securities of the surviving entity) more than fifty percent (50%) of the total voting powerrepresented by the voting securities of the Company or such surviving entity outstandingimmediately after such merger or consolidation;               (ii) the approval by the shareholders of the Company of a plan of complete liquidation of theCompany or an agreement for the sale or disposition by the Company of all or substantially all ofthe Company’s assets;               (iii) any “person” (as such term is used in Sections 13(d) and 14(d) of the SecuritiesExchange Act of 1934, as amended) becoming the “beneficial owner” (as defined in Rule 13d-3 undersaid Act), directly or indirectly, of securities of the Company representing 50% or more of thetotal 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 ofthe 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 eitheridentified 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 bythe 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 alocation more than fifty (50) miles from the Executive’s current work location, provided that suchrequirement to relocate materially increases the Executive’s commute; or (iv) the failure of theCompany to obtain the assumption of this Agreement by any successors contemplated in Section 7below.          (d) Involuntary Termination. “Involuntary Termination” shall mean (i) any terminationof the Executive’s employment by the Company which is not effected for valid Cause; or (ii) anytermination by the Executive for Good Reason.          (e) Termination Date. “Termination Date” shall mean the effective date of any noticeof 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 underthis Agreement have been satisfied.     3. At-Will Employment. The Company and the Executive acknowledge that the Executive’semployment is and shall continue to be at-will, as defined under applicable law. If theExecutive’s employment terminates for any reason, the Executive shall not be entitled to anypayments, benefits, damages, awards or compensation other than as provided by this Agreement, or asmay otherwise be established under the Company’s then existing employee benefit plans or policiesat the time of termination.PAGE 2– CHANGE OF CONTROL SEVERANCE AGREEMENT
 

 
     4. Severance Benefits.          (a) Termination Following a Change of Control.               (i) If Within Twelve Months Following a Change of Control. If the Executive’semployment with the Company terminates as a result of an Involuntary Termination at any time withintwelve (12) months after a Change of Control, and the Executive signs the release of claimspursuant 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 suchtermination or, if greater, as in effect immediately prior to the Change of Control, lessapplicable withholding, payable in a lump sum within thirty (30) days of the InvoluntaryTermination;                    (2) all stock options granted by the Company to the Executive prior to the Change of Controlshall accelerate and become vested and exercisable as to the number of shares that would haveotherwise vested during the twelve (12) months following such termination as if the Executive hadremained employed by the Company (or its successor) through such date under the applicable optionagreements to the extent such stock options are outstanding and unexercisable at the time of suchtermination; and all stock subject to a right of repurchase by the Company (or its successor) thatwas purchased prior to the Change of Control shall have such right of repurchase lapse with respectto that number of shares which would have had such right of repurchase lapse under the applicableagreement within twelve (12) months of the date of the termination as if the Executive had remainedemployed through such date; and                    (3) the same level of Company-paid health (i.e., medical, vision and dental) coverage andbenefits for such coverage as in effect for the Executive (and any eligible dependents) on the dayimmediately preceding the Executive’s Termination Date; provided, however, that (i)the Executive constitutes a qualified beneficiary, as defined in Section 4980B(g)(1) of theInternal Revenue Code of 1986, as amended; and (ii) Executive elects continuation coverage pursuantto the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), within thetime period prescribed pursuant to COBRA. The Company shall continue to provide Executive withsuch Company-paid coverage until the earlier of (i) the date Executive (and Executive’s eligibledependents) 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. Ifthe Executive’s employment with the Company terminates as a result of an Involuntary Termination atany 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 Executivesigns the release of claims pursuant to Section 7 hereto, Executive shall be entitled to thefollowing severance benefits:                    (1) a lump sum cash amount payable within thirty (30) days of the Involuntary Terminationrepresenting a portion of the Executive’s base salary and anyPAGE 3– CHANGE OF CONTROL SEVERANCE AGREEMENT
 

