Exhibit 10.26
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CENTILLIUM COMMUNICATIONS, INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
This Change of Control Severance Agreement (the "Agreement") is made and
entered into by and between Xxxxx Xxxxxx (the "Employee") and Centillium
Communications, Inc., a Delaware Corporation (the "Company"), effective as of
December 14, 2000 (the "Effective Date").
RECITALS
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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
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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
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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
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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.
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(a) Involuntary Termination Other than for Cause or Voluntary
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Termination for Good Reason Following a Change of Control. If within eighteen
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(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), or (iii) the Employee dies or terminates employment
due to becoming Disabled (as defined herein) and the Employee, except in the
case of death, 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
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receive a lump-sum severance payment (less applicable withholding taxes) equal
to 100% of the Employee's annual base salary (as in effect immediately prior to
(A) the Change of Control, or (B) the Employee's termination, whichever is
greater).
(ii) Options; Restricted Stock. All of the Employee's then
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outstanding options to purchase shares of the Company's Common Stock (the
"Options") shall immediately vest and became exercisable. Additionally, all of
the shares of the Company's Common Stock then held by the Employee subject to a
Company repurchase right (the "Restricted Stock") shall immediately vest and the
Company's right of repurchase with respect to such shares of Restricted Stock
shall lapse.
(iii) Continued Employee Benefits. Company-paid health, dental,
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vision, long-term disability and life insurance coverage at the same level of
coverage as was provided to such Employee immediately prior to the Change of
Control and at the same ratio of Company premium payment to Employee premium
payment as was in effect immediately prior to the Change of Control (the
"Company-Paid Coverage"). If such coverage included the Employee's dependents
immediately prior to the Change of Control, such dependents shall also be
covered at Company expense. Company-Paid Coverage shall continue until the
earlier of (i) twelve (12) months from the date of termination, or (ii) the date
upon which the Employee and his dependents become covered under another
employer's group health, dental, vision, long-term disability or life insurance
plans that provide Employee and his dependents with comparable benefits and
levels of coverage. For purposes of Title X of the Consolidated Budget
Reconciliation Act of 1985 ("COBRA"), the date of the "qualifying event" for
Employee and his or her dependents shall be the date upon which the Company-Paid
Coverage commences, and each month of Company-Paid Coverage provided hereunder
shall offset a month of continuation coverage otherwise due under COBRA.
(b) Timing of Severance Payments. The severance payment to which
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Employee is entitled shall be paid by the Company to Employee in cash and in
full, not later than twenty-two (22) 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
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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
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employment with the Company terminates (i) voluntarily by the Employee other
than for Good Reason, death or Disability, 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
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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
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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 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
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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
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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. Pooling of Interests Limitation. To the extent any of the benefits
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(including the equity compensation vesting acceleration) hereunder would cause a
contemplated Change of Control transaction that was intended to be accounted for
as a "pooling-of-interests" transaction to become ineligible for such accounting
treatment under generally accepted accounting principles, as determined by the
Accountants, then this Agreement shall automatically be deemed amended to
provide Employee with such lesser benefits as would allow for the contemplated
Change of Control transaction to be accounted for as a "pooling-of-interests"
transaction.
6. Definition of Terms. The following terms referred to in this
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Agreement shall have the following meanings:
(a) Cause. "Cause" shall mean (i) an act of personal dishonesty taken
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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
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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 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) Any action or event occurring within a two-year period, as
a result of which fewer than a majority of the directors are Incumbent
Directors. "Incumbent Directors" shall mean directors who either (A) are
directors of the Company as of the date hereof, or (B) are elected, or nominated
for election, to the Board with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination (but shall
not include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company); or
(iii) 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
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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
(iv) The consummation of the sale, lease or other disposition by
the Company of all or substantially all the Company's assets.
(c) Disability. "Disability" shall mean that the Employee has been
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unable to perform his or her Company duties as the result of his incapacity due
to physical or mental illness, and such inability, at least twenty-six (26)
weeks after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the Employee
or the Employee's legal representative (such Agreement as to acceptability not
to be unreasonably withheld). Termination resulting from Disability may only be
effected after at least thirty (30) days' written notice by the Company of its
intention to terminate the Employee's employment. In the event that the Employee
resumes the performance of substantially all of his or her duties hereunder
before the termination of his or her employment becomes effective, the notice of
intent to terminate shall automatically be deemed to have been revoked.
(d) Good Reason. "Good Reason" means without the Employee's express
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written consent (i) a material reduction of the Employee's duties, title,
authority or responsibilities, relative to the Employee's duties, title,
authority or responsibilities as in effect immediately prior to such reduction,
or the assignment to Employee of such reduced duties, title, authority or
responsibilities; for this purpose, a reduction in duties, title, authority or
responsibilities solely by virtue of the Company being acquired and made part of
a larger entity (as, for example, when the Chief Executive Officer of the
Company remains the Chief Executive Officer of the subsidiary or business unit
containing the Company's business following a Change of Control and is not made
the Chief Executive Officer of the acquirer) shall by itself constitute grounds
for a "Voluntary Termination for Good Reason;" (ii) a substantial reduction of
the facilities and perquisites (including office space and location) available
to the Employee immediately prior to such reduction; (iii) a reduction by the
Company in the base compensation of the Employee as in effect immediately prior
to such reduction; (iv) a material reduction by the Company in the kind or level
of benefits to which the Employee was entitled immediately prior to such
reduction with the result that such Employee's overall benefits package is
significantly reduced; (v) the relocation of the Employee to a facility or a
location more than thirty-five (35) miles from such Employee's then present
location.
7. Successors.
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(a) The Company's Successors. Any successor to the Company (whether
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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.
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(b) The Employee's Successors. The terms of this Agreement and all
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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.
8. Notice.
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(a) General. All notices and other communications required or
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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
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or by the Employee for Good Reason or Disability 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 or
Disability 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.
9. Miscellaneous Provisions.
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(a) No Duty to Mitigate. The Employee shall not be required to
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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
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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
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Agreement are for convenient reference only and do not form a part of this
Agreement.
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(d) Entire Agreement. This Agreement constitutes the entire agreement
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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.
(e) Choice of Law. The validity, interpretation, construction and
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performance of this Agreement shall be governed by the laws of the State of
California.
(f) Severability. The invalidity or unenforceability of any provision
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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
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subject to withholding of applicable income and employment taxes.
(h) Counterparts. This Agreement may be executed in counterparts,
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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.
COMPANY CENTILLIUM COMMUNICATIONS, INC.
By: /s/ Xxxx X. Xxxxxxx
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Title: CFO
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EMPLOYEE XXXXX XXXXXX
By: /s/ Xxxxx XXxxxx
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Title: CEO
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