EXHIBIT 10.14
MIPS TECHNOLOGIES, INC.
0000 Xxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, XX 00000-0000
April 1, 1999
[Name]
[Title]
MIPS Technologies, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, XX 00000-0000
SUPPLEMENT TO CHANGE IN CONTROL AGREEMENT
Dear [Name]:
Reference is hereby made to the letter agreement between you and
MIPS Technologies, Inc. (the "COMPANY"), dated the date hereof (the "CHANGE IN
CONTROL AGREEMENT"), pursuant to which the Company has undertaken to provide you
with certain benefits in the event of a Change in Control and upon certain
terminations of your employment following a Change in Control (capitalized terms
not otherwise defined herein shall have the meanings ascribed thereto in the
Change in Control Agreement). The Company's Board, in recognition of the unique
circumstances presented by the Company's current majority ownership and control
by SGI and the contemplated Recapitalization and spin-off by SGI, has determined
that appropriate measures should be taken to provide the Company's senior
management with certain protections against a termination of their employment
following a change in control of SGI while SGI maintains control over the
Company.
In order to induce you to remain in the employ of the Company and
in consideration of your agreement set forth in Section 2(g) hereof, the Company
agrees that you shall receive the benefits set forth in this supplemental
agreement (this "AGREEMENT") under the circumstances described below.
1. TERM OF AGREEMENT. This Agreement shall commence on the
date hereof and shall continue in effect until the earlier of (a) the date on
which your employment with the Company is terminated other than after an SGI
Change in Control (as defined in Section 2(i)) or (b) the first date on which
SGI no longer maintains control over the Company, unless sooner terminated by
written agreement of the Company and you. For purposes of this Agreement, SGI
shall be deemed to maintain control over the Company until the later of (i) the
date on which SGI, any successor to SGI and any of their respective affiliates
dispose of all shares of Class B Common Stock of the Company and (ii) the date
on which SGI, any successor to SGI and any of their respective affiliates first
hold securities representing less than 50% of the outstanding voting power in
the election of the Company's directors.
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, with respect to any corporation, such
corporation's board of directors.
(c) "BUSINESS COMBINATION" means and includes each and all of
the following occurrences:
(i) a consolidation or merger pursuant to which more
than 75% of SGI's voting stock is transferred to different holders,
except for a transaction intended primarily to change the state of SGI's
incorporation;
(ii) more than 75% of the assets of SGI are sold or
otherwise disposed of; or
(iii) SGI dissolves or liquidates or effects a partial
liquidation involving more than 75% of its assets;
PROVIDED, HOWEVER, that no transaction in furtherance of a Spin-Off shall
constitute a Business Combination.
(d) "CURRENT COMPENSATION" shall mean your monthly base salary,
as in effect immediately prior to your termination of employment with the
Company.
(e) "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.
(f) "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 Xxxxxxx 0 xxxxxx.
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(x) "XXXXXXXXX XXX CHANGE IN CONTROL" shall be deemed to have
occurred if (i) SGI enters into an agreement or letter of intent, the
consummation of which would result in the occurrence of an SGI Change in
Control; (ii) any person (including SGI) publicly announces an intention to take
or to consider taking actions which if consummated would constitute an SGI
Change in Control; (iii) any person, other than a trustee or other fiduciary
holding securities under an employee benefit plan for SGI, who is or becomes the
beneficial owner, directly or indirectly, of securities of SGI representing 9.5%
or more of the combined voting power of SGI'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; or (iv) the
Company's Board adopts a resolution to the effect that, for purposes of this
Agreement, a Potential SGI Change in Control has occurred. You agree that,
subject to the terms and conditions of this Agreement, in the event of a
Potential SGI Change in Control, you will remain in the employ of the Company
(or the subsidiary thereof by which you are employed at the date such Potential
SGI Change in Control occurs) until the earliest of (x) a date which is six
months from the occurrence of such Potential SGI Change in Control of the
Company, (y) the termination by you of your employment by reason of Disability
or (z) the occurrence of an SGI Change in Control.
(h) "SGI" means Silicon Graphics, Inc., a Delaware corporation.
(i) "SGI CHANGE IN CONTROL" means and includes each and all of
the following occurrences:
(i) A Business Combination.
(ii) When any "person" as defined in Section 3(a)(9) of
the Exchange Act and as used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) of the Exchange Act but
excluding SGI and any subsidiary and any employee benefit plan sponsored
or maintained by SGI or any subsidiary (including any trustee of such
plan acting as trustee), directly or indirectly, becomes the Beneficial
Owner of securities of SGI representing fifty percent (50%) or more of
the combined voting power of SGI's then outstanding securities with
respect to the election of the directors of SGI; PROVIDED, HOWEVER, that
no crossing of such 50% threshold shall be a "Change in Control" if it is
caused (i) solely as a result of an acquisition by SGI of its voting
securities or (ii) solely as a result of an acquisition of SGI's voting
securities directly from SGI, in either case until such time thereafter
as such person acquires additional voting securities other than directly
from SGI and, after giving effect to such transaction, such person owns
50% or more of the combined voting power of SGI's then outstanding
securities with respect to the election of the directors of SGI.
(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 SGI's Board (the "INCUMBENT
BOARD") cease for any reason to constitute at least a majority of SGI's
Board; PROVIDED, that any person becoming a director subsequent to
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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 SGI, 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 Company's Board may by
resolution, clarify the date as of which an SGI Change in Control shall be
deemed to have occurred.
(j) "SPIN-OFF" means (i) any transaction or series of
transactions as the result of which, after such transaction or series of
transactions, the stockholders of SGI prior to such transaction or series of
transactions hold separate interests representing the Company's business and
SGI's business or (ii) any other transaction or series of transactions as a
result of which all or substantially all of the Company's outstanding voting
securities are directly or indirectly held by the public.