 
applicable allowances, with such amount being the resulting product of: the number of monthsremaining in the Second Year as of the Termination Date, multiplied by the per-monthportion 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 becounted as “remaining,” and any fraction of a month that remains after the date of the terminationshall 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 ofmonths 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 anyfraction 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 reflectthat number of months remaining in the Second Year as of the date of termination. For purposes ofthis 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 notbe counted hereunder.          (b) Termination Apart from a Change of Control. If the Executive’s employment withthe Company terminates other than as a result of an Involuntary Termination within the twenty-four(24) months following a Change of Control, then the following provisions shall apply:               (i) Involuntary Termination. If the termination is an Involuntary Termination, theExecutive shall be entitled to the same benefits described in Section 4(a)(i), calculated as if thedate of the change of control were the same as the effective date of the Involuntary Termination.               (ii) For Cause or Voluntary Termination. If the termination is for Cause or is nototherwise an Involuntary Termination, then the Executive will not be entitled to receive severanceor other benefits hereunder.          (c) Accrued Wages and Vacation; Expenses. Without regard to the reason for, or thetiming of, Executive’s termination of employment: (i) the Company shall pay the Executive anyunpaid base salary due for periods prior to the Termination Date; (ii) the Company shall pay theExecutive 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 reimbursethe Executive for all expenses reasonably and necessarily incurred by the Executive in connectionwith the business of the Company prior to the Termination Date. These payments shall be madepromptly upon termination and within the period of time mandated by law.PAGE 4– CHANGE OF CONTROL SEVERANCE AGREEMENT
 

 
     5. Limitation on Payments. In the event that the severance and other benefitsprovided for in this Agreement or otherwise payable to the Executive (i) constitute “parachutepayments” within the meaning of Section 280G of the United States Internal Revenue Code (the“Code”), and (ii) would be subject to the excise tax imposed by Section 4999 of the Code (the“Excise Tax”), then Executive’s benefits under this Agreement shall be either          (a) delivered in full, or          (b) delivered as to such lesser extent which would result in no portion of such benefits beingsubject to the Excise Tax,     whichever of the foregoing amounts, taking into account the applicable federal, state andlocal income taxes and the Excise Tax, results in the receipt by Executive on an after-tax basis,of the greatest amount of benefits, notwithstanding that all or some portion of such benefits maybe taxable under Section 4999 of the Code.     Any determination required under this section shall be made in writing by the Company’sindependent public accountants (the “Accountants”), whose determination shall be conclusive andbinding upon the Executive and the Company for all purposes. For purposes of making thecalculations required by this section, the Accountants may make reasonable assumptions andapproximations concerning applicable taxes and may rely on reasonable, good faith interpretationsconcerning the application of Sections 280G and 4999 of the Code. The Company and the Executiveshall furnish to the Accountants such information and documents as the Accountants may reasonablyrequest in order to make a determination under this section. The Company shall bear all costs theAccountants may reasonably incur in connection with any calculations contemplated by this section.     6. Successors.          (a) Company’s Successors. Any successor to the Company (whether direct or indirectand whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all orsubstantially all of the Company’s business and/or assets shall assume the Company’s obligationsunder this Agreement and agree expressly to perform the Company’s obligations under this Agreementin the same manner and to the same extent as the Company would be required to perform suchobligations 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 anddelivers the assumption agreement described in this subsection (a) or which becomes bound by theterms of this Agreement by operation of law.          (b) Executive’s Successors. Without the written consent of the Company, Executive maynot assign or transfer this Agreement or any right or obligation under this Agreement to any otherperson or entity. Notwithstanding the foregoing, the terms of this Agreement and all rights ofExecutive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal orlegal representatives, executors, administrators, successors, heirs, distributees, devisees andlegatees.PAGE 5– CHANGE OF CONTROL SEVERANCE AGREEMENT
 

