Exhibit 10.3

Separation and Consulting Agreement
This Separation and Consulting Agreement (“Agreement”) is made by and between
Bruce Walicek , an individual (the “Executive”) and Pixelworks, Inc. (the
“Company”) (individually each a “Party” and collectively the “Parties”). The
Executive must sign and return this Agreement within twenty-one (21) days of his
Separation Date (as defined below) and not revoke this Agreement in order to be
eligible for the benefits described below.
Recital
By mutual agreement the Executive resigned effective February 1, 2016 (the
“Separation Date”) based on the agreement that his resignation shall be treated
as a termination by the Company without Cause under the terms of the employment
agreement between Executive and the Company, effective November 2, 2012 (the
“2012 Employment Agreement”). The Company has agreed to provide the Executive
with severance pay and other benefits but is willing to do so only if the
Executive provides the Company with the Release (as defined below) and agrees to
the consulting provisions in this Agreement.
The Executive acknowledges that the Executive has received final paychecks which
included payment of all wages due and all accrued, unused vacation and/or PTO.
Executive represents that he has been paid all amounts he was owed as salary,
bonuses, commissions or other wages and has received reimbursement of all
reimbursable business expenses. Executive understands that his group medical
benefits will terminate February 29, 2016, absent his election of COBRA
coverage, as described below.
Agreement
Based upon the information stated in the above Recital and the statements,
promises and agreements contained below, the Parties hereby agree as follows:
1.Severance Benefits. The Company agrees to pay the following severance payments
to Executive after the Effective Date:

a.Severance Pay. Not later than the first regularly scheduled payroll payment
date at least ten (10) days after the Effective Date of the Release (as defined
in Paragraph 25, below), the Company will pay the Executive a lump sum payment
in the gross amount of seven hundred thousand dollars ($700,000), which is
equivalent to one year of Executive’s annual base salary and Executive’s
Termination-Based Target Bonus (as defined in the 2012 Employment Agreement).
This payment will be subject to all legally required payroll withholdings.

b.COBRA. In consideration for this release and other promises made by Executive
herein, and provided that Executive timely elects COBRA coverage, the Company
agrees to pay the cost of Executive’s COBRA premiums for the group health care
coverage elected by the Executive as of his Separation Date for up to twelve
(12) months beginning on March 1, 2016 and ending on February 28, 2017 (the
“Severance Period”); provided that, notwithstanding the foregoing, in the event
such COBRA premium reimbursements could result in a penalty to the Company under
applicable law, the Company may instead provide Executive with payments during
the Severance Period equivalent in value to the COBRA premium reimbursements
otherwise payable hereunder but without regard as to whether Executive continues
health insurance coverage under the Company’s group health plan (the “Substitute
Benefit”). The Substitute Benefit payments will cease upon the occurrence of an
event that would cause Executive to no longer be eligible to receive COBRA
continuation coverage under the Company’s group health plan if Executive had
elected such coverage. The Company shall make the agreed upon COBRA payments
beginning with the first payment due after the Effective Date of this Release
Agreement. If for any reason, Executive directly pays for COBRA prior to the
Effective Date of this Release Agreement, the Company will reimburse Executive
for any such payment within 10 days of receiving the reimbursement request and
proof of payment by Executive. Executive shall notify the Company in the event
Executive is no longer eligible to receive COBRA coverage.

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2.Equity Awards. The Equity Award Statement attached as Exhibit A hereto sets
forth the terms and vesting status of all of Executive’s stock options
(“Options”) and restricted stock units (“RSUs” and together with the Options,
the “Equity Awards”) in the Company’s common stock that are outstanding as of
the Separation Date. The parties agree that the Equity Awards will continue to
vest and be exercisable pursuant to the terms of the relevant award agreements
governing the Equity Awards during the Consulting Term (as defined below), but
only after giving effect to the following amendments to such terms.

a.The parties acknowledge that the Options to the extent currently outstanding
(and not previously expired, forfeited or exercised) are vested and will expire
in accordance with their terms. For each Option identified on Exhibit A as being
subject to an Option Agreement providing for an extended exercisability period
in connection with an “Involuntary Termination” by the Company, the relevant
Option’s extended exercisability period is measured from the Separation Date and
not the end of the Consulting Term, as defined below.

