exv10w42



 






Exhibit 10.42




CENTILLIUM COMMUNICATIONS, INC.




CHANGE OF CONTROL SEVERANCE AGREEMENT




     This Change of Control Severance Agreement (the “Agreement”) is made and entered into by and
between Armando Pereira (the “Employee”) and Centillium Communications, Inc., a Delaware
corporation (the “Company”), effective as of March 10, 2005 (the “Effective Date”).



RECITALS




     1. It is expected that the Company from time to time will consider the possibility of an
acquisition by another company or other change of control. The Board of Directors of the Company
(the “Board”) recognizes that such consideration can be a distraction to the Employee and can cause
the Employee to consider alternative employment opportunities. The Board has determined that it is
in the best interests of the Company and its stockholders to assure that the Company will have the
continued dedication and objectivity of the Employee, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined herein) of the Company.



     2. The Board believes that it is in the best interests of the Company and its stockholders to
provide the Employee with an incentive to continue his or her employment and to motivate the
Employee to maximize the value of the Company upon a Change of Control for the benefit of its
stockholders.



     3. The Board believes that it is imperative to provide the Employee with certain severance
benefits upon the Employee’s termination of employment following a Change of Control. These
benefits will provide the Employee with enhanced financial security and incentive and encouragement
to remain with the Company notwithstanding the possibility of a Change of Control.



     4. Certain capitalized terms used in the Agreement are defined in Section 6 below.



AGREEMENT




     NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto
agree as follows:



     1. Term of Agreement. This Agreement shall terminate upon the date that all of the
obligations of the parties hereto with respect to this Agreement have been satisfied.



     2. At-Will Employment. The Company and the Employee acknowledge that the Employee’s
employment is and shall continue to be at-will, as defined under applicable law, except as may
otherwise be specifically provided under the terms of any written formal employment agreement
between the Company and the Employee (an “Employment Agreement”). If the Employee’s employment
terminates for any reason, including (without limitation) any termination prior to a Change of
Control, the Employee shall not be entitled to any payments, benefits, damages,



 









 







awards or compensation other than as provided by this Agreement or under his or her Employment
Agreement.



     3. Severance Benefits.



          (a) Involuntary Termination Other than for Cause or Voluntary Termination for Good Reason
Following a Change of Control. If within eighteen (18) months following a Change of Control
(i) the Employee terminates his or her employment with the Company (or any parent or subsidiary of
the Company) for “Good Reason” (as defined herein) or (ii) the Company (or any parent or subsidiary
of the Company) terminates the Employee’s employment for other than “Cause” (as defined herein),
and the Employee signs and does not revoke a standard release of claims with the Company in a form
acceptable to the Company, then the Employee shall receive the following severance from the
Company:




          (i) Severance Payment. The Employee shall be entitled to receive a lump-sum severance
payment (less applicable withholding taxes) equal to one (1) year base salary (as in effect
immediately prior to (A) the Change of Control, or (B) the Employee’s termination, whichever is
greater).




          (b) Timing of Severance Payments. The severance payment to which Employee is entitled
shall be paid by the Company to Employee in cash and in full, not later than thirty (30) calendar
days after the date of the termination of Employee’s employment as provided in Section 3(a). If
the Employee should die before all amounts have been paid, such unpaid amounts shall be paid in a
lump-sum payment (less any withholding taxes) to the Employee’s designated beneficiary, if living,
or otherwise to the personal representative of the Employee’s estate.




          (c) Voluntary Resignation; Termination for Cause. If the Employee’s employment with
the Company terminates (i) voluntarily by the Employee other than for Good Reason, or (ii) for
Cause by the Company, then the Employee shall not be entitled to receive severance or other
benefits except for those (if any) as may then be established under the Company’s then existing
severance and benefits plans and practices or pursuant to other written agreements with the
Company.




          (d) Termination Apart from Change of Control. In the event the Employee’s employment
is terminated for any reason, either prior to the occurrence of a Change of Control or after the
eighteen (18)-month period following a Change of Control, then the Employee shall be entitled to
receive severance and any other benefits only as may then be established under the Company’s
existing written severance and benefits plans and practices or pursuant to other written agreements
with the Company.




          (e) Exclusive Remedy. In the event of a termination of Employee’s employment within
eighteen (18) months following a Change of Control, the provisions of this Section 3 are intended
to be and are exclusive and in lieu of any other rights or remedies to which the Employee or the
Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this
Agreement. The Employee shall be entitled to no benefits, compensation or other payments or rights





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upon termination of employment following a Change in Control other than those benefits
expressly set forth in this Section 3.




     4. Golden Parachute Excise Tax.. In the event that the severance and other benefits
provided for in this Agreement or otherwise payable to the Employee (i) constitute “parachute
payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the
“Code”) and (ii) but for this Section, would be subject to the excise tax imposed by Section 4999
of the Code, then the Employee’s severance benefits under this Agreement shall be payable either



               (i) in full, or



               (ii) as to such lesser amount which would result in no portion of such severance benefits
being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts,
taking into account the applicable federal, state and local income taxes and the excise tax imposed
by Section 4999, results in the receipt by the Employee on an after-tax basis, of the greatest
amount of severance benefits under this Agreement, notwithstanding that all or some portion of such
severance benefits may be taxable under Section 4999 of the Code. Unless the Company and the
Employee otherwise agree in writing, any determination required under this Section shall be made in
writing by the Company’s independent public accountants (the “Accountants”), whose determination
shall be conclusive and binding upon the Employee and the Company for all purposes. For purposes
of making the calculations required by this Section, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and
the Employee shall furnish to the Accountants such information and documents as the Accountants may
reasonably request in order to make a determination under this Section. The Company shall bear all
costs the Accountants may reasonably incur in connection with any calculations contemplated by this
Section.



