Severance Agreement - Silicon Graphics Inc. and Edward R. McCracken
AGREEMENT
AGREEMENT, dated as of December 31, 1997 (the "AGREEMENT"), between
SILICON GRAPHICS, INC., a Delaware corporation (the "COMPANY") and EDWARD R.
MCCRACKEN (the "EXECUTIVE").
WHEREAS, the Executive currently serves as the Chairman and Chief
Executive Officer of the Company, having served as Chief Executive Officer
since 1984 and Chairman since 1994; and
WHEREAS, in October 1997 the Executive informed the Board of
Directors of the Company (the "BOARD") of his intention to step down from his
role as Chairman and Chief Executive Officer and agreed at the request of the
Board to continue as Chairman and Chief Executive Officer during the search
for a successor; and
WHEREAS, the Company and the Executive wish to set forth in this
Agreement their understandings and agreements with respect to the Executive's
resignation and his responsibilities and compensation in connection with the
transition to his successor;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the adequacy of which is hereby acknowledged, the
parties, intending to be legally bound, hereby agree as follows (capitalized
terms used herein without definition having the meanings assigned thereto in
Section 11 below):
1. RESIGNATION
(a) RESIGNATION AS CHAIRMAN AND CHIEF EXECUTIVE OFFICER. The
Executive hereby resigns as Chairman and Chief Executive Officer as of the
earlier of June 15, 1998 and the effective date of the appointment of the
Executive's successor as Chief Executive Officer (such earlier date being
referred to in this Agreement as the "TERMINATION DATE"). At the request of
the Executive's successor, the Executive will, at any time after the
Termination Date, resign as a member of the Board. Except as provided in
Section 2 below, the Executive also resigns as of the Termination Date from any
other position as an employee or director of any subsidiary of the Company with
which he holds such a position. No further action on the part of the Executive
will be required to effect or evidence such resignations, which are hereby
accepted by the Company.
(b) STATUS UNTIL THE TERMINATION DATE. Until the Termination Date,
the Executive shall continue as Chairman and Chief Executive Officer of the
Company, with the
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authority and responsibilities of such positions. The Executive shall
continue to assist the Company, including the Board and any search committee
appointed by the Board, in its search for, and transition to, the Executive's
successor as Chief Executive Officer.
2. CONTINUED RELATIONSHIP WITH THE COMPANY
(a) CONSULTING ARRANGEMENT. Following the Termination Date and
continuing through June 30, 1999, the Executive shall be retained by the
Company as a consultant and shall make himself available on a reasonable basis
as requested by the Chief Executive Officer to provide advice and services on
matters relating to the transition to new management and to the Company's
restructuring program. The Company acknowledges that the Executive's
responsibilities as a consultant shall not require his full-time services and
shall not preclude him from accepting part-time or full-time employment with a
third party, subject, however, to the Executive's compliance with the covenants
referred to in Section 7 below. It is contemplated by the parties that the
Executive will not be required to devote more than an average of 40 hours per
month (exclusive of any time that may be required of the Executive pursuant to
Section 10(c) below) to the affairs of the Company following the Termination
Date.
(b) DURATION OF CONSULTING/EMPLOYMENT ARRANGEMENT. The Company
agrees to maintain the Executive's consulting arrangement as contemplated by
Section 2(a) until June 30, 1999 and during such period shall have the right to
terminate the Executive's arrangement only for Cause.
(c) STATUS AS INDEPENDENT CONTRACTOR WHILE A CONSULTANT. As a
consultant to the Company, the Executive shall act in the capacity of an
independent contractor and not as an employee of the Company. The Company
shall not exercise direction or control over the Executive in the performance
of his services as a consultant. The Executive shall act solely in an advisory
capacity and in consequence shall not in any way hold himself out as an
officer, employee or (following any resignation from the Board) director of the
Company or any of its affiliates, and unless otherwise instructed or authorized
in writing shall not have any authority to act for the Company or any of its
subsidiaries or affiliates or to give instructions or orders on behalf of, or
to make any decisions or commitments for or on behalf of, the Company or any of
its subsidiaries or affiliates.
(d) OFFICE AND SECRETARY. The Company will provide the Executive
with an office and shared secretarial assistance through June 30, 1999.
