GLOBAL SETTLEMENT AGREEMENT
June 23, 2006
Xxxxx Xxxxx, Esq. Xxxxx X. Brilliant, Esq.
Xxxxxx Xxxxxxxx, Esq. Xxxxxxx Procter LLP
Winston & Xxxxxx LLP 000 Xxxxxxxxx Xxxxxx
000 Xxxx Xxxxxx Xxx Xxxx, Xxx Xxxx 00000
Xxx Xxxx, Xxx Xxxx 00000-0000
Xxxxxx Xxxxx, Esq.
Xxxxxxx Xxxxxxxxx, Esq.
Milbank, Tweed, Xxxxxx & XxXxxx LLP
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Re: In re Silicon Graphics, Inc. et al. (Case No. 06-10977)
Gentlemen:
This letter agreement (the "Agreement") is made and entered into as of
the date hereof and sets forth certain terms and conditions pursuant to which
Silicon Graphics, Inc., a debtor-in-possession in a chapter 11 case pending in
the Southern District of New York, and its debtor subsidiaries1 (collectively,
the "Debtors") will settle certain claims and disputes, and upon which (i) the
statutory committee of unsecured creditors in the Debtors' chapter 11 cases (the
"Creditors' Committee"); (ii) Quadrangle Master Funding Ltd., Watershed
Technology Holdings, LLC and Encore Fund, L.P., as lenders under the Debtors'
DIP Facility (the "DIP Lenders"), (iii) the holders of Senior Secured
Convertible Notes party to that certain Restructuring Agreement with Silicon
Graphics, Inc., dated May 7, 2006 (the "6.50% Plan Sponsors") and (iv) Xxxxxx &
Co., LLC ("Xxxxx Xxxxxx") will support such settlement (the "Global
Settlement").
--------------------------------
(1) Silicon Graphics Federal, Inc., Cray Research, L.L.C., Silicon Graphics
Real Estate, Inc., Silicon Graphics World Trade Corporation, Silicon
Studio, Inc., Cray Research America Latina Ltd., Cray Research Eastern
Europe Ltd., Cray Research India Ltd., Cray Research International,
Inc., Cray Financial Corporation, Cray Asia/Pacific, Inc., Paragraph
International, Inc., and WTI Development, Inc.
The Global Settlement will be implemented through confirmation of a
plan of reorganization in accordance with the term sheet attached hereto (as it
may be amended as provided herein, the "Plan")2:
During the period commencing on the date of this Agreement and
continuing until the termination of this Agreement as provided for in paragraph
3 hereof, the Debtors, the Creditors' Committee, the DIP Lenders, the 6.50% Plan
Sponsors and Xxxxx Xxxxxx (collectively, the "Parties") agree as follows:
1. The Parties will use their reasonable and diligent efforts to seek
prompt confirmation and consummation of the Plan and will take such other
actions (in addition to those contemplated by the Plan and related documents)
and execute such other documents (in addition to the Plan and related documents)
as may be reasonably necessary to consummate the Plan, subject to the terms and
conditions of the Plan and related documents (the "Plan Documents"), which
documents shall include with respect to the 6.50% Plan Sponsors, the
Restructuring Agreement filed with the Bankruptcy Court on May 9, 2006 (as
amended from time to time, the "Restructuring Agreement"), and the Rights
Offering Common Stock Purchase Agreement, and with respect to Xxxxx Xxxxxx, the
Xxxxx Xxxxxx Rights Offering Common Stock Purchase Agreement; provided, however,
that with respect to the Restructuring Agreement, the Debtors and the 6.50% Plan
Sponsors agree that the Agreement Termination Event in section 7(b)(vii) thereof
as to filing the Disclosure Statement has been extended to June 30, 2006 and
that the Agreement Termination Event in section 7(b)(viii) thereof as to
Bankruptcy Court approval of the Disclosure Statement has been extended to
August 1, 2006; and further provided, however, that notwithstanding section 7(c)
of the Restructuring Agreement, the Debtors agree that they will not terminate
the Restructuring Agreement without Bankruptcy Court approval. The Parties agree
that they will not object to the Plan or take any action directly or indirectly
inconsistent with the terms and conditions of this Agreement or that would
unreasonably delay confirmation or consummation of the Plan or approval of the
disclosure statement for the Plan subject to the terms and conditions of the
Plan and the Plan Documents. The Parties further agree that this Agreement or
the terms herein will be presented to the United States Bankruptcy Court for the
Southern District of New York (the "Bankruptcy Court") prior to or at the final
hearing for approval of the Debtors' postpetition credit facility currently
scheduled for June 26, 2006 (the "DIP Facility").
