CONSULTING AGREEMENT
This Consulting Agreement ("Agreement") is effective as of June 30, 1998
by and between Silicon Graphics, Inc. (the "Company") and Xxxxxx X. Xxxxx
("Consultant").
RECITALS
Consultant's employment with the Company has terminated effective June
30, 1998 (the "Separation Date"). The Company wishes to have Consultant
remain available to contribute to certain projects and activities of the
Company. Accordingly, the Company and Consultant have agreed that Consultant
will change his relationship with the Company from that of an employee to
that of a consultant on the terms set forth in this agreement.
AGREEMENT
In consideration of the mutual promises made herein, the Company and
Consultant hereby agree as follows:
1. CHANGE OF STATUS. Consultant and Company have entered into a
letter agreement dated contemporaneously herewith (the "Separation
Agreement") governing the terms of Consultant's resignation as an employee of
Company.
2. CONSULTING RELATIONSHIP.
(a) Commencing on July 1, 1998 (the "Consulting Period Effective
Date") and continuing through the earlier of June 30, 1999 or the date this
agreement is terminated under Paragraph 8 below (the "Consulting Period"),
Consultant shall serve as an independent consultant to the Company.
(b) During the Consulting Period, Consultant shall provide such
reasonable services as are agreed to by Consultant and the Company.
Consultant shall be available during the Consulting Period for such
reasonable hours on an as needed basis as are mutually agreed upon by the
parties. Consultant's duty to provide consulting services shall be limited
to those areas over which Consultant had direct management responsibility
while an employee of the Company. Nothing in this Agreement shall be
construed to prohibit Consultant from accepting full-time employment with
another employer during the Consulting Period, subject to his obligations
under Paragraphs 4, 6 and 7. Nothing in this Agreement shall be construed to
prohibit Consultant from being unavailable to provide consulting services on
site, so long as Consultant is available by telephone upon no less than
seventy-two (72) hours advance notice. Any travel time required of
Consultant shall be included as consulting time. Consultant shall at all
times be an independent contractor to the Company, and nothing in this
agreement shall in any
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way be construed to constitute Consultant as an agent, employee or
representative of the Company.
(c) The Company agrees that the workstation Consultant used as an
employee of the Company shall be available for use by Consultant from his
home, shall be maintained by the Company during the Consulting Period and
shall become his personal property upon the Separation Date, but any ongoing
fees, expenses, and access charges related to such equipment will be
Consultant's sole responsibility Consultant understands and agrees that the
net book value of the workstation on the Company's books and records at the
end of the Consulting Period, if any, will be reported as additional
compensation to him and that he will be responsible for any associated
individual taxes. Consultant will be allowed to use the Company's network on
terms and conditions similar to those provided to other independent
contractors to provide requested consulting services during the Consulting
Period; provided that such access will be subject to termination in the event
that Consultant accepts employment or a consulting project with a direct
competitor of the Company.
3. COMPENSATION.
(a) In consideration for Consultant's agreement to provide
consulting services during the Consulting Period as provided herein and his
faithful adherence to the terms and conditions of this agreement, the Company
shall pay Consultant a monthly Consulting Fee equal to one-twelfth of the
annual base salary that Consultant was earning as of the Separation Date.
Such compensation shall be paid in monthly installments within fifteen
business days after receipt of Consultant's monthly invoice, but no earlier
than the fifteenth business day of each month. The Company shall reimburse
Consultant for any reasonable out-of-pocket expenses incurred by Consultant
in providing services under this Agreement, provided that Consultant has
received prior approval for incurring such expenses from the Company. The
Company's payment obligations under this agreement in the event that it is
terminated prior to June 30, 1999, will be governed by Paragraphs 8 and 9(g)
below.
(b) The attached Personnel Option Status Summary sets forth the
details concerning all outstanding options to purchase Common Stock and all
shares of restricted stock of the Company held by Consultant. All restricted
stock granted to Consultant by the Company shall continue to be released from
the Company's repurchase right (at the rate provided in Consultant's
applicable restricted stock award agreement) during the Consulting Period.
All outstanding stock options listed on the attached summary shall remain
outstanding and continue vesting (at their normal rate provided in the
applicable stock option or stock award agreement) during the Consulting
Period. Any other stock options held by Consultant will be unaffected by the
terms of this Agreement and will terminate to the extent they are not
exercised within thirty (30) or ninety (90) days (depending on the terms of
the respective option agreements) after the Separation Date.