3. PAYMENTS. The Company shall make the following payments to the
Executive:
(a) SALARY/CONSULTING FEE. In consideration of the Executive's
continued
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service as Chief Executive Officer through the Termination Date, including
his agreement to make himself available for such continued service, if
required, until June 15, 1998, the Company agrees to pay the Executive, for
the period starting October 1, 1997 and continuing through the Termination
Date, an aggregate amount of $900,000 in salary. Such amount shall be in
lieu of any further payments of salary at the rate in effect for the
Executive prior to the date of this Agreement and shall be paid as follows:
(i) on the first normal salary payment date for Company officers
following the date of this Agreement, the Company will make a cash payment
to the Executive of the difference between (A) the amount of salary that
the Executive would have earned for all pay periods commencing on or after
October 1, 1997 and ending before the date of this Agreement based on a
salary rate of $100,000 per month and (B) the amount of salary heretofore
earned by the Executive for all such periods; and
(ii) the balance of the $900,000 shall be paid at the rate of
$100,000 per month through June 1998.
For the period July 1, 1998 through June 30, 1999, the Executive will be paid
a consulting fee at the rate of $10,000 per month. For so long as the
Executive remains an employee of the Company, payments provided for in this
Section 3(a) will be made in accordance with the Company's normal payroll
practice; thereafter, all such payments will be made monthly.
(b) BONUS. For the fiscal year of the Company ending June 30, 1998
("FISCAL 1998"), the Executive will be eligible to earn a cash bonus of up to
$2,800,000. Of this amount, $1,300,000 has been earned based on the
Executive's performance to date in assisting in the identification of his
successor as Chief Executive Officer, his efforts to facilitate the
transition of his responsibilities, and his performance in achieving the
Company's strategic objectives. The balance of up to $1,500,000 will be
based on the Executive's continuing contribution to the identification of and
transition to his successor as Chief Executive Officer and to the attainment
of the ten strategic projects discussed at the meetings of the Board held on
October 30 and December 15, 1997. The amount of the bonus in addition to the
$1,300,000 already earned will be based primarily on the number of goals
achieved and the degree to which the identified strategies have been
designed, adopted and are being pursued. Substantial achievement of the
specified goals and development of most of the identified strategies in
Fiscal 1998 would justify the payment of a substantial portion or all of the
remaining $1,500,000. The Executive's bonus will be paid at the same time
bonus payments are made to other executives of the Company in respect of
Fiscal 1998, but in no event later than July 31, 1998.
(c) SEVERANCE. The Company will pay the Executive a severance
amount of $3,250,000, net of any amounts previously loaned to the Executive
(including interest thereon in accordance with the terms of any such loans).
Of the severance amount, $500,000, net of any
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such loan amounts, will be paid to the Executive upon the signing of this
Agreement, and the balance will be paid within five business days of the
Termination Date.
(d) REIMBURSEMENT OF EXPENSES. The Executive shall be reimbursed in
accordance with the policies of the Company for any traveling and other
expenses incurred in the performance of the business of the Company.
4. STOCK OPTIONS AND RESTRICTED STOCK.
(a) OUTSTANDING OPTIONS. The Company confirms that the Compensation
Committee of the Board has taken all necessary action so that all other stock
options awarded to the Executive under the 1993 Plan to purchase shares of the
Company's Common Stock will vest as of the Termination Date, to the extent not
vested earlier in accordance with their terms. Thereafter, all stock options
awarded to the Executive under the 1993 Plan or any other stock option plan of
the Company (including the 1987 Nonstatutory Stock Option Plan, the 1986
Incentive Stock Option Plan, the 1985 Stock Incentive Plan and the 1984 Stock
Option Plan) will remain outstanding and exercisable by the Executive until the
earlier of (i) 30 days following the end of the Continuation Period and (ii)
the expiration of the normal term of each such option, and the terms and
conditions of each such stock option are hereby modified to the extent
necessary to provide for the expiration of such option, to the extent not
theretofore exercised or expired, as of 30 days following the end of the
Continuation Period. Notwithstanding the foregoing, any stock option the
normal expiration of which would occur prior to September 30, 1998 is hereby
amended so that the normal expiration date shall be considered to be September
30, 1998. Under no circumstances shall the Company be obligated to lend the
Executive all or any portion of the exercise price for any stock options
previously awarded to him.