2. The Creditors' Committee will, and the 6.50% Plan Sponsors shall use
their reasonable best efforts to cause the Ad Hoc Committee of Senior Secured
Note holders (the "Ad Hoc Committee") to, include in the solicitation materials
accompanying the disclosure statement for the Plan letters supporting the Plan.
The 6.50% Plan Sponsors and Xxxxx Xxxxxx agree that subject to prior receipt of
a disclosure statement approved by the Bankruptcy Court in respect of the Plan,
that they will vote in favor of the Plan subject to the terms and conditions of
this Agreement, the Plan, and the Plan Documents. No provision of this Agreement
obligates the individual members of the Creditors' Committee to vote for or
against the Plan. The Creditors' Committee agrees, and the 6.50% Plan Sponsors
shall use their reasonable best efforts to cause
-------------------------------
(2) Capitalized terms not defined herein shall have the meanings ascribed
to such terms in the term sheet attached hereto.
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the Ad Hoc Committee, to provide a copy of the solicitation letters to the other
Parties prior to its incorporation into any solicitation package for reasonable
comment.
3. This Agreement and the rights and obligations of the Parties
hereunder (other than any liability for breach prior to termination) shall (i)
terminate if (a) all of the Parties consent in writing to such termination or
(b) the Plan has not been confirmed by October 31, 2006 or (ii) be terminable by
any non-breaching Party upon the material breach of this Agreement, the Plan, or
the Plan Documents by any other Party.
4. The Debtors' Motion Pursuant to Section 1122 of the Bankruptcy Code
and Bankruptcy Rule 3013 for Order Determining Classification of Certain Claims
for Purposes of Debtors' Joint Plan of Reorganization dated June 15, 2006 (the
"3013 Motion") is settled as part of this Agreement; provided, however, that in
the event that the Plan is not confirmed or this Agreement is terminated under
paragraph 3 hereof, the Parties reserve all rights with respect to the 3013
Motion.
5. The Creditors' Committee shall withdraw the Motion and Memorandum of
Law of the Official Committee of Unsecured Creditors to Transfer Venue, dated
June 19, 2006 without prejudice.
6. The Creditors' Committee and Xxxxx Xxxxxx shall withdraw their
respective objections to the Debtors' motion to approve the DIP Facility.
7. The Plan shall not be modified or amended in any materially adverse
way to Xxxxx Xxxxxx or the holders of the Debtors' Convertible Subordinated
Debentures, which bear interest at the rate of 6.125% per annum (the "Cray
Unsecured Debentures") without the prior written consent of Xxxxx Xxxxxx and the
Creditors' Committee (which consent of the latter shall not be unreasonably
withheld or delayed) unless each of the following conditions is satisfied:
(1) such modification or amendment is to provide for a
Permitted Transaction (as defined below); and
(2) notwithstanding such Permitted Transaction, the
capital structure of Reorganized SGI shall not
consist of more than one class of common stock; and
(3) notwithstanding such Permitted Transaction,
Reorganized SGI shall emerge from bankruptcy as a
public reporting company; and
(4) if the Permitted Transaction involves the issuance of
New Common Stock or securities convertible or
exchangeable for New Common Stock, holders of claims
on account of the Cray Unsecured Debentures shall be
diluted pro rata based upon the number of shares
outstanding on the effective date of the Plan and
assuming full issuance of any shares based on the
Rights Offering and the actual number of
Overallotment Shares issued; and
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(5) if the Permitted Transaction involves the sale,
repurchase or redemption of New Common Stock to be
issued under the Plan, holders of claims on account
of the Cray Unsecured Debentures shall have the pro
rata right to participate in such sale, repurchase or
redemption based upon the number of shares
outstanding on the effective date of the Plan and
assuming full issuance of any shares based on the
Rights Offering and the actual number of
Overallotment Shares issued; and
(6) if the Permitted Transaction involves the payment of
any dividend or distribution on account of New Common
Stock, holders of claims on account of the Cray
Unsecured Debentures shall receive the pro rata share
of such dividend or distribution based upon the
number of shares outstanding on the effective date of
the Plan and assuming full issuance of any shares
based on the Rights Offering and the actual number of
Overallotment Shares issued; and
(7) if the Permitted Transaction involves the sale or
transfer (including a license) of assets, the
proceeds of such sale or transfer, including without
limitation any ownership interests in a separate
legal entity, shall be distributed pro rata based
upon the number of shares outstanding on the
effective date of the Plan and assuming full issuance
of any shares based on the Rights Offering and the
actual number of Overallotment Shares issued.
