CHANGE OF CONTROL SEVERANCE
AGREEMENT
This Change of
Control Severance Agreement (the “Agreement”) is made
and entered into effective as of _________, 2008 (the
“Effective Date”), by and between Steven Moore (the
“Executive”) and Pixelworks, Inc., an Oregon
corporation (the “Company”). Certain capitalized terms
used in this Agreement are defined in Section 1
below.
The Board believes
that it is in the best interests of the Company and its
shareholders to provide the Executive with an incentive to continue
Executive’s employment following, and so to maximize the
value of the Company upon, a Change of Control for the benefit of
its shareholders. To do so, the Board believes it appropriate to
provide the Executive with certain severance benefits upon the
Executive’s termination of employment following a Change of
Control.
The parties
therefore agree as follows:
1.
Definition of Terms . The following terms referred to in
this Agreement shall have the following meanings:
(a)
Cause . “Cause” shall mean Executive engaged in
any one or more of the following: (i) a material act of
dishonesty, fraud, misconduct, or willful violation of any material
law, ethical rule or fiduciary duty that is in connection with
Executive’s responsibilities as an executive of the Company;
(ii) acts constituting a felony or moral turpitude which the
Board reasonably believes has had or will have a material
detrimental effect on the Company’s reputation or business;
or (iii) repeated willful failure to perform Executive’s
duties as an executive of the Company and the failure to effect
such cure within 30 days after written notice of such
violation or breach is given to Executive; or (iv) the willful
violation of any material Company policy or procedure, or breach of
any material provision of this Agreement or other agreement with
the Company, and if such violation or breach is susceptible of
cure, the failure to effect such cure within 30 days after
written notice of such violation or breach is given to
Executive.
(b)
Change of Control . “Change of Control” shall
mean the occurrence of any of the following events:
(i) the
approval by shareholders of the Company of a merger or
consolidation of the Company with any other corporation, or of a
subsidiary of the Company with any other corporation, other than a
merger or consolidation which would result in effective voting
control over the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
PAGE 1 - CHANGE OF CONTROL
SEVERANCE AGREEMENT
securities of
the surviving entity) more than 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;
(ii) the
approval by the shareholders of the Company of a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company’s assets;
(iii) any
“person” (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) becoming
the “beneficial owner” (as defined in Rule 13d-3
under said Act), directly or indirectly, of securities of the
Company representing 50% or more of the total voting power
represented by the Company’s then outstanding voting
securities; or
(iv) a
change in the composition of the Board, 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 those directors who
are either identified in (A) or identified as their successors
elected under this clause (B).
(c)
Good Reason Event. A “Good Reason Event” shall
be any of the following: (i) without the Executive’s express
written consent, a material diminution of the Executive’s
duties, authority or responsibilities; (ii) without the
Executive’s express written consent, a reduction by the
Company of the Executive’s base salary; (iii) without
the Executive’s express written consent, the imposition of a
requirement that Executive’s primary place of employment be
at a facility or a location more than fifty (50) miles from
the Executive’s current work location, provided that such
requirement to relocate materially increases the Executive’s
commute; or (iv) the failure of the Company to obtain the
assumption of this Agreement by any successors contemplated in
Section 7 below.
(d)
Involuntary Termination . “Involuntary
Termination” shall mean (i) any termination of the
Executive’s employment by the Company which is not effected
for valid Cause; or (ii) any termination by the Executive for
Good Reason.
(e)
Termination Date . “Termination Date” shall mean
the effective date of any notice of termination delivered by one
party to the other hereunder.
2. Term
of Agreement . This Agreement shall terminate upon the earlier
of two (2) years after a Change of Control, or (ii) the date
that all obligations of the parties hereto under this Agreement
have been satisfied.
3.
At-Will Employment . The Company and the Executive
acknowledge that the Executive’s employment is and shall
continue to be at-will, as defined under applicable law. If the
Executive’s employment terminates for any reason, the
Executive shall not be entitled to any payments, benefits, damages,
awards or compensation other than as provided by this Agreement, or
as may otherwise be established under the Company’s then
existing employee benefit plans or policies at the time of
termination.
