EXHIBIT 10.3
Second Amended and
Restated
Change of Control
Terms and Conditions
TiVo Inc. (the
“Corporation”) considers it essential to the best
interests of its shareholders to foster the continuous employment
of the Corporation’s key management personnel. In this
regard, the Corporation’s Board of Directors (the
“Board”) recognizes that, as is the case with many
publicly-held corporations, the possibility of a change in control
of the Corporation may exist and the uncertainty and questions that
it may raise among management could result in the departure or
distraction of management personnel to the detriment of the
Corporation and its shareholders.
The Board has decided to reinforce
and encourage the continued attention and dedication of members of
the Corporation’s management, including yourself, to their
assigned duties without the distraction arising from the
possibility of a change in control of the Corporation.
In order to induce you to remain in
its employ, the Corporation hereby agrees that after this letter
agreement (this “Agreement”) has been fully executed,
you shall receive the severance benefits set forth in this
Agreement in the event that your employment with the Corporation is
terminated under the circumstances described below in anticipation
of or subsequent to a Change in Control (as defined
below).
Upon the Effective Date (as defined
below), this Agreement shall supersede in its entirety that certain
Amended and Restated Change of Control Terms and Conditions
agreement entered into between you and the Corporation effective
March 21, 2007 (the “Prior Agreement”) which shall
terminate and be of no further effect as of the Effective Date. You
understand and agree that upon the Effective Date, the Corporation
shall have no liability, and you shall have no rights to any
payments whatsoever, under the Prior Agreement.
1. Term of Agreement . This
Agreement shall commence on September 16, 2008 (the
“Effective Date”) and shall continue in effect until
the earlier of its termination by mutual written consent of you and
Corporation or the date all payments or benefits required to be
made or provided hereunder have been made or provided in their
entirety.
2. Change in Control . No
benefits shall be payable hereunder unless there has been a Change
in Control. For purposes of this Agreement, a “Change in
Control” shall mean:
(i) a dissolution or liquidation of
the Corporation;
(ii) a sale of all or substantially
all of the assets of the Corporation;
(iii) a sale by the stockholders of
the Corporation of the voting stock of the Corporation to another
corporation or its subsidiaries that results in the ownership by
such corporation and/or its subsidiaries of eighty percent
(80%) or more of the combined voting power of all classes of
the voting stock of the Corporation entitled to vote;
(iv) a merger or consolidation
involving the Corporation in which the Corporation is not the
surviving corporation or a merger or consolidation of a subsidiary
of the Corporation and in which, in either case, beneficial
ownership of securities of the Corporation representing at least
fifty percent (50%) of the combined voting power entitled to
vote in the election of members of the Board of Directors
(“Directors”) has changed;
(v) a reverse merger in which the
Corporation is the surviving corporation but the shares of the
Corporation’s Common Stock outstanding immediately preceding
the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, and
in which beneficial ownership of securities of the Corporation
representing at least fifty percent (50%) of the combined
voting power entitled to vote in the election of Directors has
changed;
(vi) an acquisition by any person,
entity or group within the meaning of Section 13(d) or 14(d)
of the Exchange Act, or any comparable successor provisions
(excluding any employee benefit plan, or related trust, sponsored
or maintained by the Corporation or subsidiary of the Corporation
or other entity controlled by the Corporation) of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the
Corporation representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of
Directors; or
(vii) for any reason during any
period of two (2) consecutive years (not including any period
prior to the Effective Date) a majority of the Board is constituted
by individuals other than (1) individuals who were directors
immediately prior to the beginning of such period, and (2) new
directors whose election or appointment by the Board or nomination
for election by the Corporation’s stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors immediately prior to the
beginning of the period or whose election or nomination for
election was previously so approved.
3. Termination in Anticipation of
or Following Change in Control .
