arranged
prior to 9:00 a.m. (New York time) on that day by each of three leading
brokers of Federal funds transactions in New York City selected by the
Bank.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"GAAP" means generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants
and statements and pronouncements of the Financial Accounting Standards
Board (or agencies with similar functions of comparable stature and
authority within the accounting profession), or in such other statements by
such other entity as may be in general use by significant segments of the
U.S. accounting profession, which are applicable to the circumstances as of
the date of determination.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state
or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) 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.
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"GUARANTY" has the meaning specified in Section 2.01.
"GUARANTY OBLIGATION" means, as applied to any Person, any direct
or indirect liability of that Person with respect to any Indebtedness,
lease, dividend, letter of credit or other obligation (the "primary
obligations") of another Person (the "primary obligor"), including any
obligation of that Person, whether or not contingent, (a) to purchase,
repurchase or otherwise acquire such primary obligations or any property
constituting direct or indirect security therefor, or (b) to advance or
provide funds (i) for the payment or discharge of any such primary
obligation, or (ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor, or (c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation,
or (d) otherwise to assure or hold harmless the holder of any such primary
obligation against loss in respect thereof. The amount of any such
Guaranty Obligation shall be deemed equal to the stated or determinable
amount of the primary obligation in respect of which such Guaranty
Obligation is made or, if not stated or if indeterminable, the maximum
reasonably anticipated liability in respect thereof.
"INDEBTEDNESS" of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than
trade payables entered into in the ordinary course of business pursuant to
ordinary terms); (c) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses; (d) all
indebtedness created or arising under any conditional sale or other title
retention agreement, in either case with respect to property acquired by
the Person (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale
of such Property), excluding obligations arising from master lease
agreements and other off-balance sheet financing arrangements; (e) all
Capital Lease Obligations; and (f) all Guaranty Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses
(a) through (f) above.
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"INDEMNIFIED PERSON" has the meaning specified in subsection
9.05(a).
"INDEMNIFIED LIABILITIES" has the meaning specified in subsection
9.05(a).
"INSOLVENCY PROCEEDING" means (a) any case, action or proceeding
before any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the
benefit of creditors, composition, marshalling of assets for creditors or
other, similar arrangement in respect of its creditors generally or any
substantial portion of its creditors; in each case (a) and (b) undertaken
under U.S. Federal, State or foreign law, including the Bankruptcy Code.
"INTEREST PAYMENT DATE" means, with respect to any CD Rate Loan or
Offshore Rate Loan, the last day of each Interest Period applicable to such
Loan and, with respect to Base Rate Loans, the last Business Day of each
calendar quarter and each date a Base Rate Loan is converted into an
Offshore Rate Loan or a CD Rate Loan, PROVIDED, HOWEVER, that if any
Interest Period for a CD Rate Loan or Offshore Rate Loan exceeds 90 days or
three months, respectively, interest shall also be paid on the date which
falls 90 days or three months after the beginning of such Interest Period.
"INTEREST PERIOD" means, (a) with respect to any Offshore Rate
Loan, the period commencing on the Business Day the Loan is disbursed or
continued or on the Conversion Date on which the Loan is converted to the
Offshore Rate Loan and ending on the date one, two, three or six months
thereafter, as selected by the Company in its Notice of Borrowing or Notice
of Conversion/Continuation; and (b) with respect to any CD Rate Loan, the
period commencing on the Business Day the CD Rate Loan is disbursed or
continued or on the Conversion Date on which a Loan is converted to the CD
Rate Loan and ending 30, 60, 90 or 180 days thereafter, as selected by the
Company in its Notice of Borrowing or Notice of Conversion/Continuation;
PROVIDED that:
(i) if any Interest Period pertaining to an Offshore Rate
Loan or CD Rate Loan would otherwise end on a day which is not a
Business Day, that Interest Period shall be extended to the next
succeeding Business Day unless, in the case of an Offshore Rate Loan,
the result of such extension would be to carry such Interest
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Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Business Day;
(ii) any Interest Period pertaining to an Offshore Rate Loan
that begins on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest
Period; and
(iii) no Interest Period for any Revolving Loan shall extend
beyond 90 days after the Revolving Termination Date.
"JOINT VENTURE" means a single-purpose corporation, partnership,
joint venture or other similar legal arrangement (whether created pursuant
to contract or conducted through a separate legal entity) now or hereafter
formed by the Company or any of its Subsidiaries with another Person in
order to conduct a common venture or enterprise with such Person.
"LENDING OFFICE" means, with respect to the Bank, the office or
offices of the Bank specified as its "Lending Office" or "Domestic Lending
Office" or "Offshore Lending Office", as the case may be, opposite its name on
the signature page hereto, or such other office or offices of the Bank as it may
from time to time notify the Company.
"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment, charge or deposit arrangement, encumbrance, lien (statutory or
other) or preference, priority or other security interest or preferential
arrangement of any kind or nature whatsoever (including those created by,
arising under or evidenced by any conditional sale or other title retention
agreement, the interest of a lessor under a Capital Lease Obligation, any
financing lease having substantially the same economic effect as any of the
foregoing, or the filing of any financing statement naming the owner of the
asset to which such lien relates as debtor, under the UCC or any comparable
law) and any contingent or other agreement to provide any of the foregoing,
but not including the interest of a lessor under an Operating Lease.
"LOAN" means an extension of credit by the Bank to the Company or
an Other Borrowing Entity pursuant to Article II (other than pursuant to
Section 2.06), and may be a Base Rate Loan, CD Rate Loan, Offshore Rate
Loan or any Local Currency Loan.
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"LOAN DOCUMENTS" means this Agreement and all documents delivered
to the Bank in connection therewith (including all documents executed by
the Company, any Other Borrowing Entity, or the Bank in connection with the
making of any Local Currency Loans or the issuance of any Acceptances).
"LOCAL CURRENCY" means a lawful currency other than United States
dollars which is available at a branch of the Bank located in a country
other than the United States and is the legal tender of that country where
such branch is located.
"LOCAL CURRENCY LOAN" means a Loan in a Local Currency made
pursuant to and in accordance with the provisions of Section 2.04.
"MARGIN STOCK" means "margin stock" as such term is defined in
Regulation U of the Federal Reserve Board.
"MATERIAL ADVERSE EFFECT" means a material adverse change in, or a
material adverse effect upon, any of (a) the operations, business,
financial condition of the Company or the Company and its Subsidiaries
taken as a whole; (b) the ability of the Company to perform under any Loan
Document and avoid any Event of Default; or (c) the legality, validity,
binding effect or enforceability of any Loan Document.
"NOTICE OF BORROWING" means a notice given by the Company to the
Bank pursuant to Section 2.03, in substantially the form of EXHIBIT A.
"NOTICE OF CONVERSION/CONTINUATION" means a notice given by the
Company to the Bank pursuant to Section 2.05, in substantially the form of
EXHIBIT B.
"NOTICE OF LIEN" means any "notice of lien" or similar document
intended to be filed or recorded with any court, registry, recorder's
office, central filing office or other Governmental Authority for the
purpose of evidencing, creating, perfecting or preserving the priority of a
Lien securing obligations owing to a Governmental Authority.
"OBLIGATIONS" means all Loans, Acceptances and other Indebtedness,
advances, debts, liabilities, obligations, covenants and duties owing by
the Company to the Bank or any other Person required to be indemnified
under any Loan Document, of any kind or nature, present or future, whether
or not evidenced by any note, guaranty or other instrument, arising under
this Agreement, under any other Loan Document, or in respect of any Rate
Contract, whether or not for the
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payment of money, whether arising by reason of an extension of credit,
loan, guaranty, indemnification or in any other manner, whether direct or
indirect (including those acquired by assignment), absolute or contingent,
due or to become due, now existing or hereafter arising and however
acquired.
"OFFSHORE CURRENCY" means a lawful currency other than United
States dollars which is freely transferable and convertible into dollars
and is traded in the offshore interbank currency markets at the time of the
Revolving Loan.
"OFFSHORE LENDING OFFICE" means with respect to the Bank, the
office of the Bank designated as such on the applicable signature page
hereto or such other office of the Bank as the Bank may from time to time
specify to the Company.
"OFFSHORE RATE" means, for each Interest Period in respect of an
Offshore Rate Loan, an interest rate per annum (rounded upward to the
nearest 1/16th of 1%) determined pursuant to the following formula:
Offshore Rate = IBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"EURODOLLAR RESERVE PERCENTAGE" means the maximum reserve
percentage (expressed as a decimal, rounded upward to the nearest
1/100th of 1%) in effect on the date IBOR for such Interest Period is
determined (whether or not applicable to the Bank) under regulations
issued from time to time by the Federal Reserve Board for determining
the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with respect to
Eurocurrency funding (currently referred to as "Eurocurrency
liabilities") having a term comparable to such Interest Period; and
"IBOR" means the rate of interest per annum determined by the
Bank as the rate at which deposits in the applicable currency in the
approximate amount of the Bank's Offshore Rate Loans and having a
maturity comparable to such Interest Period would be offered by the
Bank's Grand Cayman Branch, Grand Cayman B.W.I., to major banks in
the offshore dollar (or other applicable currency) interbank market
upon request of such banks at approximately 11:00 a.m. (New York City
time) two
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Business Days prior to the commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as of the
effective date of any change in the Eurodollar Reserve Percentage.
"OFFSHORE RATE LOAN" means a Loan that bears interest based on the
Offshore Rate, including a Revolving Loan made in an Offshore Currency.
"OPERATING LEASE" means, as applied to any Person, any lease of
Property which is not a Capital Lease.
"ORDINARY COURSE OF BUSINESS" means, in respect of any transaction
involving the Company or any Subsidiary of the Company, the ordinary course
of such Person's business, substantially as conducted by any such Person
prior to or as of the Closing Date, and undertaken by such Person in good
faith and not for purposes of evading any covenant or restriction in any
Loan Document.
"ORGANIZATION DOCUMENTS" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate of
determination or instrument relating to the rights of preferred
shareholders of such corporation, and all applicable resolutions of the
board of directors (or any committee thereof) of such corporation.
"OTHER BORROWING ENTITY" has the meaning specified in subsection
2.01(b).
"PARTICIPANT" has the meaning specified in subsection 9.08(d).
"PERMITTED LIENS" has the meaning specified in Section 7.01.
"PENSION PLAN" means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA which the Company sponsors, maintains,
or to which it makes, is making, or is obligated to make contributions, or
in the case of a multiple employer plan (as described in Section 4064(a) of
ERISA) has made contributions at any time during the immediately preceding
five (5) plan years.
"PERSON" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, Joint
Venture or Governmental Authority.
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"PLAN" means an employee benefit plan (as defined in Section 3(3)
of ERISA) which the Company sponsors or maintains or to which the Company
makes, is making, or is obligated to make contributions and includes any
Pension Plan.
"PROHIBITED LC LOANS" has the meaning specified in subsection
3.02(a).
"PROPERTY" means any estate or interest in any kind of property or
asset, whether real, personal or mixed, and whether tangible or intangible.
"RATE CONTRACTS" means interest rate and currency swap agreements,
cap, floor and collar agreements, interest rate insurance, currency spot
and forward contracts and other agreements or arrangements designed to
provide protection against fluctuations in interest or currency exchange
rates.
"RELATED PERSON" means any trade or business (whether or not
incorporated) under common control with the Company within the meaning of
Section 414(b), 414(c) or 414(m) of the Code.
"REQUIREMENT OF LAW" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of
a Governmental Authority, in each case applicable to or binding upon the
Person or any of its property or to which the Person or any of its property
is subject.
"RESPONSIBLE OFFICER" means the chairman and chief executive
officer; the president and chief operating officer; the senior vice
president, finance and chief financial officer; the vice president, finance
and treasurer; or the vice president, controller of the Company, or any
other officer having substantially the same authority and responsibility
or, with respect to financial matters, the chief financial officer or the
treasurer of the Company, or any other officer having substantially the
same authority and responsibility.
"REVOLVING COMMITMENT" has the meaning specified in subsection
2.01(a).
"REVOLVING LOAN" means Base Rate Loans, CD Rate Loans and Offshore
Rate Loans.
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"REVOLVING TERMINATION DATE" means the earlier to occur of
(a) December 31, 1996; and
(b) the date on which the Revolving Commitment shall terminate
in accordance with the provisions of this Agreement.
"SEC" means the Securities and Exchange Commission, or any
successor thereto.
"SOLVENT" means, as to any Person at any time, that (a) the fair
value of the Property of such Person is greater than the amount of such
Person's liabilities (including disputed, contingent and unliquidated
liabilities) as such value is established and liabilities evaluated for
purposes of Section 101(31) of the Bankruptcy Code; (b) the present fair
saleable value of the Property of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured; (c) such Person is able to
realize upon its Property and pay its debts and other liabilities
(including disputed, contingent and unliquidated liabilities) as they
mature in the normal course of business; (d) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond
such Person's ability to pay as such debts and liabilities mature; and (e)
such Person is not engaged in business or a transaction, and is not about
to engage in business or a transaction, for which such Person's property
would constitute unreasonably small capital.
"SUBSIDIARY" of a Person means any corporation, association,
partnership, Joint Venture or other business entity of which more than 50%
of the voting stock or other equity interests (in the case of Persons other
than corporations), is owned or controlled directly or indirectly by the
Person, or one or more of the Subsidiaries of the Person, or a combination
thereof.
"TANGIBLE NET WORTH" has the meaning specified in Section 7.08.
"UCC" means the Uniform Commercial Code as in effect in any
jurisdiction.
"UNITED STATES" and "U.S." each means the United States of
America.
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"WHOLLY-OWNED SUBSIDIARY" means any corporation in which (other
than directors' qualifying shares required by law) 100% of the capital
stock of each class having ordinary voting power, and 100% of the capital
stock of every other class, in each case, at the time as of which any
determination is being made, is owned, beneficially and of record, by the
Company, or by one or more of the other Wholly-Owned Subsidiaries, or both.
1.02 OTHER INTERPRETIVE PROVISIONS.
(a) DEFINED TERMS. Unless otherwise specified herein or therein,
all terms defined in this Agreement shall have the defined meanings when used in
any certificate or other document made or delivered pursuant hereto. The
meaning of defined terms shall be equally applicable to the singular and plural
forms of the defined terms. Terms (including uncapitalized terms) not otherwise
defined herein and that are defined in the UCC shall have the meanings therein
described.
(b) THE AGREEMENT. The words "hereof", "herein", "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, schedule and exhibit references are to this Agreement unless otherwise
specified.
(c) CERTAIN COMMON TERMS.
(i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(ii) The term "including" is not limiting and means "including
without limitation."
(d) PERFORMANCE; TIME. Whenever any performance obligation
hereunder (other than a payment obligation) shall be stated to be due or
required to be satisfied on a day other than a Business Day, such performance
shall be made or satisfied on the next succeeding Business Day. In the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including"; the words "to" and "until" each mean
"to but excluding," and the word "through" means "to and including". If any
provision of this Agreement refers to any action taken or to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
interpreted to encompass any and all means, direct or indirect, of taking, or
not taking, such action.
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(e) CONTRACTS. Unless otherwise expressly provided herein,
references to agreements and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications thereto, but only to
the extent such amendments and other modifications are not prohibited by the
terms of any Loan Document.
(f) LAWS. References to any statute or regulation are to be
construed as including all statutory and regulatory provisions consolidating,
amending, replacing, supplementing or interpreting the statute or regulation.
(g) CAPTIONS. The captions and headings of this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
(h) INDEPENDENCE OF PROVISIONS. The parties acknowledge that this
Agreement and other Loan Documents may use several different limitations, tests
or measurements to regulate the same or similar matters, and that such
limitations, tests and measurements are cumulative and must each be performed,
except as expressly stated to the contrary in this Agreement.
1.03 ACCOUNTING PRINCIPLES.
(a) Unless the context otherwise clearly requires, all accounting
terms not expressly defined herein shall be construed, and all financial
computations required under this Agreement shall be made, in accordance with
GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter" refer
to such fiscal periods of the Company.
ARTICLE II
THE CREDIT FACILITY
2.01 AMOUNT AND TERMS OF THE CREDIT FACILITY.
(a) COMMITTED REVOLVING LOANS. The Bank agrees, on the terms and
conditions hereinafter set forth, to make Revolving Loans, in dollars or
Offshore Currencies, from time to time on any Business Day during the period
from the Closing Date to the Revolving Termination Date, in an aggregate amount
not to exceed at any time outstanding $20,000,000 (such amount as the same may
be reduced pursuant to Section 2.07 or as a result of one or more assignments
pursuant to Section 9.08, the Bank's "Revolving Commitment"); PROVIDED,
HOWEVER, that, after giving effect to any
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<PAGE>
Borrowing of a Revolving Loan, or the continuation or conversion thereof, the
aggregate principal amount of all outstanding Revolving Loans and all Local
Currency Loans and the face amount of all Acceptances issued hereunder shall not
exceed the Revolving Commitment. In determining compliance with the immediately
preceding sentence, all Loans denominated in Local Currencies or Offshore
Currencies shall be deemed to be converted to their Equivalent Amounts in
Dollars on the date any such Loan is made. Within the limits of the Bank's
Revolving Commitment, and subject to the other terms and conditions hereof, the
Company may borrow under this subsection 2.01(a), prepay pursuant to Section
2.08 and reborrow pursuant to this subsection 2.01(a).
