Form of Employment Continuation Agreement



 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 within three months of your termination of employment will automatically become non-statutory
options), or (ii) to have such options “cashed out” at their market value determined as provided herein. The cash out proceeds shall be paid to you or, in the event of your death prior to payment, the representative of your estate. For
this purpose, the fair market value of an outstanding option shall be measured as the difference between the option exercise price and the “Change in Control Price” as defined in subparagraph 3(d), as of the date such Change in Control is
determined to have occurred or such other date as the Board of Directors may determine prior to the Change in Control. 
  
 (ii) all outstanding incentive stock options granted to you by the Company on or prior to the date of this agreement (including any
options issued in substitution or assumption of such options as a result of a Change in Control), shall be accelerated 15 calendar days after the date of such Change in Control to the extent then unvested, and shall be fully exercisable through the
period ending three (3) months after the termination of your employment with the company, subject to any further limitation on your right to exercise such options upon termination of your employment pursuant to the terms of any applicable option
agreement. 
  
 (iii) all restricted stock granted
to you by the Company shall be released from the Company’s repurchase right (which is set forth in your restricted stock purchase agreements) 15 calendar days after the date of such Change in Control. 
  
 (c) Any cash payable to you under subparagraph 3(a) shall be payable between
30 and 60 calendar days after your termination of employment. Any cash payable to you under subparagraph 3(b)(i) shall be made within 30 calendar days after the earlier of (i) the expiration of the respective periods in the subsections thereof, or
(ii) the date the Company receives your written notice electing to be cashed out on the value of your options in lieu of exercise thereof. 
  
 (d) For purposes of this Paragraph 3, “Change in Control Price” shall be, as determined by the Board, (i) the highest closing sale price of a
share of the Company’s Common Stock as reported by the NASDAQ National Market System and as appearing in the Wall Street Journal (or, in the event the Common Stock is listed on a stock exchange, the highest closing price on such exchange as
reported on the composite transactions reporting system), at any time within the 60-day period immediately preceding the date of determination of the Change in Control Price by the Board (the “60-day period”), or (ii) the highest price
paid or offered for a share of the Common Stock, as determined by the Board, in any bona fide transaction or bona fide offer related to the Change in Control of the Company, at any time within the 60-day period. 
  
 (e) Anything contained in subparagraphs (a) or (b) above to the contrary
notwithstanding, the Company shall have no obligation to pay a Termination Payment or to accelerate vesting of shares or to cash out options or to release shares from the Company’s repurchase right under this Agreement in the event of a
termination prior to a Change in Control. The Company also shall have no obligation to pay a Termination Payment if, after a Change in 

  

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Control, it terminates your employment for “Cause” or if your employment terminates due to death, retirement or resignation other than for
“Good Reason.” Furthermore, if it is determined by the Company’s Board of Directors, upon receipt of a written opinion of the Company’s independent public accountants that acceleration of vesting of shares or cash out of
outstanding options or releasing of shares from the Company’s repurchase right would preclude accounting for the acquisition of the Company as a pooling of interests, and the Board otherwise desires to approve a proposed acquisition of the
Company by an acquiring Company which requires as a condition to closing of the acquisition that the acquisition be accounted for as a pooling of interests, then the Company shall not be obligated to accelerate your options or cash out your options
or release your restricted stock from its repurchase right under this Paragraph 3. 
  
 (f) In the event that the terms of this Agreement relating to options or restricted stock conflict with the terms of any option, stock award or related agreement between you and the Company, the terms that are more
favorable to you will control. 
  
 4. Termination for
Cause. Termination of your employment with the Company shall be regarded as termination for Cause only upon: 
  
 (a) your willful and continued failure to substantially perform your duties with the Company (other than such failure resulting from your incapacity due
to physical or mental illness) after there is delivered to you by the Board a written demand for substantial performance which sets forth in detail the specific respects in which it believes you have not substantially performed your duties;

  
 (b) your willfully engaging in gross misconduct which is
materially and demonstrably injurious to the Company; 
  
 (c) your
committing a felony or an act of fraud against the Company or its affiliates; or 
  
 (d) your breaching materially the terms of your employee confidentiality and proprietary information agreement with the Company. 
  

