Exhibit 10.16
EXECUTION COPY
MIPS TECHNOLOGIES, INC.
0000 Xxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, XX 00000-0000
April 1, 1999
Xxxx Xxxxxxxx
President and Chief Executive Officer
MIPS Technologies, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, XX 00000-0000
SUPPLEMENT TO CHANGE IN CONTROL AGREEMENT
Dear Xxxx:
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, 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
April 1, 1999
Page 2
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 then held by them
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.
April 1, 1999
Page 3
(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 Section 5 hereof.
(g) "POTENTIAL SGI 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
April 1, 1999
Page 4
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 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 a result of which, after such transaction or series of transactions, the
stockholders of SGI prior to such transaction or series of transactions hold
independent 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
April 1, 1999
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(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.
(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.
April 1, 1999
Page 6
(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.
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
April 1, 1999
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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 the CEO 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
(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
April 1, 1999
Page 8
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 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.
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
April 1, 1999
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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 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
April 1, 1999
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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.
April 1, 1999
Page 11
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: /s/ Xxxxx Xxxxxxxxx
-------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Vice President and General
Counsel
ACCEPTED AND AGREED TO AS OF
THE DATE FIRST SET FORTH ABOVE:
/s/ Xxxx Xxxxxxxx
----------------------------
Name: Xxxx Xxxxxxxx
