EXHIBIT 10.2

PIXELWORKS, INC.

AMENDED AND RESTATED 2006 STOCK INCENTIVE PLAN

TERMS AND CONDITIONS OF DIRECTOR STOCK UNIT AWARD

1. General. These Terms and Conditions of Director Stock Unit Award (these
“Terms”) apply to a particular award (“Award”) of restricted stock units (“Stock
Units”) if referenced in the Notice of Grant of Director Stock Units (“Grant
Notice”) corresponding to that particular Award. The recipient of the Award
identified in the Grant Notice is referred to as the “Director.” The effective
date of grant of the Award as set forth in the Grant Notice is referred to as
the “Award Date.”

The Award was granted under and subject to the Company’s Amended and Restated
2006 Stock Incentive Plan (the “Plan”). Capitalized terms are defined in the
Plan if not defined herein. The Award has been granted to the Director in
addition to, and not in lieu of, any other form of compensation otherwise
payable or to be paid to the Director. The Grant Notice and these Terms are
collectively referred to as the “Award Agreement” applicable to the Award.

2. Stock Units. As used herein, the term “stock unit” shall mean a non-voting
unit of measurement which is deemed for bookkeeping purposes to be equivalent to
one outstanding share of the Company’s Common Stock (subject to adjustment as
provided in Section 11.1 of the Plan) solely for purposes of the Plan and these
Terms. The Stock Units shall be used solely as a device for the determination of
the payment to eventually be made to the Director if such Stock Units vest
pursuant to the terms hereof. The Stock Units shall not be treated as property
or as a trust fund of any kind.

3. Vesting. Subject to Section 9(b) below, the Award shall vest and become
nonforfeitable in accordance with the schedule set forth in the Grant Notice.

4. Continuance of Service. The vesting of the Stock Units subject to the Award
and the rights and benefits under these Terms require continued service through
each applicable vesting date as a condition to the vesting of the applicable
installment of the Award and the rights and benefits under these Terms. Service
for only a portion of the vesting period, even if a substantial portion, will
not entitle the Director to any proportionate vesting or avoid or mitigate a
termination of rights and benefits upon or following a termination of services
as provided herein or under the Plan. Nothing contained in these Terms, the
Grant Notice or the Plan constitutes a continued service commitment by the
Company or interferes with the right of the Company to increase or decrease the
compensation of the Director from the rate in existence at any time.

5. Limitations on Rights Associated with Units. The Director shall have no
rights as a shareholder of the Company, no dividend rights and no voting rights,
with respect to the Stock Units and any shares of Common Stock underlying or
issuable in respect of such Stock Units until such shares of Common Stock are
actually issued to and held of record by the Director. No adjustments will be
made for dividends or other rights of a holder for which the record date is
prior to the date of issuance of the stock certificate. For purposes of clarity,
the foregoing

 

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provisions of this Section 5 shall apply to both (a) Stock Units that have not
yet vested pursuant to Section 3, and (b) vested Stock Units, the payment of
which has been deferred pursuant to Section 7, until such time as such vested
Stock Units are actually paid under the terms hereof.

6. Restrictions on Transfer. Neither the Award, nor any interest therein or
amount or shares payable in respect thereof may be sold, assigned, transferred,
pledged or otherwise disposed of, alienated or encumbered, either voluntarily or
involuntarily. The transfer restrictions in the preceding sentence shall not
apply to (a) transfers to the Company, or (b) transfers by will or the laws of
descent and distribution.

7. Timing and Manner of Payment of Stock Units. For each Stock Unit subject to
the Award that vests pursuant to the terms hereof, the Company shall deliver to
the Director a share of Common Stock (either by delivering a certificate for
such share or by entering such share in book entry form, as determined by the
Company in its discretion). Subject to the following provisions of this
Section 7, payment of a vested Stock Unit shall be made on or as soon as
administratively practical following the vesting date of such Stock Unit
pursuant to the terms hereof (and in all events not later than two and one-half
months after the end of the calendar year in which such vesting event occurs). A
Director may, however, irrevocably elect, not later than December 31 that
precedes the calendar year in which the Award is granted and on such form and in
such manner as may be prescribed by the Board from time to time, that the vested
Stock Units shall be paid on (i) the Director’s Separation from Service,
(ii) any calendar year elected by the Director that is not earlier than the
second year following the year in which the Award is granted, or (iii) the first
to occur of the dates referred to in the foregoing clauses (i) and (ii). In the
event of any such timely deferral election, payment of the Director’s Stock
Units subject to the Award that vest pursuant to the terms hereof shall not be
made in connection with the related vesting event but instead shall be made in
accordance with the Director’s deferral election. Notwithstanding the foregoing
or a Director’s deferral election to the contrary, in the event that the payment
of vested Stock Units is triggered by the Director’s Separation from Service and
the Director is a “specified employee” (within the meaning of Treasury
Regulation Section 1.409A-1(i)) on the date of such Separation from Service, the
Director shall not be entitled to any payment of the Stock Units until the
earlier of (i) the date which is six (6) months after the Director’s Separation
from Service with the Company for any reason other than death, or (ii) the date
of the Director’s death, if and to the extent such delay in payment is required
to comply with Section 409A of the Code (and in such case, payment will be made
within thirty (30) days after the date specified in clause (i) or (ii), as
applicable). The Company’s obligation to deliver shares of Common Stock or
otherwise make payment with respect to vested Stock Units is subject to the
condition precedent that the Director or other person entitled under the Plan to
receive any shares with respect to the vested Stock Units deliver to the Company
any representations or other documents or assurances required pursuant to
Section 14 of the Plan. The Director shall have no further rights with respect
to any Stock Units that are paid or that terminate pursuant to Section 8. For
purposes of these Terms, “Separation from Service” has the meaning given to such
term for purposes of Section 409A of the Code (which Separation from Service
generally will occur on the date the Director ceases to be a member of the
Board).

