Loan Agreement - Silicon Graphics Inc., Gary L. Lauer and Katherine W. Lauer
LOAN AGREEMENT
This Loan Agreement is entered into as of this 25th day of May, 1995 by
and between SILICON GRAPHICS, INC., a Delaware corporation ("SGI"), and GARY
L. LAUER ("Employee") and KATHARINE W. LAUER, individually and as trustees of
the Lauer Family Trust U/D/T Dated July 8, 1991 (collectively, "Borrower").
RECITALS
WHEREAS, Borrower's current residence is located at 1305 McKenzie Avenue,
Los Altos, California ("Existing Residence");
WHEREAS, Borrower desires to purchase a new principal residence located at
27866 Via Corita Court, Los Altos Hills, California 94022 ("New Residence");
WHEREAS, Borrower desires to purchase the New Residence prior to the sale
of the Existing Residence;
WHEREAS, Borrower desires to borrow from SGI the sum of One Million
Dollars ($1,000,000) for purposes of purchasing the New Residence;
NOW, THEREFORE, SGI and Borrower agree as follows:
1. AGREEMENT TO LOAN. SGI agrees to loan to Borrower, and Borrower agrees
to borrow from SGI, the principal sum of One Million Dollars ($1,000,000)
upon the terms and conditions set forth herein. The loan ("Loan") shall be
evidence by a promissory note in the form attached hereto as Exhibit "A"
("Note"). The Note shall be secured by (i) a deed of trust with assignment
of rents (with a due on sale provision) in the form attached hereto as
Exhibit "B" ("Deed of Trust"), encumbering the Existing Residence, and (ii) a
Stock Pledge Agreement in the form attached hereto as Exhibit "C" ("Stock
Pledge"), encumbering all of Borrower's stock options and shares in SGI.
This Agreement, the Note, the Deed of Trust, the Pledge Agreement and any
other documents or instruments now or hereafter evidencing the Loan or
securing the obligations of Borrower thereunder shall be collectively
referred to herein as the "Loan Documents," and the terms and conditions of
the Loan Documents are incorporated herein by this reference.
2. PURPOSE OF LOAN. Employee has notified SGI that Employee requires
funds for purposes of purchasing the New Residence. SGI is willing to make
the Loan to Borrower for the sole purpose of Borrower's purchase of the New
Residence.
3. PAYMENT OF LOAN. The principal and accrued interest under the Loan
shall be payable in accordance with the Note, which provides as follows:
(a) Three Hundred Thousand ($300,000) (or, if the then outstanding
balance of principal under the Note shall be less than Three Hundred Thousand
Dollars
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($300,000), the then outstanding balance of principal and interest under the
Note) shall be payable to SGI upon the sale, transfer or other conveyance of
the Existing Residence;
(b) Fifty percent (50%) of the Net After-Tax Proceeds (as defined
below) from the sale of any Shares (as defined in the Pledge Agreement) shall
be payable on the date that such proceeds are otherwise payable to, or
withheld on behalf of, Borrower. For purposes of this Agreement, the term
"Net After-Tax Proceeds" shall mean (i) the gross sales proceeds from the
sale of any Shares (including any applicable income tax withholdings), less
applicable brokerage commissions ("Net Pre-Tax Proceeds"), less (ii) the
product obtained by multiplying the Net Pre-Tax Proceeds by Employee's income
tax withholding rate, which, for purposes of this Agreement, shall be deemed
to be thirty-six and forty-five hundredths percent (36.45%) for all
transactions involving the sale of any Shares (including, without limitation,
transactions involving Incentive Stock Options). In no event shall this
subparagraph (b) modify or otherwise relieve Borrower of its obligation to
make the full amount of the payment identified in subparagraph (a) above, and
the payment obligations under subparagraph (a) shall be independent of the
payment obligations under this subparagraph (b).
(c) All principal and accrued but unpaid interest outstanding as of
the Due Date shall be immediately due and payable on the Due Date. For
purposes of this Agreement, the "Due Date" shall be the earlier of (i) the
date of termination or cessation of SGI's employment of Employee, whether
voluntarily or involuntarily, and whether with or without cause, (ii) the
date that all or part of Borrower's right, title and interest in the New
Residence (as defined below) is sold, transferred or otherwise conveyed by
Borrower, whether voluntarily or involuntarily, or (iii) the fifth (5th)
anniversary of the effective date of the Note.
