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Exhibit 10.11
PIXELWORKS, INC.
TRANSITION EMPLOYMENT AGREEMENT
This Agreement (the "Agreement")
is made and entered into effective as of December 12, 2006
(the "Effective Date"), by and between Hans Olsen (the "Executive")
and Pixelworks, Inc., an Oregon corporation (the "Company").
Certain capitalized terms used in this Agreement are defined in
Section 1 below.
R E C I T A L S
A. The Company’s
founding CEO has recently decided he will step down as CEO of the
Company, effective December 31, 2006. The Company’s
Board of Directors ("Board") consequently expects to initiate a
search for a new CEO.
B. The Company wishes
Executive to serve as Interim CEO from January 1, 2007 until a
permanent CEO is identified and hired. Executive is willing to
serve in this interim role, on the understanding that he will hold
and exercise the full authority as CEO during this period.
Executive also understands that he may elect to be a candidate for
the full time position if he so chooses, but has received no
assurances that he will be selected, and has sought none.
C. The Company also is
undergoing a substantial reorganization that includes moving and
consolidating a variety of functions, closing certain sites, and
bringing up lead competence in other sites for key company
functions.
D. Through both the
Company’s leadership transition period and the period of
organizational transition, Company will particularly rely on
Executive’s knowledge of the organization and its people, as
well as his organizational and executive skills, to achieve the
expense reductions and other benefits the Company seeks to achieve
for shareholders and to assure an excellent transition to the
Company’s new executive leadership. Company wishes to provide
Executive with additional incentives for fulfilling the challenging
role he is being asked to fulfill.
AGREEMENT
In consideration of the mutual
covenants herein contained, the parties 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 any one or more of the following:
(i) a material act of dishonesty, fraud, or misconduct by the
Executive that is in connection with Executive’s
responsibilities as an Executive of the Company;
(ii) Executive’s commission of acts constituting a
felony 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 by the Executive
to perform Executive’s duties as an employee of the Company
after there has been
PAGE 1 — Transition Employment Agreement (Hans Olsen)
delivered to the Executive a written demand for performance from
the Company which describes the basis for the Company’s
belief that the Executive has not substantially performed
Executive’s duties and had a 30-day opportunity to cure, no
cure having been made.
(b)
Change of Control . "Change of Control" shall mean the
occurrence of any of the following events, if the occurrence takes
place before the Transition End Date:
(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 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 reduction of the Executive’s duties, position 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; or (iv) the
failure of the Company to obtain the assumption of this Agreement
by any successors contemplated in Section 8 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)
Retention Pay. The "Retention Pay" is the sum defined on
Exhibit A hereto, payable as provided in this Agreement.
PAGE 2 — Transition Employment Agreement (Hans Olsen)
(f)
Termination Date . "Termination Date" shall mean the
effective date of any notice of termination delivered by one party
to the other hereunder.
(g)
Transition End Date. "Transition End Date" shall be the
Transition End Date specified on Exhibit A hereto.
2. 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. Company or Executive may terminate
this Agreement by written notice pursuant to Section 10(b) hereof.
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, subject to Section 13(b) hereof.
3. Term of Agreement
. The term of this Agreement shall be December 12, 2006
through the Transition End Date, unless earlier terminated as
provided herein or except as Exhibit A continues any benefit
past the Transition End Date. With respect to any Good Reason Event
occurring on or before the Transition End Date and as to which the
relevant time periods have not expired as of the Transition End
Date, this Agreement shall terminate on the expiration of all
relevant time periods arising therefrom. All benefits accrued as of
the termination date of this Agreement shall remain due and
payable, and dispute resolution provisions of this Agreement shall
survive for purposes of enforcing rights to benefits.
4. Retention Pay on
Transition End Date. Provided the Executive signs the release
of claims pursuant to Section 9 hereof, and following the
expiration of any waiver period applicable to the release of
claims, and provided the Executive is employed by the Company on
the Transition End Date, Company will pay Executive the Retention
Pay (less applicable withholding) on the Transition End Date.
5. Transition Termination
Benefits . Upon the Termination Date, provided the
Executive’s employment has ended as a result of an
Involuntary Termination and provided the Executive signs the
release of claims pursuant to Section 9 hereof, and following
the expiration of any waiver period applicable to the release of
claims, Executive shall be entitled to the following benefits, in
addition to all pay and bonuses accrued and earned through the
applicable date:
(a)
Retention Pay. If it has not already been paid, Company will
pay Executive the Retention Pay.
(b)
Option Acceleration if on Change of Control. If the
Termination Date is within twelve (12) months after a Change
of Control, all stock options granted by the Company to the
Executive prior to the Change of Control, and that absent the
Involuntary Termination would have become exercisable during the
twelve months immediately following the Change of Control, shall if
not already vested and exercisable accelerate and become vested and
exercisable, 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
PAGE 3 — Transition Employment Agreement (Hans Olsen)
applicable agreement within twelve (12) months following
the date of Change of Control as if the Executive had remained
employed through such date.
(c)
Medical Continuation. Executive’s insured group
medical and dental benefits will continue to be effective through
the later of Executive’s Termination Date or the Transition
End Date.
(d)
COBRA Extension. Company will pay all COBRA premiums for an
extension of COBRA for an additional twelve months, tacked on to
the end of any other coverage period owing to Executive
hereunder.
6. Accrued Wages and
Vacation; Expenses . Without regard to the reason for, or the
timing of, Executive’s termination of employment:
(i) the Company shall pay the Executive any unpaid base salary
due for periods prior to the Termination Date; (ii) the
Company shall pay the Executive all of the Executive’s
accrued and unused vacation through the Termination Date; and
(iii) following submission of proper expense reports by the
Executive, the Company shall reimb
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