AMENDMENT NO. 1 TO LEASE AGREEMENT
THIS AMENDMENT NO. 1 TO LEASE AGREEMENT (this "Amendment") is made as
of March 15, 1995 by and between Virtual Funding, Limited Partnership, a
Delaware limited partnership (the "Lessor") and Silicon Graphics Real Estate,
Inc., a Delaware corporation (the "Lessee").
W I T N E S S E T H :
WHEREAS, the Lessor and the Lessee entered into that certain Agreement
for Lease, dated as of November 18, 1993 (the "Agreement for Lease"), pursuant
to which the Lessor appointed the Lessee to act as agent for the Lessor in
connection with the selection of the Lessor's fee and/or leasehold interests in
Unit Premises (as defined in the Agreement for Lease) from time to time, and
with the construction of Unit Improvements (as defined in the Agreement for
Lease) and the installation of Unit FF&E (as defined in the Agreement for Lease)
thereon, if any, and in connection with all matters related to such
construction, all as more particularly described in the Agreement for Lease;
WHEREAS, contemporaneously herewith, the Lessor and the Lessee are
entering into Amendment No. 1 to the Agreement for Lease, of even date herewith,
which amends the Agreement for Lease in connection with the acquisition by the
Lessor and the development and equipping thereof in accordance with the
Agreement for Lease, as so amended, of a leasehold interest in the North
Charleston Unit (as defined in the Agreement for Lease).
WHEREAS, the Lessor, as lessor, and the Lessee, as lessee, entered
into that certain Lease Agreement (the "Lease"; capitalized terms used herein
without definition shall have the meanings ascribed to such terms in the Lease),
dated as of November 18, 1993, pursuant to which the Lessor agreed to lease or
sublease to the Lessee, from time to time, Property and Equipment, all as more
particularly described in the Lease; and
WHEREAS, the Lessor and the Lessee desire to amend the Lease (i) to
modify the formula for the calculation of Basic Rent and (ii) in connection with
the acquisition by the Lessor of a leasehold interest in the North Charleston
Unit.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Lessor and the Lessee hereby agree as follows:
Section 1. AMENDMENTS TO LEASE. From and after the Effective Date
(as hereinafter defined), the Lease shall be and hereby is amended as follows:
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(a) NEW DEFINITIONS. The following definitions are hereby added to
Section 1 of the Lease:
" 'EBITDA/INTEREST RATIO' means, on any date of determination,
the ratio, determined as of the end of the Guarantor's most recently ended
fiscal quarter on a consolidated basis in accordance with generally
accepted accounting principles, of (i) the sum of the Guarantor's earnings
before interest expense, depreciation, amortization, rent expense, income
taxes and nonrecurring restructuring and merger-related charges for the
period of four fiscal quarters ending at the end of such most recently
ended fiscal quarter TO (ii) all obligations of the Guarantor paid in such
period of four fiscal quarters in respect of interest expense and the
Variable Component of Basic Rent.
'NC SUB-UNIT PARCEL' means a Parcel of Property that has been
designated through redesignation of a portion of the North Charleston
Property into an NC Sub-Unit (as defined in the Agreement for Lease) in
accordance with Section 20 of the Agreement for Lease.
'NORTH CHARLESTON PROPERTY' means the Parcel of Property located
on Xxxxx Xxxxxxxxxx Xxxx, Xxxxxxxx Xxxx, Xxxxxxxxxx.
'REALLOCATION PARCELS' has the meaning set forth in Section 3(h)
hereof.
'TANGIBLE NET WORTH/ADJUSTED ACQUISITION COST RATIO' means, on
any date of determination, the ratio of (i) VCF Consolidated Tangible Net
Worth on such date to (ii) the aggregate amount on such date of the
Adjusted Acquisition Cost of all Property and Equipment.
'VARIABLE COMPONENT FACTOR' means Xxxxx 0, Xxxxx 0, Xxxxx 0,
Xxxxx 4 or Xxxxx 0, as the case may be.
'VCF CONSOLIDATED TANGIBLE NET WORTH' means, on any date of
determination, a sum equal to (i) the amount of Consolidated Tangible Net
Worth on such date PLUS (ii) an amount equal to the aggregate amount of
consideration paid by the Guarantor on or before such date for repurchases
of the Guarantor's capital stock; provided, however, that such amount
referred to in this clause (ii) shall not include any amount in excess of
$250 million for such repurchases in any fiscal year of the Guarantor."