4. DOCUMENTS. In connection with the Loan, Borrower shall, at least one
(1) business day prior to the Close of Escrow (as defined below), execute,
acknowledge (as applicable) and deposit with First American Title Guaranty
("Escrow Holder"), whose address is 161 South San Antonio Road, Suite 5, Los
Altos, CA 94022 Attn: Erma Romani, for delivery to SGI on the Close of
Escrow, the following documents and instruments:
(a) the Note;
(b) the Deed of Trust;
(c) the Stock Pledge Agreement;
(d) such other documents and instruments as may be deemed necessary or
desirable by SGI to evidence the Loan and/or evidence and perfect SGI's
security interest in the Existing Residence.
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5. CONDITIONS TO CLOSING. SGI's obligation to make the Loan to Borrower
on the Close of Escrow is subject to the fulfillment, on or before the Close
of Escrow, of each of the following conditions precedent:
(a) Borrower shall have executed, acknowledged (as applicable) and
deposited with Escrow Holder the documents and instruments described in
Paragraph 4 above;
(b) Borrower and the seller ("Seller") of the New Residence shall
have approved their respective closing statements and authorized Escrow
Holder to close the purchase and sale transaction, and Escrow Holder shall be
prepared to record in the Official Records of Santa Clara County, California,
a grant deed duly executed and acknowledged by Seller conveying fee title in
the New Residence to Borrower ("Grant Deed");
(c) Borrower shall have executed, acknowledged (as applicable) and
deposited with Escrow Holder all applicable loan documents in connection with
a loan ("Nations Loan") from Nations Bank ("Nations Bank") in a principal sum
not to exceed Six Hundred Fifty Thousand Dollars ($650,000) and secured by a
first deed of trust encumbering the New Residence ("Nations Deed of Trust"),
Nations Bank shall have deposited the full amount of the Nations Loan with
Escrow Holder for application towards payment of the purchase price for the
New Residence at the Close of Escrow, Borrower and Nations Bank shall have
approved their respective closing statements and authorized Escrow Holder to
close the respective purchase/sale and loan transactions;
(d) Escrow Holder shall be prepared to issue to SGI a CLTA Lender's
Policy of Title Insurance, with a liability limit of not less than Six
Hundred Thousand Dollars ($600,000), insuring SGI's interest under the Deed
of Trust as a valid second lien against the Existing Residence, subject only
to the lien of real property taxes not yet due and payable, Exceptions 2, 3,
5, and 7 of that certain Preliminary Title Report dated as of May 10, 1995
issued by Escrow Holder ("Title Report"), together with such endorsements as
may be requested by SGI; and
(e) Borrower shall have delivered to Escrow Holder, for delivery to
SGI, certificates of insurance evidencing fire and extended casualty
insurance coverage (including earthquake coverage) for the full replacement
cost of the Existing Residence, naming SGI as a loss payee thereunder.
6. CLOSE OF ESCROW. The "Close of Escrow" shall mean the date that the
Grant Deed, the Nations Deed of Trust and the Deed of Trust are recorded in
the Official Records of Santa Clara County, California. If the Close of
Escrow fails to occur on or before May 31, 1995, then this Agreement shall
terminate, unless extended by written agreement of the parties hereto.
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7. CLOSING COSTS. SGI shall pay the premiums for the Title Policy, the
cost of endorsements requested by SGI, and the recording fees applicable to
the Deed of Trust.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER. Borrower hereby
makes the following representations, warranties and covenants to SGI and
acknowledges that SGI is relying upon the same in making the Loan:
(a) Borrower shall acquire good and marketable fee title in the New
Residence, free and clear of all liens and encumbrances, other than the lien
of real property taxes not yet due and payable, Exceptions 5, 6, 7, and 8 of
the Preliminary Title Report dated as of March 30, 1995 issued by Escrow
Holder, and the Nations Deed of Trust.
(b) Borrower shall use all proceeds of the Loan for purposes of
purchasing the New Residence.