The Parties hereto agree that the Debtors, with the prior consent of the 6.50%
Plan Sponsors, and upon notice to the Creditors' Committee and Xxxxx Xxxxxx, may
make non-material and non-adverse changes to the Plan.
"Permitted Transaction" shall mean any of the following:
i. the sale or transfer (including by means of merger,
consolidation or other business combination) of non-core
assets to a separate legal entity, or the dissolution of legal
entities;
ii. the sale or transfer of New Common Stock for cash to an
unaffiliated third party including, without limitation, any
such sale or transfer resulting in a Change of Control (as
defined below);
iii. the repurchase or redemption of New Common Stock or Rights to
be issued under the Plan;
iv. the payment of any dividend in cash or stock or the making of
any other cash distributions to holders of New Common Stock;
v. the issuance of any securities to an unaffiliated third party
including, without limitation, warrants or securities
convertible or exchangeable for New Common Stock; provided,
however, that the liquidation preference of any preferred
stock, the face value of any debt securities, the indebtedness
and guarantee of indebtedness (excluding the guarantee by a
Debtor of one or more Debtor's indebtedness
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or coborrowing by a Debtor with one or more Debtors)
referenced in (vi) below, and the outstanding amount of the
Exit Facility shall not exceed, in the aggregate,
$100,000,000;
vi. the incurrence of indebtedness, guarantee of indebtedness or
creation of liens in favor of an unaffiliated third party;
provided, however, that the amount of such incurrence or
guarantee (excluding the guarantee by a Debtor of one or more
Debtor's indebtedness or coborrowing by a Debtor with one or
more Debtors), the liquidation preference of any preferred
stock, the face value of any debt securities, and the
outstanding amount of the Exit Facility shall not exceed, in
the aggregate, $100,000,000;
vii. the sale or transfer of assets for cash to an unaffiliated
third party or separate legal entity, including, without
limitation, any such sale or transfer resulting in a Change of
Control, provided, however, that such sale or transfer is not
for substantially all of the assets of the Debtors;
viii. the sale, transfer, license of any intellectual property or
the purchase or license of any intellectual property, in each
case involving an unaffiliated third party or separate legal
entity;
ix. any merger, consolidation or other business combination (a)
between or among the Debtors, or (b) with any unaffiliated
third party, including without limitation, any merger,
consolidation or other business combination resulting in a
Change of Control, provided, however that the entity used by
the unaffiliated third party in connection with such merger,
consolidation or other business combination shall have been
formed solely for the purpose of engaging in such transaction
and shall not have engaged in other business activities or
other operations;
x. any increase or decrease in the number of directors on the
board;
xi. any change in the means of appointing directors; and
xii. the entry into a management contract or other agreement
customarily used in connection with the transactions
contemplated in clauses (i) - (xi) above with an unaffiliated
third party.
"Change of Control" shall mean the sale, exchange or transfer by holders, in a
single transaction or series of related transactions, of New Common Stock
representing a majority of the voting power to elect the directors of
Reorganized SGI.
