**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 andbetween Armando Pereira (the “Employee”) and Centillium Communications, Inc., a Delawarecorporation (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 anacquisition 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 causethe Employee to consider alternative employment opportunities. The Board has determined that it isin the best interests of the Company and its stockholders to assure that the Company will have thecontinued dedication and objectivity of the Employee, notwithstanding the possibility, threat oroccurrence 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 toprovide the Employee with an incentive to continue his or her employment and to motivate theEmployee to maximize the value of the Company upon a Change of Control for the benefit of itsstockholders.
     3. The Board believes that it is imperative to provide the Employee with certain severancebenefits upon the Employee’s termination of employment following a Change of Control. Thesebenefits will provide the Employee with enhanced financial security and incentive and encouragementto 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 heretoagree as follows:
     1. Term of Agreement. This Agreement shall terminate upon the date that all of theobligations 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’semployment is and shall continue to be at-will, as defined under applicable law, except as mayotherwise be specifically provided under the terms of any written formal employment agreementbetween the Company and the Employee (an “Employment Agreement”). If the Employee’s employmentterminates for any reason, including (without limitation) any termination prior to a Change ofControl, 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 EmploymentAgreement.
     3. Severance Benefits.
          (a) Involuntary Termination Other than for Cause or Voluntary Termination for Good ReasonFollowing 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 ofthe Company) for “Good Reason” (as defined herein) or (ii) the Company (or any parent or subsidiaryof 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 formacceptable to the Company, then the Employee shall receive the following severance from theCompany:
          (i) Severance Payment. The Employee shall be entitled to receive a lump-sum severancepayment (less applicable withholding taxes) equal to one (1) year base salary (as in effectimmediately prior to (A) the Change of Control, or (B) the Employee’s termination, whichever isgreater).
          (b) Timing of Severance Payments. The severance payment to which Employee is entitledshall be paid by the Company to Employee in cash and in full, not later than thirty (30) calendardays after the date of the termination of Employee’s employment as provided in Section 3(a). Ifthe Employee should die before all amounts have been paid, such unpaid amounts shall be paid in alump-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 withthe Company terminates (i) voluntarily by the Employee other than for Good Reason, or (ii) forCause by the Company, then the Employee shall not be entitled to receive severance or otherbenefits except for those (if any) as may then be established under the Company’s then existingseverance and benefits plans and practices or pursuant to other written agreements with theCompany.
          (d) Termination Apart from Change of Control. In the event the Employee’s employmentis terminated for any reason, either prior to the occurrence of a Change of Control or after theeighteen (18)-month period following a Change of Control, then the Employee shall be entitled toreceive severance and any other benefits only as may then be established under the Company’sexisting written severance and benefits plans and practices or pursuant to other written agreementswith the Company.
          (e) Exclusive Remedy. In the event of a termination of Employee’s employment withineighteen (18) months following a Change of Control, the provisions of this Section 3 are intendedto be and are exclusive and in lieu of any other rights or remedies to which the Employee or theCompany may otherwise be entitled, whether at law, tort or contract, in equity, or under thisAgreement. 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 benefitsexpressly set forth in this Section 3.
     4. Golden Parachute Excise Tax.. In the event that the severance and other benefitsprovided for in this Agreement or otherwise payable to the Employee (i) constitute “parachutepayments” 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 4999of 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 benefitsbeing 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 imposedby Section 4999, results in the receipt by the Employee on an after-tax basis, of the greatestamount of severance benefits under this Agreement, notwithstanding that all or some portion of suchseverance benefits may be taxable under Section 4999 of the Code. Unless the Company and theEmployee otherwise agree in writing, any determination required under this Section shall be made inwriting by the Company’s independent public accountants (the “Accountants”), whose determinationshall be conclusive and binding upon the Employee and the Company for all purposes. For purposesof making the calculations required by this Section, the Accountants may make reasonableassumptions and approximations concerning applicable taxes and may rely on reasonable, good faithinterpretations concerning the application of Sections 280G and 4999 of the Code. The Company andthe Employee shall furnish to the Accountants such information and documents as the Accountants mayreasonably request in order to make a determination under this Section. The Company shall bear allcosts the Accountants may reasonably incur in connection with any calculations contemplated by thisSection.