(c) Borrower has good and marketable fee title in the Existing
Residence, free and clear of all liens and other encumbrances, other than the
lien for real property taxes not yet due and payable and Exceptions 2, 3, 5
and 7 of the Preliminary Title Report dated as of May 10, 1995 issued by
Escrow Holder. The Deed of Trust shall constitute a valid second lien upon
Borrower's fee interest in the Existing Residence.
(d) Borrower shall timely perform all obligations and covenants to be
performed by Borrower under any and all liens and other encumbrances
affecting the Existing Residence, including, without limitation, all
obligations secured by that certain Deed of Trust dated February 12, 1993 in
favor of State Street Bank and Trust (as assignee of First California
Mortgage Co.) ("Existing Deed of Trust"), securing repayment of an original
principal sum of Two Hundred Thirty Thousand Dollars ($230,000). In no event
shall the outstanding balance of principal and interest under the Existing
Deed of Trust (or such modifications, extensions or substitutions thereof)
exceed Two Hundred Thirty Thousand Dollars ($230,000) at any time during
which the Deed of Trust constitutes a lien against the Existing Residence.
Borrower shall immediately notify SGI of any breach or default by Borrower
under the Existing Deed of Trust and/or the loan secured thereby.
(e) There are no actions, proceedings, claims or disputes pending or,
to Borrower's knowledge, threatened against or affecting Borrower, the New
Residence or the Existing Residence, except as otherwise disclosed to SGI in
writing prior to the date of this Agreement.
9. DEFAULT. The occurrence of any of the following shall constitute an
event of default under this Agreement:
(a) Borrower shall fail to pay any amount as and when due under the
Note and/or Deed of Trust;
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(b) Borrower shall fail to timely perform any other obligation of
Borrower under the Loan Documents;
(c) Borrower is otherwise in breach of any representation, warranty
or covenant of Borrower under the Loan Documents; and/or
(d) Borrower shall fail to pay any amount as and when due or timely
perform any other obligation of Borrower under the Existing Deed of Trust
and/or the loan secured thereby.
(e) Borrower shall fail to pay any amount as and when due or timely
perform any other obligation of Borrower under the Nations Deed of Trust
and/or the Nations Loan.
Upon the occurrence of an event of default hereunder, SGI may, at its
option, accelerate the maturity of the Note and declare all principal
thereunder immediately due and payable. In the event that SGI exercises this
option, all outstanding principal and accrued interest under the Note shall
thereafter bear simple interest at the maximum rate permitted by law.
Failure to exercise this option shall not constitute a waiver of SGI's right
to exercise the same with respect to any prior or subsequent defaults.
10. SUBSTITUTE COLLATERAL. SGI shall have the right to require Borrower
to supplement and/or substitute the Deed of Trust with additional and/or
substitute security and collateral reasonably acceptable to SGI, including,
without limitation, a deed of trust in substantially the same form as the
Deed of Trust encumbering other real property owned by Borrower. Within ten
(10) days following receipt thereof, Borrower shall execute and acknowledge
such documents and instruments as may be deemed necessary or desirable by SGI
to effect the substitution of security as contemplated herein.
11. ENTIRE AGREEMENT. This Agreement and the exhibits attached hereto
shall constitute the full and entire understanding and agreement between the
parties hereto with regard to the subject matter hereof. Neither this
Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against
whom enforcement of any such amendment, waiver, discharge or termination is
sought.
12. NO EMPLOYMENT AGREEMENT. Employee understands that this Agreement
and the Loan Documents do not constitute an employment agreement or a promise
by SGI to continue Employee's employment.
13. NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed effectively given upon
personal delivery to the party to be notified or three (3) days after
depositing in the United States mail, by registered or certified mail,
postage prepaid, addressed to the address set forth on the
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signature page hereof, or such other address as either party may furnish to
the other party in writing.
14. NO ASSIGNMENT. Neither party may assign the rights and/or duties
under this Agreement to a third party, except that in the event that SGI is
merged into another corporation, or substantially all the outstanding stock
or assets of SGI are sold to another corporation and the surviving or
acquiring corporation agrees in writing to be bound by the rights and duties
of SGI under this Agreement, then SGI may assign its rights and duties
hereunder to such acquiring or surviving corporation.
15. TAX LIABILITY. Borrower understands and agrees that any and all
income tax liability to Borrower resulting from this Loan (including, without
limitation, any tax liability resulting from imputed interest and/or the
forgiveness of principal) shall be the sole responsibility of Borrower.
16. GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California.
17. SEVERABILITY. In case one or more of the provisions herein shall for
any reason be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had not been contained herein.
18. FURTHER ACTIONS. Each party hereto agrees to do such further acts and
things and to execute, acknowledge and deliver or to cause to have executed,
acknowledged and delivered such other and further instruments and documents
as may reasonably be requested by the other to carry out the purpose and
intent of this Agreement. This Agreement may be executed in counterparts and
each counterpart shall be deemed an original.
19. JOINT AND SEVERAL OBLIGATIONS. If this Agreement is signed by more
than one borrower, the obligations of each borrower under this Agreement and
each and every Loan Document shall be joint and several.
20. BORROWER HEREBY ACKNOWLEDGES AND AGREES THAT (A) THIS AGREEMENT, THE
NOTE, THE DEED OF TRUST, THE PLEDGE AGREEMENT AND ALL RELATED DOCUMENTATION
ARE OR WILL BE EXECUTED VOLUNTARILY AND WITHOUT ANY DURESS OR UNDUE INFLUENCE
ON THE PART OR BEHALF OF ANY PARTY HERETO, WITH THE FULL INTENT OF CREATING A
LOAN AND THE OBLIGATIONS AND SECURITY INTERESTS DESCRIBED THEREIN; (B)
BORROWER HAS READ SUCH DOCUMENTATION; (C) BORROWER HAS BEEN REPRESENTED IN
THE PREPARATION, NEGOTIATION AND EXECUTION OF SUCH DOCUMENTATION BY LEGAL
COUNSEL OF BORROWER'S OWN CHOICE OR BORROWER HAS VOLUNTARILY DECLINED TO SEEK
SUCH COUNSEL; (D) BORROWER UNDERSTANDS THE TERMS AND CONSEQUENCES OF THIS
AGREEMENT, THE
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NOTE, THE DEED OF TRUST, THE PLEDGE AGREEMENT AND ALL RELATED DOCUMENTATION
AND THE OBLIGATIONS THEY CREATE; AND (E) BORROWER IS FULLY AWARE OF THE LEGAL
AND BINDING EFFECT OF THIS AGREEMENT, THE NOTE, THE DEED OF TRUST, THE PLEDGE
AGREEMENT AND ALL RELATED DOCUMENTATION CONTEMPLATED BY THIS AGREEMENT.
BORROWER'S INITIALS: /s/ GLL
-----------
/s/ KWL
-----------
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
SGI:
SILICON GRAPHICS, INC.,
a Delaware corporation
By /s/ William M. Kelly
Its Vice President, Busines Development
General Counsel & Secretary
Address:
2011 N. Shoreline Blvd.
Mountain View, CA 94039
Attn: Legal Services
BORROWER:
/s/ Gary L. Lauer
GARY L. LAUER, individually and as
trustee of the Lauer Family Trust U/D/T
Dated July 8, 1991
/s/ Katharine W. Lauer
KATHARINE W. LAUER, individually and
as trustee of the Lauer Family Trust U/D/T
Dated July 8, 1991
Address prior to purchase of
New Residence:
1305 McKenzie Avenue
Los Altos, CA 94024
Address after purchase of
New Residence:
27866 Via Corita Court
Los Altos Hills, CA 94022
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EXHIBIT A
PROMISSORY NOTE
SECURED BY DEED OF TRUST
(Special Loan)
NOTICE: THIS PROMISSORY NOTE PROVIDES FOR A BALLOON PAYMENT.
$1,000,000.00 Mountain View, California
May 30, 1995
For value received, the undersigned, GARY L. LAUER ("Employee") and KATHARINE
W. LAUER, individually and as trustees of the Lauer Family Trust U/D/T Dated
July 8, 1991 (collectively, "Borrower"), jointly and severally promise to pay
to SILICON GRAPHICS, INC., a Delaware corporation ("SGI"), or order, at 2011
N. Shoreline Boulevard, P.O. Box 7311, Mountain View, California 94039-7311,
or such other place as SGI may designate in writing from time to time, in
lawful money of the United States of America, without abatement, demand,
deduction, setoff or counterclaim, the principal sum of One Million and
00/100 Dollars ($1,000,000.00), together with interest thereon at the rate of
seven and twelve hundredths percent (7.12%) per annum, compounded annually,
from the date first set forth above ("Effective Date") until all principal,
interest and other charges under this Promissory Note are paid in full.