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(c) Consultant is advised that as a result of the conversion of
his status from employee to Consultant, any incentive stock options ("ISOs")
will become non-statutory options ("NSOs"), to the extent they are not
exercised within ninety (90) days after the date Consultant ceases to be an
employee. If Consultant's consulting relationship terminates for any reason,
then all vesting shall immediately stop, and Consultant's ability to exercise
such options shall be governed by the terms of each of the respective option
agreements.
(d) Notwithstanding the termination of the employment continuation
agreement dated as of July 10, 1989 and amended as of October 21, 1993 and
November 14, 1997 between Consultant and the Company (the "Employment
Continuation Agreement"), if a Change in Control of the Company (as defined
in the Employment Continuation Agreement) occurs during the Consulting
Period, Consultant shall have the rights provided under Section 3(b) of the
Employment Continuation Agreement with respect to his then outstanding stock
options to the extent that such rights could have been exercised by him if
the Employment Continuation Agreement had been in effect and had Consultant
been an employee of the Company at the time of the Change in Control.
(e) During the Consulting Period, the Company shall provide to
Consultant medical, dental and vision continuation benefits through COBRA and
Company shall pay the COBRA premiums until the earlier of (i) the date the
Consultant and Consultant's covered dependents become covered under another
employer's group health plan providing benefits and levels of coverage
comparable to that of the Company or (ii) the termination of the Consulting
Period as specified herein. The Company shall also pay or reimburse
Consultant for financial and tax consulting services and an annual physical
exam in accordance with the Company's executive perquisite program until the
earlier of (i) the termination of the Consulting Period, or (ii) the date at
which Consultant accepts full-time employment with another employer. The
provisions of the executive perquisite program covering an automobile
allowance, cellular telephone charges and life insurance premiums will not be
applicable during the Consulting Period.
(f) The Company will, upon repayment of the remaining balance,
forgive an amount equal to $633,445 on Consultant's loan in the aggregate
amount of $1,317,414 (including accrued interest) on July 31, 1998. The
forgiveness of the loan will be reported as additional compensation to
Consultant and Consultant will be responsible for reimbursing the Company for
the employee share of applicable payroll taxes and for paying any additional
federal, state and local taxes imposed on Consultant associated with this
income. The remaining balance of the loan in the amount of $683,969 will be
due and payable to the Company in accordance with its terms on July 31, 1998.
Upon payment, the Company shall return to Consultant the original promissory
notes executed by Consultant marked paid in full, and shall immediately
release and reconvey all security for said notes.
(g) Other than the provisions set forth in the Separation Agreement,
the existing Indemnification Agreement dated July 1, 1996 between Consultant and
the
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Company, in Consultant's stock option and stock award agreements and herein,
Consultant has no expectation of, and shall make no other claims for payment or
any other compensation or benefits from the Company.
4. CONFIDENTIAL INFORMATION. Consultant acknowledges that, because of
his position with the Company, he has specific knowledge of many types of
information that are confidential and proprietary to the Company, including,
without limitation, its current and planned technology, its current and
planned sales, marketing, and corporate strategies; strategic customer and
business partners; and the organizational structure, identity, skills and
interests of its employees. Consultant agrees to keep and treat all such
proprietary information as confidential and he acknowledges and reaffirms his
obligations to the Company under the Proprietary Information and Invention
Agreement between Consultant and the Company, wherein Consultant agreed to
keep and treat all such proprietary information as confidential. Those
obligations survive the termination of Consultant's employment or consulting
relationship with the Company and the termination of this agreement.
5. TAX CONSEQUENCES. Consultant acknowledges that he is obligated to
report as income all compensation received by Consultant pursuant to this
agreement, and Consultant acknowledges his obligation to pay all federal,
state or local income, self-employment or other taxes relating to such
compensation or any amounts realized upon exercise of Consultant's options,
and any penalties or assessments thereon. Except as referred to in Paragraph
3(c), the Company gives no opinions and makes no representations with respect
to the potential or actual tax consequences or liabilities, if any,
associated with the payment of any amounts to Consultant under the terms of
this Agreement or the continued vesting of Consultant's options. Consultant
assumes sole responsibility for any tax liability that results from the
payment of any compensation described herein.