     5. Definition of Terms. The following terms referred to in this Agreement shall havethe following meanings:
          (a) Cause. “Cause” shall mean (i) an act of personal dishonesty taken by the Employeein connection with his responsibilities as an employee and intended to result in substantialpersonal enrichment of the Employee, (ii) Employee being convicted of a felony, (iii) a willful actby 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 whichdescribes the basis for the Company’s reasonable belief that the Employee has not substantiallyperformed his duties, continued violations by the Employee of the Employee’s obligations to theCompany which are demonstrably willful and deliberate on the Employee’s part.
          (b) Change of Control. “Change of Control” means the occurrence of any of thefollowing:
               (i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities ExchangeAct 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 fiftypercent (50%) or more of the total voting power represented by the Company’s then outstandingvoting 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 Companyoutstanding immediately prior thereto continuing to represent (either by remaining outstanding orby being converted into voting securities of the surviving entity) at least fifty percent (50%) ofthe total voting power represented by the voting securities of the Company or such surviving entityoutstanding immediately after such merger or consolidation; or
               (iii) The consummation of the sale, lease or other disposition by the Company of all orsubstantially 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 theEmployee’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) areduction by the Company in the base compensation of the Employee as in effect immediately prior tosuch 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 orindirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all orsubstantially all of the Company’s business and/or assets shall assume the obligations under thisAgreement and agree expressly to perform the obligations under this Agreement in the same mannerand to the same extent as the Company would be required to perform such obligations in the absenceof a succession. For all purposes under this Agreement, the term “Company” shall include anysuccessor to the Company’s business and/or assets which executes and delivers the assumptionagreement described in this Section 7(a) or which becomes bound by the terms of this Agreement byoperation of law.
          (b) The Employee’s Successors. The terms of this Agreement and all rights of theEmployee hereunder shall inure to the benefit of, and be enforceable by, the Employee’s personal orlegal representatives, executors, administrators, successors, heirs, distributees, devisees andlegatees.
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     7. Notice.
          (a) General. All notices and other communications required or permitted hereundershall be in writing, shall be effective when given, and shall in any event be deemed to be givenupon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or otherapplicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, ifdelivered by hand, (c) one (1) business day after the business day of deposit with Federal Expressor similar overnight courier, freight prepaid or (d) one (1) business day after the business day offacsimile 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 residentialaddress 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 theEmployee for Good Reason or as a result of a voluntary resignation shall be communicated by anotice of termination to the other party hereto given in accordance with Section 8(b) of thisAgreement. Such notice shall indicate the specific termination provision in this Agreement reliedupon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basisfor termination under the provision so indicated, and shall specify the termination date (whichshall be not more than thirty (30) days after the giving of such notice). The failure by theEmployee to include in the notice any fact or circumstance which contributes to a showing of GoodReason shall not waive any right of the Employee hereunder or preclude the Employee from assertingsuch 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 ofany payment contemplated by this Agreement, nor shall any such payment be reduced by any earningsthat the Employee may receive from any other source.
          (b) Waiver. No provision of this Agreement shall be modified, waived or dischargedunless the modification, waiver or discharge is agreed to in writing and signed by the Employee andby an authorized officer of the Company (other than the Employee). No waiver by either party ofany breach of, or of compliance with, any condition or provision of this Agreement by the otherparty shall be considered a waiver of any other condition or provision or of the same condition orprovision at another time.
          (c) Headings. All captions and section headings used in this Agreement are forconvenient reference only and do not form a part of this Agreement.
          (d) Entire Agreement. This Agreement constitutes the entire agreement of the partieshereto and supersedes in their entirety all prior representations, understandings, undertakings oragreements (whether oral or written and whether expressed or implied) of the parties with respectto the subject matter hereof.
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          (e) Choice of Law. The validity, interpretation, construction and performance of thisAgreement shall be governed by the laws of the State of California.
          (f) Severability. The invalidity or unenforceability of any provision or provisionsof 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 towithholding of applicable income and employment taxes.
          (h) Counterparts. This Agreement may be executed in counterparts, each of which shallbe 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 theCompany 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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