In the event of any modification or amendment to the Plan to
provide for a Permitted Transaction, the Debtors shall reimburse the reasonable
fees and expenses of legal and financial advisors to Xxxxx Xxxxxx up to an
additional $100,000 for costs incurred in connection with the review and
documentation of such modification or amendment.
8. This Agreement shall be governed by and construed in accordance with
the federal bankruptcy laws and the internal laws of the State of New York,
without regard to any conflicts of law provision which would require the
application of the law of any other jurisdiction. By its execution and delivery
of this Agreement, each of the Parties hereby
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irrevocably and unconditionally agrees for itself that any legal action, suit,
or proceeding against it with respect to any matter under or arising out of or
in connection with this Agreement or for recognition or enforcement of any
judgment rendered in any such action, suit, or proceeding, may be brought in the
Bankruptcy Court. By execution and delivery of this Agreement, each of the
Parties irrevocably accepts and submits itself to the nonexclusive jurisdiction
of such court, generally and unconditionally, with respect to any such action,
suit, or proceeding.
9. This Agreement is intended to bind and inure to the benefit of the
Parties and their respective successors, permitted assigns, heirs, executors,
administrators, and representatives.
10. No provision in this Agreement is intended to benefit any entity
not a party to the Agreement, and there shall be no third party beneficiaries to
the Agreement.
11. This Agreement, including the Term Sheet annexed hereto, supersedes
all prior negotiations with respect to this Global Settlement Agreement;
provided, however, that nothing in this Agreement shall affect the terms and
conditions of the Restructuring Agreement, which shall remain unchanged except
the Plan Term Sheet (as defined in the Restructuring Agreement) shall be
replaced with the plan term sheet attached hereto.
12. Xxxxx Xxxxxx represents and warrants to the other Parties that (i)
Xxxxx Xxxxxx either (A) is the beneficial owner of not less than $30,000,000
aggregate principal amount (the "Xxxxx Xxxxxx Debentures") of Cray Unsecured
Debentures (as defined in the Term Sheet) or (B) has investment and voting
discretion with respect to such Xxxxx Xxxxxx Debentures and has the power and
authority to bind the beneficial owners of such Xxxxx Xxxxxx Debentures to the
terms of this Agreement and (ii) such Xxxxx Xxxxxx Debentures are beneficially
owned free and clear of any mortgage, deed of trust, security interest, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
otherwise), or other security agreement, option, warrant, attachment, right of
first refusal, preemptive, put, call or other claim or right, limitation or
restriction on transfer (other than restrictions imposed by federal and state
securities laws) or preferential arrangement of any kind or nature whatsoever.
13. Before any transfer or sale of any Xxxxx Xxxxxx Debentures by Xxxxx
Xxxxxx shall be effective, the transferee thereof must agree in writing to be
bound by this Agreement by executing a counterpart signature page to this
Agreement. This Agreement shall in no way preclude Xxxxx Xxxxxx from acquiring
additional Cray Unsecured Debentures; however any such Cray Unsecured Debentures
so acquired shall automatically be deemed to be subject to the terms of this
Agreement.
14. The Debtors will provide drafts of the Plan, the Plan Documents and
the disclosure statement relating to the Plan to the Parties hereto, and, if
requested, the Debtors will respond to reasonable requests for information
concerning the Debtors' business or assets. All information furnished to Xxxxx
Xxxxxx pursuant to this section shall furnished to Xxxxx Conway's advisors only,
and Xxxxx Conway's advisors shall be subject to the provisions of the existing
protective order between SGI and Xxxxx Xxxxxx.