No act, or failure to act, by you shall be considered “willful” if done, or omitted to be done, by you in good faith and in your reasonable
belief that your act or omission was in the best interest of the Company and/or required by applicable law. 
  
 Anything contained in this paragraph 4 to the contrary notwithstanding, you shall not be deemed to have been terminated for Cause unless and until there
shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board at a meeting of the Board called and held for that purpose (after reasonable notice to and
an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board, you were guilty of conduct set forth in subparagraphs (a) or (b) of this Paragraph 4 and specifying the
particulars thereof in detail. 
  

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 5. Termination for Good Reason. Your employment with the Company may be regarded as having been
constructively terminated by the Company, and you may therefore terminate your employment for Good Reason and thereupon become entitled to compensation pursuant to Paragraph 3 above, if, after a Change in Control, one or more of the following events
shall occur (unless such event(s) applies to a person solely in his capacity as a member of the Board): 
  
 (i) without your express written consent, the assignment to you of any duties or the significant reduction of your duties, either of which
is inconsistent with your position with the Company (or the duties and responsibilities of such position) immediately prior to a Change in Control, or your removal from or any failure to re-elect you to any such position; 
  
 (ii) without your express written consent, the substantial
reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to you immediately prior to a Change in Control, unless such reduction applies generally to all officers of the Company and
any successor to the Company, or; 
  
 (iii) a
reduction by the Company in your salary or in any bonus compensation formula applicable to you as in effect immediately prior to a Change in Control, or the failure by the Company (other than a failure that applies generally to all officers of the
Company and any successor to the Company) to increase such base salary each year following a Change in Control by an amount which equals at least one-half (1/2), on a percentage basis, of the average annual percentage increase in base salary for all
officers of the Company (and any successor of the Company) during the prior two full calendar years; 
  
 (iv) a material reduction by the Company in the kind or level of employee benefits to which you were entitled prior to a Change in Control
with the result that your overall benefits package is significantly reduced after the Change in Control; or the taking of any action by the Company which would materially and adversely affect your participation in any plan, program or policy
generally applicable to executives or employees of the Company or any successor of the Company (including but not limited to paid vacation days), or deprive you in a material and substantial way of any fringe benefits enjoyed by you prior to a
Change in Control; 
  
 (v) the Company’s
requiring you to be based anywhere other than your then present location (except for required travel on the Company’s business to an extent substantially consistent with your present business travel obligations) or a location more than 25 miles
from your then present location, without your consent; 
  
 (vi) any purported termination of your employment by the Company which is not effected for Disability or for Cause, or any purported termination for which the grounds relied upon are not valid; or 
  

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 (vii) the failure of the Company to obtain the assumption of this Agreement by any
successor as contemplated in Paragraph 10 hereof. 
  
 6.
Parachute Payments. In the event that any payment or benefit received or to be received by you in connection with a termination of your employment with the Company or any corporation which is a related corporation within the meaning of
section 280G(e) of the Internal Revenue Code of 1986 (the “Code”) (collectively, the “Severance Payments”) would (i) constitute a “parachute payment” within the meaning of section 280G of the Code or any similar or
successor provision and (ii) but for this Paragraph 6, be subject to the excise tax imposed by section 4999 of the Code or any similar or successor provision (the “Excise Tax”), then, subject to the provisions of Paragraph 7 hereof, such
Severance Payments (which Severance Payments shall collectively be referred to herein as the “Severance Parachute Payments”) shall be reduced to the largest amount which you, in your sole discretion, determine would result in no portion of
the Severance Parachute Payments being subject to the Excise Tax. The determination of any required reduction pursuant to this Paragraph 6 (including the determination as to which specific Severance Parachute Payments shall be reduced) shall be made
by you in your sole discretion, and such determination shall be conclusive and binding upon the Company or any related corporation for all purposes. The Company and its related corporations waive all claims and rights against you with respect
thereto except as specifically set forth in the next sentence. If the Internal Revenue Service (the “IRS”) determines that a Severance Parachute Payment is subject to the Excise Tax, then the Company or any related corporation, as their
exclusive remedy, shall seek to enforce the provisions of Paragraph 7 hereof. Such enforcement of Paragraph 7 hereof shall be the only remedy, under any and all applicable state and federal laws or otherwise, for your failure to reduce the Severance
Parachute Payments so that no portion thereof is subject to the Excise Tax. The company or related corporation shall reduce a Severance Parachute Payment in accordance with Paragraph 6 only upon written notice by you indicating the amount of such
reduction, if any. 
  