(b) DISCRETIONARY REVOLVING LOANS AND ACCEPTANCES. From time to
time on any Business Day during the period from the Closing Date to the
Revolving Termination Date, upon the request of the Company, and if agreed to by
the Bank in its reasonable discretion, the Bank agrees to make Loans to and
issue Acceptances for the account of the Company's Subsidiaries. If the Bank
shall agree to make a Loan to or issue an Acceptance in favor of a Subsidiary of
the Company, such Subsidiary shall be deemed then to be an "Other Borrowing
Entity" and such Subsidiary shall remain an Other Borrowing Entity for so long
as any such Loan or Acceptance remains outstanding. The Company acknowledges
and agrees (and shall cause each Other Borrowing Entity to acknowledge and
agree) that (i) prior to the Bank making any Loan to or issuing any Acceptance
for the account of an Other Borrowing Entity, the Bank expects to receive an
appropriate guaranty or guaranties by the Company of the Obligations to the Bank
of each Other Borrowing Entity that receives such an extension of credit in
substantially the form of EXHIBIT C (each a "Guaranty"), together with such
other documents or information as may be required by the Bank (in its reasonable
discretion), (ii) reasonable delays are to be anticipated by the Company and the
Other Borrowing Entities in connection with the Bank's review of, and
satisfaction with, each Guaranty and the other documents and information
required to be received by the Bank (in its reasonable discretion) prior to the
Bank making any Loan to or issuing any Acceptance for the account of any Other
Borrowing Entity (and the Bank will make reasonable efforts to keep the Company
informed of the length of any anticipated delays), and (iii) the Company and the
Other Borrowing Entities assume all of the risks associated with any reasonable
delays in receiving any such extension of credit from the Bank. The total
amount of Revolving Loans and Local Currency Loans made to, and the face amount
of all Acceptances issued for the account of, the Company and the Other
Borrowing Entities shall not at any time exceed the Revolving Commitment. In
determining compliance at any time with the immediately preceding sentence, all
Loans to the Company and the Other Borrowing Entities denominated in Local
Currencies or
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Offshore Currencies shall be deemed to be converted to their Equivalent Amounts
in Dollars on the date any such Loan is made.
2.02 LOAN ACCOUNTS. The Loans made by the Bank shall be evidenced by
one or more loan accounts maintained by the Bank in the ordinary course of
business. The loan accounts maintained by the Bank shall be conclusive absent
manifest error of the amount of the Loans made by the Bank to the Company or any
Other Borrowing Entity and the interest and payments thereon. Any failure so to
record or any error in doing so shall not, however, limit or otherwise affect
the obligation of the Company or any Other Borrowing Entity hereunder to pay any
amount owing with respect to the Loans.
2.03 PROCEDURE FOR BORROWING.
(a) Each Borrowing shall be made upon the Company's irrevocable
written notice to the Bank in accordance with Section 9.02 in the form of a
Notice of Borrowing to the Bank (which notice must be received by the Bank prior
to 9:00 a.m. (San Francisco time) (i) two Business Days prior to the requested
Borrowing date, in the case of Offshore Rate Loans; (ii) two Business Days prior
to the requested Borrowing date, in the case of CD Rate Loans, and (iii) one
Business Day prior to the requested Borrowing date, in the case of Base Rate
Loans, specifying:
(A) the amount of the Loan, which, in the case of
Offshore Rate Loans and CD Rate Loans, shall be in a minimum
principal amount of One Million dollars ($1,000,000) or any multiple
of One Million dollars ($1,000,000) in excess thereof and, in the
case of Base Rate Loans shall be in a minimum principal amount of One
Hundred Thousand Dollars ($100,000) or any multiple of One Hundred
Thousand Dollars ($100,000) in excess thereof;
(B) the requested Borrowing date, which shall be a
Business Day;
(C) the currency of the proposed Loan;
(D) whether the Loan is to be an Offshore Rate Loan, CD
Rate Loan or Base Rate Loan;
(E) the duration of the Interest Period applicable to
such Loan included in such notice. If the Notice of Borrowing shall
fail to specify the duration of the Interest Period for any CD Rate
Loan or Offshore
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Rate Loan, such Interest Period shall be 90 days or three months,
respectively; and
(F) the account or accounts to which such Loan should
be deposited into or sent in accordance with the Notice of Borrowing.
(b) The Bank will make the amount of the Borrowing available to the
Company by 10:00 a.m. (San Francisco time) on the Borrowing date requested by
the Company in funds immediately available to the Company.
(c) Unless the Bank shall otherwise agree, during the existence of
a Default or Event of Default, the Company may not elect to have a Loan be made
as, or converted into or continued as, an Offshore Rate Loan or a CD Rate Loan.
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2.04 LOCAL CURRENCY LOANS.
(a) From time to time from the Closing Date until the Revolving
Termination Date, if agreed to by the Bank in each case (in the Bank's
reasonable discretion), the Bank agrees to consider requests to make Local
Currency Loans to the Company and to the Other Borrowing Entities. If the Bank
does decide to make Local Currency Loans, the Bank and the Company or each
appropriate Other Borrowing Entity shall make their best efforts to agree, at
the time of the request for a Local Currency Loan, on the date such Local
Currency Loan is to be made, on the Local Currency in which such Local Currency
Loan is to be made, and on the amount, principal payment dates, interest rate
and payment dates, prepayment and overdue payment terms, conversion and
continuation terms, and the reserve and tax provisions for such Local Currency
Loan. Each Local Currency Loan shall be due and payable no later than 90 days
after the Revolving Termination Date. Each request for a Local Currency Loan
and each confirmation of a telephone request for a Local Currency Loan shall be
in the form of a notice of borrowing (which shall be in a form reasonably
satisfactory to the Bank) executed by the Company or, if so required by the Bank
in its reasonable discretion, by the Company and each appropriate Other
Borrowing Entity. All references to the Bank herein with regard to any Local
Currency Loan shall be deemed to include any foreign office, foreign branch or
foreign affiliate of the Bank, as determined by the Bank, through which the Bank
makes such Local Currency Loan.
(b) The Company acknowledges and agrees (and shall cause each Other
Borrowing Entity to acknowledge and agree) that (i) prior to the Bank making any
Local Currency Loan, the Bank expects to receive appropriate Guaranties (in the
case of Local Currency Loans to Other Borrowing Parties) and other documentation
and information required to be received by the Bank (in its reasonable
discretion) in accordance with the terms of this Agreement, (ii) reasonable
delays are to be anticipated by the Company and the Other Borrowing Entities in
connection with the Bank's review of, and satisfaction with, the Guaranties (in
the case of Local Currency Loans to Other Borrowing Entities) and the other
documents and information required to be received by the Bank prior to the Bank
making any Local Currency Loan, (iii) the Company and the Other Borrowing
Entities assume all of the risks associated with any reasonable delays in
receiving any Local Currency Loan from the Bank, and (iv) under no circumstances
shall the total amount of Local Currency Loans and Revolving Loans made to, and
the face amount of all Acceptances issued for the account of, the Company and
the Other Borrowing Entities at any time exceed the Revolving Commitment. In
determining compliance at any time with clause (iv) of the
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immediately preceding sentence, all Loans denominated in Local Currencies or
Offshore Currencies shall be deemed to be converted to their Equivalent Amounts
in Dollars on the date any such Loan is made.
2.05 CONVERSION AND CONTINUATION ELECTIONS.
(a) The Company may upon irrevocable written notice to the Bank in
accordance with subsection 2.05(b):
(i) elect to convert on any Business Day, any Base Rate Loan
(or any part thereof in an amount not less than $1,000,000, or that is in
an integral multiple of $1,000,000 in excess thereof) into an Offshore Rate
Loan or CD Rate Loan or;
(ii) elect to convert on any Interest Payment Date any
Offshore Rate Loan or CD Rate Loan maturing on such Interest Payment Date
(or any part thereof in an amount not less than $1,000,000, or that is in
an integral multiple of $1,000,000 in excess thereof) into a Base Rate
Loan; or
(iii) elect to renew on any Interest Payment Date any Offshore
Rate Loan or CD Rate Loan maturing on such Interest Payment Date (or any
part thereof in an amount not less than $1,000,000, or that is in an
integral multiple of $1,000,000 in excess thereof);
PROVIDED, that if the amount of any CD Rate Loan or Offshore Rate Loan shall
have been reduced, by payment, prepayment, or conversion of part thereof to be
less than $1,000,000, the CD Rate Loan or Offshore Rate Loan shall automatically
convert into a Base Rate Loan, and on and after such date the right of the
Company to continue such Loan as an Offshore Rate Loan or CD Rate Loan, as the
case may be, shall terminate.
(b) The Company shall deliver a Notice of Conversion/Continuation
in accordance with Section 9.02 to be received by the Bank not later than 10:00
a.m. (San Francisco time) at least (i) two Business Days in advance of the
Conversion Date or continuation date, if any Loan is to be converted into or
continued as an Offshore Rate Loan; (ii) two Business Days in advance of the
Conversion Date or continuation date, if any Loan is to be converted into or
continued as a CD Rate Loan; and (iii) one Business Day in advance of the
Conversion Date or continuation date, if any Loan is to be converted into or
renewed as a Base Rate Loan, specifying:
(A) the proposed Conversion Date or continuation
date;
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(B) the aggregate amount of the Loan to be
converted or renewed;
(C) the nature of the proposed conversion or
continuation; and
(D) the duration of the requested Interest
Period.
(c) If upon the expiration of any Interest Period applicable to any
CD Rate Loan or Offshore Rate Loan, the Company has failed to select a new
Interest Period to be applicable to such CD Rate Loan or Offshore Rate Loan, as
the case may be, or if any Default or Event of Default shall then exist, the
Company shall be deemed to have elected to convert such CD Rate Loan or Offshore
Rate Loan into a Base Rate Loan effective as of the expiration date of such
current Interest Period.
2.06 BANKERS' ACCEPTANCES. (a) The Bank agrees, on the terms and
conditions hereinafter set forth, from time to time on any Business Day during
the period from the Closing Date to the Revolving Termination Date to create and
discount acceptances (each an "Acceptance") for the account of the Company or,
subject to subsection 2.01(b), an Other Borrowing Entity; PROVIDED, HOWEVER,
that, after giving effect to the issuance of any Acceptance, the aggregate
principal amount of all outstanding Revolving Loans and all Local Currency Loans
and the face amount of all Acceptances made hereunder shall not exceed the
Revolving Commitment. In determining compliance with the immediately preceding
sentence, all Loans denominated in Local Currencies or Offshore Currencies shall
be deemed to be converted to the Equivalent Amounts in Dollars on the date any
such Acceptance is issued.
(b) Each Acceptance shall be in an amount not less than $1,000,000.
The creation and discount of Acceptances shall be pursuant to the terms and
conditions hereof and of a Bank standard form agreement for Acceptances executed
by the Company or an Other Borrowing Entity, as applicable, as further set forth
in Article IV.
(c) Each draft related to an Acceptance hereunder shall: (i) mature
on or before 180 days after the date of such draft but in no event later than 90
days after the Revolving Termination Period; and (ii) be otherwise in form and
substance satisfactory to the Bank.
(d) The discount and commission for each draft shall be at the rate
which the Bank advises the Company or the Other Borrowing Entity is applicable
to Acceptances created for the
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account of the Company's or the Other Borrowing Entity, as applicable, on the
date of Acceptance and discount. The minimum commission will be $500.
(e) The Company shall pay or cause the Other Borrowing Entity to pay
to the Bank the face amount of each Acceptance created hereunder on the maturity
date of the draft related to such Acceptance. Any sum owed to the Bank with
respect to an Acceptance created and discounted for the account of the Company
or an Other Borrowing Entity which is not paid when due shall, at the option of
the Bank in each instance, be deemed to be a Revolving Loan to the Company or
the Other Borrowing Entity, as applicable, outstanding under this Agreement and
shall thereafter bear interest at the Base Rate.
(f) The Bank shall have no obligation to issue an Acceptance
hereunder if the requested Acceptance is not in compliance with applicable
regulations of the Federal Reserve Board governing bankers' Acceptances or is
ineligible for discount by Federal Reserve Banks. In the event that any
regulatory development or other circumstance relating to the creation of
Acceptances hereunder or their eligibility for discount shall at any time in the
reasonable opinion of the Bank make it unlawful or impracticable for the Bank to
create Acceptances hereunder or to discount them, no Acceptances shall be
created hereunder thereafter until and unless the Bank determines that such
creation would be lawful and practicable. In the event that any Acceptance
hereunder is created and is not eligible for discount by Federal Reserve Banks,
the Company and each Other Borrowing Entity shall indemnify the Bank for all
costs and expenses resulting from such determination (including costs under
Regulation D of the Federal Reserve Board).
2.07 VOLUNTARY TERMINATION OR REDUCTION OF REVOLVING COMMITMENT. The
Company may, upon not less than five Business Days' prior written notice to the
Bank, terminate the Revolving Commitment or permanently reduce the Revolving
Commitment by an aggregate minimum amount of $1,000,000 or any multiple of
$1,000,000; PROVIDED that no such reduction or termination shall be permitted
if, after giving effect thereto and to any prepayments of the Revolving Loans
made on the effective date thereof, the then outstanding principal amount of the
Revolving Loans and Local Currency Loans and the face amount of all Acceptances
issued hereunder would exceed the amount of the Revolving Commitment then in
effect and, PROVIDED, FURTHER, that once reduced in accordance with this
Section 2.07, the Revolving Commitment may not be increased. If the Revolving
Commitment is terminated in its entirety, all accrued fees to, but not including
the effective date of such termination shall be payable
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to the Bank on the effective date of such termination without any premium or
penalty.
2.08 OPTIONAL PREPAYMENTS. Subject to Section 3.04, the Company may, at
any time or from time to time, upon at least two Business Days' notice to the
Bank, prepay Revolving Loans in whole or in part, in amounts of $1,000,000 or
any multiple of $1,000,000 in excess thereof. Such notice of prepayment shall
specify the date and amount of such prepayment and whether such prepayment is of
Base Rate Loans, CD Rate Loans or Offshore Rate Loans, or any combination
thereof. Such notice shall not thereafter be revocable by the Company. If such
notice is given by the Company, the Company shall make such prepayment and the
payment amount specified in such notice shall be due and payable on the date
specified therein, together with accrued interest to each such date on the
amount prepaid and the amounts required pursuant to Section 3.04.
2.09 REPAYMENT AND MANDATORY PREPAYMENT. The Company shall (and shall
cause each Other Borrowing Entity to) repay (a) the principal amount of all Base
Rate Loans and Local Currency Loans on or before the date that is 90 days after
the Revolving Termination Date, (b) all Offshore Rate Loans and CD Rate Loans on
the last day of the Interest Period that is pending for such Loans, which shall
in no event be later than 90 days after the Revolving Termination Date, and (c)
the face amount of each Acceptance on the maturity date of the draft related
thereto, which shall in no event be later than 90 days after the Revolving
Termination Date. The Company shall (and shall cause each Other Borrowing
Entity to) immediately prepay that portion of the principal amount of any Loans
at any time outstanding which exceeds the Revolving Commitment; PROVIDED, that
if the foregoing applies due to a change in applicable rates of exchange between
Dollars and Offshore Currencies or Local Currencies, as applicable, the Company
shall be obligated to pay such amount only if the excess is equal to or greater
than 10% of the Revolving Commitment. In determining compliance with the
immediately preceding sentence, all Loans denominated in Local Currencies or
Offshore Currencies shall be deemed to be converted to the Equivalent Amounts in
Dollars on the last Business Day of each fiscal quarter of the Company. The
Company shall also reimburse the Bank for any funding losses incurred by the
Bank in connection with such prepayments as set forth in Section 3.04.
2.10 INTEREST.
(a) Each Revolving Loan shall bear interest on the outstanding
principal amount thereof from the date when made until it becomes due at a rate
per annum equal to the CD Rate, the Offshore Rate or the Base Rate, as the case
may be, PLUS the
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Applicable Margin; PROVIDED, HOWEVER, that any Revolving Loan made in an
Offshore Currency shall bear interest at the Offshore Rate only.
(b) Interest on each Revolving Loan shall be paid in arrears on
each Interest Payment Date. Interest shall also be paid on the date of any
prepayment of Revolving Loans pursuant to Section 2.08 for the portion of the
Revolving Loans so prepaid and upon payment (including prepayment) in full
thereof and, during the existence of any Event of Default, interest shall be
paid on demand.
(c) Anything herein to the contrary notwithstanding, the obligations
of the Company hereunder shall be subject to the limitation that payments of
interest shall not be required, for any period for which interest is computed
hereunder, to the extent (but only to the extent) that contracting for or
receiving such payment by the respective Bank would be contrary to the
provisions of any law applicable to the Bank limiting the highest rate of
interest which may be lawfully contracted for, charged or received by the Bank,
and in such event the Company shall pay the Bank interest at the highest rate
permitted by applicable law.
2.11 FACILITY FEE. A facility fee to be paid by the Company shall
accrue for the Bank's own account in an amount equal to 0.09% per annum
multiplied by the amount of the Revolving Commitment, as the amount of the
Revolving Commitment may change from time to time. Such accrued fee shall be
paid quarterly in arrears on the first Business Day of each July, October,
January and April of each year.