(b) RESTRICTED STOCK. The July 1997 restricted stock grant made to
the Executive under the 1993 Plan shall remain outstanding in accordance with
its terms until June 30, 1998, after which, to the extent not vested, it shall
expire and the Executive shall have no further rights or interest therein. The
terms of such restricted stock grant are hereby modified to the extent
necessary to give effect to the preceding sentence.
(c) NO FURTHER GRANTS. No additional grants or stock options or
other equity awards will be made to the Executive under the 1993 Plan or any
other equity plan of the Company after the date hereof. Without limiting the
generality of the preceding sentence, the Executive will not be eligible for an
award of stock options in January 1998 at the time stock options are
anticipated to be made generally to officers of the Company.
5. OTHER BENEFITS.
(a) MEDICAL, LIFE INSURANCE, DENTAL BENEFITS. During the
Continuation Period,
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the Executive and his family will remain eligible for medical, life insurance
and dental benefits under the applicable plans of the Company, on the same
terms and conditions (including without limitation any provisions concerning
payment of premiums, deductibles and co-payments) that apply to senior
officers of the Company, PROVIDED HOWEVER, that such eligibility shall cease
prior to the end of the Continuation Period if the Executive becomes eligible
to be covered by a comparable program of a subsequent employer, and PROVIDED,
FURTHER, that following the date hereof the Executive shall have no right to
participate in any equity, incentive, bonus or similar compensation plan or
arrangement of the Company or any of its subsidiaries, or in any severance
plan or arrangement of the Company or any of its subsidiaries, it being
understood that the compensation, benefits and severance provided for in this
Agreement shall be in lieu of any compensation, benefits and severance that
the Executive might otherwise have been eligible to earn or receive from the
Company or any of its subsidiaries under such other plans or arrangements.
Nothing in this Agreement, however, shall be construed to alter or in any way
impair the Executive's rights to previously earned but deferred compensation.
(b) MISCELLANEOUS. The Executive will be permitted to retain,
without any payment to the Company, the laptop computer, color printer and
cellular telephone previously provided to him. The Executive agrees to
delete from the memory of such computer, and not to make or retain any copies
of, all Confidential Information (as defined in Section 11 below).
6. TERMINATION
(a) DEATH. If the Executive should die before all amounts required
to be paid as set forth in Section 3 of this Agreement have been paid, the
Executive's beneficiary (or if no beneficiary has been designated, his
estate) shall be entitled to receive such payments at the time they would
have been paid to the Executive, PROVIDED, HOWEVER, that in lieu of such
payment schedule, the Executive's beneficiary (or if no such beneficiary is
designated, his estate) may elect, by written notice to the Company given not
more than 90 days following the date of the Executive's death, to receive all
such amounts that have not theretofore been paid in a single lump sum equal
to the present value of all such payments, EXCEPT that the portion of the
Executive's bonus for Fiscal 1998 in excess of the $1,300,000 already earned
shall not be subject to early payment to the Executive's beneficiary or
estate but shall instead be determined and paid as provided in Section 3(b).
For purposes of the previous sentence, present value shall be calculated on
the basis of the applicable short-term federal interest rate (applicable to
loans with monthly compounding) as determined pursuant to Section 1274(d) of
the Internal Revenue Code of 1986, as amended, for the month in which death
occurs.
(b) TERMINATION WITHOUT CAUSE. If the Company terminates the
Executive's status as Chairman and Chief Executive Officer of the Company
prior to the Termination Date, or, following the Termination Date but before
June 30, 1999, terminates the Executive's consulting or employment
arrangement provided for in Section 2 above, in any such case without
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Cause, then all amounts due to the Executive under this Agreement shall
become immediately due and payable and shall be paid to the Executive in a
lump sum. For purposes of calculating the amount due hereunder, if the
Executive's bonus for Fiscal 1998 has not been determined as of the date of
termination, then it will be assumed that the Executive would have earned the
maximum bonus provided for in Section 3(b). In the event of such termination
without Cause, the Executive and, in the case of the benefits provided for in
Section 5(a), the members of his family, shall remain entitled to the
benefits provided for in this Agreement as though the Executive's employment
had continued until June 30, 1999.