1. PAYMENTS. Principal and accrued but unpaid interest under this
Promissory Note shall be due and payable as follows:
(a) Three Hundred Thousand ($300,000) (or, if the then outstanding
balance of principal hereunder shall be less than Three Hundred Thousand
Dollars ($300,000), the then outstanding balance of principal and interest
hereunder) shall be due and payable by Borrower to SGI upon the sale,
transfer or other conveyance of the Existing Residence (as defined below);
(b) Fifty percent (50%) of the Net After-Tax Proceeds (as defined
below) from the sale of any Shares (as defined in the Pledge Agreement) shall
be payable on the date that such proceeds are otherwise payable to, or
withheld on behalf of, Borrower. For purposes of this Agreement, the term
"Net After-Tax Proceeds" shall mean (i) the gross sales proceeds from the
sale of any Shares (including any applicable income tax withholdings), less
applicable brokerage commissions ("Net Pre-Tax Proceeds"), less (ii) the
product obtained by multiplying the Net Pre-Tax Proceeds by Employee's income
tax withholding rate, which, for purposes of this Agreement, shall be deemed
to be thirty-six and forty-five hundredths percent (36.45%) for all
transactions involving the sale of any Shares (including, without limitation,
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transactions involving Incentive Stock Options). In no event shall this
subparagraph (b) modify or otherwise relieve Borrower of its obligation to
make the full amount of the payment identified in subparagraph (a) above, and
the payment obligations under subparagraph (a) shall be independent of the
payment obligations under this subparagraph (b).
(c) All principal and accrued but unpaid interest outstanding as of
the Due Date shall become immediately due and payable on the Due Date.
Borrower may prepay the principal amount outstanding under this Promissory
Note in whole or in part at any time without penalty.
2. DUE DATE. The "Due Date" shall be the earlier of (i) the date of
termination or cessation of SGI's employment of Employee, whether voluntarily
or involuntarily, and whether with or without cause, (ii) the date that all
or part of Borrower's right, title and interest in the New Residence (as
defined below) is sold, transferred or otherwise conveyed by Borrower,
whether voluntarily or involuntarily, or (iii) the fifth (5th) anniversary of
the date first set forth above. Borrower hereby covenants and agrees to
immediately inform SGI in writing of the occurrence of any event described in
(ii) above.
3. PURPOSE OF LOAN. Borrower acknowledges and agrees that SGI is making
this loan to Borrower for the express purpose of facilitating Borrower's
purchase of Borrower's new residence located at 27866 Via Corita Court, Los
Altos Hills, California ("New Residence"). Borrower represents and warrants
to SGI that Borrower will use all proceeds of this Promissory Note for
purposes of purchasing the New Residence.
4. DEFAULT. In the event that Borrower fails (i) to pay any amount as and
when due under this Promissory Note, (ii) to timely perform any obligation of
Borrower under the Deed of Trust (as defined below) and/or the Pledge
Agreement (as defined below) securing Borrower's obligations under this
Promissory Note, or (iii) to timely perform Borrower's obligations under any
other agreement or instrument now or hereafter executed by Borrower in
connection therewith or securing the performance of Borrower's obligations
thereunder, SGI may, at its option, declare the entire principal sum under
this Promissory Note immediately due and payable. In the event that SGI
exercises this option or the principal balance of this Promissory Note
otherwise becomes due and payable, all principal then outstanding under this
Promissory Note shall thereafter bear simple interest at the maximum rate
permitted by law. Failure to exercise this option shall not constitute a
waiver of SGI's right to exercise the same with respect to any prior or
subsequent defaults.
5. SECURITY. Borrower's obligations under this Promissory Note are
secured by (i) that certain Deed of Trust with Assignment of Rents of even
date herewith ("Deed of Trust") encumbering Borrower's existing residence
located at
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1305 McKenzie Avenue, Los Altos, California, as more particularly described
in the Deed of Trust ("Existing Residence"), and (ii) that certain Pledge
Agreement of even date herewith ("Pledge Agreement") encumbering Borrower's
right, title and interest in any and all stock options now or hereafter
issued to Employee by SGI, as more particularly described in the Pledge
Agreement.