2.12 COMPUTATION OF FEES AND INTEREST.
(a) All computations of interest payable in respect of Base Rate
Loans at all times as the Base Rate is determined by the Bank's "reference rate"
shall be made on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed. All other computations of fees and interest under this
Agreement shall be made on the basis of a 360-day year and actual days elapsed,
which results in more interest being paid than if computed on the basis of a
365-day year. Interest and fees shall accrue during each period during which
interest or such fees are computed from the first day thereof to the last day
thereof.
(b) Any change in the interest rate on a Loan resulting from a
change in the Applicable Margin, Reserve Percentage, Eurocurrency Reserve
Percentage, or the Assessment Rate shall become effective as of the opening of
business on the day on which such change in the Applicable Margin, Reserve
Percentage, Eurocurrency Reserve Percentage, or the Assessment Rate becomes
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effective and the Bank agrees to notify the Company of any such change in the
interest rate on a Loan; PROVIDED, that the failure to so notify the Company
shall not affect any of the Company's obligations under this Agreement.
(c) Each determination of an interest rate by the Bank shall be
conclusive and binding on the Company in the absence of manifest error.
2.13 PAYMENTS BY THE COMPANY OR OTHER BORROWING ENTITIES.
(a) All payments (including prepayments) to be made by the Company
or any Other Borrowing Entity on account of principal, interest, fees and other
amounts required hereunder shall be made without set-off, recoupment or
counterclaim and shall, except as otherwise expressly provided herein, be made
to the Bank at the Bank's offices as set forth on the applicable signature pages
hereof, in dollars or, in the case of Revolving Loans made in Offshore
Currencies, in such Offshore Currency, and in immediately available funds, no
later than 10:00 a.m. (San Francisco time) on the date specified herein. Any
payment which is received by the Bank later than 10:00 a.m. (San Francisco time)
shall be deemed to have been received on the immediately succeeding Business Day
and any applicable interest or fee shall continue to accrue.
(b) Whenever any payment hereunder shall be stated to be due on a
day other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of interest or fees, as the case may be; subject to the provisions
set forth in the definition of "Interest Period" herein.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 TAXES.
(a) (i) If any taxes (other than taxes on net income imposed on or
measured by the Bank's net income by the jurisdiction under the laws of which
the Bank is organized or maintains a lending office from which Loans or other
extensions of credit hereunder are made) are at any time imposed on any payments
under or in respect of this Agreement or any instrument or agreement required
hereunder including, but not limited to, payments made pursuant to this Section
3.01, the Company shall, or shall cause the relevant Other Borrowing Entity to,
pay all such taxes and shall also pay to the Bank, at the time interest
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is paid, all additional amounts which the Bank specifies as necessary to
preserve the after-tax yield the Bank would have received if such taxes had not
been imposed (as such additional amounts are determined in accordance with
Section 3.01(a)(ii)).
(ii) The additional amounts necessary to preserve the
after-tax yield the Bank would have received if such taxes had not been imposed
shall be calculated pursuant to the formula:
(w)(t)(i)
y = -----------
1-w-t
where the terms are defined as follows:
y = additional payment to be made to the Bank
w = withholding tax rate levied by foreign
government
t = the Bank's combined Federal and state tax rate
i = amount of interest to be paid on sum due (computed by
using the base
rate plus the
Applicable
Margin)
1 = one
(b) The Company will provide (or cause the relevant Other Borrowing
Entity to provide) the Bank with original tax receipts, notarized copies of tax
receipts, or such other documentation as will prove payment of tax in a court of
law applying the United States Federal Rules of Evidence, for all taxes paid by
the Company or any Other Borrowing Entity pursuant to Section 3.01(a) above.
The Company will deliver (or cause the relevant Other Borrowing Entity to
deliver) receipts to the Bank within 30 days after the due date for the related
tax.
3.02 ILLEGALITY.
(a) If the Bank shall determine that the introduction of any
Requirement of Law, or any change in any Requirement of Law or in the
interpretation or administration thereof, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is unlawful,
for the Bank or its Lending Office to make or maintain Offshore Rate Loans, CD
Rate Loans or Base Rate Loans, to issue Acceptances, or to make Local
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Currency Loans in respect of any foreign jurisdiction ("Prohibited LC Loans"),
then, on notice thereof by the Bank to the Company or the relevant Other
Borrowing Entity, the obligation of the Bank to make or maintain Offshore Rate
Loans, CD Rate Loans or Base Rate Loans, to issue Acceptances, or to make
Prohibited LC Loans shall be suspended until the Bank shall have notified the
Company or the relevant Other Borrowing Entity that the circumstances giving
rise to such determination no longer exists.
(b) If the Bank shall determine that it is unlawful to maintain any
Offshore Rate Loan or Prohibited LC Loan, the Company shall (or shall cause the
relevant Other Borrowing Entity to) prepay in full all Offshore Rate Loans or
Prohibited LC Loans of the Bank then outstanding, together with interest accrued
thereon, either on the last day of the Interest Period thereof if the Bank may
lawfully continue to maintain such Offshore Rate Loans or Prohibited LC Loans to
such day, or immediately, if the Bank may not lawfully continue to maintain such
Offshore Rate Loans or Prohibited LC Loans.
(c) If the Company or the relevant Other Borrowing Entity is
required to prepay any Offshore Rate Loan or Prohibited LC Loans immediately as
provided in subsection 3.02(b), then concurrently with such prepayment, the
Company shall (or shall cause the relevant Other Borrowing Entity to) borrow
from the Bank, in the amount of such repayment, Base Rate Loans.
3.03 INCREASED COSTS AND REDUCTION OF RETURN.
(a) If the Bank shall determine that, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law),
there shall be any increase in the cost to the Bank of agreeing to make or
making, funding or maintaining any Offshore Rate Loans, then the Company or the
relevant Other Borrowing Entity shall be liable for, and shall (or shall cause
the relevant Other Borrowing Entity to) from time to time, upon demand therefor
by the Bank, pay to the Bank, additional amounts as are sufficient to compensate
the Bank for such increased costs.
(b) If the Bank shall have determined that (i) the introduction of
any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy
Regulation, (iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (iv) compliance by
the Bank (or its Lending Office) or any
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corporation controlling the Bank, with any Capital Adequacy Regulation, affects
or would affect the amount of capital required or expected to be maintained by
the Bank or any corporation controlling the Bank and (taking into consideration
the Bank's or such corporation's policies with respect to capital adequacy and
the Bank's desired return on capital and assuming the full utilization of the
Bank's capital) determines that the amount of such capital is increased as a
consequence of its Revolving Commitment, loans, credits or obligations under
this Agreement, then, upon demand of the Bank, the Company shall (or shall cause
the relevant Other Borrowing Entity to) immediately pay to the Bank, from time
to time as specified by the Bank, additional amounts sufficient to compensate
the Bank for such increase. In determining such amounts the Bank may use any
reasonable averaging or attribution methods.
3.04 FUNDING LOSSES. The Company agrees to (or shall cause the relevant
Other Borrowing Entity to) reimburse the Bank and to hold the Bank harmless from
any loss, cost or expense which the Bank may sustain or incur as a consequence
of:
(a) any failure of the Company or the relevant Other Borrowing
Entity to make any payment or prepayment of principal of any Local Currency
Loan, Offshore Rate Loan or CD Rate Loan (including payments made after any
acceleration thereof);
(b) any failure of the Company (or the relevant Other Borrowing
Entity) to borrow, continue or convert a Loan after the Company (or the relevant
Other Borrowing Entity) has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/Continuation;
(c) any failure of the Company to make any prepayment after the
Company has given a notice in accordance with Section 2.08;
(d) any prepayment of a Local Currency Loan, Offshore Rate Loan or
a CD Rate Loan on a day which is not the last day of the Interest Period with
respect thereto; or
(e) any conversion pursuant to Section 2.05 of any Offshore Rate
Loan or CD Rate Loan to a Base Rate Loan on a day that is not the last day of
the respective Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Local Currency Loan, Offshore Rate Loans
or CD Rate Loans hereunder or from fees payable to terminate the deposits from
which such funds were obtained. Solely for purposes of calculating amounts
payable by the Company to the Bank under this Section 3.04,
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(i) each Offshore Rate Loan made by the Bank (and each related reserve, special
deposit or similar requirement) shall be conclusively deemed to have been funded
at the IBOR used in determining the Offshore Rate for such Offshore Rate Loan by
a matching deposit or other borrowing in the interbank eurodollar (or other
applicable currency) market for a comparable amount and for a comparable period,
whether or not such Offshore Rate Loan is in fact so funded, (ii) each CD Rate
Loan made by the Bank (and each related reserve, special deposit or similar
requirement) shall be conclusively deemed to have been funded at the Certificate
of Deposit Rate used in determining the CD Rate for such CD Rate Loan by the
issuance of its certificate of deposit in a comparable amount and for a
comparable period, whether or not such CD Rate Loan is in fact so funded, and
(iii) each Local Currency Loan made by the Bank (and each related reserve,
special deposit or similar requirement) shall be conclusively deemed to have
been funded at the applicable similar interest rate used by the Bank in
determining the interest rate for such Local Currency Loan in a comparable
amount and for a comparable period, whether or not such Local Currency Loan is
in fact so funded.
3.05 INABILITY TO DETERMINE RATES. If the Bank shall have determined
that for any reason adequate and reasonable means do not exist for ascertaining
the Offshore Rate or the CD Rate for any requested Interest Period with respect
to a proposed Offshore Rate Loan or CD Rate Loan or that the Offshore Rate or
the CD Rate applicable pursuant to subsection 2.10(a) for any requested Interest
Period with respect to a proposed Offshore Rate Loan or CD Rate Loan does not
adequately and fairly reflect the cost to the Bank of funding such Loan, the
Bank will promptly give notice of such determination to the Company.
Thereafter, the obligation of the Bank to make or maintain CD Rate Loans or
Offshore Rate Loans, as the case may be, hereunder shall be suspended until the
Bank revokes such notice in writing. Upon receipt of such notice, the Company
may revoke any Notice of Borrowing or Notice of Conversion/Continuation then
submitted by it. If the Company does not revoke such notice, the Bank shall
make, convert or continue the Loans, as proposed by the Company, in the amount
specified in the applicable notice submitted by the Company, but such Loans
shall be made, converted or continued as Base Rate Loans instead of CD Rate
Loans or Offshore Rate Loans, as the case may be.
3.06 CERTIFICATE OF BANK. If the Bank claims reimbursement or
compensation pursuant to this Article III, it shall deliver to the Company a
certificate setting forth in reasonable detail the amount payable to the Bank
hereunder and such certificate shall be conclusive and binding on the Company
and each Other Borrowing Entity in the absence of manifest error.
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3.07 SURVIVAL. The agreements and obligations of the Company in this
Article III shall survive the payment of all other Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
4.01 CONDITIONS OF INITIAL EXTENSION OF CREDIT TO THE COMPANY. The
obligation of the Bank to make its initial extension of credit to the Company
hereunder is subject to the condition that the Bank shall have received on or
before the Closing Date all of the following, in form and substance satisfactory
to the Bank and its counsel:
(a) CREDIT AGREEMENT. This Agreement executed by the Company and
the Bank;
(b) RESOLUTIONS; INCUMBENCY.
(i) Copies of the resolutions of the board of directors of the
Company approving and authorizing the execution, delivery and performance
by the Company of this Agreement and the other Loan Documents to be
delivered hereunder, and authorizing the borrowing of the Loans and the
issuance of Acceptances, certified as of the Closing Date by the Secretary
or an Assistant Secretary of the Company; and
(ii) A certificate of the Secretary or Assistant Secretary of
the Company certifying the names and true signatures of the officers of the
Company authorized to execute, deliver and perform, as applicable, this
Agreement, and all other Loan Documents to be delivered hereunder;
(c) PAYMENT OF FEES. The Company shall have paid all costs,
accrued and unpaid fees, costs and expenses to the extent then due and payable
on the Closing Date;
(d) CERTIFICATE. A certificate signed by a Responsible Officer,
dated as of the Closing Date, stating that:
(i) the representations and warranties contained in Article V
are true and correct on and as of such date, as though made on and as of
such date;
(ii) no Default or Event of Default exists or would result
from the initial Borrowing; and
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(iii) there has occurred since September 30, 1994, no event or
circumstance that could reasonably be expected to result in a Material
Adverse Effect;
(e) FINANCIAL STATEMENTS. A certified copy of financial
statements of the Company and its Subsidiaries referred to in Section 5.11; and
(f) OTHER DOCUMENTS. Such other approvals, opinions or documents
as the Bank reasonably may request.
4.02 CONDITIONS TO ALL BORROWINGS OF REVOLVING LOANS BY THE COMPANY.
The obligation of the Bank to make any Revolving Loan to be made by it to the
Company hereunder (including its initial Revolving Loan) is subject to the
satisfaction of the following conditions precedent on the relevant Borrowing
date:
(a) NOTICE OF BORROWING. The Bank shall have received a Notice
of Borrowing;
(b) CONTINUATION OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made by the Company contained in Article V shall
be true and correct on and as of such borrowing date with the same effect as if
made on and as of such borrowing date (except to the extent such representations
and warranties expressly refer to an earlier date, in which case they shall be
true and correct as of such earlier date);
(c) NO EXISTING DEFAULT. No Default or Event of Default shall
exist or shall result from such Borrowing; and
(d) AUTHORIZED AND EXECUTED AGREEMENTS. Any instrument or
agreement (including any guaranty) required by the Bank under this Agreement
prior to the making of any Loan to any Person shall have been duly authorized,
executed and delivered by such Persons and the form of any such agreement or
instrument (including any guaranty) shall be satisfactory to the Bank.
Each Notice of Borrowing submitted by the Company hereunder shall constitute a
representation and warranty by the Company hereunder, as of the date of each
such notice or application and as of the date of each Borrowing, that the
conditions in Section 4.02 are satisfied.
4.03 CONDITIONS TO ALL ISSUANCES OF ACCEPTANCES FOR THE ACCOUNT OF THE
COMPANY. The obligation of the Bank to issue any Acceptance for the account of
the Company hereunder is subject to the satisfaction of the following conditions
precedent on the date of the extension of such credit:
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(a) ACCEPTANCE DOCUMENTATION. Credit documentation relating to
the requested Acceptance executed by the Company (such credit documentation
shall contain such terms and provisions as the Bank deems appropriate for such
requested Acceptance in the Bank's reasonable discretion) and such other
instruments, agreements, documents and evidence that the Bank may reasonably
require;
(b) CONTINUATION OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made by the Company contained in Article V shall
be true and correct on and as of the date of such extension of credit with the
same effect as if made on and as of such date (except to the extent such
representations and warranties expressly refer to an earlier date, in which case
they shall be true and correct as of such earlier date);
(c) NO EXISTING DEFAULT. No Default or Event of Default shall
exist or shall result from such extension of credit; and
(d) AUTHORIZED AND EXECUTED AGREEMENTS. Any instrument or
agreement (including any guaranty) required by the Bank under this Agreement
prior to issuing any Acceptance for the account of any Person shall have been
duly authorized, executed and delivered by such Persons and the form of any such
agreement or instrument (including any guaranty) shall be satisfactory to the
Bank.
Each request for the issuance of an Acceptance submitted by the Company
hereunder shall constitute a representation and warranty by the Company
hereunder, as of the date of each such application and as of the date of each
extension of credit, that the conditions in Section 4.03 are satisfied.
4.04 CONDITIONS TO ALL EXTENSIONS OF CREDIT TO OTHER BORROWING ENTITIES
AND TO LOCAL CURRENCY LOANS TO THE COMPANY. The Bank shall not make any Loan
to or issue an Acceptance for the account of an Other Borrowing Entity, or make
a Local Currency Loan to the Company, in each case which has been requested by
the Company, unless and until the Bank has decided, in its reasonable
discretion, to make any such requested Loan or to issue such requested
Acceptance (it being understood by the parties hereto that the Bank has no
commitment or obligation to make Loans to or issue Acceptances for the account
of the Other Borrowing Entities or to make Local Currency Loans to the Company)
and there shall have been delivered, in form and substance satisfactory to the
Bank with respect to each such requested Loan or Acceptance:
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(a) CREDIT DOCUMENTATION. Credit documentation relating to the
requested credit extension executed by the relevant Other Borrowing Entity or
the Company (such credit documentation shall contain such terms and provisions
(including but not limited to the amount of the Loan or Acceptance, interest,
fees, conditions precedent, covenants, and events of default) as the Bank deems
appropriate for such requested Loan or Acceptance in the Bank's reasonable
discretion) and such other instruments, agreements, documents, and evidence that
the Bank may reasonably require;
(b) GUARANTIES, ETC. In the case of each Loan to or Acceptance
for the account of an Other Borrowing Entity, a Guaranty executed by the Company
guaranteeing the requested Loan or Acceptance, as required by Section 2.01, and
such other related documents that the Bank may require with respect to the
Company as guarantor and such Guaranty;
(c) COMPLIANCE WITH CONDITIONS PRECEDENT. Evidence that all
conditions precedent relating to such requested credit extension set forth in
Sections 4.01, 4.02 and 4.03 (as applicable) have been complied with; and
(d) OTHER EVIDENCE. Such other evidence as the Bank may
reasonably request to establish and effect fully the consummation of the
transactions contemplated thereby, the taking of all proceedings in connection
therewith, and compliance with the conditions set forth in the agreements
relating to such requested Loan or Acceptance.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Bank that:
5.01 ORGANIZATION. The Company is a corporation duly organized and
existing in good standing under the laws of the State of Delaware, each
Subsidiary is duly organized and existing in good standing under the laws of the
jurisdiction in which it is incorporated, and the Company has and each
Subsidiary has the corporate power to own its respective properties and to carry
on its respective businesses as now being conducted.
