Exhibit 10.28
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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 Xxxxxx Xxxxxxx (the "Chairman") 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 Chairman and can cause the Chairman to
consider alternative 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 Chairman,
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 Chairman with an incentive to continue his or
her service as Chairman of the Board and to motivate the Chairman 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 Chairman with
certain severance benefits upon the Chairman's termination as Chairman of the
Board following a Change of Control. These benefits will provide the Chairman
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. Severance Benefits.
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(i) 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 Chairman terminates his or her
position with the Company as Chairman of the Board (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 Chairman's position as Chairman of the Board for other than
"Cause" (as defined herein), or (iii) the Chairman dies or terminates employment
due to becoming Disabled (as defined herein) and the Chairman, 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 all of the Chairman's then
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 Chairman 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.
(b) Voluntary Resignation; Termination for Cause. If the Chairman's
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position with the Company as Chairman of the Board terminates (i) voluntarily by
the Chairman other than for Good Reason, death or Disability, or (ii) for Cause
by the Company, then the Chairman shall not be entitled to receive any 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.
(c) Termination Apart from Change of Control. In the event the
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Chairman's position as Chairman of the Board of the Company 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 Chairman
shall be entitled to receive 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.
(d) Exclusive Remedy. In the event of a termination of Chairman's
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position as Chairman of the Board of the Company 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
Chairman or the Company may otherwise be entitled, whether at law, tort or
contract, in equity, or under this Agreement. The Chairman shall be entitled to
no benefits, compensation or other payments or rights upon termination of his
position as Chairman of the Board of the Company following a Change in Control
other than those benefits expressly set forth in this Section 3.
3. Golden Parachute Excise Tax.. In the event that the benefits provided
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for in this Agreement or otherwise payable to the Chairman (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
Chairman'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 Chairman on an after-tax basis, of the
greatest amount of severance benefits under this Agreement, notwithstanding that
all or some
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portion of such severance benefits may be taxable under Section 4999 of the
Code. Unless the Company and the Chairman 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 Chairman 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 Chairman 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.
4. 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 Chairman with such lesser benefits as would allow for the contemplated
Change of Control transaction to be accounted for as a "pooling-of-interests"
transaction.
5. 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 Chairman in connection with his responsibilities as Chairman of the Board
and intended to result in substantial personal enrichment of the Chairman, (ii)
Chairman being convicted of a felony, (iii) a willful act by the Chairman which
constitutes gross misconduct and which is injurious to the Company, (iv)
following delivery to the Chairman of a written demand for performance from the
Company which describes the basis for the Company's reasonable belief that the
Chairman has not substantially performed his duties, continued violations by the
Chairman of the Chairman's obligations to the Company which are demonstrably
willful and deliberate on the Chairman's part.
(b) Chairman of the Board. "Chairman of the Board" means the
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chairman of the board of directors of Centillium Communications, Inc.
(c) 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
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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 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.
(d) Disability. "Disability" shall mean that the Chairman 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 Chairman
or the Chairman'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 Chairman's position as Chairman of the Board. In the
event that the Chairman 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.
(e) Good Reason. "Good Reason" means without the Chairman's express
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written consent (i) a change of the Chairman's position with the Company to
anything other than Chairman of the Board; (ii) a substantial reduction of the
facilities and perquisites (including office space and location) available to
the Chairman immediately prior to such change of position; (iv) a material
reduction by the Company in the kind or level of benefits to which the Chairman
was entitled immediately prior to such change of position with the result that
such Chairman's overall benefits package is significantly reduced; (v) the
relocation of the Chairman to a facility or a location more than thirty-five
(35) miles from such Chairman's then present location.
6. 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
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agreement described in this Section 7(a) or which becomes bound by the terms of
this Agreement by operation of law.
(b) The Chairman's Successors. The terms of this Agreement and all
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rights of the Chairman hereunder shall inure to the benefit of, and be
enforceable by, the Chairman's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
7. 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 Chairman, 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 Chairman 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 Chairman 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 Chairman hereunder or preclude the
Chairman from asserting such fact or circumstance in enforcing his or her rights
hereunder.
8. Miscellaneous Provisions.
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(a) No Duty to Mitigate. The Chairman 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 Chairman 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 Chairman and by an authorized officer of the Company
(other than the Chairman). 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.
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(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.
(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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CHAIRMAN XXXXXX XXXXXXX
By: /s/ XXXXXX XXXXXXX
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Title: Chairman
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