6. DUE ON SALE. The Deed of Trust provides as follows:
If the trustor shall sell, convey or alienate said property, or any
part thereof, or any interest therein, or shall be divested of his
title or any interest therein in any manner or way, whether
voluntarily or involuntarily, without the written consent of the
beneficiary being first had and obtained, beneficiary shall have the
right, at its option, except as prohibited by law, to declare any
indebtedness or obligations secured hereby, irrespective of the
maturity date specified in any note evidencing the same, immediately
due and payable.
7. ATTORNEYS' FEES. In the event any legal action or proceeding is
required to enforce or interpret any provision of this Promissory Note,
Borrower shall pay to SGI upon demand all costs of collection and reasonable
attorneys' fees incurred by SGI.
8. TAX LIABILITY. Borrower understands and agrees that any and all income
tax liability to Borrower resulting from this Promissory Note (including,
without limitation, any tax liability resulting from imputed interest) shall
be the sole responsibility of Borrower.
9. MISCELLANEOUS. If any provision of this Promissory Note shall be
invalid or unenforceable for any reason, the same shall be ineffective, but
the remainder of this Promissory Note shall not be affected thereby and shall
remain in full force and effect. Time is of the essence of each and every
obligation of Borrower hereunder. Presentment and demand for payment, notice
of dishonor, protest and notice of protest are hereby waived by Borrower. If
the due date for any payment under this Promissory Note falls on a Saturday,
Sunday or legal holiday, then such due date shall be extended to the next
business day. None of the terms or provisions of this Promissory Note may be
waived, altered, modified or amended except by a writing signed by SGI and
Borrower. The provisions of this Promissory Note shall be governed by
California law. The covenants, terms and conditions hereof shall bind the
heirs, successors and assigns of Borrower and shall inure to the benefit of
the successors and assigns of SGI.
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IN WITNESS WHEREOF, Borrower has executed this Promissory Note as of the
date first set forth above.
BORROWER:
_______________________________________
GARY L. LAUER, individually and as
trustee of the Lauer Family Trust U/D/T
Dated July 8, 1991
_______________________________________
KATHARINE W. LAUER, individually and
as trustee of the Lauer Family Trust U/D/T
Dated July 8, 1991
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EXHIBIT C
PLEDGE AGREEMENT
This Pledge Agreement ("Agreement") is made and entered into as of this
30th day of May, 1995 ("Effective Date") by and between Silicon Graphics, Inc.,
a Delaware corporation (the "Company"), and Gary L. Lauer ("Employee") and
Katharine W. Lauer, individually and as trustee of the Lauer Family Trust U/D/T
Dated July 8, 1991 (collectively, "Pledgor").
RECITALS
A. SGI has agreed to make a loan ("Loan") to Pledgor in the original
principal amount of One Million and 00/100 Dollars ($1,000,000.00) pursuant to
that certain Loan Agreement of even date herewith ("Loan Agreement"). The Loan
will be evidenced by the Loan Agreement and that certain Promissory Note of even
date herewith, and secured by this Pledge Agreement and that certain Deed of
Trust of even date herewith encumbering certain real property owned by Pledgor
(collectively, the "Loan Documents").
B. SGI has granted or may hereafter grant to Employee certain stock
options for the purchase of shares of common stock of SGI pursuant to the terms
and conditions of that certain Non-Qualified Stock Option Grant Agreement and/or
Incentive Stock Option Grant Agreement, as the same may be amended from time to
time (individually and collectively, "Option Agreement"). The stock options
granted to Employee as of the Effective Date are more particularly described on
Exhibit A attached hereto. For purposes of this Agreement, the term "Shares"
shall include the above-described shares and such other options and shares of
common stock of SGI now or hereafter issued or issuable to Employee under the
Option Agreement.
C. Pledgor now desires to pledge all of its right, title and interest in
and to the Shares to SGI upon the terms and conditions set forth hereinbelow.