(b) AMENDMENTS TO DEFINED TERMS. (i) The second sentence of the
definition of "Assignee" set forth in Section 1 of the Lease is hereby deleted
in its entirety and the following substituted therefor:
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"For purposes of paragraph (k) of Section 2, clauses (i), (iv) and (v)
of paragraph (f) of Section 10, Section 11, and Section 33 hereof, the term
"Assignee" shall include any lender to the Lessor or other Person providing
credit support to the Lessor pursuant to the Credit Agreement."
(ii) Clause (iii) of paragraph (a) of the definition of "Basic Rent"
set forth in Section 1 of the Lease Agreement is hereby deleted in its entirety
and the following substituted therefor:
"(iii) the decimal equivalent of a percentage (which percentage will
be based upon the Variable Component Factor) as follows: if
the Variable Component Factor is Level 1, the percentage shall
be 0.455% during the Initial Term and 0.45% during the
Extended Term; if the Variable Component Factor is Level 2,
the percentage shall be 0.505% during the Initial Term and
0.50% during the Extended Term; if the Variable Component
Factor is Level 3, the percentage shall be 0.61% during the
Initial Term and 0.60% during the Extended Term; if the
Variable Component Factor is Level 4, the percentage shall be
0.817% during the Initial Term and 0.80% during the Extended
Term; if the Variable Component Factor is Level 5, the
percentage shall be 1.237% during the Initial Term and 1.20%
during the Extended Term), plus (A) the weighted average bond
yield equivalent percentage cost per annum (including as part
of such cost any fees for a letter or letters of credit, any
facility, commitment or other fees under a revolving credit
agreement and any dealer discount or placement agency
commission payable by the Lessor in respect of its Commercial
Paper) on all Commercial Paper of the Lessor issued to finance
or refinance the acquisition and ownership of Property and
Equipment outstanding at any time during the period from and
including the 16th day of the preceding calendar month to and
including the 15th day of the calendar month for which Basic
Rent is being computed (the "Computation Period"), or (B) if
no such Commercial Paper of the Lessor is outstanding during
the Computation Period, the Lessor's weighted average
percentage cost per annum (including, without duplication, any
interest accruing at a default rate, any facility, commitment
or other fees under a revolving credit agreement) of other
borrowings outstanding at any time during the Computation
Period for which Basic Rent is being computed to finance or
refinance the acquisition and ownership of Property or
Equipment or (C) if both Commercial Paper and other borrowings
are outstanding at any time during the Computation Period for
which Basic Rent is being computed, a weighted average blended
rate based on the calculations referred to in clauses (A) and
(B) above;"
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(iii) The definition of "Level 2" set forth in Section 1 of the
Lease Agreement is hereby deleted in its entirety and the following substituted
therefor:
" 'LEVEL 2' means when all of following conditions are met:
(i) the conditions for Level 1 are not met;
(ii) VCF Consolidated Tangible Net Worth is $950 million or
greater;
(iii) the Tangible Net Worth/Adjusted Acquisition Cost Ratio is 5.0
or greater TO 1.0; and
(iv) the EBITDA/Interest Ratio is 13.0 or greater TO 1.0."
(iv) The definition of "Level 3" set forth in Section 1 of the
Lease Agreement is hereby deleted in its entirety and the following substituted
therefor:
" 'LEVEL 3' means when all of the following conditions are met:
(i) the conditions for Level 1 are not met and the conditions for
Level 2 are not met;
(ii) VCF Consolidated Tangible Net Worth is $800 million or
greater;
(iii) the Tangible Net Worth/Adjusted Acquisition Cost Ratio is 4.0
or greater TO 1.0; and
(iv) the EBITDA/Interest Ratio is 10.0 or greater TO 1.0."
(v) The definition of "Level 4" set forth in Section 1 of the
Lease Agreement is hereby deleted in its entirety and the following substituted
therefor:
" 'LEVEL 4' means when all of the following conditions are met:
(i) the conditions for Level 1 are not met, the conditions for
Level 2 are not met and the conditions for Level 3 are not met;
(ii) VCF Consolidated Tangible Net Worth is $650 million or
greater;
(iii) the Tangible Net Worth/Adjusted Acquisition Cost Ratio is 3.0
or greater TO 1.0; and
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(iv) the EBITDA/Interest Ratio is 7.5 or greater TO 1.0."