 7. Remedy. If, notwithstanding the
reduction described in Paragraph 6 hereof, the IRS determines that you are liable for the Excise Tax as a result of the receipt of a Severance Parachute Payment, then you shall, subject to the provisions of this Agreement, be obligated to pay to the
Company (the “Repayment Obligation”) an amount of money equal to the “Repayment Amount.” The Repayment Amount with respect to a Severance Parachute Payment shall be the smallest such amount, if any, as shall be required to be
paid to the Company so that your net proceeds with respect to any Severance Parachute Payment (after taking into account the payment of the Excise Tax imposed on such Severance Parachute Payment) shall be maximized. Notwithstanding the foregoing,
the Repayment Amount with respect to a Severance Parachute Payment shall be zero if a Repayment Amount of more than zero would not eliminate the Excise Tax imposed on such Severance Parachute Payment. If the Excise Tax is not eliminated through the
performance of the Repayment Obligation, you shall pay the Excise Tax. The Repayment Obligation shall be performed within 30 days of either (i) your entering into a binding agreement with the IRS as to the amount of your Excise Tax liability or (ii)
a final determination by the IRS or a court decision requiring you to pay the Excise Tax with respect to such a Severance Parachute Payment from which no appeal is available or is timely taken. 
  

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 8. Disputes. To dispute a termination for Good Reason by you, the Company must give you written
notice of such dispute within ten working days after your effective date of termination. To dispute a termination by the Company or any failure to make payments claimed to be due hereunder, you must give written notice of such dispute to the Company
within 30 days after receiving a notice of termination, or within 30 days after the date on which a payment claimed by you to be due hereunder was due to be made, as the case may be. 
  
 If any such dispute is finally determined in your favor, the Company shall pay all reasonable fees and expenses, including
attorneys’ and consultants’ fees, that you incur in good faith in connection therewith. 
  
 9. No Mitigation. 
  
 (a) You shall not be required to mitigate the amount of any payment provided for in Paragraph 3 hereof by seeking other employment or otherwise, nor shall
the amount of such payment be reduced by reason of compensation or other income you receive for services rendered after your termination of employment with the Company. 
  
 (b) In addition to the Termination Payment payable pursuant to Paragraph 3 hereof, you shall be entitled to receive all
benefits payable to you under any benefit plan of the Company in which you participate. 
  
 10. Company’s Successors. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of
the Company, to expressly assume and agree to perform the obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. As used in this Paragraph 10,
“Company” includes any successor to its business or assets as aforesaid which executes and delivers this Agreement or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. 
  
 11. Notice. 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 five (5) days after deposit with postal authorities transmitted by United States registered or certified mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the first or last page of this Agreement, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt. 
  
 12. Amendment
or Waiver. No provisions of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing by you and the Company. No waiver of either party at any time of the breach of, or lack of
compliance with, any conditions or provisions of this Agreement shall be deemed a waiver of other provisions or conditions hereof. 
  

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 13. Sole Agreement. This Agreement represents the entire agreement between you and the Company
with respect to the matters set forth herein. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter of this Agreement will be made by either party which are not set forth expressly herein.

  
 14. Employee’s Successors. This Agreement shall
inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If you should die while any amounts are still payable to you hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee, or other designee or, if there be no such designees, to your estate. 
  
 15. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. 
  
 16. Applicable Law. This Agreement shall be interpreted and enforced in accordance with the laws of the State of California. 
  
 17. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together will constitute one and the same instrument. 
  
 If the foregoing conforms with our understanding, please indicate your agreement to the terms hereof by signing where indicated below and returning one
copy of this Agreement to the undersigned. 
  
  

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 IN WITNESS WHEREOF, this Agreement is executed effective as of the date set forth above. 
  

			
	 Very truly yours,
  

	SILICON GRAPHICS, INC.
		
	By:	 	  




  
 ACCEPTED AND AGREED TO AS OF

 THE DATE FIRST SET FORTH ABOVE: 
  
 __________________________________ 
  

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