b.Notwithstanding anything to the contrary in the relevant award agreements
governing the RSUs, the Company’s 2006 Stock Incentive Plan, Executive’s 2012
Executive Employment Agreement or any other agreement between the parties, the
vesting and termination terms of the Executive’s RSUs to the extent outstanding
immediately prior to the Separation Date (i.e., not previously terminated,
expired or vested) are amended effective as of the Separation Date to provide:

i.The outstanding RSUs shall remain outstanding subject to vesting as provided
in this Paragraph 2.b. For avoidance of doubt, the time vesting schedules
previously applicable to such RSUs shall cease to apply effective February 1,
2016.

ii.As consideration for and subject to Executive’s performance of the consulting
services set forth in Paragraph 5 below, an aggregate of 12,100 RSUs across all
outstanding RSU awards shall vest on the last trading date of each month during
the six month Consulting Term, provided that no more than 72,600 RSUs in the
aggregate will become vested after the Separation Date as consideration for
performance of consulting services pursuant to Paragraph 5 below.

iii.The Executive’s outstanding RSUs to the extent not vested on the Separation
Date and which have not vested in consideration for consulting services under
Paragraph 5 shall remain outstanding and shall be eligible to vest in the event
of Change of Control during the Control Change Window as provided in Section
4.a. of the 2012 Employment Agreement, provided that Executive’s termination
shall be treated as covered by Section 4.a. of the Employment Agreement and for
purposes of identifying the Control Change Window, the Separation Date under
this Agreement shall apply without regard to any continued service during the
Consulting Term. Such RSUs shall, except to the extent vested by reason of the
preceding sentence, terminate on the close of business on the date which is six
(6) months after the Separation Date. Vesting of RSUs under this paragraph shall
continue to be subject to the limitations of Section 6 of the Employment
Agreement.

3.Separation from Employment. Positions, and Offices. Executive hereby confirms
the cessation of his employment with the Company as President and Chief
Executive Officer, and from all positions and offices that he held with the
Company and/or its subsidiaries and/or affiliates effective as of the Separation
Date. Executive has resigned from all officer or director positions he has with
the Company, its subsidiaries, and/or affiliates. Executive further agrees that
he shall promptly execute such additional documents as are reasonably requested
by the Company to evidence and effectuate this Paragraph 3.

4.Pay in Lieu of Notice. Executive acknowledges and agrees that he has been paid
thirty-one thousand, two hundred and fifty dollars ($31,250), less legal
withholding, in lieu of receiving 30 days advance notice of termination of his
employment.

5.Consulting. For a period of six months after the Separation Date (the
“Consulting Term”), Executive agrees that he will reasonably cooperate with the
Company and the new Chief Executive Officer

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concerning requests for information about the business of the Company and to
assist the Chief Executive Officer as requested with respect to the transition
of duties. Executive will be compensated for such services in accordance with
Paragraph 2(b)(ii) above.

