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Form of Employment Continuation Agreement

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Exhibit 10.4


SILICON GRAPHICS, INC.

1600 Amphitheatre Parkway

Mountain View, California 94043-1351 __________________________ October 23, 2001 Silicon Graphics, Inc. 1600 Amphitheatre Parkway Mountain View, California 94043-1351


Dear :

The Company considers it essential to the best interests of its shareholders to foster the continuous employment of key management personnel. In this connection, the Board of Directors of the Company (the " Board" ) recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its shareholders.


The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of officers of the Company, including you, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company.

In order to induce you to remain in the employ of the Company and in consideration of your agreements set forth in subparagraph 2(i) hereof, the Company agrees that you shall receive the benefits set forth in this agreement (" Agreement" ) under the circumstances described below.

1. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect until your employment with the Company is terminated unless sooner terminated by written agreement of the Company and you.

2. Definitions . As used in this Agreement:

(a) " Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the " Exchange Act" ).


(b) " Board" shall mean the Board of Directors of the Company.


(c) " Business Combination" means and includes each and all of the following occurrences:

(i) Consummation of any reorganization, merger or consolidation with respect to the Company (each a " Reorganization" ), unless immediately followiing such Reorganization more than 50% of the outstanding voting stock of the entity resulting from such reorganization continues to be benefically owned, directly or indirectly, by all or substantially all of the Persons who were the beneficial owners of the outstanding shares of voting stock of the Company outstanding immediately prior to such Reorganization.

(ii) The sale or other disposition (or the last in a series of such transactions) of all or substantially all of the assets of the Company to an entity with respect to which following such sale or other disposition more than 50% of the outstanding voting shares if such entity is beneficially owned, directly or indirectly, by Persons who were the beneficial owners of the outstanding shares of the voting stock of the Company outstanding immediately prior to such sale or disposition.

(iii) The Company dissolves or liquidates or effects a partial liquidation involving more than 75% of its assets.

(d) " Change in Control" of the Company means and includes each and all of the following occurrences:


(i) A Business Combination.


(ii) When any " Person" other than the Company and any subsidiary and any employee benefit plan sponsored or maintained by the Company or any subsidiary (including any trustee of such plan acting as trustee), directly or indirectly, becomes the Beneficial Owner of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company' s then outstanding securities with respect to the election of the directors of the Company.

(iii) During any period of three (3) consecutive years (not including any period prior to the date hereof), individuals who, at the beginning of such period, constitute the Board (the " Incumbent Board" ) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a Director subsequent to the date hereof whose election, or nomination for election by the Company' s shareholders, was approved by the vote of at least a majority of the Directors then comprising the Incumbent Board (other than an election or nomination of any individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board.

For purposes of this Agreement, the Board of Directors may by resolution, clarify the date as of which a Change in Control shall be deemed to have occurred.


(e) " Current Compensation" shall mean your monthly base salary, as in effect immediately prior to the Change in Control. In addition, if you participate in a variable compensation program (other than the corporate annual executive incentive plan or a similar incentive plan in which all senior executives participate), then your Current Compensation will be based on your target compensation (including base and variable compensation) in effect under that plan during the six (6) months immediately preceding the month in which the Change in Control occurred.


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(f) " Disability" shall mean a physical or mental illness or injury which, as determined by the Company, continuously prevents you from performing your duties with the Company for a period of six months prior to termination.

(g) " Good Reason" shall mean grounds for termination by you of your employment by the Company based upon prior constructive termination by the Company as provided in Paragraph 5 hereof.


(h) " Person" means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Secutities Exchange act of 1934, as amended.


(i) " Potential Change in Control of the Company" shall be deemed to have occurred if (i) the Company enters into an agreement or letter of intent, the consummation of which would result in the occurrence of a Change in Control of the Company; (ii) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control of the Company; (iii) any person, other than a trustee or other fiduciary holding securities under an employee benefit plan for the Company, who is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 9.5% or more of the combined voting power of the Company' s then outstanding securities increases his beneficial ownership of such securities by five (5) percentage points or more over the percentage so owned by such person on the date hereof; or (iv) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred. You agree that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control of the Company, you will remain in the employ of the Company (or the subsidiary thereof by which you are employed at the date such Potential Change in Control occurs) until the earliest of (x) a date which is six months from the occurrence of such Potential Change in Control of the Company, (y) the termination by you of your employment by reason of Disability, as defined in subparagraph 2(e) or (z) the occurrence of a Change in Control of the Company.


(j) " Termination Payment" shall mean the severance pay to which you are entitled upon termination of your employment within 24 months after a Change in Control as provided in Subparagraph 3(a) hereof.

3. Compensation Following a Change in Control.

(a) Subject to Sections 6 and 7 below, if your employment with the Company is terminated within 24 months after a Change in Control other than as set forth in Section 3(e), you shall be entitled to a Termination Payment, payable in cash, in an amount equal to twenty-four (24) months of your Current Compensation at the rate in effect immediately prior to such Change in Control.

(b) In addition to the Termination Payment,

(i) you shall have the right during the period of six months following such Change in Control either (i) to exercise all non-statutory options granted to you by


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the Company and all incentive stock options granted to you by the Company after the date of this agreement, as to all or any part of the shares covered thereby, including shares as to which such options would not otherwise then be exercisable, (provided that any incentive stock options non exercised with
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