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Exhibit
10.31
FORM OF EMPLOYMENT
CONTINUATION AGREEMENT
SILICON GRAPHICS,
INC.
1600 Amphitheatre
Parkway
Mountain View, California
94043-1351
[Date]
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 herein (including, but not limited to, those
set forth in Section 2(g)), the Company agrees that you shall
receive the benefits set forth in this agreement
(“Agreement”) under the circumstances described below.
This Agreement shall supersede any prior agreement that you may
have had with the Company regarding any severance or change in
control benefits.
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) “Board” shall
mean the Board of Directors of the Company.
(b) “Change in
Control” of the Company means any of the following
occurrences:
(i) Any person(s) acting
together which would constitute a “group” for purposes
of Section 13(d) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) (other than the Company,
any subsidiary, or any “permitted holder” as defined
below) shall “beneficially own” (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, at least 35%
of the total voting power of all classes of capital stock of the
Company entitled to vote generally in the election of the
Board;
(ii) Either
(A) “incumbent directors”, as defined below, shall
cease for any reason to constitute at least a majority of the
members of the Board (for these purposes, an “incumbent
director” shall mean any member of the Board as of the
effective date of this Agreement, and any successor of a incumbent
director whose election, or nomination for election by the
Company’s shareholders was approved by at least a majority of
the current directors then on the Board), or (B) at any
meeting of the shareholders of the Company called for the purpose
of electing directors, a majority of the persons nominated by the
Board for election as directors shall fail to be
elected;
(iii) Consummation of a
merger or consolidation of the Company (A) in which the
Company is not the continuing or surviving corporation (other than
a consolidation or merger with a wholly-owned subsidiary of the
Company in which all shares of Common Stock outstanding immediately
prior to the effectiveness
thereof are changed into or
exchanged for common stock of the subsidiary) or (B) pursuant
to which all shares of Common Stock are converted into cash,
securities or other property, except in either case, a
consolidation or merger of the Company in which the holders of the
shares of Common Stock immediately prior to the consolidation or
merger have, directly or indirectly, at least a majority of the
shares of Common Stock of the continuing or surviving corporation
immediately after such consolidation or merger or in which the
Board immediately prior the merger or consolidation would,
immediately after the merger or consolidation, constitute a
majority of the board of directors of the continuing or surviving
corporation;
(iv) Consummation of a plan
of complete liquidation of the Company; or
(v) The consummation of a
sale or other disposition (in one transaction or a series of
transactions) of all or substantially all of the assets of the
Company.
For purposes of this
Agreement, the Board may by resolution, clarify the date as of
which a Change in Control shall be deemed to have
occurred.
(c) “Current
Compensation” shall mean your monthly base salary, as in
effect immediately prior to the Change in Control.
(d) “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.
(e) “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 Section 6 hereof.
(f) “Person”
means any individual, entity or group within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act.
(g) “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 (with
beneficial ownership determined under Rule 13d-3 of the Exchange
Act); 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 following 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 Section 2(d) or (z) the
occurrence of a Change in Control of the Company.
(h) “Termination
Payment” shall mean the severance pay to which you are
entitled upon termination of your employment within twenty-four
(24) months after a Change in Control as provided in
Section 4(a).
2
3. Benefits Upon a Change
in Control.
(a) Subject to Section 7
below, in the event of a Change in Control, you shall be entitled
to the following benefits:
(i) Any non-statutory stock
options and incentive stock options granted to you by the Company
that are outstanding immediately prior to the effective date of the
Change in Control and that are not assumed, converted or replaced
by the surviving or continuing entity in connection with the Change
in Control shall (A) become fully vested and exercisable
immediately prior to the Change in Control (contingent upon the
effectiveness of the Change in Control) and (B) terminate if
not exercised at or prior to the effective time of the Change in
Control.
(ii) Any restricted stock
unit awards granted to you by the Company that are outstanding
immediately prior to the effective date of the Change in Control
and that are not assumed, converted or replaced by the surviving or
continuing entity in connection with the Change in Control shall
become fully vested immediately prior to the Change in Control
(contingent upon the effectiveness of the Change in
Control).
(iii) With respect to any
restricted stock granted to you by the Company, if the
reacquisition or repurchase rights held by the Company with respect
to such restricted stock is not assigned to the surviving or
continuing entity in connection with the Change in Control, such
restricted stock shall be released from the Company’s
reacquisition or repurchase rights immediately prior to the Change
in Control (contingent upon the effectiveness of the Change in
Control).
4. Benefits Upon a
Termination Following a Change in Control.
(a) Subject to Section 7
below, if your employment with the Company is terminated within
twenty-four (24) months after a Change in Control, other than
as set forth in Section 4(c), you shall be entitled to the
following benefits:
(i) A Termination Payment,
payable in cash, in an amount equal to the sum of the
following:
(A) [12/24] months of your
Current Compensation at the rate in effect immediately prior to
such Change in Control; and
(B) a prorated amount of your
annual bonus at target under the Company’s corporate annual
executive incentive plan or a similar incentive plan in which all
senior executives participate (the “Target Bonus”) for
the calendar year in which such termination occurs (which shall be
equal to (A) the number of full months that you were employed
by the Company during such calendar year prior to such termination
divided by twelve (12), multiplied by (B) the amount of such
Target Bonus).
(ii) Any non-statutory stock
options and incentive stock options granted to you by the Company
that are outstanding as of the date of your termination shall
(A) become fully vested and exercisable upon your termination
and (B) remain exercisable for ninety (90) days following
your termination.
(iii) Any restricted stock
unit awards granted to you by the Company that are outstanding as
of the date of your termination shall become fully vested upon your
termination.
(iv) Any restricted stock
granted to you by the Company shall be released from the
Company’s reacquisition or repurchase rights upon your
termination.
(v) If you are enrolled in a
health, dental, or vision plan sponsored by the Company and you
timely elect to continue coverage under such health, dental, or
vision plan at the time of your termination of employment under the
Consolidated Omnibus Budget Reconciliation Act of 1985
(“COBRA”), the Company shall pay a portion of the
applicable premiums for such coverage for [12/24] months following
such termination, at the same rate that the Company paid for
coverage under suc
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