(k) "TERMINATION PAYMENT" shall mean the severance pay to which
you are entitled upon termination of your employment within 12 months after an
SGI Change in Control as provided in Section 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 12 months after an SGI Change in Control:
(i) you shall be entitled to a Termination Payment, payable
in cash, in an amount equal to 24 months of your Current Compensation
at the rate in effect immediately prior to such SGI Change in Control;
and
(ii) (A) any stock option granted to you by the Company shall
become fully vested and exercisable and shall remain exercisable in
accordance with the terms of the applicable option award agreement,
and (B) you shall have the right during the period of six months
following such termination of employment to have any such option
"cashed out" at its 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 market value of an outstanding option shall be measured
as the difference between the option exercise price and the closing
market price on the date of your termination of employment; and
(iii) all forfeiture restrictions applicable to restricted
stock granted to you by the Company shall lapse and such restricted
stock shall be released from the Company's repurchase right set forth
in the applicable restricted stock agreement.
(b) Any cash payable to you under Section 3(a)(i) shall be
payable between 30 and 60 calendar days after your termination of employment.
Any cash payable to you under Section 3(a)(ii) shall be made within 30 calendar
days after the date the Company receives your written notice electing to be
cashed out on the value of your options.
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(c) Anything contained in Section 3(a) above to the contrary
notwithstanding, the Company shall have no obligation to pay you a Termination
Payment, to accelerate the vesting of your options, to cash out your options or
to release your restricted shares from their forfeiture restrictions or
repurchase rights under this Agreement (i) in the event of a termination of your
employment prior to an SGI Change in Control or (ii) if, after an SGI Change in
Control, the Company terminates your employment for "Cause" or if your
employment terminates due to your death, retirement or resignation other than
for "Good Reason." Furthermore, if it is determined by SGI's Board, upon
receipt of a written opinion of SGI's independent public accountants that for
the Company to accelerate the vesting of your options, to cash out your options
or to release your restricted shares from their forfeiture restrictions or
repurchase rights under this Agreement would preclude accounting for the
acquisition of SGI as a pooling of interests, and SGI's Board otherwise desires
to approve a proposed acquisition of SGI 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 or cash out your options or release your restricted shares from their
forfeiture restrictions or repurchase rights under this Agreement to the extent
necessary to enable the acquisition to be accounted for as a pooling of
interests, and shall not take any such action without the express written
consent of SGI.
(d) 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 termination of employment in the ordinary course of
business due to your failure to satisfactorily perform the duties assigned to
you, in the good faith determination of the Company's chief executive officer
or, if such position is vacant, the Company's Board, in either case based upon
documented reports regarding your performance;
(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.
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Anything contained in this Section 4 to the contrary
notwithstanding, you shall not be deemed to have been terminated for Cause under
Section 4(b) or (c) 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 Company's Board at a meeting of the
Company's 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
Company's Board), finding that in the good faith opinion of the Company's Board,
you were guilty of conduct set forth in Section 4(b) or (c) and specifying the
particulars thereof in detail.
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 Section 3 above, if, after an SGI Change in
Control, one or more of the following events shall occur (unless such event(s)
applies generally to all officers of the Company and any successor to the
Company, or applies to a person solely in his capacity as a member of the
Company's Board):
(a) the assignment to you of duties (or the significant
reduction of your duties) which are inconsistent with the position of an
executive of the Company, provided that you resign your employment within 30
days after the effectiveness of such assignment or reduction and you cite this
Section 5(a) as the reason for your resignation in a formal letter of
resignation addressed to the Company's Board;
(b) a reduction by the Company in your salary or in any bonus
compensation formula applicable to you as in effect immediately prior to the SGI
Change in Control, or the failure by the Company to increase such base salary in
the year following such SGI 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;
(c) a material reduction by the Company in the kind or level of
employee benefits to which you were entitled prior to the SGI Change in Control
with the result that your overall benefits package is significantly reduced
after the SGI 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 the SGI Change in Control;
(d) the Company's requiring you to be based at a location that
is more than 35 miles from your then present location without your consent
(except for required travel on the Company's business to an extent substantially
consistent with your present business travel obligations); or
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(e) 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.
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 Section 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
Section 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
Section 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 Section 7 hereof. Such
enforcement of Section 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 Section 6 only upon written notice by you indicating
the amount of such reduction, if any.
7. REMEDY. If, notwithstanding the reduction described in
Section 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 SGI (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
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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.
8. DISPUTES. To dispute a termination for Good Reason by you,
the Company must give you written notice of such dispute within ten business
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 Section 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, subject to Section 18; PROVIDED,
HOWEVER, that the amount of any payment provided for in Section 3 may be offset
by the Company by the amount of any indebtedness you may have to the Company at
the time of your termination of employment.
(b) In addition to the Termination Payment payable pursuant to
Section 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
Section 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 applicable address set
forth on the first page of this Agreement, or to such other address as either
party may
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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.
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.
18. RIGHTS NOT DUPLICATIVE. Any amounts paid or payable to you
hereunder shall be reduced and offset by any amounts paid to you under the terms
of the Change in Control Agreement.
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If the foregoing conforms with your understanding of the matters
described herein, please indicate your agreement to the terms hereof by signing
where indicated below and returning one copy of this Agreement to the
undersigned.
Very truly yours,
MIPS TECHNOLOGIES, INC.
By:
---------------------------------
Name:
Title:
ACCEPTED AND AGREED TO AS OF
THE DATE FIRST SET FORTH ABOVE:
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Name:
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