(c) TERMINATION FOR CAUSE; RESIGNATION. If the Company terminates
the Executive's status as Chairman and Chief Executive Officer of the Company
prior to the Termination Date, or, following the Termination Date but before
June 30, 1999, terminates the Executive's consulting or employment
arrangement provided for in Section 2 above, in any such case for Cause, or
if the Executive resigns as Chairman and Chief Executive Officer of the
Company prior to the Termination Date, the Company shall pay the Executive
(i) all amounts of salary earned through the effective date of termination or
resignation, (ii) if not previously paid, the $1,300,000 portion of the
Executive's bonus for Fiscal 1998 that has already been earned and (iii) the
unpaid balance, if any, of the severance amount provided for in Section 3(c),
all of which amounts shall be paid at the times provided for in this
Agreement. Except as provided in the previous sentence, the Company shall
have no obligation to make any further payment of bonus or to provide
benefits continuation under Section 5(a) following the effective date of
termination. If the Executive resigns from the consulting arrangement
provided for in Section 2 above following the Termination Date but before
June 30, 1999, the Company shall be relieved of any obligation to pay the
Executive consulting fee in respect of periods following the effective date
of resignation, but shall make all other payments provided for herein
(including the full amount of the Executive's bonus for Fiscal 1998,
determined in accordance with Section 3(b)) at the times provided for such
payments; the Executive's resignation, however, will result in termination of
the Continuation Period and, consequently, the rights of the Executive (and
his family) under Section 5(a) above shall terminate.
7. CERTAIN COVENANTS.
(a) CONFIDENTIAL INFORMATION. The Executive agrees that he will
not, whether during the Continuation Period or thereafter, make use, for his
own benefit or the benefit of any other person or entity, of any Confidential
Information of any kind or character, nor divulge Confidential Information
except to the extent the Company's Chief Executive Officer or its board of
directors may so authorize in writing, and that within 10 days of the
Termination Date he will surrender to the Company all records, in whatever
form maintained (including without limitation records maintained as computer
files) and other documents and materials obtained by him or entrusted to him
during the course of his employment by the Company or any of its subsidiaries
or affiliates (together with all copies thereof) which relate to any such
Confidential Information.
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Nothing set forth in this Section 7(a), however, shall be interpreted to
prohibit the Executive from disclosing any such information as may be
required by law, including pursuant to any court or government decree and/or
subpoena. The obligations of this Section 7(a) shall survive any termination
of the Executive's employment or consulting relationships with the Company
and any termination of this Agreement.
(b) COMPETITION; SOLICITATION. In consideration of the Company's
obligation to pay the amounts provided for in Section 3 and its other
undertakings set forth herein, the Executive agrees that, during the period
beginning on the date of this Agreement and continuing through June 30, 1999,
he will not, without the express written consent of the Board (which consent
may be withheld in the sole discretion of the Board):
(i) directly or indirectly hire or attempt to hire any person
who is, or during the 90 days preceding Termination Date was, employed
by the Company or any of its subsidiaries; or
(ii) solicit, in competition with the Company or any of its
subsidiaries, any business of any person or entity who is or was a
customer or client of the Company or any of its subsidiaries; or
(iii) engage in any activities, whether as employee, director,
consultant, agent, proprietor, owner, partner, contractor,
stockholder (other than the holder of less than 5% of the stock of a
corporation the securities of which are traded on a national
securities exchange or in the over-the-counter market), or
otherwise, with or for the account of any corporation or firm
engaged in the Computer Systems Business that competes with the
Company or any of its subsidiaries.
Anything in this Agreement to the contrary notwithstanding, the Company
agrees that the Executive's continued service as a member of the board of
directors of National Semiconductor Corporation shall not constitute a
violation of the Executive's obligations under this Section 7(b).
(c) NON-DISPARAGEMENT. The Executive and the Company agree that,
from and after the date of this Agreement and continuing until one year after
the end of the Continuation Period, each party shall not, in any
communications with the press or other media, any customer or client of the
Company or any of the Company's affiliates, criticize, ridicule or make any
statement which disparages or is derogatory of the other party or, in the
case of communications by the Executive, of the Company's divisions or
affiliates or any of its or their senior officers or directors. For purposes
of the foregoing covenant, a statement shall be attributable to the Company
if made or authorized by any of its senior corporate executives having the
rank of Senior Vice President or higher, internal or retained public
relations or communications staff or any member of the Board.