NOW, THEREFORE, Pledgor hereby covenants and agrees as follows:
1. PLEDGE OF COLLATERAL. Pledgor hereby pledges, assigns, grants and
delivers to SGI a security interest in all of Pledgor's right, title and
interest in and to the Option Agreement, all options and shares of common stock
of SGI now or hereafter issued or issuable to Pledgor thereunder ("Shares") and
all cash and noncash proceeds and substitutions thereof (collectively, the
"Pledged Collateral") as security for the prompt performance of Pledgor's
obligations under the Loan. Pledgor's stock options under the Option Agreement
as of the Effective Date are more particularly set forth in Exhibit A attached
hereto.
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2. PLEDGOR'S COVENANTS. Pledgor hereby represents, warrants and
covenants to SGI as follows:
(a) The Pledged Collateral is free and clear of any security
interests, liens, encumbrances or other interests other than this Agreement.
(b) Pledgor has full power and authority to create a first lien
on the Pledged Collateral in favor of SGI and no disability or contractual
obligation exists which would prohibit Pledgor from pledging the Pledged
Collateral pursuant to this Agreement.
(c) Pledgor shall not assign, create or permit to exist any other
claim to, lien or encumbrance upon, or security interest in any of the
Pledged Collateral, and shall not permit Pledgor's rights in the Pledged
Collateral to be reached by attachment, levy or other judicial process.
(d) At SGI's request, Pledgor shall execute and acknowledge such
other documents and instruments which SGI deems necessary or desirable to
evidence, continue or preserve SGI's security interest in the Pledged
Collateral and/or to otherwise effect any of the terms of this Agreement.
The foregoing representations, warranties and covenants shall survive
the termination of this Agreement.
3. PAYMENT OF PROCEEDS.
(a) All monies or other proceeds payable to Pledgor in connection
with the sale or transfer of any Shares shall be applied first to the payment
of principal, accrued interest and other charges then due and payable under
the Loan. Upon Pledgor's payment to SGI of all principal, accrued interest
and other charges outstanding under the Loan and this Agreement, the security
interest created under this Agreement shall automatically terminate, and SGI
shall promptly deliver to Pledgor all remaining Shares and proceeds then held
by SGI and otherwise distributable to Pledgor pursuant to the terms and
conditions of the Option Agreement.
(b) With respect to the concurrent exercise and disposition of
Shares by "Same Day Sale," Pledgor shall instruct Pledgor's stock broker
("Broker") to pay directly to SGI from Broker's account an amount equal to
the lesser of (i) the sales price of the Shares, less commissions and
applicable withholdings, or (ii) the amount of principal, accrued interest
and other charges then due and payable under the Loan. SGI shall have no
obligation to deliver the Shares to Broker unless and until SGI receives
written confirmation from Broker that the foregoing payment shall be promptly
made by Broker to SGI.
(c) With respect to the exercise of Shares by "Cash Exercise," the
exercise price paid by Pledgor shall be applied to the payment of the
exercise price for such Shares, the applicable shares of SGI's common stock
shall be issued and deemed delivered to Pledgor, and SGI shall retain
possession of such shares until either (i) all principal, accrued interest
and other charges under the Loan have been paid in full or (ii) Pledgor
effects the sale of the Shares and applies the applicable proceeds to the
payment of all principal, accrued interest and other charges then due and
payable under the Loan. If Pledgor desires to sell any such Shares, Pledgor
shall instruct Broker to pay directly to SGI from Broker's account an amount
equal to the lesser of (i) the sales price of the Shares, less commissions
and applicable withholdings, or (ii) the amount of principal, accrued
interest and other charges then due and payable under the Loan. SGI shall
have no obligation to deliver the Shares to Pledgor or Broker unless and
until SGI receives written confirmation from Broker that the foregoing
payment shall be promptly made by Broker to SGI.
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(d) All instructions required to be submitted by Pledgor to Broker
shall be irrevocable and in writing, with a copy thereof delivered
concurrently to SGI. All proceeds paid for the Shares (less commissions) and
otherwise payable to SGI hereunder shall be deposited directly into the
account of Broker for payment to SGI. SGI's delivery of any Shares to Broker
shall be for the sole purpose of facilitating the sale of such Shares, and
SGI's security interest therein shall continue until Broker shall have paid
to SGI all applicable sums as required hereinabove.
4. EVENTS OF DEFAULT. Each of the following shall constitute an event
of default ("Event of Default") hereunder:
(a) The failure by Pledgor to observe or perform any of the
provisions of this Agreement or to pay any amount due under the Loan and/or
this Agreement.
