SiliconBeat

MIPS Technologies will pay no rent during the first six months of a seven-year lease it signed Feb. 27 with AMB Property for 36,013 square feet of R&D space at 955 E. Arques in Sunnyvale, according to the lease, which begins June 1.

In the seventh month of the lease, MIPS will begin paying $52,281.85 per month for the space, or $1.45 per square foot per month, with three percent annual increases thereafter.

MIPS Technologies filed an amendment Friday to its credit agreement set up last August that provided for $35 million of revolving credit that would mature after a year. The week before MIPS “acknowledged that we were in default of the leverage ratio covenant as of December 31, 2007.” The amendment increased interest rates on the loans, reduced the amount that could be borrowed to $20 million (with additional $1 million reductions to occur each month beginning on March 31), and imposed certain limitations on how the borrowed money could be used.

MIPS also had to pay a $200,000 “amendment fee”. The company could have been forced under the default terms to have paid even higher interest that would have been applied retroactively to the loan from its inception.

Stuart Nichols, the man who wouldn’t act as “war-time counselor” to KLA-Tencor’s then chief executive Ken Schroeder in his battle to win battles for talent during the bubble years using questionable stock option practices, surfaced Monday as the new chief lawyer for MIPS Technologies.

Nichols resigned as general counsel at KLA-Tencor last year the same day that the company “terminated” its employment agreement with its former CEO in the wake of an investigation that uncovered misdated stock options. It was also the same day that the company’s founder and chairman, Ken Levy, chose to “retire”.

Nichols authored a “Stock Options Pricing” memo sent to Schroeder in March 2001 warning him that selecting grant prices with hindsight required the company to take a compensation charge, and that doing so without disclosing the fact could run afoul of the law, according to a civil action filed by the SEC against Schroeder in July.

In an e-mail reply, Schroeder asked Nichols to “Help me, don’t just tell me how to follow a strict interpretation of rules. I need a “”war-time counselor,” not someone who can recite page and verse.” Schroeder’s behavior continued as late as 2005, despite legal advice from Nichols that doing so was against the rules, the SEC alleges.

In August, the SEC accused KLA’s former general counsel prior to Nichols, with intentionally misdating ”dozens” of grants between 1997 and 2003 and of providing KLA a guide on how to backdate options when she left the company in 1999 to join Juniper Networks.

Nichols’ new employer had its own brush with option-backdating practices and took a charge of $46 million to account for mispriced options granted from 1999 through 2003 when it finally filed its 10-K for fiscal year 2006.

Nichols, who will be paid $250,000 a year and be eligible to receive a bonus of between
$100,000 and $200,000 a year, will also be given an option for 250,000 shares of MIPS, according to his offer letter. The timing of their grant date is meticulously spelled out in his Nov. 14 offer letter from the company’s chief executive: “Currently, new hire options are granted on the last Thursday of each month and are priced using the market closing price on that date.”

That would be Thursday, Nov. 29, a date that will nevertheless be rather well-timed: MIPS shares touched a 52-week low Monday of $5.69.

MIPS Technologies (ticker:MIPS) is just one in a long line of Silicon Valley companies that got its hand caught in the options backdating cookie jar.

Fortunately, it didn’t let that little nuisance stop it from rewarding its executives with nice bonuses. In a proxy filed on Thursday, MIPS, which makes embedded processors, said that executives got bonuses that exceeded their targets because operating results exceeded targets. Makes sense so far.

Except then the company also noted that it ignored the impact of the restatements on those results, saying “these charges were not taken into account by the Board of Directors in the operating plan for 2007.” So since the board didn’t plan for them, they don’t count.

In the case of CEO John E. Bourgoin, that means that on top of his $400,000 salary in 2007, he also got a bonus $550,477.