6.Litigation/Audit Cooperation. Executive shall reasonably cooperate with the
Company or any of its subsidiaries or affiliates (the “Company Group”) in
connection with (a) any internal or governmental investigation or
administrative, regulatory, arbitral or judicial proceeding involving any member
of the Company Group with respect to matters relating to Executive's employment
with or service as a member of the board of directors of any member of the
Company Group other than a third party proceeding in which Executive is a named
party and Executive and the Company (or the applicable member(s) of the Company
Group) have not entered into a mutually acceptable joint defense
agreement(collectively, “Litigation") or (b) for a two (2) year period following
the Separation Date, any audit of the financial statements of any member of the
Company Group with respect to the period of time when Executive was employed by
any member of the Company Group (“Audit”). Executive acknowledges that such
cooperation may include, but shall not be limited to, Executive making himself
available to the Company or any other member of the Company Group (or their
respective attorneys or auditors) upon reasonable notice for: (i) interviews,
factual investigations, and providing declarations or affidavits that provide
truthful information in connection with any Litigation or Audit; (ii) appearing
at the request of the Company or any member of the Company Group to give
testimony without requiring service of a subpoena or other legal process; (iii)
volunteering to the Company or any member of the Company Group pertinent
information related to any Litigation or Audit; (iv) providing information and
legal representations to the auditors of the Company or any member or any member
of the Company Group, in a form and within a timeframe requested by the Board,
with respect to the Company's or any member of the Company Group's opening
balance sheet valuation of intangibles and financial statements for the period
in which Executive was employed by the Company or any member of the Company
Group; and (v) turning over to the Company or any member of the Company Group
any documents relevant to any Litigation or Audit that are or may come into
Executive's possession. The Company shall reimburse Executive for reasonable
travel expenses incurred in connection with providing the services under this
Paragraph 6, including lodging and meals, upon Executive's submission of
receipts. After completion of the Consulting Term, the Company shall also
compensate Executive for each hour that Executive provides cooperation in
connection with this Paragraph 6 at an hourly rate of $336.54 (Executive's
termination-base salary plus his termination-base bonus, divided by 2080).
Executive shall submit invoices for any month in which Executive performs
services pursuant to this Paragraph 6 that details the amount of time and a
description of the services rendered for each separate day that Executive
performed such services. Any reimbursement requests pursuant to this Paragraph 6
must be submitted within sixty (60) days of the day Executive incurs such
expenses. The Company shall reimburse Executive within fifteen (15) days of
receiving a reimbursement request from Executive.

7.General Release. The Executive releases and forever discharges the Company and
each of its employees, officers, directors, shareholders, agents, predecessors
and successors in interest, parents, subsidiaries, attorneys, and assigns
(“Company-Affiliates”), from any and all claims, demands, obligations and/or
liabilities which arise out of or relate to any action by the Company or the
Company-Affiliates or omission to act by the Company or the Company-Affiliates
occurring on or before the date this Agreement is signed by the Executive or
relating to Executive’s employment (the “Release”).

8.Claims which may not be Released. There are certain claims which, under state
or federal statutes or regulations, may not be released or may not be released
except with the participation and approval of a state or federal agency. For
example, claims for indemnification under the California Labor Code cannot be
waived or released and claims related to Workers’ Compensation benefits may not
be waived without the express approval of the agency that oversees
administration of those laws. The Release does not extend to claims for
unemployment or workers’ compensation benefits. The Release is not intended to
cover and does not extend to these claims or other claims that, by law, cannot
be released in an agreement between an employer and an employee. In addition,
this release does not extend to any rights to indemnification which Executive
may have pursuant to any written agreement with the Company, or any parent or
subsidiary of the Company, to which Executive is a party; the charter, bylaws or
other governing documents of the Company, or any parent or subsidiary of the
Company; under

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applicable law; or under directors and officers liability, errors and omissions,
or other insurance policies including any run-off endorsement relating thereto,
or otherwise.

9.Release of All-employment Related claims. To the extent permitted by law, the
Release includes, but is not limited to, release of any and all claims arising
out of the Executive’s employment with the Company or Company-Affiliates and the
termination of that employment. This includes a release of any rights or claims
the Executive may have under the Age Discrimination in Employment in Employment
Act, 29 U.S.C. §§621, et seq., (as amended by the Older Workers’ Benefit
Protection Act, 29 U.S.C. §626(f)) which prohibits age discrimi-nation in
employment, Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§2000, et
seq., which prohibits discrimination in employment based on race, color,
national origin, religion, or sex, the Equal Pay Act, which prohibits paying men
and women unequal pay for equal work, the Americans with Disabilities Act (42
U.S.C. §§12101, et seq.), which prohibits discrimination against the disabled,
the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §§1001, et
seq., the Family Medical Leave Act (29 USC §2601, et seq.) which provides job
security to employees due to certain absences from work, the Fair Labor
Standards Act, 29 U.S.C. §§201 et seq., (as amended), the California Fair
Employ-ment and Housing Act (“FEHA”), Government Code §§12940, et seq., the
California Labor Code, the California Private Attorney General Act, or any other
federal, state or local laws or regulations relating to terms and conditions of
employment. The Release also includes any claims for unpaid wages, wrongful
discharge, breach of contract, fraud, misrepresentation, intentional and
negligent infliction of emotional distress, harassment, and any claims that the
Company or any Company-Affiliate has dealt with the Executive unfairly or in bad
faith.