(b) The breach or default by Borrower under the Loan Documents, or
any other documents or instruments now or hereafter executed by Borrower to
evidence the Loan and/or provide security for the performance of Borrower's
obligations thereunder.
(c) The inaccuracy or breach of any warranty, representation or
statement made or furnished to SGI by or on behalf of Pledgor in connection
with the Loan.
(d) The assignment for the benefit of creditors or the
commencement of any proceeding under any bankruptcy or insolvency law by or
against Pledgor.
(e) The seizure or attachment of, or a levy on all or any portion
of the Pledged Collateral.
5. SGI'S REMEDIES UPON DEFAULT.
(a) Upon the occurrence of an Event of Default, SGI shall have the
right to:
(i) Declare all of the obligations and liabilities of
Pledgor under the Loan immediately due and payable;
(ii) Repurchase all or part of the Shares from Pledgor for a
purchase price equal to the lesser of (i) the fair market value of such
Shares as of the date of the Event of Default, or (ii) the fair market value
of such shares as of the date of repurchase. The fair market value shall be
the sales price established by the New York Stock Exchange for the common
stock of SGI as of the applicable date set forth hereinabove; and/or
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(iii) Exercise any and all rights of a secured party under the
Uniform Commercial Code of the State of California which SGI, in its sole
judgment, deems necessary or appropriate, including without limitation the
right to sell or otherwise dispose of all or any part of the Pledged
Collateral;
(b) After the repurchase, sale or transfer of any of the Pledged
Collateral, SGI may deduct all reasonable attorneys' fees, brokerage
commissions and other expenses incurred by SGI in preserving, collecting,
selling, repurchasing and/or delivering the Pledged Collateral and for
enforcing its rights with respect to the Loan and this Agreement, and shall
apply the residue of the proceeds to, or hold as a reserve against, the Loan
in such manner as SGI in its reasonable discretion shall determine, and shall
pay the balance, if any, to Pledgor.
6 SGI'S DUTIES. SGI shall have no duty or liability for the Pledged
Collateral except for the exercise of reasonable care of the Pledged
Collateral while in the possession of SGI.
7. GENERAL PROVISIONS.
(a) SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure
to the benefit of the respective heirs, successors and permitted assigns of
each of the parties; provided, however, that neither this Agreement nor any
rights hereunder may be assigned by Pledgor without SGI's prior written
consent, which consent may be granted or withheld in SGI's sole discretion.
(b) SEVERABILITY OF PROVISIONS. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the
purpose of determining the legal enforceability of any specific provision.
In case one or more of the provisions contained in this Agreement shall for
any reason be held invalid, illegal or unenforceable in any respect, the
invalidity, illegality or unenforceability of that provision shall not affect
any other provision of this Agreement.
(c) JOINT AND SEVERAL OBLIGATIONS. If Pledgor consists of more
than one person, the obligations of Pledgor shall be the joint and several
obligations of all such persons. When the context and construction so
require, all words used in the singular herein shall be deemed to have been
used in the plural and the masculine shall include the feminine and neuter
and vice versa.
(d) NO WAIVER. No delay or omission by SGI in exercising any right
or remedy arising from any default of Pledgor shall be construed as a waiver
of such default or as an acquiescence therein, nor shall any single or
partial exercise thereof preclude any further exercise thereof. SGI may, at
its option, waive any of the conditions herein and any such waiver shall not
be deemed the waiver of SGI's rights hereunder. The waiver of any Event of
Default shall not be construed as any waiver of or acquiescence in or consent
to any preceding or subsequent Event of Default by Pledgor hereunder.
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(e) COLLECTION COSTS. Pledgor shall promptly pay SGI all
reasonable attorneys' fees and all costs and other expenses paid or incurred
by SGI in enforcing or exercising its rights or remedies created by,
connected with or provided in this Agreement, and payment thereof shall be
secured by the Pledged Collateral.
IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the
Effective Date.
PLEDGOR:
_______________________________________
GARY L. LAUER, individually and as
trustee of the Lauer Family Trust U/D/T
Dated July 8, 1991
_______________________________________
KATHARINE W. LAUER, individually and
as trustee of the Lauer Family Trust U/D/T
Dated July 8, 1991
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