15. Nothing in this Agreement is intended to, or does, in any manner
amend, modify, waive, limit, impair or restrict, or consent to the amendment,
modification, waiver, limitation,
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impairment or restriction of, the rights and remedies of the DIP Lenders under
(i) the Post-Petition Loan and Security Agreement, dated as of May 8, 2006 (as
amended, supplemented or otherwise modified from time to time, the "Interim DIP
Loan Agreement"), by and among the DIP Lenders and the Debtors, (ii) the DIP
Facility, (iii) any documents or agreements entered into in connection with the
Interim DIP Loan Agreement or the DIP Facility or (iv) any order approving the
documents referenced in clauses (i) through (iii) of this paragraph Section 15,
all of which are hereby reserved. Pursuant to Sections 8.12(a) and (b) of the
Interim DIP Loan Agreement and Sections 8.10(a) and (b) of the DIP Facility, the
DIP Lenders agree that the Plan contemplated hereby is acceptable to the DIP
Lenders.
16. Except as otherwise expressly provided in this Agreement, nothing
herein is intended to, or does, in any manner waive, limit, impair or restrict
the ability of Xxxxx Xxxxxx to protect and preserve any of its rights, remedies,
and interests, including without limitation its claims against the Debtors, or
its full participation in the Debtors' bankruptcy cases. If the Plan is not
consummated, or if this Agreement is terminated in accordance with its terms,
the Parties hereto reserve any and all of their respective rights. Pursuant to
Federal Rule of Evidence 408 and any applicable state rules of evidence, neither
this Agreement, the Plan, nor the Plan Documents shall be admitted into evidence
in any proceeding other than to enforce their terms.
17. This Agreement is not and shall not be deemed to be a solicitation
for votes in favor of the Plan. No vote will be solicited until each Party
entitled to vote has received the disclosure statement approved by the
Bankruptcy Court.
18. Each of the signatories to this Agreement has the authority to
execute this Agreement and to bind its client(s) to the terms and conditions
hereof.
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19. This Agreement, including the Term Sheet annexed hereto, may be
executed in one or more counterparts, each of which shall be deemed an original
and all of which shall constitute one and the same Agreement.
20. The Debtors will seek Bankruptcy Court approval of this Agreement
in connection with confirmation of the Plan.
Sincerely,
/s/ Xxxx X. Xxxxxxx, Esq
-----------------------------------
Xxxx X. Xxxxxxx, Esq.
Weil, Gotshal & Xxxxxx LLP
for the Debtors
AGREED AND ACCEPTED
/s/ Xxxxx Xxxxx, Esq.
---------------------------------
Xxxxx Xxxxx, Esq.
Xxxxxx Xxxxxxxx, Esq.
Xxxxxxx & Xxxxxx LLP
for the Creditors' Committee
/s/ Xxxxx X. Brilliant, Esq.
---------------------------------
Xxxxx X. Brilliant, Esq.
Xxxxxxx Procter LLP
for the The DIP Lenders
and the 6.50% Plan Sponsors
/s/ Xxxxxx Xxxxx, Esq.
---------------------------------
Xxxxxx Xxxxx, Esq.
Xxxxxxx Xxxxxxxxx, Esq.
Milbank, Tweed, Xxxxxx & XxXxxx LLP
for Xxxxx Xxxxxx & Co., LLC
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SILICON GRAPHICS, INC.
Plan Term Sheet
June 23, 2006
This term sheet describes the material terms of a financial restructuring of
Silicon Graphics, Inc. ("SGI" and, as reorganized, "Reorganized SGI") and
certain of its subsidiaries (together with SGI, the "Company" and, as
reorganized with Reorganized SGI, the "Reorganized Company"). The transactions
contemplated by this term sheet are subject to conditions to be set forth in
definitive documents.
Reference is hereby made to the following agreements:
(i) Third Amended and Restated Credit Agreement, dated as of October 24,
2005 among SGI, Silicon Graphics Federal, Inc., Silicon Graphics World
Trade Corporation, Xxxxx Fargo Foothill, Inc., as Agent and Lender, and
Ableco Finance LLC, as Lender (the "Loan Agreement");
(ii) Indenture, dated as of Xxxxxxxx 00, 0000 xxxxx XXX and U.S. Bank
National Association, as Trustee, regarding 6.50% Senior Secured
Convertible Notes due 2009 (the "6.50% Secured Notes");
(iii) Indenture, dated as of Xxxxxxxx 00, 0000 xxxxx XXX and U.S. Bank
National Association, as Trustee, regarding 11.75% Senior Secured Notes
due 2009 (the "11.75% Secured Notes"); and
(iv) First Supplemental Indenture, dated as of June 30, 1996 among SGI, Cray
Research, Inc. and JPMorgan Chase (formerly known as Manufacturers
Hanover Trust Company), as Trustee, regarding 6-1/8% Convertible
Subordinated Debentures due 2011 (the "Cray Unsecured Debentures")
(which supplements the Indenture dated as of February 1, 1986 between
Cray Research, Inc. and Manufacturers Hanover Trust Company, as
Trustee).