(i) General . If a Change in
Control shall have occurred during the term of this Agreement, you
shall be entitled to the benefits provided in Section 4(ii) if
your employment is terminated within the thirteen (13) month
period immediately following the date of such Change in Control
(a) by the Corporation other than for Cause or Disability
(each as defined below), or (b) by you for Good Reason (as
defined below), provided that the termination of your employment
constitutes a “separation from service” within the
meaning of Section 409A of the Internal Revenue Code of 1986,
as amended (the “Code”) and the regulations promulgated
thereunder, including Treasury Regulation Section 1.409A-1(h)
(a “Separation from Service”); a termination of your
employment under the circumstances described in this sentence is
sometimes hereinafter referred to as a “Payment
Termination”. Notwithstanding anything contained herein, if
your employment is terminated during the period commencing on the
public announcement of a transaction which if consummated will
constitute a Change in Control and ending on
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the date of consummation of such
Change in Control either by the Corporation other than for Cause or
Disability or by you for Good Reason, and if such termination
(1) was at the request of a third party effecting the Change
in Control or (2) otherwise arose in connection with or in
anticipation of the Change in Control, then for all purposes of
this Agreement you shall be deemed to have incurred a Payment
Termination immediately after the actual occurrence of the Change
in Control if the Change in Control constitutes a change in the
ownership or effective control of the Corporation or a change in
the ownership of a substantial portion of the assets of the
Corporation, as described in Treasury Regulation
Section 1.409A-3(i)(5); provided, however that nothing herein
shall extend the period within which any option to purchase the
Corporation’s capital stock that you hold may be exercised
following your termination of employment in such a manner as to
result in adverse tax consequences to you under Section 409A
of the Code. Except as described in the preceding sentence, in the
event that your employment with the Corporation is terminated for
any reason and subsequently a Change in Control occurs, you shall
not be entitled to any benefits hereunder. In the event that you
are entitled to the benefits provided in Section 4(ii), such
benefits shall be paid notwithstanding the subsequent expiration of
the term of this Agreement. Notwithstanding the foregoing, if your
employment is terminated in a Payment Termination, if any benefit
or payment that would otherwise be provided to you pursuant to
Section 5 of the Employment Agreement but for your termination
being a Payment Termination is more favorable to you than that to
which you would be entitled under this Agreement, you shall be
entitled to receive the more favorable benefit or
payment.
(ii) Death or Disability .
Your employment with the Corporation shall terminate automatically
upon your death. The Corporation may terminate your employment for
Disability, but only if that Disability continues through the Date
of Termination (as hereinafter defined). For purposes of this
Agreement, “Disability” shall mean your absence from
the full-time performance of your duties with the Corporation for
one hundred eighty (180) consecutive days by reason of your
physical or mental illness.
(iii) Cause . The Corporation
may terminate your employment for Cause. For purposes of this
Agreement, “Cause” shall mean (a) your willful and
continued failure to substantially perform your duties with the
Corporation (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual or
anticipated failure after your issuance of a Notice of Termination
(as defined below) for Good Reason), after a written demand for
substantial performance is delivered to you by the Board, which
demand specifically identifies the manner in which the Board
believes that you have not substantially performed your duties,
(b) your willful and continued failure to substantially follow
and comply with such specific and lawful directives of the Board
that are not inconsistent with your position as President and Chief
Executive Officer of the Corporation (other than any such failure
resulting from your incapacity due to physical or mental illness or
any such actual or anticipated failure after your issuance of a
Notice of Termination for Good Reason), after a written demand for
substantial performance is delivered to you by the Board, which
demand specifically identifies the manner in which the Board
believes that you have not substantially performed your duties,
(c) your willful commission of an act of fraud or dishonesty
resulting in material
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economic or financial injury to the
Corporation, or (d) your conviction of, or entry by you of a
guilty or no contest plea to, the commission of a felony involving
moral turpitude. For purposes of this Section 3(iii), no act,
or failure to act, on your part shall be deemed
“willful” unless done, or omitted to be done, by you
not in good faith.
(iv) Good Reason . You may
terminate your employment with the Corporation for Good Reason. For
purposes of this Agreement, “Good Reason” shall mean
the occurrence, after a Change in Control, of any one or more of
the following events without your prior written consent, unless the
Corporation fully corrects the circumstances constituting Good
Reason (provided such circumstances are capable of correction)
prior to the Date of Termination:
(a) Your removal from your position
as Chief Executive Officer or President of the Corporation for any
reason other than for Cause or your Disability;
(b)(i) any change in reporting
relationship such that you no longer report to the Board of
Directors of the Corporation (or, if the Corporation has a parent
company, to the Board of Directors of the ultimate parent of the
Corporation) or (ii) any reduction in the nature and scope of
your authorities, duties, and responsibilities from their level in
effect immediately prior to such Change in Control (for this
purpose, if the Corporation ceases to be a publicly-traded
corporation, you will be deemed to have suffered such a reduction
in the nature and scope of your authorities, duties, and
responsibilities unless you are offered a position as Chief
Executive Officer of a publicly-traded parent of the
Corporation).