(vi) The definition of "Level 5" set forth in Section 1 of the
Lease Agreement is hereby deleted in its entirety and the following substituted
therefor:
" 'LEVEL 5' means when the conditions for Level 1 are not met, the
conditions for Level 2 are not met, the conditions for Level 3 are not met
and the conditions for Level 4 are not met."
(c) AMENDMENTS TO SECTION 2 OF THE LEASE. (i) Clause (i) of
paragraph (h) of Section 2 of the Lease Agreement is hereby deleted in its
entirety and the following substituted therefor:
"(i) promptly, and in any event not more than 100 days after the
end of the fiscal year of the Guarantor, copies of the Guarantor's Annual
Reports on Form 10-K and promptly, and in any event not more than 60 days
after the end of each fiscal quarter of the Guarantor, copies of the
Guarantor's Quarterly Reports on Form 10-Q (in each case accompanied by a
certificate of a Responsible Officer of the Guarantor setting forth
calculations of (x) the Guarantor's Consolidated Tangible Net Worth and VCF
Consolidated Tangible Net Worth, (y) the Tangible Net Worth/Adjusted
Acquisition Cost Ratio and (z) the EBITDA/Interest Ratio, in each case as
of the end of the fiscal year or fiscal quarter, as the case may be, to
which such Report pertains) and promptly, any reports on Form 8-K the
Guarantor files with the Securities and Exchange Commission,"
(ii) Paragraph (i) of Section 2 of the Lease Agreement is hereby
deleted in its entirety and the following substituted therefor:
"(i) Organization. Silicon Graphics Real Estate, Inc., a
California corporation ("SGREI-CA") was organized on May 6, 1993, for
purposes unrelated to this transaction. The Lessee was organized on
November 12, 1993 to effect a reincorporation of SGREI-CA as a Delaware
corporation. SGREI-CA was merged into the Lessee on March 31, 1994,
whereupon the Lessee by operation of law succeeded to all of SGREI-CA's
rights and obligations."
(d) AMENDMENTS TO SECTION 3 OF THE LEASE. The following
paragraphs are hereby added as new paragraphs at the end of Section 3 of the
Lease:
"(g) With respect to any Parcel of Property acquired and built
pursuant to the Agreement for Lease which is an NC Sub-Unit Parcel, at such
time as the North Charleston Property is further split into one or more NC
Sub-Unit Parcels pursuant to Section 20 of the Agreement for Lease, the
Lessee shall deliver to the Lessor either (i) a
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restated AFL Unit Leasing Record for such NC Sub-Unit Parcel, reflecting
the restated Unit Acquisition Cost therefor, or (ii) a written statement
that the Unit Acquisition Cost set forth in the AFL Unit Leasing Record for
such NC Sub-Unit Parcel remains unmodified.
(h) In the event that under and pursuant to the Section 20 of the
Agreement for Lease, the North Charleston Property was split into one or
more NC Sub-Unit Parcels (such NC Sub-Unit Parcels, together with the
remaining portion of the North Charleston Property, are referred to herein,
collectively, as the "Reallocation Parcels"), the Lessee may deliver to the
Lessor, within six (6) months of the Effective Date of the last
Reallocation Parcel, a revised AFL Unit Leasing Record for one or more
Reallocation Parcels setting forth for each respective Reallocation Parcel
the actual amounts expended by the Lessee with respect to such Reallocation
Parcel while it was subject to the Agreement for Lease for items included
in the aggregate Unit Budgets (as defined in the Agreement for Lease), as
the same may have been previously adjusted pursuant to Section 3(f) hereof,
for the Reallocation Parcels. The Lessor shall execute the revised AFL
Unit Leasing Record to reflect the increase or decrease, as the case may
be, in the Acquisition Cost of the respective Reallocation Parcels within
seven (7) Business Days of its receipt thereof from the Lessee."