5.02 CORPORATE AUTHORIZATION; NO CONTRAVENTION. The execution, delivery
and performance by the Company (and those of its Subsidiaries which are a party
to this Agreement) of this Agreement, and any other Loan Document to which such
Person is party, have been duly authorized by all necessary corporate action,
and do not and will not:
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(a) contravene the terms of any of that Person's Organization
Documents;
(b) conflict with or result in any breach or contravention of, or
the creation of any Lien under, any document evidencing any Contractual
Obligation to which such Person is a party or any order, injunction, writ or
decree of any Governmental Authority to which such Person or its Property is
subject; or
(c) to the best knowledge of the Company, violate any Requirement
of Law.
5.03 GOVERNMENTAL AUTHORIZATION. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company (or
any of its Subsidiaries which are a party to this Agreement or any other Loan
Document) of the Agreement or any other Loan Document.
5.04 BINDING EFFECT. This Agreement and each other Loan Document to
which the Company or any of its Subsidiaries is a party constitute the legal,
valid and binding obligations of the Company and any of its Subsidiaries to the
extent it is a party thereto, enforceable against such Person in accordance with
their respective terms.
5.05 LITIGATION. There are no actions, suits, proceedings, claims or
disputes pending, or to the best knowledge of the Company, threatened or
contemplated, at law, in equity, in arbitration or before any Governmental
Authority, against the Company, or its Subsidiaries or any of their respective
Properties which purport to affect or pertain to this Agreement, or any other
Loan Document, or any of the transactions contemplated hereby or thereby. No
injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin or
restrain the execution, delivery and performance of this Agreement or any other
Loan Document, or directing that the transactions provided for herein or therein
not be consummated as herein or therein provided.
5.06 NO DEFAULT. No Default or Event of Default exists or would result
from the incurring of any Obligations by the Company. Neither the Company nor
any of its Subsidiaries is in default under or with respect to any Contractual
Obligation in any respect which, individually or together with all such
defaults, could reasonably be expected to have a Material Adverse Effect.
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5.07 ERISA COMPLIANCE. (a) Each Plan is in compliance in all material
respects with the applicable provisions of ERISA and the Code. Each Plan which
is intended to qualify under Section 401(a) of the Code has received, or has
applied for within the required time period, a favorable determination letter
from the Internal Revenue Service and to the best knowledge of the Company,
nothing has occurred which would cause the loss of such qualification.
(b) There are no pending, or to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which could reasonably be expected to constitute a
Material Adverse Effect. There has been no prohibited transaction or other
violation of the fiduciary responsibility rules with respect to any Plan which
could reasonably result in a Material Adverse Effect.
(c) Neither the Company nor any trade or business (whether or not
incorporated under common control with the Company within the meaning of Code
Section 414(b), (c), (m) or (o)) maintains or contributes to any Pension Plan or
other Plan subject to Section 412 of the Code. Neither the Company nor any
entity under common control with the Company in the preceding sentence maintains
or contributes, or has ever maintained or contributed, to any multiemployer plan
within the meaning of Section 4001(a)(3) of ERISA.
5.08 USE OF PROCEEDS; MARGIN REGULATIONS. The proceeds of the
extensions of credit hereunder are intended to be and shall be used solely for
the purposes set forth in and permitted by Section 6.11, and are intended to be
and shall be used in compliance with Section 7.06.
5.09 TITLE TO PROPERTIES. The Company and each of its Subsidiaries has
good record and marketable title in fee simple to, or valid leasehold interests
in, all real Property necessary or used in the ordinary conduct of its business,
except for such defects in title as could not, individually or in the aggregate,
have a Material Adverse Effect. As of the Closing Date, the Property of the
Company and its Subsidiaries is subject to no Liens, other than Permitted Liens.
5.10 TAXES. The Company and its Subsidiaries have filed all Federal and
other material tax returns and reports required to be filed, and have paid all
Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their Properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP and no Notice of Lien
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with respect to a Lien securing an obligation in excess of $100,000 has been
filed or recorded. There is no proposed tax assessment against the Company or
any of its Subsidiaries which would, if the assessment were made, have a
Material Adverse Effect.
5.11 FINANCIAL CONDITION.
(a) The consolidated unaudited financial statements of financial
condition of the Company and its Subsidiaries dated September 30, 1994, and the
related unaudited consolidated statements of operations, shareholders' equity
and cash flows for the fiscal quarter ended on that date:
(i) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein;
(ii) are complete, accurate and fairly present the financial
condition of the Company and its Subsidiaries as of the date thereof and
results of operations for the period covered thereby; and
(iii) except (A) as specifically disclosed in SCHEDULE 5.11
and (B) for any Guaranty Obligation that is in an amount less than
$5,000,000 so long as the aggregate amount of such Guaranty Obligation does
not exceed 3% of the Company's consolidated total assets as of such date,
show all material indebtedness and other liabilities, direct or contingent
of the Company and its consolidated Subsidiaries as of the date thereof,
including liabilities for taxes, material commitments and material
contingent obligations.
(b) Since September 30, 1994, there has been no Material Adverse
Effect.
5.12 ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 5.12, the
Company and each of its Subsidiaries has obtained and is in compliance with all
permits, licenses, and other authorizations that are required under all
Environmental Laws, including laws relating to emissions, discharges, releases,
or threatened releases of contaminants into the environment (including ambient
air, surface water, ground water, or land) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of contaminants, except to the extent that failure to
have (or comply with) any such permit, license or other authorization does not
have a Material Adverse Effect. Except as set forth in SCHEDULE 5.12, the
Company is not aware of any prior use of any of the owned or leased properties
of the Company or any of its
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Subsidiaries, by any Person, that constitutes a violation of any Environmental
Laws, except to the extent that such violation is not likely to have a Material
Adverse Effect. The Company is not aware of any event, condition, or activity
which may interfere with or prevent continued compliance by the Company and each
of its Subsidiaries with all Environmental Laws, except to the extent that
failure so to continue to comply, would not likely have a Material Adverse
Effect.
5.13 REGULATED ENTITIES. None of the Company, any Person controlling
the Company, or any Subsidiary of the Company, is (a) an "Investment Company"
within the meaning of the Investment Company Act of 1940; or (b) subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, any state public utilities code, or any
other Federal or state statute or regulation limiting its ability to incur
Indebtedness.
5.14 NO BURDENSOME RESTRICTIONS. Neither the Company nor any of its
Subsidiaries is a party to or bound by any Contractual Obligation, or subject to
any charter or corporate restriction, or, to the best knowledge of the Company,
any Requirement of Law, which could reasonably be expected to have a Material
Adverse Effect.
5.15 LABOR RELATIONS. There are no strikes, lockouts or other labor
disputes against the Company or any of its Subsidiaries, or, to the best of the
Company's knowledge, threatened against or affecting the Company or any of its
Subsidiaries that would be likely to have a Material Adverse Effect, and no
significant unfair labor practice complaint is pending against the Company or
any of its Subsidiaries or, to the best knowledge of the Company, threatened
against any of them before any Governmental Authority that would be likely to
have a Material Adverse Effect.
5.16 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES, ETC. The Company or
its Subsidiaries own or are licensed or otherwise have the right to use all of
the patents, trademarks, service marks, trade names, copyrights, franchises,
authorizations and other rights that are reasonably necessary for the operation
of their respective businesses, without conflict with the rights of any other
Person that could reasonably be expected to have a Material Adverse Effect.
5.17 SUBSIDIARIES. The Company has no Subsidiaries other than those
specifically disclosed in part (a) of SCHEDULE 5.17 hereto and has no equity
investment in any one other corporation or entity which exceeds $25,000,000 (or
any investments in any other corporations or entities which in the aggregate
exceed
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$50,000,000) other than those specifically disclosed in part (b) of
SCHEDULE 5.17.
5.18 INSURANCE. The Properties of the Company and its Subsidiaries are
insured in such amounts, with such deductibles and covering such risks as are
customarily carried by companies engaged in similar businesses and owning
similar Properties in localities where the Company or such Subsidiary operates,
PROVIDED, that this Section 5.18 shall not be construed as requiring the
Company to maintain or cause to be maintained earthquake, errors and omissions,
pollution, directors and officers, patent infringement or professional liability
insurance.
5.19 FULL DISCLOSURE. None of the representations or warranties made by
the Company or any of its Subsidiaries in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in each exhibit, report, statement or certificate furnished
by or on behalf of the Company or any of its Subsidiaries in connection with the
Loan Documents taken as a whole, contains any untrue statement of a material
fact or omits any material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
are made, not misleading.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Company covenants and agrees that, so long as the Bank shall have any
Revolving Commitment hereunder, or any Loan, Acceptance or other Obligation
shall remain unpaid or unsatisfied, unless the Bank waives compliance in
writing:
6.01 FINANCIAL STATEMENTS. The Company shall deliver to the Bank in
form and detail satisfactory to the Bank:
(a) as soon as available, but not later than 95 days after the end
of each fiscal year, a copy of the audited consolidated balance sheet of the
Company as at the end of such year and the related consolidated statements of
income, shareholders' equity and cash flows for such fiscal year, setting forth
in each case in comparative form the figures for the previous year, and
accompanied by the unqualified opinion of a nationally-recognized independent
public accounting firm which opinion shall state that such consolidated
financial statements present fairly the financial position for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years;
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(b) as soon as available, but not later than 50 days after the end
of each of the first three fiscal quarters of each year, a copy of the unaudited
consolidated balance sheet of the Company and its consolidated Subsidiaries as
of the end of such quarter and the related consolidated statements of income,
shareholders' equity and cash flows for the period commencing on the first day
and ending on the last day of such quarter, and certified by an appropriate
Responsible Officer as being complete and correct and fairly presenting, in
accordance with GAAP, the financial position and the results of operations of
the Company and the Subsidiaries;
(c) as soon as available, but not later than 95 days after the end
of each fiscal year, a copy of the Company's annual report on Form 10-K as filed
with the Securities and Exchange Commission;
(d) as soon as available, but not later than 50 days after the end
of each of the first three fiscal quarters of each year, a copy of the Company's
quarterly report on Form 10-Q as filed with the Securities and Exchange
Commission; and
(e) as soon as available, but not later than 15 days after the
event, circumstance or occurrence giving rise to the filing thereof, a copy of
any report on Form 8-K filed by the Company with the Securities and Exchange
Commission.
6.02 CERTIFICATES; OTHER INFORMATION. The Company shall furnish to the
Bank:
(a) concurrently with the delivery of the financial statements
referred to in subsection 6.01(a) above, a certificate of a Responsible Officer
(i) stating that, to the best of such officer's knowledge, the Company, during
such period, has observed and performed all of its covenants and other
agreements, and satisfied every condition contained in this Agreement to be
observed, performed or satisfied by it, and that such officer has obtained no
knowledge of any Default or Event of Default except as specified (by applicable
subsection reference) in such certificate, and (ii) showing in detail the
calculations supporting such statements in respect of Section 7.08.
(b) in addition to those financial statements and reports required
pursuant to Section 6.01, promptly after the same are sent, copies of all other
financial statements and reports which the Company sends to its shareholders;
and promptly after the same are filed, copies of all other financial statements
and regular, periodical or material special reports which the Company may make
to, or file with, the Securities and
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Exchange Commission or any successor or similar Federal Governmental Authority;
and
(c) promptly, such additional business, financial, corporate
affairs and other information as the Bank may from time to time reasonably
request.
6.03 NOTICES. The Company shall promptly notify the Bank:
(a) of the occurrence of any Default or Event of Default, and of
the occurrence or existence of any event or circumstance that foreseeably will
become a Default or Event of Default;
(b) of (i) any breach or non-performance of, or any default under,
any Contractual Obligation of the Company or any of its Subsidiaries which is
likely to result in a Material Adverse Effect; and (ii) any dispute, litigation,
investigation, proceeding or suspension which may exist at any time between the
Company or any of its Subsidiaries and any Governmental Authority which is
likely to have a Material Adverse Effect;
(c) of the commencement of any litigation or proceeding in which
the relief sought is an injunction or other stay of the performance of this
Agreement or any Loan Document;
(d) upon, but in no event later than 10 days after, becoming aware
of any and all enforcement, cleanup, removal or other governmental or regulatory
actions instituted, completed or threatened against the Company or any
Subsidiary or any of their Properties pursuant to any applicable Environmental
Laws;
(e) of any other litigation or proceeding affecting the Company or
any of its Subsidiaries which the Company would be required to report to the SEC
pursuant to the Exchange Act, within four days after reporting the same to the
SEC;
(f) of any Material Adverse Effect subsequent to the date of the
most recent audited financial statements of the Company delivered to the Bank
pursuant to subsection 6.01(a);
(g) of any material change in accounting policies or public
financial reporting practices by the Company or any of its Subsidiaries other
than such changes are disclosed in such reports as are generally recommended to
be, or are generally adopted by, Persons subject to the financial reporting
requirements of the Exchange Act or as a result of legislative, regulatory or
GAAP requirements;
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(h) of any labor controversy resulting in or threatening to result
in any strike, work stoppage, boycott, shutdown or other labor disruption
against or involving the Company or any of its Subsidiaries which is likely to
have a Material Adverse Effect; or
(i) of any of the following events affecting the Company (but in no
event more than 10 days after such event), and deliver to the Bank a copy of any
notice with respect to such event that is filed with a Governmental Authority
and any notice delivered by a Governmental Authority to the Company with respect
to such event:
(i) the adoption of any new Pension Plan or other Plan subject
to Section 412 of the Code by the Company; or
(ii) the commencement of contributions by the Company to any
Pension Plan or other Plan subject to Section 412 of the Code.
Each notice pursuant to this Section shall be accompanied by a
written statement by a Responsible Officer of the Company setting forth details
of the occurrence referred to therein. Each notice under subsection 6.03(a)
shall describe with particularity any and all clauses or provisions of this
Agreement or other Loan Document that have been breached or violated.
6.04 PRESERVATION OF CORPORATE EXISTENCE, ETC. Subject to Section 7.03,
the Company shall, and shall cause each of its Subsidiaries to:
(a) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state or jurisdiction of
incorporation;
(b) preserve and maintain in full force and effect all rights,
privileges, qualifications, permits, licenses and franchises necessary for
conduct of its business and which, if not preserved or maintained, is likely to
have a Material Adverse Effect;
(c) preserve or renew all of its registered trademarks, trade names
and service marks, the non-preservation of which could reasonably be expected to
have a Material Adverse Effect.
6.05 MAINTENANCE OF PROPERTY. The Company shall maintain, and shall
cause each of its Subsidiaries to maintain, and preserve all its Property which
is necessary for the carrying on
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of its business in good working order and condition, ordinary wear and tear
excepted.
6.06 INSURANCE. The Company shall maintain, and shall cause each
Subsidiary to maintain insurance with respect to its Properties and business
against loss or damage of the kinds customarily insured against by Persons
engaged in the same or similarly situated business, of such types and in such
amounts as are customarily carried under similar circumstances by such other
Persons, PROVIDED, that this Section 6.06 shall not be construed as requiring
the Company to maintain or cause to be maintained earthquake, errors and
omissions, pollution, directors and officers, patent infringement or
professional liability insurance.
6.07 PAYMENT OF OBLIGATIONS. The Company shall, and shall cause its
Subsidiaries to, pay and discharge as the same shall become due and payable, all
their obligations and liabilities unless such are being contested in good faith
and are not likely to have a Material Adverse Effect, including:
(a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being contested
in good faith by appropriate proceedings and adequate reserves as required in
accordance with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims in excess of $10,000,000 which, if unpaid,
would by law become a Lien upon its Property; and
(c) all Indebtedness, as and when due and payable, but subject to
any subordination provisions contained in any instrument or agreement evidencing
such Indebtedness.
6.08 COMPLIANCE WITH LAWS. The Company shall comply, and shall cause
each of its Subsidiaries to comply, in all material respects with all
Requirements of Law of any Governmental Authority having jurisdiction over it or
its business (including the Federal Fair Labor Standards Act), except such
noncompliance as is not likely to have a Material Adverse Effect or such
noncompliance which is being contested in good faith or as to which a bona fide
dispute may exist.
6.09 INSPECTION OF PROPERTY AND BOOKS AND RECORDS. The Company shall
maintain and shall cause each of its Subsidiaries to maintain proper books of
record and account, in which full, true and correct entries in conformity with
GAAP consistently applied shall be made of all financial transactions and
matters involving the assets and business of the Company and such Subsidiaries.
The Company shall permit, and shall cause each of
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its Subsidiaries to permit, representatives and independent contractors of the
Bank to visit and inspect any of their respective Properties, to examine their
respective corporate, financial and operating records, and make copies thereof
or abstracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective directors, officers, and independent public
accountants, all at such reasonable times during normal business hours and as
often as may be reasonably desired, upon reasonable advance notice to the
Company PROVIDED, that, in the event the Company reasonably objects to the
Bank that any Person so designated by the Bank is a competitor or an affiliate
of a competitor of the Company or any of its Subsidiaries (or an employee
thereof), the Company shall not be required to afford such Person any inspection
rights; PROVIDED, HOWEVER, when an Event of Default exists the Bank may do
any of the foregoing at the expense of the Company at any time during normal
business hours and without advance notice.