(c) the Corporation’s
reduction of your annual base salary or bonus opportunity, each as
in effect on the date hereof or as the same may be increased from
time to time;
(d) the Corporation’s failure
to maintain a suitable and appropriate office in New York, New York
or the Corporation’s discontinuance of its agreement to
reimburse you for first class air travel for travel between New
York, New York and the Corporation’s offices in Alviso,
California;
(e) the Corporation’s failure
to pay to you any portion of your then current compensation or any
portion of an installment of deferred compensation under any
deferred compensation program of the Corporation, in each case
within seven (7) days of the date such compensation is
due;
(f) the Corporation’s failure
to continue in effect compensation and benefit plans which provide
you with benefits which are no less favorable on an aggregate
basis, both in terms of the amount of benefits provided and the
level of your participation relative to other participants, to the
benefits provided to you under the Corporation’s compensation
and benefit plans and practices immediately prior to the Change in
Control;
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(g) the Corporation’s failure
to obtain a satisfactory agreement from any successor to assume and
agree to perform this Agreement, as contemplated in Section 5
hereof;
(h) the Corporation requiring you to
relocate your primary residence from New York;
(i) any purported modification of
this Agreement by the Corporation or any termination of your
employment by the Corporation for any reason other than for Cause
or your Disability;
(j) the Corporation’s
providing notice to you pursuant to Section 1 above that it
does not wish to extend the term of this Agreement; or
(k) the Corporation’s material
breach of any provision of your employment agreement with the
Corporation.
Your right to terminate your
employment pursuant to this Section 3(iv) shall not be
affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver
of rights with respect to, any circumstance constituting Good
Reason hereunder.
(v) Notice of Termination .
Any purported termination of your employment by the Corporation or
by you (other than termination due to your death, which shall
terminate your employment automatically) shall be communicated by a
written Notice of Termination to the other party hereto in
accordance with Section 6. For purposes of this Agreement,
“Notice of Termination” shall mean a notice that shall
indicate the specific termination provision in this Agreement (if
any) relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of
your employment under the provision so indicated.
(vi) Date of Termination .
For purposes of this Agreement, “Date of Termination”
shall mean (a) if your employment is terminated due to your
death, the date of your death; (b) if your employment is
terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to
the full time performance of your duties during such thirty
(30) day period), and (c) if your employment is
terminated for any reason other than death or Disability, the date
specified in the Notice of Termination (which, in the case of a
termination by the Corporation without Cause shall not be less than
thirty (30) days from the date such Notice of Termination is
given, and in the case of a termination by you for Good Reason
shall not be less than fifteen (15) nor more than thirty
(30) days from the date such Notice of Termination is
given).
4. Compensation Upon
Termination .
(i) If your employment with the
Corporation is terminated by reason of your death, by the
Corporation for Cause or Disability, or by you other than for Good
Reason, the Corporation shall pay you your full base salary, when
due, through the Date of
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Termination at the rate in effect at
the time Notice of Termination is given, plus all other amounts to
which you are entitled under any compensation plan or practice of
the Corporation at the time such payments are due (including,
without limitation, all accrued and unused vacation), and the
Corporation shall have no further obligations to you under this
Agreement.
(ii) If you incur a Payment
Termination, then, subject to Section 4(v), in lieu of any
severance benefits to which you may otherwise be entitled under any
severance plan or program of the Corporation or by law, you shall
be entitled to the benefits provided below:
(a) the Corporation shall pay to you
your full base salary, when due, through the Date of Termination at
the rate in effect at the time Notice of Termination is given, plus
all other amounts to which you are entitled under any compensation
plan or practice of the Corporation at the time such payments are
due (including, without limitation, all accrued and unused
vacation);
(b) the Corporation shall, at the
time specified in Section 4(iii), pay as severance pay to you
a lump-sum severance payment equal to the sum of the
following:
(A) one hundred percent
(100%) of the greater of (x) your monthly base salary as
in effect immediately prior to delivery of the Notice of
Termination multiplied by eighteen (18) or (y) your
monthly base salary as in effect immediately prior to the Change in
Control multiplied by eighteen (18); and
(B) one hundred percent
(100%) of the greater of (x) your targeted annual bonus
for the year in which the Date of Termination occurs or
(y) your targeted annual bonus for the year in which the
Change in Control occurs, as if the bonus goals are
satisfied;
(c) you shall immediately become
vested with respect to one hundred percent (100%) of the
unvested portion of any stock options, stock appreciation rights,
restricted stock and such other awards granted pursuant to the
Corporation’s stock option and equity incentive award plans
or agreements and any shares of stock issued upon exercise thereof
that you then hold (including without limitation any stock options
or restricted shares of the Corporation’s capital stock held
by you that contain provisions making the vesting of, or lapse of
restrictions with respect to, such awards contingent upon the
attainment of one or more performance goals) and you shall be
permitted to exercise each of your outstanding vested stock options
or stock appreciation rights (or similar equity compensation
awards) for the remainder of the original term of such stock
option, stock appreciation right or similar award. The foregoing