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(d) REMEDIES. Without limiting the right of the Company to pursue
all other legal and equitable remedies available for violation by the
Executive of the covenants contained in this Section 7, it is expressly
agreed that if the Executive materially breaches the covenants set forth in
Section 7 and fails to cure such breach to the reasonable satisfaction of the
Company within 30 days after written notice thereof, any further obligations
of the Company pursuant to this Agreement (including without limitation
pursuant to Section 3 hereof, but not including the severance payments
provided for in Section 3(c) and the $1,300,000 portion of the Executive's
bonus for Fiscal 1998 that has already been earned) shall be canceled. In
addition, both the Executive and the Company acknowledge that a breach of any
of the covenants contained in this Section 7 (in the case of a breach by the
Executive) or in Section 7(c) (in the case of a breach by the Company) may
result in material irreparable injury to the other party for which there is
no adequate remedy at law, that it will not be possible to measure damages
for such injuries precisely and that, in the event of such a breach or threat
thereof, the Executive or the Company, as the case may be, shall be entitled,
in addition to any other rights or remedies he or it may have (including
without limitation the remedy provided in the preceding sentence), to obtain
a temporary restraining order and/or a preliminary or permanent injunction
enjoining or restraining the Executive or the Company, as the case may be,
from engaging in activities prohibited by Section 7 of this Agreement or
requiring his or its compliance with the affirmative obligations provided for
in such Section.
8. TAX WITHHOLDING. All amounts payable to the Executive pursuant
to this Agreement shall be subject to all legal requirements with respect to
the withholding of taxes. Without limiting the generality of the foregoing,
the Executive acknowledges that the Company will withhold applicable taxes
from payments of salary, bonus and severance contemplated hereby. The
Executive further acknowledges that he shall be solely responsible for and
shall file, on a timely basis, tax returns and payments required to be filed
with or made to any relevant tax authorities with respect to consulting fee
paid hereunder.
9. SOURCE OF PAYMENTS. All payments provided under this Agreement,
other than payments made pursuant to a benefit plan which may provide
otherwise, shall be paid in cash from the general funds of the Company, and no
special or separate fund shall be established, and no other segregation of
assets made, to assure payment. The Executive shall have no right, title or
interest whatever in or to any investments which the Company may make to aid
the Company in meeting its obligations hereunder. Nothing contained in this
Agreement, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind, or a fiduciary relationship, between
the Company and the Executive or any other person. To the extent that any
person acquires a right to receive payments from the Company hereunder, such
right shall be no greater than the right of an unsecured creditor of the
Company.
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10. MISCELLANEOUS
(a) ENTIRE AGREEMENT/AUTHORIZATION. This Agreement sets forth the
entire understanding of the parties hereto with respect to the subject matter
hereof and supersedes any other oral or written understandings relating to the
Executive's employment by the Company or to his rights, benefits and
obligations upon termination of such employment, including without limitation
the employment continuation agreement between the Executive and the Company as
amended as of October 21, 1993, BUT EXCLUDING the Amended and Restated
Indemnification Agreement, dated as of October 22, 1992, between the Executive
and the Company, which shall continue in full force and effect. Without
limiting the generality of the preceding sentence, the compensation, benefits
and severance provided for in this Agreement shall be in lieu of any
compensation, benefits and severance that the Executive might otherwise have
been eligible to earn or receive through the end of the Continuation Period.
This Agreement cannot be amended or modified except by a writing signed by all
such parties. The waiver by either party of compliance with any provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any other provision of this Agreement or of any subsequent breach by such
party of a provision of this Agreement. The Company represents and warrants
that it has full power and authority, and has taken all necessary action and
obtained any necessary corporate approvals, in order to enter into this
Agreement and fulfill its obligations hereunder.
(b) FULL SATISFACTION/WAIVER.
(i) The Executive acknowledges and agrees that the compensation and
other benefits provided for in this Agreement will constitute, in the
aggregate, full satisfaction of all claims for payment or other benefits
that the Executive may have against the Company or any of its subsidiaries
arising out of (A) his employment by the Company or his status as an
officer and director of the Company or any of the Company's subsidiaries,
(B) the termination of such employment and status and (C) the services he
will perform as a consultant pursuant to Section 2 above. Nothing in this
Agreement, however, shall be construed to alter or in any way impair the
Executive's rights to previously earned but deferred compensation.