10.Release of Unknown Claims. To the maximum extent permitted by law, the
Release extends to all claims of every nature and kind whatsoever, whether known
or unknown, suspected or unsuspected. The Executive expressly waives the
provisions of Section 1542 of the Civil Code which provides:

A general release does not extend to claims which the creditor does not know or
suspect to exist in his or her favor at the time of executing the release, which
if known by him or her must have materially affected his or her settlement with
the debtor.
11.No-Pending Claims. The Executive promises and states that the Executive has
not given or sold any claim discussed in this Agreement to anyone and that the
Executive has not filed a lawsuit, claim, or charge with any court or government
agency asserting any claims that are released by the Release. Without limiting
the generality of the foregoing, the Executive agrees that the Executive will
not bring or participate in any class action or collective action against the
Company which asserts, in whole or in part, any claim(s) which arose prior to
the date this Agreement is signed by the Executive, whether or not such claims
are covered by the Release.

12.Return of Company Property. The Executive promises and states that he has
returned to the Company all property belonging to the Company or authored by or
concerning the Company (other than the Executive’s personal copies of his/her
payroll and benefits records), including, but not limited to, keys and passes,
credit cards, computer hardware and software, papers, manuals, records,
drawings, and documents.

13.Protection of Proprietary Information. The Executive promises and agrees that
he will not, except upon written authorization from the Company or as required
by law, disclose any confidential or proprietary information belonging to or
concerning the Company, and/or Company-Affiliates, vendors, or customers,
including, without limitation, financial data, business and marketing plans,
budgets, personnel information, product designs and specifications, research and
development plans and budgets, technical drawings and specifications,
manufacturing methods, technical know‑how or other trade secrets. The Executive
acknowledges and reaffirms in its entirety the Employee Nondisclosure and
Inventions Agreement executed upon commencement of his/her employment, a copy of
which is attached to this Agreement (the “IP Agreement”). Notwithstanding
anything else contained herein nothing in this Agreement is intended to or shall
be construed to modify, impair or terminate any obligation of the Executive
pursuant to the IP Agreement that by the terms of the IP Agreement continues
after his/her separation from the Company’s employment. Nothing in this
provision prohibits the Executive from reporting

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possible violations of law or regulation to any governmental agency or entity,
including but not limited to the Department of Justice, the Securities and
Exchange Commission, the Congress, and any agency Inspector General, or making
other disclosures that are protected under the whistleblower provisions of state
or federal law or regulation.

14.No Acts Detrimental to Company. Executive agrees not to act in any manner
that might damage the business of the Company. Executive agrees not to counsel
or assist any attorneys or their clients in the presentation or prosecution of
any disputes, differences, grievances, claims, charges, or complaints by any
third party against the Company and/or any officer, director, Executive, agent,
representative, shareholder or attorney of the Company, unless under a subpoena
or other court order to do so.

15.Non-interference with rights of Government agencies. This Agreement
recognizes the rights and responsibilities of the Equal Employment Opportunity
Commission (“EEOC”) and the California Department of Fair Employment and Housing
(“DFEH”) to enforce the statutes which come under their jurisdiction. This
Agreement is not intended to prevent Executive from initiating or participating
in any investigation or proceeding conducted by the EEOC or the DFEH; provided,
however, that nothing in this section limits or affects the finality or the
scope of the Release. The Executive has waived and released any claim the
Executive may have for damages based on any alleged discrimination and may not
recover damages in any proceeding conducted by the EEOC or the DFEH.