On May 8, 0000, XXX and certain of its direct and indirect subsidiaries
(collectively, the "Debtors") filed with the United States Bankruptcy Court for
the Southern District of New York (the "Bankruptcy Court") cases (the "Chapter
11 Cases") under chapter 11 of Title 11 of the United States Code (11 U.S.C.
SectionSection 101 et seq. (as amended, the "Bankruptcy Code")). SGI shall
restructure its capital structure through a joint chapter 11 plan of
reorganization (as amended, modified or supplemented from time to time, the
"Plan") consistent with the terms below, which are agreed to by (i) the ad hoc
committee (the "Ad Hoc Committee") of certain holders of the 6.50% Secured
Notes, (ii) the Official Committee of Unsecured Creditors (the "Creditors'
Committee"), and (iii) Xxxxx, Xxxxxx & Co. LLC ("Xxxxx Xxxxxx").
TREATMENT OF CLAIMS AND INTERESTS UNDER THE PLAN
DIP Financing Any Debtor in Possession financing (the "DIP
Financing") shall be paid in full on the
effective date of the Plan. $50 million of
DIP Financing provided by the holders of the
6.50% Secured Notes (the "Senior Note
Lenders") shall be repaid on the effective
date of the Plan by the Rights Offering (as
defined below).
Loan Agreement Claims Subject to review of the validity and
perfection of liens and security interests
of the lenders under the Loan Agreement (the
"Senior Credit Lenders") by the Creditors'
Committee, the claims arising from the Loan
Agreement shall, to the extent not repaid
during the pendency of the Chapter 11 Cases
be paid in full in cash on the effective
date of a Plan.
6.50% Secured Notes and 11.75% Holders of claims on account of the 6.50%
Secured Notes Claims Secured Notes and the 11.75% Secured Notes
shall receive their pro rata share of (a)
2,500,000 shares of newly issued common
stock of Reorganized SGI (the "Distribution
Common Stock") constituting 25% of the New
Common Stock (as defined below), (b)
6,800,000 rights to purchase one share of
New Common Stock ("Rights" and each, a
"Right") at the Rights Offerings Price (as
defined below), and (c) 100% of the
beneficial interests in a trust or other
entity that will liquidate any potential
claims held by the Debtors in the DRAM price
fixing litigation and the Debtors shall
contribute $250,000 cash to such trust or
other entity.
The aggregate shares (the "New Common
Stock") of the Distribution Common Stock and
the Rights Offering Common Stock (as defined
below) shall constitute 100% of the
outstanding equity of Reorganized SGI,
subject to dilution for the Overallotment
Shares (as defined below) and the Management
Incentive Plan (as defined below). The
aggregate number of shares of New Common
Stock of Reorganized SGI shall initially be
10,000,000 without dilution for the
Overallotment Shares and 11,125,000 shares
assuming exercise of 100% of the
Overallotment Shares.
General Unsecured Claims "General Unsecured Claims" means allowed
general unsecured claims against the
Debtors, excluding (i) claims on account of
the Cray Unsecured Debentures and (ii) any
deficiency claims on account of the 6.50%
Secured Notes and the 11.75% Secured Notes.