(ii) In consideration of the agreements set forth herein, the Company,
on the one hand, and the Executive, on the other hand, release and waive
all claims, causes of action or the like arising on or before the date
hereof, regardless of whether or not known at present (INCLUDING WITHOUT
LIMITATION, in the case of the Executive, any claims arising under the Age
Discrimination in Employment Act of 1967 ("ADEA"), Title VII of the Civil
Rights Act of 1964 as amended by the Civil Rights Act of 1991, the Equal
Pay Act of 1962, The Americans with Disabilities Act of 1990, or any other
federal, state or local statute or ordinance, BUT EXCLUDING, in the case of
both the Company and the Executive, any claims that arise out of an
asserted breach of the terms of this Agreement), that either has or may
have in the future against the other, and in the case of the Company, its
successors,
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shareholders, directors, officers, agents and employees, regarding all
matters relating to the Executive's service as an officer and director of
the Company or any of its subsidiaries and to the termination of such
relationships, including, without limitation, all claims related to the
payment of compensation and benefits and all claims arising under any
Federal or state statute or regulation. Without limiting the generality
of the preceding sentence, the Executive specifically waives the
provisions of Section 1542 of the California Civil Code, which reads as
follows: "A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of executing
the release, which if known by him [might] have materially affected his
settlement with the debtor." Notwithstanding the provisions of Section
1542, and for the purpose of implementing a full and complete release and
discharge of the Company, the Executive expressly acknowledges that this
Agreement is intended to include in its effect, without limitation, all
claims described herein, whether known or unknown, and that this
Agreement contemplates the extinction of any and all such claims,
including claims for attorney's fees. Furthermore, the Executive
expressly waives any right to assert hereafter that any such claim,
demand, obligation, or cause of action, has, through ignorance or
oversight, been omitted from the scope of this Agreement.
(iii) In addition to the general and specific release and waiver
of claims contained above, the Executive specifically waives any rights or
claims he may have under ADEA against the Company and its successors,
shareholders, directors, officers, agents and employees. As contemplated
under ADEA, the Executive shall have up to 21 days from receipt of this
Agreement to accept its terms, although the Executive may accept the
Agreement at any time within those 21 days. The Company hereby advises the
Executive to consult with, and the Executive hereby acknowledges that he
has consulted with, his own personal legal counsel concerning any questions
about the Agreement. This Agreement will not become effective or
enforceable until seven days following the date the Executive signs and
returns it to the Company. During that seven-day period, the Executive may
rescind the Agreement by notifying the Company in writing that he no longer
wishes to enter into the Agreement, in which event the Company shall not be
required to provide the Executive with any payment or benefit hereunder.
If the Executive does not rescind the Agreement, the eighth day after the
date of the Executive's acceptance will be the "effective date" of this
Agreement.
(c) COOPERATION. The Executive agrees that he will, upon the
Company's or its agent's request and reasonable notice, cooperate with the
Company in connection with any claim or litigation or other matter about which
the Executive may have relevant information. Upon request, the Executive will
also provide the Company with information that he obtained from his employment
or consulting arrangement with the Company regarding the Company's business or
operations. Additionally, the Executive will immediately notify the Company's
General Counsel if he receives any written or oral request for information from
any persons, or their counsel, who are asserting or investigating claims or
litigation asserted against, or otherwise adverse to, the
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Company. The Executive will not disclose information to such persons except
as required by legal process.
(d) NO DUTY TO MITIGATE; NO OFFSET. The Executive shall have no duty
of mitigation with respect to amounts payable to him pursuant to this Agreement
or other benefits to which he is entitled pursuant hereto, and subject to the
specific provisions concerning medical, dental and insurance plans set forth in
Section 5(a) above, no amounts payable to the Executive pursuant to hereto, or
other benefits to which he is entitled pursuant hereto, will be offset or
reduced by any compensation, payments or benefits he may receive from a
subsequent employer.
(e) ASSIGNMENT AND DELEGATION. Neither this Agreement nor any right,
duty, obligation or interest hereunder shall be assignable by the Executive
without the Company's prior written consent; PROVIDED, HOWEVER, that nothing in
this Section shall preclude the Executive from designating any of his
beneficiaries to receive any benefits payable hereunder upon his death or
disability, or his executors, administrators, or other legal representatives,
from assigning any rights hereunder to the person or persons entitled thereto.