16.Non-disparagement. Executive agrees to refrain from any disparagement,
defamation, libel or slander of the Company or Company-Affiliates or tortious
interference with the contracts and relationships of the Company. The Company
agrees to use reasonable efforts to request all directors and executive officers
to refrain from any disparagement, defamation, libel or slander of Executive;
provided the Company shall not be restricted with respect to any legally
required disclosures.

17.Choice of Law. This Agreement is to be governed by California law.

18.Withholding. Payments and benefits provided under this Agreement are taxable
under the laws of the United States and the State of California and will be
subject to all required withholdings and court ordered wage assignments and/or
garnishments.

19.Severability. If any portion of this Agreement is found to be unenforceable,
then both the Executive and the Company desire that all other portions that can
be separated from it or appropriately limited in scope shall remain fully valid
and enforceable.

20.Arbitration. Except as prohibited by law, any dispute concerning the scope,
interpretation or application of this Agreement or regarding any aspect of the
employment of Employee by Company shall be resolved through final and binding
arbitration in Santa Clara, California in accordance with the then existing
Employment Dispute Resolution Rules (the “Rules”) of the American Arbitration
Association (“AAA”). Judgment upon the award rendered by the arbitrator in such
proceeding may be entered in any court having jurisdiction thereof, provided,
however, that the law applicable to any issues regarding the scope,
effectiveness or interpretation of this arbitration provision shall be the
Federal Arbitration Act. The arbitration shall be conducted by a single neutral
arbitrator selected by the parties from a list maintained by the AAA, through
the selection procedures set forth in the AAA Employment Dispute Resolution
Rules. This arbitration provision is not intended to modify or limit substantive
rights or the remedies available to the Parties, including the right to seek
interim relief, such as injunction or attachment, through judicial process,
which shall not be deemed a waiver of the right to demand and obtain
arbitration.

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21.Integration. This Agreement is intended by the Parties to be their final
agreement. The statements, promises and agreements in this Agreement may not be
contradicted by any prior understandings, agreements, promises or statements.
The Executive states and promises that in signing this Agreement he has not
relied on any statements or promises made by the Company, other than the
promises contained in this Agreement. Any changes to this Agreement must be in
writing and signed by both Parties.

22.Effect of Breach. Except as provide in Paragraph 25 (vii) hereof, if the
Executive breaks any of the promises or agreements made in this Agreement, or if
any of the representations or statements made by the Executive in this Agreement
are discovered to be untrue, the Company may stop providing the severance
benefits described in Paragraph 1 and Equity payments in Paragraph 2 and the
Executive will return to the company all such payments which have been made up
to that date. All of the other terms of this Agreement will remain in full force
and effect.

23.Attorneys’ Fees. Except as provided in Paragraph 25 (vii) hereof, in the
event that either Party brings an action to enforce or effect its rights under
this Agreement, the prevailing Party shall be entitled to recover its costs and
expenses, including the costs of mediation, arbitration, litigation, court fees,
plus reasonable attorneys’ fees, incurred in connection with such an action.

24.Binding Effect. In signing this Agreement, the Executive intends to bind
himself and his heirs, administrators, executors, personal representatives and
assigns.

25.Waiver of Rights under the Age Discrimination in Employment Act. Executive is
over the age of forty (40) years, and in accordance with the Age Discrimination
in Employment Act and Older Workers’ Benefit Protection Act (collectively, the
“Act”), Executive acknowledges that:

i.He has been advised in writing to consult with an attorney prior to executing
this Release, and has had the opportunity to do so;

ii.He is aware of certain rights to which he may be entitled under the Act;

iii.In exchange for executing this Release, Executive will receive severance pay
to which he would otherwise not be entitled, and in addition to the compensation
and benefits that he earned as an employee of the Company;

iv.By signing this Agreement, he will not waive rights or claims under the Act
which may arise after the execution of this Agreement;

v.He has been given a period of at least 21 days to consider this Release, and
understands that if he does not sign this Agreement he will not receive the
severance pay and equity awards described in Paragraphs 1 and 2 of this
Agreement; and

vi.Executive further acknowledges that he has a period of seven days from the
date of execution in which to revoke this Agreement by email notice to Richard
Sanquini. If the Executive revokes this Agreement, it shall not become effective
or enforceable and the Executive will not receive the severance benefits
described in Paragraph 1 and Equity payments described in Paragraph 2 of this
Agreement. In the event Executive does not exercise his right to revoke this
Agreement, the Agreement shall become effective on the date immediately
following the seven-day revocation period described above (“Effective Date”).