6.10 ENVIRONMENTAL LAWS. The Company shall, and shall cause each of its
Subsidiaries to, conduct its operations and keep and maintain its Property in
compliance with all Environmental Laws except when the failure to so comply
would not likely have a Material Adverse Effect.
6.11 USE OF PROCEEDS. The Company shall (and shall cause each Other
Borrowing Entity to) use the proceeds of the extensions of credit hereunder
solely for working capital purposes and otherwise in the Ordinary Course of
Business but not in contravention of any Requirement of Law.
6.12 COMPLIANCE WITH ERISA. The Company shall (a) maintain each Plan in
compliance in all material respects with the applicable provisions of ERISA and
the Code; and (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification.
ARTICLE VII
NEGATIVE COVENANTS
The Company hereby covenants and agrees that, so long as the Bank shall
have any Revolving Commitment hereunder, or any Loan, Acceptance or other
Obligation shall remain unpaid or unsatisfied, unless the Bank waives compliance
in writing:
7.01 LIMITATION ON LIENS. The Company shall not, and shall not suffer
or permit any of its Subsidiaries to, directly or indirectly, make, create,
incur, assume or suffer to exist any Lien upon or with respect to any part of
its Property, whether
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now owned or hereafter acquired, other than the following ("Permitted Liens"):
(a) any Lien existing on the Property of the Company or its
Subsidiaries on the Closing Date and set forth in SCHEDULE 7.01 securing
Indebtedness outstanding on such date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or to the
extent that non-payment thereof is permitted by Section 6.07, provided that no
Notice of Lien has been filed or recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the Ordinary Course
of Business which are not delinquent or remain payable without penalty;
(e) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the Ordinary Course of Business in connection
with workers' compensation, unemployment insurance and other social security
legislation;
(f) Liens on the Property of the Company or any of its Subsidiaries
securing (i) the non-delinquent performance of bids, trade contracts (other than
for borrowed money), statutory obligations, (ii) contingent obligations on
surety and appeal bonds, and (iii) other non-delinquent obligations of a like
nature; in each case, incurred in the Ordinary Course of Business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the Ordinary Course of Business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the Property subject thereto or interfere
with the ordinary conduct of the businesses of the Company and its Subsidiaries
or which relate to the relocation of the direct off-ramp to northbound North
Shoreline Boulevard from Highway 101;
(h) Purchase money security interests on any Property acquired or
held by the Company or its Subsidiaries in the Ordinary Course of Business
securing Indebtedness incurred or assumed for the purpose of financing all or
any part of the cost of acquiring such Property; PROVIDED that (i) such Lien
attaches solely to the Property so acquired in such transaction, and (ii) the
principal amount of the debt secured thereby does not exceed 100% of the cost of
such Property.
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7.02 DISPOSITION OF ASSETS. The Company shall not, and shall not suffer
or permit any of its Subsidiaries to, directly or indirectly, sell, assign,
lease, convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any Property (including accounts and notes receivable (with or
without recourse) and equipment sale-leaseback transactions) or enter into any
agreement to do any of the foregoing, except:
(a) dispositions of inventory, or used, out-moded, worn-out or
surplus equipment, all in the Ordinary Course of Business;
(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to the
purchase price of such replacement equipment; and
(c) dispositions not otherwise permitted hereunder which are made
for fair market value; PROVIDED, that (i) at the time of any disposition, no
Default or Event of Default shall exist or shall result from such disposition,
(ii) the aggregate sales price from any disposition pursuant to a sale-leaseback
transaction shall be paid in cash, (iii) sale-leaseback transactions shall only
be permitted with respect to real property and equipment, and (iv) the aggregate
fair market value of all assets (excluding real property and equipment subject
to sale-leaseback transactions) so sold by the Company and its Subsidiaries,
together with all other sales under this subsection (c) since the Closing Date,
shall not exceed in the aggregate 30% of the Company's Tangible Net Worth.
7.03 CONSOLIDATIONS, MERGERS, JOINT VENTURES AND ACQUISITIONS. The
Company shall not, and shall not suffer or permit any of its Subsidiaries to,
liquidate or dissolve or enter into any consolidation, merger, Acquisition,
Joint Venture or other combination, or sell, lease, or dispose of its business
or assets as a whole or in such amount as the Bank reasonably believes to
constitute a substantial portion of its business or assets (whether now owned or
hereafter acquired); PROVIDED, HOWEVER, that (a) any Subsidiary may merge
with the Company, provided that the Company shall be the continuing or surviving
corporation, or with any one or more Subsidiaries, provided that if any
transaction shall be between a Subsidiary and a Wholly-Owned Subsidiary, the
Wholly-Owned Subsidiary shall be the continuing or surviving corporation, and
(b) any Subsidiary may sell or otherwise transfer all or substantially all of
its assets (upon voluntary liquidation or otherwise) to the Company or another
Wholly-Owned Subsidiary; PROVIDED, FURTHER, that the Company and its
Subsidiaries may enter into Acquisitions or Joint
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Ventures if the aggregate value of all consideration in any form given by the
Company and its Subsidiaries is less than or equal to $250,000,000, during the
period from the Closing Date through December 30, 1995, and $250,000,000, during
the period from December 31, 1995 through the Revolving Termination Date; and
PROVIDED, FURTHER, that no such Acquisitions or Joint Ventures shall cause
any Default or Event of Default. Notwithstanding anything to the contrary
contained in this Section 7.03, (a) if any Person or business acquired, in
accordance with this Section 7.03, (the "Acquiree") is subject to Section 12 of
the Exchange Act or subject to the requirements of Section 15(d) of such
Exchange Act, the prior effective written consent of the board of directors or
equivalent governing body of the Acquiree shall be obtained and delivered to the
Bank, or (b) if the Acquiree does not meet the qualifications set forth in
subclause (a), the prior effective written consent of the board of directors or
equivalent governing body and the percent of any and all classes of stock or
other equity of such Acquiree the consent of which, notwithstanding any
provisions in the organization documents of the Acquiree to the contrary, is
required by applicable statute to consummate the Acquisition, shall be obtained
and delivered to the Bank.
7.04 TRANSACTIONS WITH AFFILIATES. Without the prior written consent of
the Bank, the Company shall not, and shall not suffer or permit any of its
Subsidiaries to, enter into any transaction with any Affiliate of the Company or
of any such Subsidiary, except (a) as expressly permitted by this Agreement, (b)
in the Ordinary Course of Business and pursuant to the reasonable requirements
of the business of the Company or such Subsidiary, or (c) if the terms of the
transaction are no less favorable than those that would be obtained from third
parties.
7.05 USE OF PROCEEDS. The Company shall not and shall not suffer or
permit any of its Subsidiaries to use any portion of the proceeds of the
extensions of credit hereunder, directly or indirectly, (i) to purchase or carry
Margin Stock, (ii) to repay or otherwise refinance indebtedness of the Company
or others incurred to purchase or carry Margin Stock, (iii) to extend credit for
the purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any
security in any transaction that is subject to Section 13 or 14 of the Exchange
Act.
7.06 COMPLIANCE WITH ERISA. The Company shall not (a) engage in a
prohibited transaction or violation of the fiduciary responsibility rules with
respect to any Plan which has resulted or could reasonably be expected to result
in liability of the Company in an aggregate amount in excess of $5,000,000; (b)
engage in a transaction that could be subject to Section 4069 or 4212(c) of
ERISA; or (c) permit to exist (i) with respect to all
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Plans (except multiemployer plans within the meaning of Section 4001(a)(3) of
ERISA) maintained or contributed to by the Company or a Related Person,
accumulated funding deficiencies (as defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, or (ii) with respect to multiemployer
plans (within the meaning of Section 4001(a)(3) of ERISA) maintained or
contributed to by the Company or a Related Person, complete or partial
withdrawal liabilities determined pursuant to Title IV of ERISA, which, in the
aggregate, exceed $5,000,000.
7.07 RESTRICTED PAYMENTS. The Company shall not, and shall not suffer
or permit any of its Subsidiaries to purchase, redeem or otherwise acquire for
value any shares of its capital stock or any warrants or options to acquire such
shares, now or hereafter outstanding; except that (a) the Company may purchase
shares of its capital stock, PROVIDED, HOWEVER, that under no circumstances
may the Company exchange or transfer more than $250,000,000, during the period
from the Closing Date through December 30, 1995, and $250,000,000, during the
period from December 31, 1995 through the Revolving Termination Date, or an
equivalent amount of other consideration for such purchases in the aggregate
during either such period, (b) the Company's Subsidiaries may purchase shares of
their capital stock, PROVIDED, HOWEVER, that under no circumstances may the
Company or its Subsidiaries exchange or transfer more than $250,000,000, during
the period from the Closing Date through December 30, 1995, and $250,000,000,
during the period from December 31, 1995 through the Revolving Termination Date,
or an equivalent amount of other considerations for such purposes in the
aggregate during either such period, and (c) the Company and its Subsidiaries
may effect purchases, redemptions or other acquisitions for value of the capital
stock of any Subsidiary in connection with a merger, consolidation or other
corporate reorganization or restructuring involving the Company and/or its
Subsidiaries, provided, such merger, consolidation or other corporate
reorganization or restructuring is otherwise permitted by this Agreement.
7.08 TANGIBLE NET WORTH. At the end of each fiscal quarter of the
Company, the Company shall not permit on a consolidated basis the Tangible Net
Worth for the Company during any fiscal quarter to be less than the sum of (a)
$375,000,000, plus (b) 50% of quarterly net income for the Company for each
fiscal quarter ending subsequent to the fiscal quarter ended December 31, 1994,
with no reduction for net losses. "Tangible Net Worth" means the gross book
value of the assets of the Company (exclusive of goodwill, patents, trademarks,
trade names, organization expense, treasury stock, unamortized debt discount and
expense, deferred charges and other like intangibles) less (i) reserves
applicable thereto and (ii) all liabilities (including accrued and deferred
income taxes).
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7.09 ACCOUNTING CHANGES. The Company shall not make any significant
change in accounting treatment or reporting practices, except as required by
GAAP.
ARTICLE VIII
EVENTS OF DEFAULT
8.01 EVENT OF DEFAULT. Any of the following shall constitute an "Event
of Default":
(a) NON-PAYMENT. The Company or any Other Borrowing Entity fails
to pay, when and as required to be paid herein, any amount of principal of any
Loan, any interest, fee or any other amount payable hereunder or pursuant to any
other Loan Document, including with respect to an Acceptance; or
(b) REPRESENTATION OR WARRANTY. Any representation or warranty
by the Company or any of its Subsidiaries made or deemed made herein, in any
Loan Document, or which is contained in any certificate, document or financial
or other statement by the Company, any of its Subsidiaries, or their respective
Responsible Officers, furnished at any time under this Agreement, or in or under
any Loan Document, shall prove to have been incorrect in any material respect on
or as of the date made or deemed made; or
(c) SPECIFIC DEFAULTS. The Company fails to perform or observe
any term, covenant or agreement contained in Sections 6.01, 6.02, 6.03 and 6.09
or Article VII or any financial or other information described in Sections 6.01
or 6.02 proves to have been incorrect or misleading in any material respect when
made; or
(d) OTHER DEFAULTS. The Company or any Other Borrowing Entity
fails to perform or observe any other term or covenant contained in this
Agreement or any Loan Document; PROVIDED, HOWEVER, that if such default is
capable of being remedied, such default shall not be considered an Event of
Default hereunder for a period of 20 Business Days after the date in which the
Bank gives notice of such default to the Company or such Other Borrowing Entity;
or
(e) CROSS-DEFAULT. (a) Any default occurs under any other
agreement involving the borrowing of money or the extension of credit under
which the Company or any of its Subsidiaries may be obligated as borrower,
guarantor, or instalment purchaser if (i) such default consists of the failure
to pay any Indebtedness or Guaranty Obligation having an aggregate principal
amount (including undrawn as committed or available amounts and
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including amounts owed to all creditors under any combined or syndicated credit
arrangement) in excess of $25,000,000 on the date it was due (whether by
scheduled maturity, required prepayment, demand or otherwise) or, if applicable,
by the last day of the cure period subsequent to said due date (except an
obligation which is contested in good faith or as to which a bona fide dispute
exists), (ii) such default gives to the holder of the obligation concerned the
right to accelerate the obligation or (iii) such default consists of the failure
to pay any Indebtedness or Guaranty Obligation owed to the Bank or (b) the
Company or any Subsidiary fails to perform or observe any other condition or
covenant, or any other event shall occur or condition exist, under any
agreement, guaranty or instrument relating to such Indebtedness or Guaranty
Obligation, other than with respect to any such Indebtedness or Guaranty
Obligation of the Company or Subsidiaries in favor of Virtual Funding L.P.
and/or obligations arising from master lease agreements and other off-balance
sheet financing arrangements, and such failure continues after the applicable
grace or notice period, if any, specified in the document relating thereto if
the effect of such failure, event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such Indebtedness to be declared to be
due and payable prior to its stated maturity, or such Guaranty Obligation to
become payable or cash collateral in respect thereof to be demanded; (c) the
Company or any of its Subsidiaries disavows any of its Guaranty Obligations or
any guaranty of the Company or its Subsidiaries otherwise becomes ineffective;
(d) the Company or any of its Subsidiaries defaults under any other agreement
with respect to Indebtedness incurred by it from the Bank; or
(f) INSOLVENCY; VOLUNTARY PROCEEDINGS. The Company or any of its
Subsidiaries (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise; (ii)
voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing; or
(g) INVOLUNTARY PROCEEDINGS. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company or any Subsidiary of the
Company, or any writ, judgment, warrant of attachment, execution or similar
process, is issued or levied against a substantial part of the Company's or any
of its Subsidiaries' Properties, and any such proceeding or petition shall not
be dismissed, or such writ, judgment, warrant of
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attachment, execution or similar process shall not be released, vacated or fully
bonded within 60 days after commencement, filing or levy; (ii) the Company or
any of its Subsidiaries admits the material allegations of a petition against it
in any Insolvency Proceeding, or an order for relief (or similar order under
non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the Company or
any of its Subsidiaries acquiesces in the appointment of a receiver, trustee,
custodian, conservator, liquidator, mortgagee in possession (or agent therefor),
or other similar Person for itself or a substantial portion of its Property or
business; or
(h) ERISA. The failure of the Company to comply with any of the
provisions of Sections 6.12 or 7.06; the Company or any trade or business
(whether or not incorporated under common control with the Company within the
meaning of Code Section 414(b), (c), (m) or (o)) maintains or contributes to any
Pension Plan or other Plan subject to Section 412 of the Code; or the Company or
any entity under common control with the Company in the preceding clause
maintains or contributes to a multiemployer plan within the meaning of Section
4001(a)(3) of ERISA; or
(i) MONETARY JUDGMENTS. One or more final (non-interlocutory)
judgments, orders or decrees shall be entered against the Company or any of its
Subsidiaries which results in a liability that is not covered by insurance from
a third-party insurer in excess of $10,000,000 as to any single or related
series of transactions, incidents or conditions, and the same shall remain
unsatisfied, unvacated and unstayed pending appeal for a period of 30 days after
the entry thereof; or
(j) NON-MONETARY JUDGMENTS. Any non-monetary judgment, order or
decree shall be rendered against the Company or any of its Subsidiaries which
does or would reasonably be expected to have a Material Adverse Effect, and
there shall be any period of 10 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(k) MATERIAL ADVERSE EFFECT. There shall occur any Material
Adverse Effect; or
(l) GUARANTY. The Company or any of its Subsidiaries contests
the validity or enforceability of any Guaranty; or
(m) CHANGE OF CONTROL. (i) any person or two or more persons
acting in concert shall acquire beneficial ownership, directly or indirectly, of
securities of the Company (or other securities convertible into such securities)
representing 50% or more of the combined voting power of all securities of the
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Company entitled to vote in the election of directors; or (ii) any person or two
or more persons acting in concert acquiring by contract or otherwise, or
entering into a contract or arrangement which upon consummation will result in
its or their acquisition of, or control over, securities of the Company (or
other securities convertible into such securities) representing 50% or more of
the combined voting power of all securities of the Company entitled to vote in
the election of directors.
8.02 REMEDIES. If any Event of Default occurs, the Bank may:
(a) declare the Revolving Commitment of the Bank to make Loans and
issue Acceptances to be terminated, whereupon the Bank's Revolving Commitment
shall forthwith be terminated;
(b) declare the unpaid principal amount of all outstanding Loans
advanced by the Bank, all interest accrued and unpaid thereon, the amount of any
outstanding Acceptances, and all other amounts owing or payable hereunder or
under any other Loan Document in favor of the Bank to be immediately due and
payable; without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived by the Company and each Other Borrowing
Entity; and
(c) exercise all rights and remedies available to the Bank under
the Loan Documents or applicable law;
PROVIDED, HOWEVER, that upon the occurrence of any event specified in
paragraph (f) or (g) above (in the case of clause (i) of paragraph (g) upon the
expiration of the 60-day period mentioned therein), the obligation of the Bank
to make Loans and issue Acceptances shall automatically terminate and the unpaid
principal amount of all outstanding Loans and all interest and other amounts as
aforesaid, including the amount of any outstanding Acceptances, shall
automatically become due and payable without further act of the Bank.