This Agreement shall be binding upon, and inure to the benefit of, the parties
hereto, any successors to or assigns of the Company and the Executive's heirs
and the personal representatives of the Executive's estate. The Company will
not consolidate with or merge into, or sell all or substantially all of its
assets to, another corporation, partnership or other entity, unless such other
corporation, partnership or entity shall assume this Agreement, and upon such
assumption the Executive and the successor corporation, partnership or other
entity shall become obligated to perform all of the terms and conditions set
forth herein.
(f) HEADINGS. The headings of the Sections of this Agreement are
included solely for convenience of reference and shall not be construed or
interpreted in any way as affecting the meaning of such Sections.
(g) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
(h) GOVERNING LAW. This Agreement is to be governed by and
interpreted in accordance with the laws of the State of California, without
giving effect to the choice-of-law provisions thereof.
(i) DISPUTE RESOLUTION. In the event of any dispute, claim,
question, controversy or disagreement arising under or in connection with this
Agreement, the parties agree to use their best efforts to settle such matters
in an amicable manner. Initially, they shall consult and negotiate with each
other, in good faith and, recognizing their mutual interests, attempt to reach
a just and equitable solution satisfactory to both parties. If they do not
reach such
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resolution within a period of six weeks, then upon written notice by either
party to the other, any unresolved matter shall be submitted to confidential
mediation conducted by a mediator mutually acceptable to each of them.
Either party may, without inconsistency with this Agreement, apply to any
court having jurisdiction and seek injunctive relief so as to maintain the
status quo until such time as the mediation is concluded or the controversy
is otherwise resolved. The site of the mediation shall be in San Francisco,
California. Following resolution of all claims between the parties in a
mediation or legal proceeding, the Company shall promptly reimburse the
Executive for all legal fees and expenses incurred by the Executive in
connection any claim to enforce his rights under this Agreement, except for
any claim which shall have been determined, in such mediation or legal
proceedings, to have been brought by the Executive in bad faith.
11. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings indicated below:
"CAUSE" means any of (i) the grounds for termination of employment
specified in Section 2924 of the California Labor Code, (ii) a material
breach by the Executive of any of the covenants referred to in Section 7
above which the Executive fails to cure to the reasonable satisfaction of
the Company within 30 days after delivery of written notice thereof to the
Executive or (iii) conviction of the Executive of any felony or any other
crime resulting in material harm to the financial condition or business
reputation of the Company or any of its subsidiaries.
A corporation or other firm will be considered to be engaged in the
"COMPUTER SYSTEMS BUSINESS" if it is engaged in the design, manufacture or
marketing of desktop or deskside computer systems, servers, graphics
microprocessors or graphics hardware components, or in any combination of
such activities.
"CONFIDENTIAL INFORMATION" means information concerning the business
or financial affairs of the Company or any of its subsidiaries which (i)
has not been disclosed publicly by the Company or one of its subsidiaries
and (ii) is otherwise not a matter of public knowledge or is a matter of
public knowledge but the Executive has reason to know that such information
became a matter of public knowledge through an unauthorized disclosure.
Confidential Information may include, without limitation, client lists of
the Company and its subsidiaries, their respective trade secrets and
technological know-how, information concerning products under development
or for which patent applications are pending or in preparation,
confidential information about (or provided by) any customer or supplier,
or prospective or former customer or supplier, information concerning the
business or financial affairs of the Company or any of its subsidiaries,
including books and records, commitments, procedures, plans and prospectus,
strategies, or current or
<PAGE>
13
prospective transactions or business, and any other "inside information".
"CONTINUATION PERIOD" means the period beginning on the date of this
Agreement and ending on June 30, 1999, PROVIDED, HOWEVER, that if the
Executive's employment is terminated for Cause prior to June 30, 1999, or
if the Executive either resigns as Chairman and Chief Executive Officer
prior to the Termination Date or, following the Termination Date but prior
to June 30, 1999 resigns from the consulting arrangement provided for in
Section 2 above, then the Continuation Period shall end as of the effective
date of such termination or resignation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
SILICON GRAPHICS, INC.
William M. Kelly
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Name: William M. Kelly
Title: Senior Vice President
APPROVED BY THE BOARD OF DIRECTORS:
C. Richard Kramlich
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Name: C. Richard Kramlich
Title: Chairman, Compensation and Human
Resources Committee
EXECUTIVE
Edward R. McCracken
----------------------------------------
Edward R. McCracken