Holders of General Unsecured Claims against
SGI shall receive their pro rata share of
$9.0 million. Holders of General
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Unsecured Claims against Silicon Graphics
Federal, Inc. ("Federal") and Silicon
Graphics World Trade Corporation ("World
Trade") shall be paid in full or otherwise
be treated as unimpaired provided, however,
that a condition to the effectiveness of the
Plan shall be that allowed General Unsecured
Claims against Federal and World Trade shall
not exceed $1 million in the aggregate (not
including cure claims).
Cray Unsecured Debentures Holders of Claims on account of the Cray
Unsecured Debentures shall receive their pro
rata share of (a) 700,000 Rights at the
Rights Offering Price and (b) $1.2 million
(less the reasonable fees and expenses
(including reasonable fees and expenses of
counsel) of the Indenture Trustee for the
Cray Unsecured Debentures). The record date
for holders of Cray Unsecured Debentures to
be eligible to participate in the Rights
Offering shall be ten (10) days after notice
of the Rights Offering in respect of such
holders is received by the NASD. The Debtors
will send notice of such record date to the
NASD within one (1) business day after the
Global Settlement Agreement is announced by
the Debtors in open court before the
Bankruptcy Court.
Equity Interests Holders of equity interests in SGI shall
receive no recovery and all equity interests
in SGI shall be cancelled.
ADDITIONAL PROVISIONS OF PLAN
Rights Offering Rights Offering. Pursuant to an election to
be made on or with the ballot in conjunction
with voting on the Plan (the "Rights
Offering"), (i) the holders of the 6.50%
Secured Notes and the 11.75% Secured Notes
shall have the right to purchase on the
effective date of a Plan, on a ratable
basis, 6,800,000 shares of New Common Stock
(the "Rights Offering Common Stock") in
consideration for such claims and $6.67 per
share (the "Rights Offering Price") and (ii)
the holders of the Cray Unsecured Debentures
shall have Rights to purchase 700,000 shares
of the New Common Stock in consideration for
such claims and the Rights Offering Price
(the "Cray Rights Offering Shares").
Senior Note Lenders Rights Offering
Commitment. In
3
accordance with the terms and subject to the
conditions of a purchase agreement in form
and substance acceptable to the Senior Note
Lenders in their sole discretion (the
"Rights Offering Common Stock Purchase
Agreement"), the Senior Note Lenders shall
commit (the "Rights Offering Commitment") to
purchase at the Rights Offering Price, the
aggregate shares of the Rights Offering
Common Stock not otherwise purchased in the
Rights Offering or pursuant to the Xxxxx
Xxxxxx Rights Offering Stock Purchase
Agreement (defined below), the allocation of
which shall be agreed upon among the Senior
Note Lenders.
Xxxxx Xxxxxx Rights Offering Option. In
accordance with the terms and subject to the
conditions of a purchase agreement in form
and substance reasonably satisfactory to
Xxxxx Xxxxxx (the "Xxxxx Xxxxxx Rights
Offering Common Stock Purchase Agreement"),
Xxxxx Xxxxxx shall have the option to
purchase at the Rights Offering Price, the
aggregate shares of the Cray Rights Offering
Shares not otherwise purchased in the Rights
Offering by the holders of Cray Unsecured
Debentures. Xxxxx Xxxxxx shall notify the
Debtors in writing on or before five (5)
days after the deadline to exercise such
Rights of its determination to purchase the
Cray Rights Offering Shares not otherwise
purchased by the holders of Cray Unsecured
Debentures and the amount thereof.
Commitment Fee. In exchange for the Rights
Offering Commitment, the Senior Note Lenders
shall receive a commitment fee equal to
$1,000,000.
Over-Allotment Rights. In exchange for the
Rights Offering Commitment, the Senior Note
Lenders shall receive the right (but shall
have no obligation) to purchase at the
Rights Offering Price 1,125,000 shares
comprising 15% of the Rights Offering Common
Stock (the "Overallotment Shares"), the
allocation of which shall be agreed upon
among the Senior Note Lenders.
Xxxxx Xxxxxx Expense Reimbursement. Xxxxx
Xxxxxx shall receive an amount up to
$315,000 for reimbursement of expenses
(including the reasonable fees and expenses
of counsel and financial advisors) incurred
in connection with these chapter 11 cases.