PAGE 2 - CHANGE OF CONTROL
SEVERANCE AGREEMENT
(a)
Termination Following a Change of Control .
(i)
If Within Twelve Months Following a Change of Control . If
the Executive’s employment with the Company terminates as a
result of an Involuntary Termination at any time within twelve
(12) months after a Change of Control, and the Executive signs
the release of claims pursuant to Section 7 hereto, Executive
shall be entitled to the following severance benefits:
(1) twelve
(12) months of Executive’s base salary as in effect as
of the date of such termination or, if greater, as in effect
immediately prior to the Change of Control, less applicable
withholding, payable in a lump sum within thirty (30) days of
the Involuntary Termination;
(2) all
stock options granted by the Company to the Executive prior to the
Change of Control shall accelerate and become vested and
exercisable as to the number of shares that would have otherwise
vested during the twelve (12) months following such
termination as if the Executive had remained employed by the
Company (or its successor) through such date under the applicable
option agreements to the extent such stock options are outstanding
and unexercisable at the time of such termination; and all stock
subject to a right of repurchase by the Company (or its successor)
that was purchased prior to the Change of Control shall have such
right of repurchase lapse with respect to that number of shares
which would have had such right of repurchase lapse under the
applicable agreement within twelve (12) months of the date of
the termination as if the Executive had remained employed through
such date; and
(3) the
same level of Company-paid health (i.e., medical, vision and
dental) coverage and benefits for such coverage as in effect for
the Executive (and any eligible dependents) on the day immediately
preceding the Executive’s Termination Date; provided ,
however , that (i) the Executive constitutes a qualified
beneficiary, as defined in Section 4980B(g)(1) of the Internal
Revenue Code of 1986, as amended; and (ii) Executive elects
continuation coverage pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”),
within the time period prescribed pursuant to COBRA. The Company
shall continue to provide Executive with such Company-paid coverage
until the earlier of (i) the date Executive (and
Executive’s eligible dependents) is no longer eligible to
receive continuation coverage pursuant to COBRA, or (ii) twelve
(12) months from the Termination Date.
(ii)
If Between Twelve Months and Twenty-Four Months Following Change
of Control . If the Executive’s employment with the
Company terminates as a result of an Involuntary Termination at any
time during the period that is from twelve (12) months after a
Change of Control to twenty-four (24) months after a Change of
Control (such period being the “Second Year”), and the
Executive signs the release of claims pursuant to Section 7
hereto, Executive shall be entitled to the following severance
benefits:
(1) a
lump sum cash amount payable within thirty (30) days of the
Involuntary Termination representing a portion of the
Executive’s base salary and any
PAGE 3 - CHANGE OF CONTROL
SEVERANCE AGREEMENT
applicable
allowances, with such amount being the resulting product of: the
number of months remaining in the Second Year as of the Termination
Date, multiplied by the per-month portion of the
Executive’s base salary and allowances as in effect as of the
Termination Date or, if greater, as in effect immediately prior to
the Change of Control, less applicable withholding. For purposes of
this subsection (1), only entire months that remain in the Second
Year shall be counted as “remaining,” and any fraction
of a month that remains after the date of the termination shall not
be counted hereunder;
(2) the
health benefits set forth in Section 4(a)(i)(3) above,
provided , however , that the twelve (12) month
period shall be pro-rated to reflect that number of months
remaining in the Second Year as of the date of termination. For
purposes of this subsection (2), only entire months that remain in
the Second Year shall be counted as “remaining,” and
any fraction of a month that remains after the date of the
termination shall not be counted hereunder; and
(3) the
stock option acceleration benefits set forth in
Section 4(a)(i)(2) above, provided , however ,
that the twelve (12) month period shall be pro-rated to
reflect that number of months remaining in the Second Year as of
the date of termination. For purposes of this subsection (2), only
entire months that remain in the Second Year shall be counted as
“remaining,” and any fraction of a month that remains
after the date of the termination shall not be counted
hereunder.
(b)
Termination Apart from a Change of Control . If the
Executive’s employment with the Company terminates other than
as a result of an Involuntary Termination within the twenty-four
(24) months following a Change of Control, then the Executive
shall not be entitled to receive severance or other benefits
hereunder, but may b
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