8.03 RIGHTS NOT EXCLUSIVE. The rights provided for in this Agreement
and the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
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ARTICLE IX
MISCELLANEOUS
9.01 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company or any Other Borrowing Entity therefrom, shall be
effective unless the same shall be in writing and signed by the Bank, the
Company and each Other Borrowing Entity affected by such amendment or waiver,
and then such waiver shall be effective only in the specific instance and for
the specific purpose for which given.
9.02 NOTICES.
(a) All notices, requests and other communications provided for
hereunder shall be in writing (including, unless the context expressly otherwise
provides, by facsimile transmission, PROVIDED, that any matter transmitted by
the Company and each Other Borrowing Entity by facsimile (i) shall be
immediately confirmed by a telephone call to the recipient at the number
specified on the applicable signature page hereof, and (ii) shall be followed
promptly by a hard copy original thereof) and mailed, faxed, telecopied or
delivered, to the address or facsimile number specified for notices on the
applicable signature page hereof; or, as to the Company, each relevant Other
Borrowing Entity or the Bank, to such other address as shall be designated by
such party in a written notice to the other parties, and as directed to each
other party, at such other address as shall be designated by such party in a
written notice to the Company, each relevant Other Borrowing Entity and the
Bank.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery or faxed, be effective when delivered for
overnight (next day) delivery, transmitted by facsimile machine, respectively,
or if delivered, upon delivery, except that notices pursuant to Article II shall
not be effective until actually received by the Bank.
(c) The Company acknowledges and agrees (and shall cause each Other
Borrowing Entity to acknowledge and agree) that any agreement of the Bank at
Article II herein to receive certain notices by telephone and facsimile is
solely for the convenience and at the request of the Company and each Other
Borrowing Entity. The Bank shall be entitled to rely on the authority of any
Person purporting to be a Person authorized by the Company and each Other
Borrowing Entity to give such notice and the Bank shall not have any liability
to the Company, any Other Borrowing Entity or other Person on account of any
action taken or not taken by the Bank in reliance upon such telephonic or
facsimile
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notice. The obligation of the Company and each Other Borrowing Entity to repay
the extensions of credit and any other amounts outstanding hereunder shall not
be affected in any way or to any extent by any failure by the Bank to receive
written confirmation of any telephonic or facsimile notice or the receipt by the
Bank of a confirmation which is at variance with the terms understood by the
Bank to be contained in the telephonic or facsimile notice.
9.03 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Bank, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.
9.04 COSTS AND EXPENSES. The Company shall (or shall cause the relevant
Other Borrowing Entity to), whether or not the transactions contemplated hereby
shall be consummated:
(a) pay or reimburse the Bank within thirty days after demand for
all reasonable costs and expenses incurred by the Bank in connection with the
development, preparation, delivery, administration and execution of, and any
amendment, supplement, waiver or modification to (in each case whether or not
consummated), this Agreement, any Loan Document and any other documents prepared
in connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including the reasonable Attorney Costs
incurred by the Bank with respect thereto; PROVIDED, that, the Company shall
only be obligated to pay to the Bank such Attorney Costs incurred by the Bank in
connection with the execution of the Loan Documents executed on the Closing Date
which are not in excess of $10,000; and
(b) pay or reimburse the Bank within thirty days after demand for
all reasonable costs and expenses incurred by them in connection with the
enforcement or preservation of any rights or remedies (including in connection
with any "workout" or restructuring regarding any extensions of credit or any
other amounts outstanding hereunder, and including in any Insolvency Proceeding
or appellate proceeding) under this Agreement, any other Loan Document, and any
such other documents, including reasonable Attorney Costs incurred by the Bank.
9.05 INDEMNITY. The Company shall (or shall cause the relevant Other
Borrowing Entity to) pay, indemnify, and hold the Bank and each of their
respective officers, directors, employees, counsel, agents and attorneys-in-fact
(each, an "Indemnified
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Person") harmless from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, charges, expenses or
disbursements (including Attorney Costs) of any kind or nature whatsoever with
respect to the execution, delivery, enforcement, performance and administration
of this Agreement and any other Loan Documents, or the transactions contemplated
hereby and thereby, and with respect to any investigation, litigation or
proceeding (including any Insolvency Proceeding or appellate proceeding) related
to this Agreement, any extensions of credit hereunder, or the use of the
proceeds thereof, whether or not any Indemnified Person is a party thereto (all
the foregoing, collectively, the "Indemnified Liabilities"); PROVIDED, that
the Company and each Other Borrowing Entity shall have no obligation hereunder
to any Indemnified Person with respect to Indemnified Liabilities arising from
the gross negligence or willful misconduct of such Indemnified Person. The
agreements in this Section shall survive payment of all other Obligations.
9.06 MARSHALLING; PAYMENTS SET ASIDE. The Bank shall not be under any
obligation to marshall any assets in favor of the Company, any Other Borrowing
Entity or any other Person or against or in payment of any or all of the
Obligations. To the extent that the Company or any Other Borrowing Entity makes
a payment or payments to the Bank, or the Bank enforces its Liens or exercise
their rights of set-off, and such payment or payments or the proceeds of such
enforcement or set-off or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, receiver or any other party in connection with any Insolvency
Proceeding, or otherwise, then to the extent of such recovery the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or set-off had not occurred.
9.07 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company and each Other Borrowing Entity
may not assign or transfer any of their rights or obligations under this
Agreement without the prior written consent of the Bank.
9.08 ASSIGNMENTS, PARTICIPATIONS, ETC.
(a) The Bank may, at any time assign and delegate to Bank of America
Illinois, an affiliate of the Bank (the "Assignee") all, or any part of all, of
any extensions of credit hereunder, the Revolving Commitment and the other
rights and obligations of the Bank hereunder; PROVIDED, HOWEVER, that (i)
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the Company and each Other Borrowing Entity may continue to deal solely and
directly with the Bank in connection with the interest so assigned to the
Assignee until (A) written notice of such assignment, together with payment
instructions, addresses and related information with respect to the Assignee,
shall have been given to the Company and each Other Borrowing Entity by the Bank
and the Assignee; and (B) the Bank and its Assignee shall have delivered to the
Company and each Other Borrowing Entity a form of an Assignment and Acceptance
reasonably satisfactory to the Company and each such Other Borrowing Entity
("Assignment and Acceptance").
(b) From and after the date that the Bank and the Assignee deliver
to the company and each Other Borrowing Entity an executed Assignment and
Acceptance, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Bank under the Loan Documents, and (ii) the Bank shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Loan Documents.
(c) Immediately after complying with the conditions contained in
subsections 9.08(a) and (b) to the Bank's making an assignment or delegation to
the Assignee, this Agreement shall be deemed to be amended to the extent, but
only to the extent, necessary to reflect the addition of the Assignee and the
resulting adjustment of the Revolving Commitment arising therefrom. The
Revolving Commitment allocated to the Assignee shall reduce the Revolving
Commitment of the Bank PRO TANTO.
(d) The Bank may at any time sell to Bank of America Illinois, an
affiliate of the Bank (the "Participant") participating interests in any
extensions of credit hereunder, the Revolving Commitment and the other interests
of the Bank hereunder and under the other Loan Documents; PROVIDED, HOWEVER,
that (i) the Bank's obligations under this Agreement shall remain unchanged,
(ii) the Bank shall remain solely responsible for the performance of such
obligations, (iii) the Company shall (and shall cause each Other Borrowing
Entity to) continue to deal solely and directly with the Bank in connection with
the Bank's rights and obligations under this Agreement and the other Loan
Documents, and (iv) the Bank shall not transfer or grant any participating
interest under which the Participant shall have rights to approve any amendment
to, or any consent or waiver with respect to, this Agreement or any other Loan
Document, except to the extent such amendment, consent or waiver would:
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(i) increase or extend the Revolving Commitment (or reinstate
any Revolving Commitment terminated pursuant to Section 8.02);
(ii) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or other
amounts due to the Bank hereunder or under any other Loan Document,
including without limitation any mandatory prepayment required under
Section 2.09;
(iii) reduce the principal of, or the rate of interest
specified herein on any Loan, or (subject to clause (ii) above) any fees or
other amounts payable hereunder or under any other Loan Document, including
with respect to any Acceptance; or
(iv) amend this Section.
In the case of any such participation, the Participant shall be entitled to the
benefit of Sections 3.01, 3.03 and 9.05 as though it were also a Bank hereunder,
and not have any rights under this Agreement, or any of the other Loan
Documents, and all amounts payable by the Company or any Other Borrowing Entity
hereunder shall be determined as if the Bank had not sold such participation;
except that, if amounts outstanding under this Agreement are due and unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, the Participant shall be deemed to have the
right of set-off in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Bank under this Agreement.
9.09 SET-OFF. In addition to any rights and remedies of the Bank
provided by law, if an Event of Default exists, the Bank is authorized at any
time and from time to time, without prior notice to the Company or any Other
Borrowing Entity, any such notice being waived by the Company (and, in the case
of each Other Borrowing Entity, being caused to be waived by the Company) to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by,
and other indebtedness at any time owing to, the Bank to or for the credit or
the account of the Company or any Other Borrowing Entity against any and all
Obligations owing to the Bank, now or hereafter existing, irrespective of
whether or not the Bank shall have made demand under this Agreement or any Loan
Document and although such Obligations may be contingent or unmatured. The Bank
agrees promptly to notify the Company after any such set-off and
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application made by the Bank; PROVIDED, HOWEVER, that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Bank under this Section 9.09 are in addition to the other rights
and remedies (including other rights of set-off) which the Bank may have.
9.10 AUTOMATIC DEBITS OF FEES. With respect to any fee due and payable
to the Bank under the Loan Documents by the Company, the Company hereby
irrevocably authorizes (and shall cause each Other Borrowing Entity to
irrevocably authorize) the Bank to debit any deposit account of the Company with
the Bank in an amount such that the aggregate amount debited from all such
deposit accounts does not exceed such fee. If there are insufficient funds in
such deposit accounts to cover the amount of the fee then due, such debits will
be reversed (in whole or in part, in the Bank's reasonable discretion) and such
amount not debited shall be deemed to be unpaid. No such debit under this
Section 9.10 shall be deemed a setoff.
9.11 COUNTERPARTS. This Agreement may be executed by one or more of the
parties to this Agreement in any number of separate counterparts, each of which,
when so executed, shall be deemed an original, and all of said counterparts
taken together shall be deemed to constitute but one and the same instrument. A
set of the copies of this Agreement signed by all the parties shall be lodged
with the Company and the Bank.
9.12 SEVERABILITY. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
9.13 NO THIRD PARTIES BENEFITED. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the relevant
Borrowing Entities and the Bank, and their permitted successors and assigns, and
no other Person shall be a direct or indirect legal beneficiary of, or have any
direct or indirect cause of action or claim in connection with, this Agreement
or any of the other Loan Documents. No Bank shall have any obligation to any
Person not a party to this Agreement or other Loan Documents.
9.14 TIME. Time is of the essence as to each term or provision of this
Agreement and each of the other Loan Documents.
9.15 GOVERNING LAW AND JURISDICTION.
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(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA; PROVIDED THAT THE BANK
SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES
FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE COMPANY AND THE BANK CONSENTS (AND THE COMPANY SHALL
CAUSE EACH OF THE OTHER BORROWING ENTITIES TO CONSENT), FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE
COMPANY AND THE BANK IRREVOCABLY WAIVES (AND THE COMPANY SHALL CAUSE EACH OF THE
OTHER BORROWING ENTITIES TO WAIVE) ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE
COMPANY AND THE BANK WAIVE (AND THE COMPANY SHALL CAUSE EACH OF THE OTHER
BORROWING ENTITIES TO WAIVE) PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER
PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW.
9.16 ARBITRATION; REFERENCE.
(a) MANDATORY ARBITRATION. Any controversy or claim between or
among the parties (including any relevant Other Borrowing Entity), including but
not limited to those arising out of or relating to this Agreement or any
agreements or instruments relating hereto or delivered in connection herewith
and any claim based on or arising from an alleged tort, shall at the request of
any party be determined by arbitration. The arbitration shall be conducted in
accordance with the United States Arbitration Act (Title 9, U.S. Code),
notwithstanding any choice of law provision in this Agreement, and under the
Commercial Rules of the American Arbitration Association ("AAA"). The
arbitrator(s) shall give effect to statutes of limitation in determining any
claim. Any controversy concerning whether an issue is arbitrable shall be
determined by the arbitrator(s). Judgment upon the arbitration award may be
entered in any court having jurisdiction. The institution and maintenance of an
action for judicial relief or pursuit of a provisional or ancillary remedy shall
not constitute a waiver of the right of any party (and any relevant Other
Borrowing Entity), including the plaintiff, to submit the controversy or claim
to arbitration if any other party contests such action for judicial relief.
(b) JUDICIAL REFERENCE. At the request of any party (including
any relevant Other Borrowing Entity) a controversy or claim which is not
submitted to arbitration as provided and
59
<PAGE>
limited in subparagraph (a) shall be determined by a reference in accordance
with California Code of Civil Procedure Section 638 ET SEQ. If such an
election is made, the parties (including any relevant Other Borrowing Entity)
shall designate to the court a referee or referees selected under the auspices
of the AAA in the same manner as arbitrators are selected in AAA-sponsored
proceedings. The presiding referee of the panel, or the referee if there is a
single referee, shall be an active attorney or retired judge. Judgment upon the
award rendered by such referee or referees shall be entered in the court in
which such proceeding was commenced in accordance with California Code of Civil
Procedure Sections 644 and 645.
(c) PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No provision
of this paragraph shall limit the right of any party (including any relevant
Other Borrowing Entity) to this Agreement to exercise self-help remedies such as
setoff, foreclosure against or sale of any real or personal property collateral
or security, or obtaining provisional or ancillary remedies from a court of
competent jurisdiction before, after, or during the pendency of any arbitration
or other proceeding. The exercise of a remedy does not waive the right of
either party (including any relevant Other Borrowing Entity) to resort to
arbitration or reference.
9.17 ENTIRE AGREEMENT. This Agreement, together with the other Loan
Documents, embodies the entire Agreement and understanding among the Company,
the Other Borrowing Entities and the Bank and supersedes all prior or
contemporaneous Agreements and understandings of such Persons, verbal or
written, relating to the subject matter hereof and thereof and any prior
arrangements made with respect to the payment by the Company or any Other
Borrowing Entities of (or any indemnification for) any fees, costs or expenses
payable to or incurred (or to be incurred) by or on behalf of the Bank.
9.18 INTERPRETATION. This Agreement is the result of negotiations
between and has been reviewed by counsel to the Bank, the Company, the Other
Borrowing Entities and other parties, and is the product of all parties hereto.
Accordingly, this Agreement and the other Loan Documents shall not be construed
against the Bank merely because of the Bank's involvement in the preparation of
such documents and agreements.
9.19 OBLIGATIONS OF OTHER BORROWING ENTITIES. The parties intend that
each Other Borrowing Entity will be liable under this Agreement only with
respect to Borrowings by it hereunder, and will not have any obligation, direct
or indirect, with respect to borrowings by the Company or any other Subsidiary
of the Company.
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<PAGE>
The entire Agreement shall be interpreted and enforced accordingly.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in San Francisco, California by their proper and
duly authorized officers as of the day and year first above written.
SILICON GRAPHICS, INC.
By:
----------------------
Title:
--------------------
By:
----------------------
Title:
--------------------
ADDRESS FOR NOTICES:
2011 N. Shoreline Boulevard
Mountain View, CA 94043
Attn: Treasury
Telephone: (415) 960-1980
Telecopy: (415) 964-5215
with a copy to:
2011 N. Shoreline Boulevard
Mountain View, CA 94043
Attn: Legal Services
Telephone: (415) 960-1980
Telecopy: (415) 965-1586
61
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
-------------------------
Vice President
Address for notices:
Credit Products - High Technology -
San Francisco #3697
555 California Street, 41st Floor
San Francisco, CA 94104
Attn: Kevin M. McMahon
Vice President
Telephone: (415) 622-8088
Telecopy: (415) 622-2514
Domestic and Offshore Lending Office:
1850 Gateway Boulevard
Concord, California 94520
62
<PAGE>
EXHIBIT A
to the Credit Agreement
FORM OF NOTICE OF BORROWING
Date:
-----------------------------
To: Bank of America National Trust and
Savings Association
1850 Gateway Boulevard
Concord, CA 94520
Attn: High Technology Credit Products Executive
Re: Silicon Graphics, Inc.
----------------------
Ladies and Gentlemen:
The undersigned, Silicon Graphics, Inc. (the "Company"), refers to the
Credit Agreement dated as of December 31, 1994 (as amended, modified, renewed or
extended from time to time, the "Credit Agreement") between the Company and Bank
of America National Trust and Savings Association (together with its successors
and assigns, the "Bank"), the terms defined therein being used herein as therein
defined, and hereby gives you notice irrevocably, pursuant to Section 2.03 of
the Credit Agreement, of the Borrowing specified herein:
1. The Business Day of the proposed Loan is ______________,________.
2. The amount of the proposed Loan is ___________________.
3. The currency of the proposed Loan is ________________.
4. The Loan is to be [an Offshore Rate] [a CD Rate] [a Base Rate] Loan.
5. The duration of the Interest Period for any Offshore Rate Loan or the
CD Rate Loan shall be [____________ days] [__________ months].