8. Effect of Termination of Service. The Director’s Stock Units shall terminate
to the extent such units have not become vested prior to the first time the
Director is no longer a member of the Board, regardless of the reason for the
termination of the Director’s services as a

 

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Board member, whether with or without cause, voluntarily or involuntarily. If
any unvested Stock Units are terminated hereunder, such Stock Units shall
automatically terminate and be cancelled as of the applicable termination date
without payment of any consideration by the Company and without any other action
by the Director, or the Director’s beneficiary or personal representative, as
the case may be.

9. Adjustments Upon Specified Events; Change in Control Event.

(a) The number of Stock Units then outstanding and the number and kind of
securities that may be issued in respect of the Award are subject to adjustment
upon the occurrence of certain events relating to the Company’s stock pursuant
to Section 11.1 of the Plan.

(b) Upon the occurrence of (1) a change in the ownership of the Company, (2) a
change in the effective control of the Company, or (3) a change in the ownership
of a substantial portion of the assets of the Company (within the meaning of
Treasury Regulation Sections 1.409A-3(i)(5)(v), (vi) and (vii), respectively)
(any such event, a “Change in Control Event”), the Stock Units, to the extent
outstanding and unvested as of the date of such Change in Control Event, shall
become fully vested as of such date, and all vested and unpaid Stock Units will
be paid on or as soon as administratively practical following the date of the
Change in Control Event (and in all events not later than five (5) business days
after such date).

10. Tax Withholding. If, at the time of any distribution of shares of Common
Stock in respect of the Stock Units, the Director is employed by the Company or
a Subsidiary or if for any other reason the Company or a Subsidiary is required
to withhold any taxes with respect to such distribution, the Company (or
Subsidiary) shall have the right at its option to (a) require the Director to
pay or provide for payment in cash of the amount of any such tax withholding
obligation, or (b) deduct from any amount payable to the Director the amount of
any such tax withholding obligation. In any case where a tax is required to be
withheld in connection with such a distribution of shares, the Administrator
may, in its sole discretion and subject to Section 14 of the Plan, direct the
Company or the Subsidiary to reduce the number of shares to be delivered by (or
otherwise reacquire) the appropriate number of whole shares, valued at their
then Fair Market Value (as determined in accordance with the applicable
provisions of the Plan), to satisfy such withholding obligation at the minimum
applicable withholding rates.

11. Notices. Any notice to be given under the terms of these Terms shall be in
writing and addressed to the Company at its principal office to the attention of
the Secretary, and to the Director at the Director’s last address reflected on
the Company’s records, or at such other address as either party may hereafter
designate in writing to the other. Any such notice shall be given only when
received, but if the Director is no longer a member of the Board, shall be
deemed to have been duly given by the Company when enclosed in a properly sealed
envelope addressed as aforesaid, registered or certified, and deposited (postage
and registry or certification fee prepaid) in a post office or branch post
office regularly maintained by the United States Government.

12. Plan. The Award and all rights of the Director under these Terms are subject
to, and the Director agrees to be bound by, all of the terms and conditions of
the provisions of the Plan,

 

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incorporated herein by reference. The Director agrees to be bound by the terms
of the Plan, the Grant Notice and these Terms. The Director acknowledges having
read and understanding the Plan, the Prospectus for the Plan, the Grant Notice
and these Terms. Unless otherwise expressly provided in other sections of these
Terms, provisions of the Plan that confer discretionary authority on the
Administrator do not (and shall not be deemed to) create any rights in the
Director unless such rights are expressly set forth herein or are otherwise in
the sole discretion of the Administrator so conferred by appropriate action of
the Administrator under the Plan after the date hereof.

13. Entire Agreement. These Terms, the Grant Notice and the Plan together
constitute the entire agreement and supersede all prior understandings and
agreements, written or oral, of the parties hereto with respect to the subject
matter hereof. The Plan, the Grant Notice and these Terms may be amended
pursuant to Section 13 of the Plan. Such amendment must be in writing and signed
by the Company. The Company may, however, unilaterally waive any provision
hereof in writing to the extent such waiver does not adversely affect the
interests of the Director hereunder, but no such waiver shall operate as or be
construed to be a subsequent waiver of the same provision or a waiver of any
other provision hereof.

14. Limitation on Director’s Rights. Participation in the Plan confers no rights
or interests other than as herein provided. These Terms create only a
contractual obligation on the part of the Company as to amounts payable and
shall not be construed as creating a trust. Neither the Plan nor any underlying
program, in and of itself, has any assets. The Director shall have only the
rights of a general unsecured creditor of the Company with respect to amounts
credited and benefits payable, if any, with respect to the Stock Units, and
rights no greater than the right to receive the Common Stock as a general
unsecured creditor with respect to Stock Units, as and when payable hereunder.

15. Counterparts. These Terms may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

16. Section Headings. The section headings of these Terms are for convenience of
reference only and shall not be deemed to alter or affect any provision hereof.

17. Governing Law. These Terms shall be governed by and construed and enforced
in accordance with the laws of the State of Oregon without regard to conflict of
law principles thereunder.

18. Construction. It is intended that the terms of the Award will not result in
the imposition of any tax liability pursuant to Section 409A of the Code. The
Agreement shall be construed and interpreted consistent with that intent.

 

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