vii.Nothing in this Agreement prevents or precludes Executive from challenging
or seeking a determination in good faith of the validity of this waiver under
the ADEA, nor does it impose any condition precedent, penalties, or costs for
doing so, unless specifically authorized by federal law. In the event Executive
signs this Agreement and returns it to the Company in less than the 21-day
period identified above, Executive hereby acknowledges that he has freely and
voluntarily chosen to waive the time period allotted for considering this
Agreement.

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26.Advice of Counsel and Acknowledgments. The Executive represents and warrants
that 1) the Executive has had the opportunity to discuss this Agreement with
counsel, and 2) the Executive signs this Agreement of the Executive’s own
volition, without outside inducement or coercion, fully intending to be bound by
its terms.

[Signatures on following page]

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In order to bind the Parties to this Agreement, the Parties, or their duly
authorized representatives have signed their names below.
Pixelworks, Inc.
Executive
By:
/s/ Richard Sanquini
By:
/s/ Bruce Walicek
Richard Sanquini, Chairman of the Board
Bruce Walicek
 
 
 
February 1, 2016
 
 
 
Date Signed By Executive

    

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EXHIBIT A - EQUITY AWARD STATEMENT

Options
Grant Date / Award#
Exercise Price Per Share
Outstanding Shares
Vested Outstanding Shares
Exercise Period After Termination
5/23/2006
N0002339
$9.00
3,333
3,333
Earlier of (i) 3 months after (A) last day of Consulting Term or (B) such
earlier date as the Executive ceases to provide the consulting services and (ii)
Option’s expiration date of 5/23/2016
5/22/2007
N003194
$4.14
3,333
3,333
3 months after (A) last day of Consulting Term or (B) such earlier date as the
Executive ceases to provide the consulting services
1/1/2008
N003356
$2.28
31,666
31,666
3 months after (A) last day of Consulting Term or (B) such earlier date as the
Executive ceases to provide the consulting services
3/31/2008
N0003394
$2.31
168,333
168,333
3 months after (A) last day of Consulting Term or (B) such earlier date as the
Executive ceases to provide the consulting services
3/23/2009
N003448
$0.60
100,000
100,000
3 months after (A) last day of Consulting Term or (B) such earlier date as the
Executive ceases to provide the consulting services
2/10/2010
N0003540
$3.13
100,000
100,000
Earlier of (i) 3 months after (A) last day of Consulting Term or (B) such
earlier date as the Executive ceases to provide the consulting services and (ii)
Option’s expiration date of 2/10/2016
2/10/2011
N0003679
$3.48
125,000
125,000
3 months after (A) last day of Consulting Term or (B) such earlier date as the
Executive ceases to provide the consulting services
2/09/2012
N003835
$2.36
100,000
100,000
Extended exercisability period until later of (i) 3 months after (A) last day of
Consulting Term or (B) such earlier date as the Executive ceases to provide the
consulting services and (ii) 12 months after Separation Date

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RSUs
Grant Date / Award#
Outstanding Shares
Unvested Outstanding Shares
Original Vesting Schedule
Amended Vesting Schedule
7/28/2014
N0004133
67,000
67,000
33,000 Shares on February 16, 2016 and 34,000 Shares on February 15, 2017
5,500 Shares vesting on the last day of each calendar month for up to 6 months,
subject in each case to continued consulting services through the vesting date
*See 2.b.iii for Control Change Window vesting
5/18/2015
N0004248
80,400
80,400
Vesting 39,600 Shares on February 16, 2016, 39,600 Shares on February 15, 2017
and 40,800 Shares on February 15, 2018
6,600 Shares vesting on the last day of each calendar month for up to 6 months,
subject in each case to continued consulting services through the vesting date
*See 2.b.iii for Control Change Window vesting