Chapter 5 Causes of Action The Reorganized Company may pursue any
causes of
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action under Chapter 5 of the Bankruptcy
Code in their sole discretion. Prior to the
time of filing the plan supplement to the
Plan, the Debtors will meet and confer with
the professionals for the 6.50% Plan
Sponsors and the professionals for the
Creditors' Committee regarding potential
causes of action under section 547 of the
Bankruptcy and potential defendants
thereunder. The Debtors will file as part of
the plan supplement to the Plan a list of
potential defendants under section 547 of
the Bankruptcy Code.
Public Company Reorganized SGI will emerge from chapter 11
as a public reporting company.
Trading/Registration Rights - Newly-issued common stock of
Reorganized SGI issued in exchange
for claims shall be freely-tradable
pursuant to section 1145 of the
Bankruptcy Code, unless any such
holder is deemed an "underwriter,"
as that term is defined in section
1145(b)(1) of the Bankruptcy Code.
- Registration Rights. On the
effective date of the Plan,
Reorganized SGI shall enter into a
registration rights agreement (the
"Registration Rights Agreement")
with any holders that will own
greater than 7.5% of the
outstanding New Common Stock upon
the effective date of the Plan
pursuant to which Reorganized SGI
shall agree, subject to the terms
and conditions set forth in the
Registration Rights Agreement, to
register the resale of the shares
of New Common Stock issued to any
such holders in accordance with the
requirements of the Securities Act
of 1933, as amended. The
Registration Rights Agreement shall
provide that any holder owning
greater than 7.5% of the
outstanding New Common Stock upon
the effective date of the Plan
shall be entitled to two (2) demand
rights and unlimited piggyback
registration rights.
- In the event any New Common Stock
is not entitled to exemption from
registration, then the holders
thereof shall be entitled to
unlimited piggyback registration
rights.
Exit Facility A term loan facility and a revolving
loan/letter of credit facility (the "Exit
Facility"), the total of which shall not
exceed $100 million or such other amount as
the Company and the Ad Hoc Committee deem
appropriate and necessary on the effective
date of the Plan, shall be made available to
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the Reorganized Company by one or more
lenders on terms and conditions acceptable
to the Reorganized Company and the Ad Hoc
Committee; provided, however, that the
consent of Xxxxx Xxxxxx, which consent shall
not be unreasonably withheld, shall be
required if the amount of borrowings
outstanding under such facility exceed $100
million on the effective date of the Plan.
Management Incentive Plan On or as soon as reasonably practicable
after the effective date of the Plan, a
management incentive plan (the "Management
Incentive Plan") shall be implemented to
reserve for designated members of senior
management of the Reorganized Company equity
interests (including restricted common stock
and/or options) in Reorganized SGI in an
amount not to exceed 10% of the New Common
Stock. The Management Incentive Plan shall
be in form and substance acceptable to both
the Company and the Ad Hoc Committee. The
Management Incentive Plan shall be disclosed
prior to the deadline for voting on the
Plan.
Corporate Governance On the effective date of the Plan, the Board
of Directors of Reorganized SGI shall be
comprised of five (5) members which shall be
selected by the Ad Hoc Committee. The
identities of the members of the Board of
Directors shall be disclosed prior to the
commencement of the hearing to consider
confirmation of the Plan.
Affiliate Transactions Other than as contemplated by the Plan, for
a period of two years from and after the
effective date of the Plan, in the event
that Reorganized SGI consummates any
transaction with any holder of 10% or more
of the New Common Stock or any of such
holder's affiliates (each, an "SGI
Affiliate") pursuant to which Reorganized
SGI sells assets to, issues New Common Stock
or any right to acquire New Common Stock to,
repurchases stock from, or borrows from or
lends to such SGI Affiliate in a private
transaction, in each such case, in an amount
greater than $25,000,000 (each an "Affiliate
Transaction") Reorganized SGI shall obtain a
written opinion from an independent
nationally recognized financial advisor as
to the fairness to Reorganized SGI of the
Affiliate Transaction.
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