6. The account to which such Loan shall be disbursed is ______________.
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date
A-1
<PAGE>
of the proposed Borrowing, before and after giving effect thereto and to the
application of the proceeds therefrom:
(a) the representations and warranties of the Company contained in
Article V of the Credit Agreement are true and correct as though made on
and as of each such date (except to the extent such representations and
warranties relate to an earlier date, in which case they are true and
correct as of such date and except that subsections 5.11(a) and 5.11(b) of
the Credit Agreement shall be deemed instead to refer to the last day of
the most recent fiscal year for which financial statements have then been
delivered);
(b) no Default or Event of Default exists, or would result from
such proposed Borrowing; and
(c) after giving effect to the proposed Loan, the aggregate
principal amount of all outstanding Revolving Loans and all Local Currency
Loans and the face amount of all Acceptances issued under the Credit
Agreement does not exceed the Revolving Commitment.
SILICON GRAPHICS, INC.
By:
-------------------------
Title:
------------------------
By:
-------------------------
Title:
------------------------
A-2
<PAGE>
EXHIBIT B
to the Credit Agreement
FORM OF NOTICE OF CONVERSION/CONTINUATION
Date:
-----------------------------
To: Bank of America National Trust and
Savings Association
1850 Gateway Boulevard
Concord, CA 94520
Attn: High Technology Credit Products Executive
Re: Silicon Graphics, Inc.
----------------------
Ladies and Gentlemen:
The undersigned, Silicon Graphics, Inc. (the "Company"), refers to the
Credit Agreement dated as of December 31, 1994 (as amended, modified, renewed or
extended from time to time, the "Credit Agreement") between the Company and Bank
of America National Trust and Savings Association (together with its successors
and assigns, the "Bank"), the terms defined therein being used herein as therein
defined, and hereby gives you notice irrevocably, pursuant to Section 2.05 of
the Credit Agreement, of the [conversion] [continuation] of the Loan specified
herein, that:
1. The date of the [conversion] [continuation] is __________,_____.
2. The amount of the Loan [converted] [continued] is ___.
3. The Loan is to be [converted into] [continued as] [an Offshore
Rate] [a CD Rate] [a Base Rate] Loan.
4. [If applicable:] The duration of the Interest Period for any CD
Rate Loan or Offshore Rate Loan to be [converted] [continued] shall be [___
days] [____ months].
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the proposed
[conversion][continuation], before and after giving effect thereto:
B-1
<PAGE>
(a) the representations and warranties of the Company contained in
Article V of the Credit Agreement are true and correct as though made on
and as of each such date (except to the extent such representations and
warranties relate to an earlier date, in which case they are true and
correct as of such date and except that subsections 5.11(a) and 5.11(b) of
the Credit Agreement shall be deemed instead to refer to the last day of
the most recent fiscal year for which financial statements have then been
delivered);
(b) no Default or Event of Default exists, or would result from such
proposed [conversion] [continuation]; and
(c) after giving effect to the proposed [conversion][continuation],
the aggregate principal amount of all outstanding Revolving Loans and all
Local Currency Loans and the face amount of all Acceptances issued under
the Credit Agreement does not exceed the Revolving Commitment.
SILICON GRAPHICS, INC.
By:
-------------------------
Title:
------------------------
By:
-------------------------
Title:
------------------------
B-2
<PAGE>
EXHIBIT C
to the Credit Agreement
FORM OF GUARANTY
BORROWER:____________________________
GUARANTOR: SILICON GRAPHICS, INC.
LIMITED CONTINUING GUARANTY (MULTICURRENCY)
To: The Bank (as defined below)
(1) Definitions
(a) "Bank" means BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, together with its successors and assigns.
(b) "Borrower" means the person or entity identified as such in
Paragraph 2 below.
(c) "Guarantor" means SILICON GRAPHICS, INC., a Delaware
corporation.
(d) "Indebtedness" means any and all indebtedness of Borrower to
Bank, including but not limited to any and all advances, debts, obligations
and liabilities of Borrower, heretofore, now, or hereafter made, incurred
or created, whether voluntary or involuntary and however arising, whether
direct or acquired by Bank by assignment or succession, whether due or not
due, absolute or contingent, liquidated or unliquidated, determined or
undetermined, and whether Borrower may be liable individually or jointly
with others, or whether recovery upon such indebtedness may be or hereafter
become barred by any statute of limitations, or whether such indebtedness
may be or hereafter become otherwise unenforceable.
(e) "Judgment Currency" means the currency in which any judgment on
any claim arising under or related to this Guaranty is denominated.
(f) "Obligation Currencies" means the currencies in which the
Indebtedness is denominated.
(g) The "U.S. Dollar Equivalent" of any amount denominated in any
currency other than U.S. Dollars shall be calculated at the spot rate for
the purchase of the other currency with U.S. Dollars quoted by the Bank in
San Francisco, California, at approximately 8:00 a.m., on the date for
determination specified in this Guaranty.
C-1
<PAGE>
(2) For valuable consideration, Guarantor unconditionally guarantees and
promises to pay to Bank or order, on demand, at the place or places for payment
of the Indebtedness or at such other location or locations as Bank may
designate:
(a) any and all Indebtedness of________________________________
_____________________________ ("Borrower") to Bank, in the Obligation
Currencies, or
(b) if the Bank so notifies Guarantor in writing, at the Bank's
sole and absolute discretion, the greater of: (i) the U.S. Dollar
Equivalent of the Indebtedness or any portion thereof, determined as of the
date or dates the Indebtedness was loaned to or incurred by Borrower, or
(ii) such U.S. Dollar Equivalent determined as of the date payment is made.
(3) (a) The liability of Guarantor under this Guaranty (exclusive of
liability under any other guaranties executed by Guarantor) shall not
exceed at any time the total of (i) U.S. Dollars (U.S. $_______________)
for the sum of the principal amount of any Indebtedness denominated in
U.S. Dollars and the U.S. Dollar Equivalent of the principal amount of any
Indebtedness denominated in an Obligation Currency other than U.S. Dollars,
determined as of the date or dates such principal amount was loaned to or
incurred by Borrower, and (ii) all interest, fees, costs, expenses,
payments, and indemnities relating to or arising out of this Guaranty or
the Indebtedness or such part of the Indebtedness as shall not exceed the
foregoing limitation.
(b) Bank may permit the Indebtedness to exceed Guarantor's
liability and may apply any amounts received from any source, other than
from Guarantor, to the unguaranteed portion of the Indebtedness; provided,
however, that Guarantor shall not be liable for such amount in excess of
its liability hereunder. This is a continuing guaranty relating to any
Indebtedness, including that arising under successive transactions which
shall either continue the Indebtedness or from time to time renew it after
it has been satisfied.
(c) Any payment by Guarantor at or prior to the time such payment
is due by Guarantor shall reduce its maximum obligation hereunder only to
the extent that any payment constitutes a payment of principal, and only if
written notice to the effect that the amount of principal paid reduces
Guarantor's maximum obligation hereunder is actually received by Bank at or
prior to the time of such payment. If such principal payment is made in a
currency other than U.S. Dollars, the amount of any reduction of
Guarantor's maximum obligation hereunder shall be the lesser of: (i)
C-2
<PAGE>
the U.S. Dollar Equivalent of such principal payment determined as of the
date or dates the principal Indebtedness being paid was loaned to or
incurred by Borrower, or (ii) such U.S. Dollar Equivalent as of the date
such principal payment is made.
(d) The entry of any judgment against Guarantor of its obligations
hereunder shall reduce its maximum obligation hereunder in an amount equal
to the sum of the portion of the amount of such judgment representing
principal amounts of Indebtedness denominated in U.S. Dollars, and the
lesser of: (i) the U.S. Dollar Equivalent of each principal amount of
Indebtedness denominated in an Obligation Currency other than U.S. Dollars
included in such judgment, determined as of the date or dates such amount
was loaned to or incurred by Borrower, or (ii) such U.S. Dollar Equivalent
determined as of the date of entry of such judgment.
(4) (a) If any claim arising under or related to this Guaranty is
reduced to judgment denominated in a Judgment Currency other than the
Obligation Currency, the judgment shall be for the greater of (i) the
equivalent in the Judgment Currency of the amount of the claim denominated
in the Obligation Currency (or each Obligation Currency, if more than one)
included in the judgment, determined as of the date or dates the
Indebtedness related to such claim was loaned to or incurred by Borrower,
or (ii) such equivalent determined as of the date of judgment. The
equivalent of any Obligation Currency amount in any Judgment Currency shall
be calculated at the spot rate for the purchase of the Obligation Currency
with the Judgment Currency quoted by the Bank in San Francisco, California,
at approximately 8:00 a.m. on the date for determination specified above.
(b) Guarantor shall pay Bank any increased costs resulting from any
change in exchange rates between the date any claim is reduced to judgment
and the date of payment (or, in the case of partial payments, the date of
each partial payment) thereof by Guarantor. The foregoing shall constitute
an obligation separate and independent from the other obligations contained
in this Guaranty, shall give rise to a separate and independent cause of
action, shall apply irrespective of any indulgence granted by Bank from
time to time and shall continue in full force and effect notwithstanding
any judgment or order for a liquidated sum in respect of an amount due
hereunder or under any judgment or order.
(5) (a) (i) If any taxes (other than taxes on net income (A) imposed
by the country or any subdivision of the country in which the Bank's
principal office or actual lending
C-3
<PAGE>
office is located and (B) measured by the United States taxable income the
Bank would have received if all payments under or in respect of this
Guaranty were exempt from taxes levied by Guarantor's country), are at any
time imposed on any payments under or in respect of this Guaranty
including, but not limited to, payments made pursuant to this Paragraph,
Guarantor shall pay all such taxes and shall also pay to the Bank, on
demand, all additional amounts which the Bank specifies as necessary to
preserve the after-tax yield the Bank would have received if such taxes had
not been imposed.
(ii) The additional amounts necessary to preserve
the after-tax yield the Bank would have received if such taxes had
not been imposed shall be calculated pursuant to the formula:
(w)(t)(i)
y = ---------
1-w-t
where the terms are defined as follows:
y = additional payment to be made to the Bank
w = withholding tax rate levied by foreign
government
t = the Bank's combined Federal and state tax
rate
i = stated interest amount to be paid on
Indebtedness (base rate plus the Applicable
Margin (as defined by the Credit Agreement
dated as of December 31, 1994 among Silicon
Graphics, Inc., the Bank and the other parties
thereto, as amended))
1 = one
(b) Guarantor will provide Bank with original tax receipts,
notarized copies of tax receipts, or such other documentation as will prove
payment of tax in a court of law applying the United States Federal Rules
of Evidence, for all taxes paid by Guarantor pursuant to subparagraph (a)
above. Guarantor will deliver receipts to Bank within 30 days after the
due date for the related tax.
(6) The obligations hereunder are independent of the obligations of
Borrower, and shall not be affected by any acts of any governmental authority
affecting Borrower, including but
C-4
<PAGE>
not limited to any restrictions on the conversion of currency or repatriation or
control of funds or any total or partial expropriation of Borrower's property,
or by economic, political, regulatory or other events in the countries where
Borrower is located. A separate action or actions may be brought and prosecuted
against Guarantor whether action is brought against Borrower or whether Borrower
be joined in any such action or actions; and Guarantor waives the benefit of any
statute of limitations affecting its liability hereunder which is shorter than
four years after the maturity (for any reason) of the Indebtedness.
(7) Guarantor authorizes Bank, without notice or demand and without
affecting its liability hereunder, from time to time, either before or after
revocation hereof, to (a) renew, compromise, extend, accelerate or otherwise
change the time for payment of, or otherwise change the terms of the
Indebtedness or any part thereof, including increase or decrease of the rate of
interest thereon and (b) release or substitute any one or more of the endorsers
or guarantor.
(8) Guarantor waives any right to require Bank to (a) proceed against
Borrower or (b) pursue any other remedy in Bank's power. Guarantor waives any
defense arising by reason of any disability or other defense of Borrower, or the
cessation from any cause whatsoever of the liability of Borrower, or any claim
that Guarantor's obligations exceed or are more burdensome than those of
Borrower. Guarantor waives any right of subrogation, reimbursement,
indemnification, and contribution (contractual, statutory or otherwise),
including without limitation, any claim or right of subrogation under the
Bankruptcy Code (Title 11 of the U.S. Code) or any successor statute, arising
from the existence or performance of this Guaranty and Guarantor waives any
right to enforce any remedy which Bank now has or may hereafter have against
Borrower, and waives any benefit of, and any right to participate in, any
security now or hereafter held by Bank. Guarantor waives all presentments,
demands for performance, notices of nonperformance, protests, notices of
protest, notices of dishonor, and notices of acceptance of this Guaranty and of
the existence, creation, or incurring of new or additional Indebtedness. Bank
hereby agrees to give Guarantor prior notice of any extension of the maturity of
the Indebtedness provided, that, any failure by Bank to give such notice shall
not impair any of Bank's rights under this Guaranty or relieve Guarantor of any
of its obligations under this Guaranty.
(9) Guarantor acknowledges and agrees that it shall have the sole
responsibility for obtaining from Borrower such information concerning Borrower
financial condition or business operations as Guarantor may require, and the
Bank has no duty at
C-5
<PAGE>
any time to disclose to Guarantor any information relating to the business
operations or financial condition of Borrower.
(10) Any obligations of Borrower to Guarantor, now or hereafter existing,
including but not limited to any obligations to Guarantor as subrogee of Bank or
resulting from Guarantor's performance under this Guaranty, are hereby
subordinated to the Indebtedness. Such obligations of Borrower to Guarantor if
Bank so request shall be enforced and performance received by Guarantor as
trustee for Bank and the proceeds thereof shall be paid over to Bank on account
of the Indebtedness of Borrower to Bank, but without reducing or affecting in
any manner the liability of Guarantor under the other provisions of this
Guaranty.
(11) This Guaranty may be revoked at any time by Guarantor in respect to
future transactions, unless there is a continuing consideration as to such
transactions which Guarantor does not renounce. Such revocation shall be
effective upon actual receipt by Bank, at the addresses shown below or at such
other addresses as may have been provided in writing to Guarantor by Bank, of
written notice of revocation. Revocation shall not affect any of Guarantor's
obligations or Bank's rights with respect to transactions which precede Bank's
receipt of such notice. If this Guaranty is revoked, returned, or canceled, and
subsequently any payment or transfer of any interest in property by Borrower to
Bank is rescinded or must be returned by Bank to Borrower, this Guaranty shall
be reinstated with respect to any such payment or transfer, regardless of any
such prior revocation, return, or cancellation.
(12) Where Borrower is a corporation or partnership it is not necessary
for Bank to inquire into the powers of Borrower or of the officers, directors,
partners or agents acting or purporting to act on their behalf, and any
Indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed hereunder.
(13) The Bank may, without notice to Guarantor and without affecting
Guarantor's obligations hereunder, assign the Indebtedness and this Guaranty in
whole or in part to any affiliates or wholly owned subsidiaries of the Bank.
Guarantor agrees the Bank may disclose to any prospective purchaser and any
purchaser of all or part of the Indebtedness any and all information in Bank's
possession concerning Guarantor, this Guaranty and any security for this
Guaranty.
(14) Guarantor agrees to pay all reasonable attorneys' fees, the allocated
reasonable costs of Bank's in-house counsel, and all other reasonable costs and
expenses which may be incurred by Bank in the enforcement of this Guaranty.
C-6
<PAGE>
(15) This Guaranty shall be governed by and construed according to the
laws of the State of California, United States of America, to the jurisdiction
of which State the parties hereto submit.
(16) Every notice, demand, request, consent, approval or other
communication (collectively, "Notices") which any party is required or desires
to make or communicate upon or to the other under this Guaranty shall be in
writing and shall be given or made or communicated by personally delivering same
or by mailing the same by registered or certified mail, first class postage and
fees prepaid, return receipt requested, or by Federal Express or comparable
overnight service, to the address set forth below, or at such other address or
addresses as any party may designate from time to time in accordance with this
provision.
All Notices so sent shall be deemed to have been delivered, effective, made or
communicated, as the case may be, at the time that the same and the required
copies, if any, shall have been personally delivered or deposited, registered or
certified, properly addressed, as aforesaid, first class postage and fees
prepaid, return receipt requested, in the United States mail or to Federal
Express or comparable overnight service. Rejection or other refusal to accept
or the inability to deliver because of a changed address of which no Notice was
given, shall be deemed to constitute receipt of the Notice sent.
(17) Any controversy or claim between or among the parties, including but
not limited to those arising out of or relating to this Guaranty or any
agreements or instruments relating hereto or delivered in connection herewith
and any claim based on or arising from an alleged tort, shall at the request of
any party be determined by arbitration. The arbitration shall be conducted in
accordance with the United States Arbitration Act (Title 9, U.S. Code),
notwithstanding any choice of law provision in this Guaranty, and under the
Commercial Rules of the American Arbitration Association ("AAA"). The
arbitrator(s) shall give effect to statutes of limitation in determining any
claim except where such statutes have been waived by any of the parties hereto
in this Guaranty. Any controversy concerning whether an issue is arbitrable
shall be determined by the arbitrator(s). Judgment upon the arbitration award
may be entered in any court having jurisdiction. The institution and
maintenance of an action for judicial relief or pursuit of a provisional or
ancillary remedy shall not constitute a waiver of the right of any party,
including the plaintiff, to submit the controversy or claim to arbitration if
any other party contests such action for judicial relief.