6. NON-SOLICITATION. Consultant agrees that during the term of the
Consulting Agreement, he shall not, directly or indirectly solicit or
influence any person in the employment of the Company or any affiliated
entity to (i) terminate such employment, (ii) accept employment, or enter
into any consulting arrangement, with any entity other than the Company or
any affiliated entity or (iii) interfere with the customers, suppliers,
clients or business of the Company or any affiliated entity in any manner.
7. COOPERATION. Consultant agrees, upon the Company's or its agent's
request and reasonable notice, to cooperate with the Company in connection
with any claim or litigation or other matter about which Consultant may have
relevant information. Upon request, Consultant will also provide the Company
with information that Consultant obtained from his employment with the
Company regarding the Company's business or operations. Additionally, he
will immediately notify the Company's General Counsel if he receives any
written or oral request for information from any persons (other than his
full-time employer), or their counsel, who are asserting or investigating
claims or litigation asserted against, or otherwise adverse to, the Company,
unless Consultant is
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legally required not to disclose such request for information. Consultant
will not disclose information to such persons except as required by legal
process. Consultant will not disclose to anyone, except the Company,
confidential or privileged matters obtained from or related to his employment
with the Company, except as required by law.
8. TERM AND TERMINATION.
(a) Consultant's consulting relationship may be terminated by the
Company on a "for cause" basis at any time as provided in this Paragraph 8
if, Consultant (i) willfully, flagrantly or continuously fails to perform the
consulting services as Consultant is obligated to provide in accordance with
Paragraph 2(b) after written demand for substantial performance is delivered
to Consultant specifically identifying the manner in which Consultant has
failed to perform such services, and Consultant's failure to perform
continues for a period of ten (10) days following receipt of such demand for
performance from the Company; (ii) violates any material provision of this
agreement, including without limitation, the confidential information
provision of Paragraph 4, the non-solicitation provisions of Paragraph 6, and
the cooperation provision of Paragraph 7 (iii) commits any act of moral
turpitude in connection with his performance of the consulting services, or
(iv) otherwise commits any egregious or malicious act injurious to the
Company, its business or reputation. The Company shall give thirty (30) days
notice to Consultant of the termination of the agreement pursuant to this
Paragraph 8 and shall provide Consultant with a reasonable time within said
thirty (30) day period in which to respond to and cure the alleged problem.
In the event Consultant cures the problem within the cure period, the Company
shall not terminate this Agreement. The Company will have no obligation to
make any further payments under this Agreement following a "for cause"
termination in accordance with this Paragraph 8. Any such termination by the
Company shall be in addition to and shall not affect any other remedies to
which the Company may be entitled as a result of the event leading to such
termination.
(b) Notwithstanding the expiration and/or termination of this
agreement, the provisions of Paragraphs 4 (Confidential Information), 6(b)
(Non-Solicitation) and 7 (Cooperation) by their terms, shall survive the
expiration and/or termination of this agreement.
9. GENERAL
(a) ENTIRE AGREEMENT. Except as set forth in the Separation
Agreement, this agreement represents the entire agreement and understanding
between the Company and the Consultant concerning Consultant's consulting
relationship and the termination of Consultant's employment relationship with
the Company, and, except as specifically provided herein, supersedes and
replaces all prior agreements and understandings, written and oral,
concerning Consultant's relationship with the Company and his compensation by
the Company, other than the Indemnification Agreement and the stock option
and stock award agreements referred to in Paragraphs 3(g) and 3(b) above. In
particular, except as otherwise provided herein, Consultant agrees that the
employment
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continuation agreement dated July 10, 1989 and amended October 21, 1993 and
November 14, 1997 between Consultant and the Company terminated as of the
Separation Date. Nothing in this Agreement shall affect Consultant's right to
coverage under the Company's Directors and Officers liability insurance for
actions taken while Consultant was an officer or a director of the Company.
Neither party has relied upon any representations or statements made by the
other party hereto which are not specifically set forth in this agreement.