(e) AMENDMENTS TO SECTION 18 OF THE LEASE. (i) Paragraph (f)
of Section 18 of the Lease is hereby deleted in its entirety and the following
substituted therefor:
"(f) Any indebtedness (including, without limitation, lease
obligations which are shown on the balance sheet of the Lessee or Guarantor
or which relate to sale-leaseback transactions) of the Lessee or Guarantor
in excess of $15,000,000 in the aggregate under an instrument or agreement
evidencing indebtedness in excess of $15,000,000 in the aggregate (A) shall
become or be declared to be due and payable prior to its stated maturity
and shall not be paid when due or (B) shall not be paid when due; or"
(ii) Paragraph (j) of Section 18 of the Lease is hereby amended in
its entirety and the following substituted therefor:
"(j) The Guarantor defaults in any obligation under the Guarantee
which default continues after the period of any grace period granted to the
Lessee hereunder in respect of such guaranteed obligation; the Guarantor
defaults in its obligations set forth in paragraph (a), (b) or (c) of
Section 11 of the Guarantee and such default continues for twenty (20)
Business Days after notice thereof by the Lessor to the Guarantor; or the
Guarantor defaults in its obligations set forth in paragraph (d), (e) or
(f) of Section 11 of the Guarantee and such default continues for ten (10)
Business Days after notice thereof by the Lessor to the Guarantor; or"
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(f) AMENDMENT TO SECTION 29 OF THE LEASE. Section 29 of the
Lease is hereby amended by adding the following paragraph (f) to the end
thereof:
"(f) With respect to the North Charleston Property, the Lessor
acknowledges and agrees that for purposes of this Lease and the Agreement
for Lease the Ground Lease for such Property shall consist of the Ground
Sublease Agreement, dated as of March 15, 1995, between the Lessee and the
Lessor, a copy of which is attached as Exhibit L to the Agreement for
Lease, and the Lessor further acknowledges and agrees that such Ground
Sublease Agreement, subject to the Lessee's compliance with the covenants
set forth in Section 2(b) thereof, shall be deemed to be a Mortgageable
Ground Lease for purposes of this Lease and the Agreement for Lease."
Section 2. EFFECTIVE DATE. This Amendment shall be effective on
the date (the "Effective Date") on which each of the following conditions
precedent have been satisfied:
(a) The Lessor, The Dai-Ichi Kangyo Bank, Ltd., New York Branch,
as L/C Bank and as Agent and the banks party thereto, shall have entered into
that certain Amendment No. 1 to Credit Agreement, dated as of March 15, 1995,
and the same shall have become effective.
(b) The Guarantor shall have entered into that certain Amendment
No. 1 to Guaranty, dated as March 15, 1995, for the benefit of the Lessor.
(c) The Lessor and the Lessee shall have entered into that certain
Amendment No. 1 to Agreement for Lease, dated of even date herewith.
Section 3. REPRESENTATIONS AND WARRANTIES. The Lessee represents
and warrants to the Lessor as of the Effective Date that:
(a) FINANCIAL STATEMENTS. The Lessee has caused to be furnished
to the Lessor Guarantor's Annual Report on Form 10-K for the year ended June 30,
1994 and Guarantor's Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1994 and December 31, 1994, respectively. The financial
statements contained in such documents fairly present the financial position,
results of operations and statements of cash flow of Guarantor as of the dates
and for the periods indicated therein and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis.
(b) CONTINUING REPRESENTATIONS. All representations and
warranties made in the Agreement for Lease and in the Lease are and remain true
and correct on and as of the Effective Date as if made on and as of the
Effective Date, except to the extent such representations and warranties
expressly relate specifically to an earlier date.
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Section 4. NO RECOURSE. The provisions of Section 31 of the
Lease are applicable to this Amendment.
Section 5. GENERAL CONDITIONS.
(a) GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts made and intended to be wholly performed within the State of York.
(b) CAPTIONS. The captions in this Amendment are for convenience
of reference only, and shall not be deemed to affect the meaning or construction
of any of the provisions hereof.
(c) SEVERABILITY. In the event any one or more of the
provisions contained in this Amendment shall for any reason be held to be
invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Amendment and
this Amendment shall be construed as if such invalid, illegal or unenforceable
provisions had never been contained herein.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of
the day and year first above written.
Virtual Funding, Limited Partnership by
Virtual Capital, Inc., its
General Partner
By /s/ Xxxxxx X. Xxxxx
--------------------------
Name: Xxxxxx Xxxxx
Title: Vice President and
Assistant Secretary
Silicon Graphics Real Estate, Inc.
By /s/ Xxx Xxxxxx
--------------------------
Name: Xxx Xxxxxx
Title: Vice President, Finance