(18) At the request of any party, a controversy or claim which is not
submitted to arbitration as provided and limited in
C-7
<PAGE>
Section 17 shall be determined by a reference in accordance with California Code
of Civil Procedure Section 638 ET SEQ. If such an election is made, the parties
shall designate to the court a referee or referees selected under the auspices
of the AAA in the same manner as arbitrators are selected in AAA-sponsored
proceedings. The presiding referee of the panel, or the referee if there is a
single referee, shall be an active attorney or retired judge. Judgment upon the
award rendered by such referee or referees shall be entered in the court in
which such proceeding was commenced in accordance with California Code of Civil
Procedure Sections 644 and 645.
C-8
<PAGE>
Executed this _____ day of ________, 19__.
SILICON GRAPHICS, INC.
By _____________________________
Title:
----------------------
By _____________________________
Title:
----------------------
Address: 2011 N. Shoreline Blvd.
Mountain View, CA 94043
Attn: Treasury
Telephone: (415) 960-1980
Telecopy: (415) 964-5215
With a Copy to: Legal Services
Address for Notices to Bank
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
Credit Products - High Technology -
San Francisco #3697
555 California Street, 41st Floor
San Francisco, CA 94104
Attn: Kevin M. McMahon
Vice President
Telephone: (415) 622-8088
Telecopy: (415) 622-2514
C-9
<PAGE>
[LETTERHEAD]
February 1, 1995
Thomas A. Jermoluk
Dear Tom:
The purpose of this letter is to confirm our mutual agreement concerning
your continued employment with Silicon Graphics, Inc. ("Silicon Graphics" or the
"Company").
1. Silicon Graphics agrees to employ you, and you agree to continue your
employment with Silicon Graphics, in the position of President and Chief
Operating Officer reporting to the Company's Chief Executive Officer ("CEO").
You agree to assume and discharge such duties and responsibilities as are
consistent with such office and position or such other duties and
responsibilities as may be assigned to you by the CEO or the Company's Board of
Directors (the "Board") from time to time to the extent consistent with the role
of a senior executive. You shall comply with and be bound by Silicon Graphics'
operating policies, procedures and practices from time to time in effect during
your employment.
2. Unless earlier terminated as provided below, the term of your
employment with Silicon Graphics under this Agreement shall commence on the
effective date of this Agreement and shall continue until and terminate on June
30, 1999. During the employment term, you shall devote your full time, skill
and attention to your duties and responsibilities, and shall perform them
faithfully, diligently and competently, and you shall use your best efforts to
further the business of Silicon Graphics and its affiliated entities.
3. In consideration of your services, you will be paid a base salary and
will be eligible to earn incentive bonus compensation in accordance with Silicon
Graphics policies established from time to time in an amount averaging not less
than $1,000,000 per year over the term of this Agreement. As with other
executive officers of Silicon Graphics, base and bonus compensation will be
reviewed annually by the Compensation and Human Resources Committee.
<PAGE>
Thomas A. Jermoluk
February 1, 1995
Page 2
4. You will be eligible to participate in Silicon Graphics' incentive
compensation and employee fringe benefit plans and programs made available to
other employees and officers to the full extent of your eligibility therefor.
5. (a) If, on or prior to June 30, 1999, (i) your employment with
Silicon Graphics is involuntarily terminated other than for "Cause" (defined
below), (ii) you terminate your employment with Silicon Graphics for "Good
Reason" (defined below), or (iii) your employment with Silicon Graphics
terminates as a result of your death or "Disability" (defined below), then you
shall be entitled to the special payment described in paragraph 6 below. If
your employment with Silicon Graphics terminates for any other reason on or
prior to June 30, 1999, no compensation or benefits will be paid or provided to
you under this Agreement, and your rights under the Company's other benefit
plans and programs shall be determined under the provisions of those plans and
programs.
(b) For purposes of this Agreement, termination of your employment
with Silicon Graphics shall be regarded as a termination for "Cause" only upon
(i) your willful and continued failure to substantially perform your duties with
Silicon Graphics after there is delivered to you by the Board a written demand
for substantial performance which sets forth in detail the specific respects in
which it believes you have not substantially performed your duties; (ii) your
willfully engaging in gross misconduct which is materially detrimental to
Silicon Graphics; (iii) your committing a felony or an act of fraud against
Silicon Graphics or its affiliates; or (iv) your breaching materially the terms
of your employee confidentiality and proprietary information agreement with
Silicon Graphics or any other similar agreement that may be in effect from time
to time. No act, or failure to act, by you shall be considered "willful" if
done, or omitted to be done, by you in good faith and in your reasonable belief
that your act or omission was in the best interests of Silicon Graphics and/or
required by applicable law. You shall not be deemed to have been terminated for
Cause under clause (i), (ii) or (iv) of this paragraph 5(b) unless and until
there shall have been delivered to you a copy of a resolution duly adopted by
the affirmative vote of not less than a majority of the entire membership of the
Board at a meeting of the Board called and held for that purpose (after
reasonable notice to and an opportunity for you, together with your counsel, to
be heard before the Board), finding that in the good faith opinion of the Board,
you are guilty of conduct set forth in such clauses and specifying the
particulars thereof in detail.
(c) For purposes of this Agreement, Silicon Graphics may terminate
your employment as a result of "Disability" in the event you are unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months.
(d) Your employment with Silicon Graphics may be regarded as having
been constructively terminated by Silicon Graphics, and you may therefore
<PAGE>
Thomas A. Jermoluk
February 1, 1995
Page 3
terminate your employment for "Good Reason" and thereupon become entitled to the
special payment pursuant to paragraph 6 below if, on or prior to June 30, 1999,
you terminate your employment with Silicon Graphics as a result of the
occurrence, without your written consent, of one or more of the following events
(unless such event(s) applies generally to executive officers of Silicon
Graphics and any successor to Silicon Graphics): (i) your duties,
responsibilities or authority are reduced to a level that is inconsistent with
the role of a senior executive, and (ii) the Company requires you to be based
anywhere other than the Company's current or future corporate headquarters or
the functional equivalent thereof (except for required travel on Silicon
Graphics business).
6. (a) You shall be entitled to a special payment from Silicon Graphics
as described in paragraph 6(b) below if you remain continuously employed by
Silicon Graphics and consistently perform your obligations under paragraphs 1
and 2 above through June 30, 1999, or if your employment with Silicon Graphics
is terminated at any time on or prior to June 30, 1999 (i) by Silicon Graphics
other than for Cause, (ii) by you for Good Reason, or (iii) as a result of your
death or Disability. You will not be entitled to the special payment if (i) you
terminate your employment with Silicon Graphics prior to June 30, 1999
voluntarily other than for Good Reason or (ii) Silicon Graphics terminates your
employment on or prior to June 30, 1999 for Cause.
(b) The special payment will be determined pursuant to the following
formula:
B = X - Y, where
B is the amount payable by Silicon Graphics
X is a fixed dollar amount described in paragraph 6(e) below
that is determined as of the "Determination Date" (defined
below)
Y is your "Total Compensation" (defined below).
Notwithstanding the foregoing, in the event your employment
terminates on or prior to June 30, 1999 as a result of your death of Disability,
the special payment shall be determined by multiplying B by a fraction, the
numerator of which is the number of whole months from July 1, 1994 to the
Determination Date, and the denominator of which is sixty (60).
(c) For purposes of this paragraph 6, the "Determination Date" shall
mean June 30, 1999 or, if earlier, the date on which your employment terminates
due to your death or Disability.
(d) For purposes of this paragraph 6, "Total Compensation" shall mean
the aggregate pre-tax value of the following:
<PAGE>
Thomas A. Jermoluk
February 1, 1995
Page 4
(i) all salary and bonus compensation (including any deferred
amounts), if any, paid or payable to you with respect to the period that
begins July 1, 1994 and that ends on the Determination Date in excess of
"Target Compensation" (defined below);
(ii) the value of any shares of restricted stock that vest during
the period that begins July 1, 1994 and that ends on the Determination
Date, valued as of the date the restrictions lapse, based on the closing
price for a share of the Company's Common Stock as reported daily in THE
WALL STREET JOURNAL or similar readily available public source (the "Fair
Market Value");
(iii) with respect to any Company stock options held by you
(whether granted before or after the date of this Agreement) that become
exercisable during the period that begins July 1, 1994 and that ends on the
Determination Date, the difference between the Fair Market Value of the
option shares and the applicable option exercise price determined (x) at
the time of exercise in the case of options that are exercised during such
period, (y) on the Determination Date in the case of options that are held
by you on the Determination Date but that were not exercised prior to such
Date, and (z) on the date of expiration in the case of options that expired
according to their terms prior to the Determination Date;
(iv) any amount paid or payable to you or realized or realizable
by you as the result of your termination of employment with Silicon
Graphics on or before the Determination Date pursuant to Section 3 of that
certain employment continuation agreement between you and the Company dated
July 10, 1989, as amended October 21, 1993 (the "Change in Control
Agreement"). For this purpose, any payment or benefit attributable to
stock options shall be calculated by first reducing the value attributable
to stock options as provided in clause (iii) above.
(v) in the event that you are employed by Silicon Graphics on
the Determination Date but there has been a "change in control" of Silicon
Graphics (as that term is defined in the Change in Control Agreement)
within the 24-month period preceding such date, "Total Compensation" shall
include the termination payment described in Section 3(a) of the Change in
Control Agreement notwithstanding your continued employment; provided,
however, that if, within the 24-month period after such change in control
you do not become entitled to such termination payment, you shall be
entitled to an additional payment from Silicon Graphics pursuant to this
Agreement equal in amount to the excess, if any, of (i) the special payment
that would have been payable to you pursuant to this paragraph 6 had Total
Compensation been computed without regard to this subparagraph (v), minus
(ii) the amount that was actually paid to
<PAGE>
Thomas A. Jermoluk
February 1, 1995
Page 5
you as a special payment, which additional payment shall be made between 30
and 60 calendar days after the second anniversary of such change in
control.
(vi) if, at the Determination Date, the CEO or the Board
determines that it is probable that there will be a "change in control" of
Silicon Graphics (as defined in the Change in Control Agreement) within the
six-month period following the Determination Date, then "Total
Compensation" shall include the difference between the Fair Market Value
(determined as of the Determination Date) of any option shares that are not
then exercisable and the applicable option exercise price of such options;
provided, however, that if, within the six-month period following the
Determination Date such "change in control" does not occur, you shall be
entitled to an additional payment from Silicon Graphics pursuant to this
Agreement equal in amount to the excess, if any, of (i) the special payment
that would have been payable to you pursuant to this paragraph 6 had Total
Compensation been computed without regard to this subparagraph (vi), minus
(ii) the amount that was actually paid to you as a special payment, which
additional payment shall be made between 30 and 60 calendar days after the
expiration of such six-month period.
(vii) in the event Silicon Graphics adopts any material new
benefit program during the term of this Agreement, Silicon Graphics and you
will agree on whether and how such program shall be valued for purposes of
the special payment described in this paragraph 6.
(e) The fixed dollar amount in the above formula (X) shall equal
$10,000,000 increased by the "Additional Amount" (defined below). For purposes
of the foregoing, the "Additional Amount" shall mean the amount, if any, by
which the aggregate pre-tax value of the salary and bonus compensation paid to
you with respect to the period that begins July 1, 1994 and that ends on the
earlier of June 30, 1999, or the date your employment with Silicon Graphics
terminates, is less than "Target Compensation" (defined below).
(f) For purposes of this paragraph 6, "Target Compensation" shall
mean a target aggregate level of salary and bonus compensation with respect to
the period that begins July 1, 1994 and that ends on June 30, 1999, which target
shall be calculated at an average annual rate of $1,000,000 per year.
(g) To the extent you become entitled to a payment pursuant to this
paragraph 6, such payment shall be made in cash, in shares of Silicon Graphics
Common Stock, or by combination of cash and shares as Silicon Graphics shall, at
its sole discretion, determine. In the event Silicon Graphics satisfies its
obligation with shares of Silicon Graphics Common Stock, Silicon Graphics agrees
to use its best efforts to deliver shares that are registered and freely
tradeable (subject to standard resale restrictions and
<PAGE>
Thomas A. Jermoluk
February 1, 1995
Page 6
limitations) or, alternatively, agrees to use its best efforts to undertake to
register and list such shares as soon as practicable after the Determination
Date. Any special payment to which you become entitled under this paragraph 6
shall be made between 30 and 60 calendar days after the Determination Date.
Your right to receive a special payment as set forth above may be terminated at
any time upon the mutual agreement of you and the Board that it is reasonable
and appropriate to terminate such provision.
7. Silicon Graphics shall require any successor or assignee, in
connection with any sale, transfer or other disposition of all or substantially
all of Silicon Graphic's assets or business, whether by purchase, merger,
consolidation or otherwise, expressly to assume and agree to perform the
Company's obligations under this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession or
assignment had taken place. In such event, the term "Company" or "Silicon
Graphics," as used in this Agreement, shall mean the Company and Silicon
Graphics as defined above and any successor or assignee to the business and
assets which by reason hereof becomes bound by the terms and provisions of this
Agreement.
8. You and Silicon Graphics agree that any dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in Santa Clara County, California, in accordance with the rules of
the American Arbitration Association then in effect by an arbitrator selected by
you and Silicon Graphics within 10 days after either party has notified the
other in writing that it desires a dispute between them to be settled by
arbitration. In the event you and Silicon Graphics cannot agree on such
arbitrator within such 10-day period, each party shall select an arbitrator and
inform the other party in writing of such arbitrator's name and address within
five days after the end of such 10-day period and the two arbitrators so
selected shall select a third arbitrator within 15 days thereafter; provided,
however, that in the event of a failure by either party to select an arbitrator
and notify the other party of such selection within the time period provided
above, the arbitrator selected by the other party shall be the sole arbitrator
of the dispute. Each party shall pay its own expenses associated with such
arbitration. The decision of the arbitrator or a majority of the panel of
arbitrators shall be binding upon the parties and judgment in accordance with
that decision may be entered in any court having jurisdiction thereover.
Punitive damages shall not be awarded. You and Silicon Graphics agree that
except as required by applicable laws, any such arbitration shall be kept
confidential.
9. Except as required by applicable laws, neither party shall disclose
the contents of this Agreement without first obtaining the prior written consent
of the other party, provided, however, that you may disclose this Agreement to
your attorney, financial planner and tax advisor if such persons agree to keep
the terms hereof confidential.
<PAGE>
Thomas A. Jermoluk
February 1, 1995
Page 7
10. This Agreement shall be governed by and construed in accordance with
the laws of the State of California applicable to agreements made and to be
performed entirely within such state.
11. This Agreement and any written agreements or Company plans that are
referenced herein represent the entire agreement and understanding between you
and Silicon Graphics as to the subject matter hereof and supersede all prior or
contemporaneous agreements, whether written or oral. No waiver, alteration or
modification, if any, of the provisions of this Agreement shall be binding
unless in writing and signed by you and a duly authorized representative of
Silicon Graphics.
Tom, we are excited about having you continue as a key contributor to
Silicon Graphics' future success. Please acknowledge acceptance of this
Agreement by signing and returning the enclosed copy of this letter, whereupon
it shall become a binding agreement.
Very truly yours,
SILICON GRAPHICS, INC.
Edward R. McCracken
------------------------------------
Edward R. McCracken
Chairman and Chief Executive Officer
Accepted By:
Thomas A. Jermoluk
- -------------------------
Thomas A. Jermoluk
<PAGE>
EXHIBIT 11.1
STATEMENT OF COMPUTATION OF COMMON SHARES AND COMMON
SHARE EQUIVALENTS
WEIGHTED AVERAGE SHARES OUTSTANDING:
(THOUSANDS OF SHARES)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
------------ ------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Common shares 142,567 134,583 141,450 133,417
Convertible preferred shares 1,410 1,753 1,655 1,963
Stock options 14,921 17,710 15,111 17,318
-------- -------- -------- --------
Total weighted average
shares outstanding 158,898 154,046 158,216 152,698
-------- -------- -------- --------
-------- -------- -------- --------
Net income available to
common stockholders $ 53,887 $ 36,340 $ 95,723 $ 62,080
-------- -------- -------- --------
-------- -------- -------- --------
Income Per Share:
Net income per share $ 0.34 $ 0.24 $ 0.61 $ 0.41
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
All share and per share data have been restated for all periods presented to
reflect the two-for-one stock split payable in the form of a stock dividend
which was distributed on December 15, 1993 to holders of record on November 30,
1993.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet, consolidated statement of income and
consolidated statement of cash flows included in the Company's Form 10-Q
for the period ending December 31, 1994, and is qualified in it entirety
by reference to such financial statements and the notes thereto.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 348,202
<SECURITIES> 229,657
<RECEIVABLES> 481,167
<ALLOWANCES> 0
<INVENTORY> 202,798
<CURRENT-ASSETS> 1,334,021
<PP&E> 417,175
<DEPRECIATION> (216,919)
<TOTAL-ASSETS> 1,794,433
<CURRENT-LIABILITIES> 465,939
<BONDS> 280,603
<COMMON> 143
0
33,996
<OTHER-SE> 1,013,752
<TOTAL-LIABILITY-AND-EQUITY> 1,794,433
<SALES> 469,949
<TOTAL-REVENUES> 524,002
<CGS> 221,015
<TOTAL-COSTS> 249,220
<OTHER-EXPENSES> 193,028
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,773
<INCOME-PRETAX> 76,981
<INCOME-TAX> 23,094
<INCOME-CONTINUING> 53,887
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,887
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
</TABLE>
