History (1998): Separation Financial Agreement Between Seagate and Al Shugart

Al Shugart was let go rather abruptly from Seagate Technology on July 21, replaced as CEO by Steve Luczo and as COB by Gary Filler and Larry Perlman, jointly. More recently, he resigned as board director.

But he didn’t go empty-handed. Officially, Seagate has said that it expects to take an $8 to $10 million charge in the current fiscal quarter associated with a separation agreement.

Here are the highlights:
– Shugart will receive $750,000 per annum over a 3-year period.
– The company will continue to provide him medical and group insurance benefits for 36 months.
– During this 3-year period, Shugart agrees to make himself available to perform consulting services for Seagate, up to 30 hours per fiscal quarter. These services will be subject to a-non disclosure agreement.
– Seagate will furnish him with an automobile of his choice, up to $50,000 in value, during the same period.
– In exchange, Shugart signed a non-competition clause for the next 3 years. The contract provides that “he will not, directly or indirectly, whether for his own account or as an employee, director, consultant or advisor, provide services to any business enterprise that is at the time in competition with any of the company’s [Seagate’s] or any of its subsidiaries’ existing product lines or business activities as of the effective date [July 19, 2001] and that is located geographically in an area where the company or any of its subsidiaries maintains subs,tial business activities, unless employee [Shugart] obtains the prior written, consent of the company’s CEO. […] He will not directly or indirectly solicit any individuals to leave the company […] He will not induce or attempt to induce any customer, supplier, distributor, licensor, licensee or other business relation of the company.”
– And until January 19, 2002, Shugart cannot “disparage, defame or slander” Seagate. The agreement goes so far as to stipulate that this clause is not applicable to comments Shugart makes to his immediate family!

In Novemer 1995, Shugart received a restricted stock award of 300,000 shares of common stock. Last July, 145,000 of those shares were divested. He currently holds outstanding stock options for 1,060,000 shares of Seagate’s common stock and for 100,000 shares of the common stock of Seagate Software.

For the moment, Al Shugart is still director of the board at SanDisk, the flash card maker in which Seagate invested in 1993, according to SanDisk’s VP marketing Nelson Chan. He has recently joined Cypress Semiconducto’s and Sierra Imaging’s board of directors. This latter small firm produces chips and firmware for digital cameras. Its president and CEO, Wendell Balc, is no stranger to the storage industry, since he once worked for Aura Associates. Sierra was launched in the same offices as Gigastorage, in Los Gatos, CA. Shugart also founded a new venture, Al Shugart International, in Soquel, CA.

This article is an abstract of news published on issue 128 on September 1998 from the former paper version of Computer Data Storage Newsletter.