provisions are hereby deemed to be a part of each stock option,
stock appreciation right, restricted stock and such other award
granted pursuant to the Corporation’s stock option and equity
incentive award plans or agreements and to supersede any less
favorable provision in any agreement or plan regarding such
award;
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(d) for the period beginning on the
date of the Payment Termination and ending on the earlier of
(i) the date which is eighteen (18) full months following
the date of the Payment Termination or (ii) the first day of
your eligibility to participate in a comparable group health plan
maintained by a subsequent employer, the Corporation shall pay for
and provide you and your dependents with the same medical benefits
coverage to which you would have been entitled had you remained
continuously employed by the Corporation during such period. In the
event that you are ineligible under the terms of the
Corporation’s benefit plans to continue to be so covered, the
Corporation shall provide you with substantially equivalent
coverage through other sources. At the termination of the benefits
coverage under the first sentence of this Section 4(ii)(d),
you and your dependents shall be entitled to continuation coverage
pursuant to Section 4980B of the Code, Sections 601-608 of the
Employee Retirement Income Security Act of 1974, as amended, and
under any other applicable law, to the extent required by (or
applicable pursuant to) such laws, as if you had terminated
employment with the Corporation on the date such benefits coverage
terminates; and
(e) the Corporation shall furnish
you for six (6) years following the date of the Payment
Termination (without reference to whether the term of this
Agreement continues in effect) with directors’ and
officers’ liability insurance insuring you against insurable
events which occur or have occurred while you were a director or
officer of the Corporation, such insurance to have policy limits
aggregating not less than the amount in effect immediately prior to
the Change in Control, and otherwise to be in substantially the
same form and to contain substantially the same terms, conditions
and exceptions as the liability issuance policies provided for
officers and directors of the Corporation in force from time to
time, provided, however , that such terms, conditions and
exceptions shall not be, in the aggregate, materially less
favorable to you than those in effect on the date hereof;
provided, further , that if the aggregate annual premiums
for such insurance at any time during such period exceed one
hundred and fifty percent (150%) of the per annum rate of
premium currently paid by the Corporation for such insurance, then
the Corporation shall provide the maximum coverage that will then
be available at an annual premium equal to one hundred and fifty
percent (150%) of such rate.
(iii) The payments
provided for in Section 4(ii)(b) shall be made on the
sixtieth (60 th ) day following the date
of the Payment Termination.
(iv) You shall not be required to
mitigate the amount of any payment provided for in this
Section 4 by seeking other employment or otherwise, nor shall
the amount of any payment or benefit provided for in this
Section 4 be reduced by any compensation earned by you as the
result of employment by another employer or self-employment, by
retirement benefits, by offset against any amounts (other than
loans or advances to you by the Corporation) claimed to be owed by
you to the Corporation, or otherwise.
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(v) As a condition to your receipt
of any benefits described in Section 4(ii) hereof (other than
the benefits described in Section 4(ii)(a)), you shall be
required to execute a Release in the form attached hereto as
Exhibit A (the “Release”) no later than fifty
(50) days following the date of your Payment Termination and
you must not revoke the Release during any period permitted under
applicable law.
5. Successors; Binding
Agreement .
(i) The Corporation shall 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 Corporation to expressly assume and
agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no
such succession had taken place. Unless expressly provided
otherwise, “Corporation” as used herein shall mean the
Corporation as defined in this Agreement and any successor to its
business and/or assets as aforesaid.
(ii) This Agreement shall inure to
the benefit of and be enforceable by you and your personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die while any
amount would still be payable to you hereunder had you continued to
live, 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 is no such
designee, to your estate.
6. Notice . For purposes of
this Agreement, notices and all other communications provided for
in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States certified
or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page
of this Agreement, provided that all notices to the Corporation
shall be directed to the attention of its Secretary, or to such
other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
7. Parachute Payments
.
(a) If it is determined that you
would be subject to the excise tax imposed by Section 4999 of
the Code (a “Parachute Tax”), as a result of the
receipt of any payment or other event (collectively, a
“Payment”), then the Corporation will pay to you an
additional payment or payments (a “Gross-Up Payment”)
in an amount such that after payment of all federal, state and
local income, employment, excise and penalty taxes, you are left
with an amount equal to all taxes payable by you under
Section 4999 of the Code applicable to the Payment and the
Gross-Up Payment and all penalties and interest imposed with
respect to such taxes.
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(b) All determinations required to
be made under this Section 7, including whether a Parachute
Tax is payable by you and the amount of such Parachute Tax and
whether a Gross-Up Payment is required and the amount of such
Gross-Up Payment, shall be made by the nationally recognized firm
of certified public accountants (the “Accounting Firm”)
used by the Corporation as its auditors prior to the Change in
Control (or, if such Accounting Firm declines to serve, the
Accounting Firm shall be a nationally recognized firm of certified
publi