(b) SETTLEMENT OF OUTSTANDING OBLIGATIONS. Consultant agrees that
this Agreement, the Separation Agreement, the Indemnification Agreement and
the stock option or stock award agreements represent settlement in full of
all outstanding obligations owed to Consultant by the Company as a result of
his employment by the Company or his change in status, including without
limitation all obligations for current or past salary, bonus or severance
payments.
(c) NOTICES. Notices and all other communications provided for in
this Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered, or sent by facsimile transmission or, if
mailed, five (5) days after the date of deposit in the United States mails,
registered or certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses as follows:
(i) if to the Company, to:
Silicon Graphics, Inc.
0000 X. Xxxxxxxxx Xxxx.
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx Xxxxx, M/S 741
Fax: 000-000-0000
with a copy to:
Silicon Graphics, Inc.
0000 X. Xxxxxxxxx Xxxx.
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Legal Services, M/S 710
Fax: 000-000-0000
(ii) if to Consultant, to:
Xx Xxxxx
Fax:
with a copy to:
Xxxxxx X. Xxxxx, Esq.
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Harrigan, Ruff, Sbardellati & Xxxxx
000 Xxxx Xxxxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
Fax: 000-000-0000
(d) WAIVERS AND AMENDMENTS. This agreement may be amended,
terminated or extended, or the terms hereof may be waived, only by a written
instrument signed by the parties. No delay in exercising any right hereunder
shall operate as a waiver thereof, nor shall any waiver or partial exercise
of a right preclude any other or further exercise thereof or any other right.
(e) GOVERNING LAW. This agreement shall be entered into and
governed by the laws of the State of California.
(f) DISPUTES. To dispute any failure to make payments claimed to
be due hereunder, Consultant must give written notice of such dispute to the
Company within sixty (60) days after the date on which a payment claimed by
Consultant to be due hereunder was due to be made. In the event of any
dispute, claim, question, or disagreement arising out of or relating to this
agreement or the breach thereof, the parties hereto agree to first 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 resolution within a
period of sixty (60) days, then upon written notice by either party to the
other, any unresolved dispute, claim or differences shall be submitted to
confidential mediation by a mutually agreed upon mediator. Either party may,
without inconsistency with this agreement, apply to any court having
jurisdiction hereof 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 the County of
Santa Clara, California. Each party shall each bear its own costs and
expenses and an equal share of the mediators' and any similar administrative
expenses.
(g) ASSIGNMENT AND ASSUMPTION. This agreement, and Consultant's
rights and obligations hereunder, are personal in nature and accordingly may
not be assigned by Consultant, except for an assignment by Consultant to a
corporation, trust, partnership or other legal entity established by him for
personal financial or tax purposes. If Consultant becomes disabled and is
unable to provide consulting services during the Consulting Period, except
for all stock option and stock award vesting terminating, all payments
contemplated by this Agreement shall be paid in accordance with the terms
hereof. If Consultant's consulting relationship terminates by reason of
death, except for all stock option and stock award vesting terminating,
Consultant's estate's eligibility to any outstanding and all continuing
consulting compensation payments provided hereunder shall survive. This
agreement and its rights, together with its obligations hereunder, shall be
assumed by the successors in interest of the Company in connection with any
sale, transfer or other disposition of all or substantially all of its assets
or
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business, whether by merger, consolidation or otherwise. Such successor or
assignee to the business or assets shall be bound by the terms and provisions
of this agreement.
(h) COUNTERPARTS. This agreement may be executed in counterparts,
and each counterpart shall have the same force and effect as an original and
shall constitute an effective, binding agreement on the part of each of the
parties.
10. VOLUNTARY EXECUTION OF AGREEMENT. This agreement is executed
voluntarily and without any duress or undue influence on the part or on
behalf of the parties hereto. The parties acknowledge that:
(a) They have carefully read this agreement;
(b) They have been advised and represented in the preparation,
negotiation, review and execution of this agreement by legal counsel of their
own choice;
(c) They understand the scope, terms, consequences and effects of
this agreement; and
(d) They are fully aware of the legal and binding effect of this
agreement.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
dates set forth below.
CONSULTANT: COMPANY:
Silicon Graphics, Inc.
/s/ Xxxxxx X. Xxxxx /s/ Xxxx Xxxxxxxx
---------------------------- ------------------------------------
Xxxxxx X. Xxxxx Xxxx Xxxxxxxx, Senior Vice President
Date: Date:
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