     5. Definition of Terms. The following terms referred to in this Agreement shall have
the following meanings:



          (a) Cause. “Cause” shall mean (i) an act of personal dishonesty taken by the Employee
in connection with his responsibilities as an employee and intended to result in substantial
personal enrichment of the Employee, (ii) Employee being convicted of a felony, (iii) a willful act
by the Employee which constitutes gross misconduct and which is injurious to the Company, (iv)
following delivery to the Employee of a written demand for performance from the Company which
describes the basis for the Company’s reasonable belief that the Employee has not substantially
performed his duties, continued violations by the Employee of the Employee’s obligations to the
Company which are demonstrably willful and deliberate on the Employee’s part.




          (b) Change of Control. “Change of Control” means the occurrence of any of the
following:




               (i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule



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13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the total voting power represented by the Company’s then outstanding
voting securities; or




               (ii) The consummation of a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; or



               (iii) The consummation of the sale, lease or other disposition by the Company of all or
substantially all the Company’s assets.



          (c) Good Reason. “Good Reason” means without the Employee’s express written consent
(i) ) a material reduction of Employee’s duties, authority or responsibilities, relative to the
Employee’s duties, authority or responsibilities as in effect immediately prior to such reduction,
or the assignment to Employee of such reduced duties, authority or responsibilities; (ii) a
reduction by the Company in the base compensation of the Employee as in effect immediately prior to
such reduction; or (iii) the relocation of the Employee to a facility or a location more than fifty
(50) miles from such Employee’s then present location.




     6. Successors.



          (a) The Company’s Successors. Any successor to the Company (whether direct or
indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or
substantially all of the Company’s business and/or assets shall assume the obligations under this
Agreement and agree expressly to perform the obligations under this Agreement in the same manner
and to the same extent as the Company would be required to perform such obligations in the absence
of a succession. For all purposes under this Agreement, the term “Company” shall include any
successor to the Company’s business and/or assets which executes and delivers the assumption
agreement described in this Section 7(a) or which becomes bound by the terms of this Agreement by
operation of law.




          (b) The Employee’s Successors. The terms of this Agreement and all rights of the
Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee’s personal or
legal representatives, executors, administrators, successors, heirs, distributees, devisees and
legatees.




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     7. Notice.



          (a) General. All notices and other communications required or permitted hereunder
shall be in writing, shall be effective when given, and shall in any event be deemed to be given
upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other
applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if
delivered by hand, (c) one (1) business day after the business day of deposit with Federal Express
or similar overnight courier, freight prepaid or (d) one (1) business day after the business day of
facsimile transmission, if delivered by facsimile transmission with copy by first class mail,
postage prepaid, and shall be addressed (i) if to Employee, at his or her last known residential
address and (ii) if to the Company, at the address of its principal corporate offices (attention:
Secretary), or in any such case at such other address as a party may designate by ten (10) days’
advance written notice to the other party pursuant to the provisions above.




          (b) Notice of Termination. Any termination by the Company for Cause or by the
Employee for Good Reason or as a result of a voluntary resignation shall be communicated by a
notice of termination to the other party hereto given in accordance with Section 8(b) of this
Agreement. Such notice shall indicate the specific termination provision in this Agreement relied
upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis
for termination under the provision so indicated, and shall specify the termination date (which
shall be not more than thirty (30) days after the giving of such notice). The failure by the
Employee to include in the notice any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of the Employee hereunder or preclude the Employee from asserting
such fact or circumstance in enforcing his or her rights hereunder.




     8. Miscellaneous Provisions.



          (a) No Duty to Mitigate. The Employee shall not be required to mitigate the amount of
any payment contemplated by this Agreement, nor shall any such payment be reduced by any earnings
that the Employee may receive from any other source.




          (b) Waiver. No provision of this Agreement shall be modified, waived or discharged
unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and
by an authorized officer of the Company (other than the Employee). No waiver by either party of
any breach of, or of compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of the same condition or
provision at another time.




          (c) Headings. All captions and section headings used in this Agreement are for
convenient reference only and do not form a part of this Agreement.




          (d) Entire Agreement. This Agreement constitutes the entire agreement of the parties
hereto and supersedes in their entirety all prior representations, understandings, undertakings or
agreements (whether oral or written and whether expressed or implied) of the parties with respect
to the subject matter hereof.




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          (e) Choice of Law. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of California.




          (f) Severability. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other provision hereof,
which shall remain in full force and effect.




          (g) Withholding. All payments made pursuant to this Agreement will be subject to
withholding of applicable income and employment taxes.




          (h) 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.




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     IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the
Company by its duly authorized officer, as of the day and year set forth below.



	 	 	 	 	 
	COMPANY	 	CENTILLIUM COMMUNICATIONS, INC.
	 
	 	 	 	 
	

	 	By:
	 	/s/ Faraj Aalaei
	

	 	 	 	 
	

	 	Title:
	 	Chief Executive Officer
	 
	 	 	 	 
	EMPLOYEE
	 	 	 	 
	 
	 	 	 	 
	

	 	By:
	 	/s/ Armando Pereira
	

	 	 	 	 
	

	 	Name:
	 	Armando Pereira







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