 
     7. Execution of Release Agreement upon Termination. As a condition of receiving thebenefits under Section 4 of this Agreement, the Executive shall within twenty five days after theExecutive’s Termination Date, execute and not revoke a general release of claims against theCompany in form satisfactory to the Company.     8. Litigation/Audit Cooperation. Following the termination of Executive’s employmentfor any reason, Executive shall reasonably cooperate with the Company or any of its subsidiaries oraffiliates (the “Company Group”) in connection with (a) any internal or governmental investigationor administrative, regulatory, arbitral or judicial proceeding involving any member of the CompanyGroup with respect to matters relating to Executive’s employment with or service as a member of theboard of directors of any member of the Company Group other than a third party proceeding in whichExecutive is a named party and Executive and the Company (or the applicable member(s) of theCompany Group) have not entered into a mutually acceptable joint defense agreement (collectively,“Litigation”) or (b) for a two year period following the Termination Date, any audit of thefinancial statements of any member of the Company Group with respect to the period of time whenExecutive was employed by any member of the Company Group (“Audit”). Executive acknowledges thatsuch cooperation may include, but shall not be limited to, Executive making himself available tothe 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 oraffidavits 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 testimonywithout requiring service of a subpoena or other legal process; (iii) volunteering to the Companyor 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 anymember of the Company Group, in a form and within a timeframe requested by the Board, with respectto the Company’s or any member of the Company Group’s opening balance sheet valuation ofintangibles and financial statements for the period in which Executive was employed by the Companyor any member of the Company Group; and (v) turning over to the Company or any member of theCompany Group any documents relevant to any Litigation or Audit that are or may come intoExecutive’s possession. The Company shall reimburse Executive for reasonable travel expensesincurred in connection with providing the services under this Section 9, including lodging andmeals, upon Executive’s submission of receipts. The Company shall also compensate Executive foreach hour that Executive provides cooperation in connection with this Section 9 at an hourly rateequal to Executive’s base salary as of the Termination Date divided by 2080. Executive shallsubmit invoices for any month in which Executive performs services pursuant to this Section 9 thatdetails the amount of time and a description of the services rendered for each separate day thatExecutive performed such services. The Company shall reimburse Executive for such servicesrendered within fifteen (15) days of receiving an invoice from Executive.     9. 409A Savings Clause. If Executive is a “specified employee’ within the meaning ofSection 409A of the Internal Revenue Code of 1986, as amended by the rules and regulations issuedthereunder by the Department of Treasury and the Internal Revenue Service (“409A”) as of the dateof the Executive’s “separation from service” within the meaning of Section 409A, Executive shallnot be entitled to any payment or benefit pursuant to Section 4 until the earlier of (i) the datewhich is six (6) months after his separation from service for any reason other thanPAGE 6– CHANGE OF CONTROL SEVERANCE AGREEMENT
 

 
death, or (ii) the date of Executive’s death. The provisions of this Section 10 shall onlyapply if, and to the extent, required to avoid the imputation of any tax, penalty or interestpursuant to Section 409A. Any amounts otherwise payable to Executive upon or in the six (6) monthperiod following the Executive’s separation from service that are not so paid by reason of thisSection 10 shall be paid (without interest) as soon as practicable (and in all events within thirty(30) days) after the date that is six (6) months after the Executive’s separation from service (or,if earlier, as soon as practicable, and in all events within thirty (30) days, after the date ofExecutive’s death). To the extent that any benefits pursuant to Section 4 or reimbursementspursuant to Section 5 are taxable to the Executive, any reimbursement payment due to the Executivepursuant to any such provision shall be paid to the Executive on or before the last day of theExecutive’s taxable year following the taxable year in which the related expense was incurred. Thebenefits and reimbursements pursuant to Section 4 are not subject to liquidation or exchange foranother benefit and the amount of such benefits and reimbursements that the Executive receives inone taxable year shall not affect the amount of such benefits or reimbursements that the Executivereceives in any other taxable year.     10. Notices. Notices and all other communications contemplated by this Agreementshall be in writing and shall be deemed to have been duly given when personally delivered or whenmailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In thecase of the Executive, mailed notices shall be addressed to Executive at the home address whichExecutive most recently communicated to the Company in writing. In the case of the Company, mailednotices shall be addressed to its corporate headquarters, and all notices shall be directed to theattention of its Secretary.     11. Arbitration.          (a) Any dispute or controversy arising out of, relating to, or in connection with thisAgreement, or the interpretation, validity, construction, performance, breach, or terminationthereof, shall be settled by binding arbitration to be held in Portland, Oregon in accordance withthe National Rules for the Resolution of Employment Disputes then in effect of the AmericanArbitration Association (the “Rules”). The arbitrator may grant injunctions or other relief insuch dispute or controversy. The decision of the arbitrator shall be final, conclusive and bindingon the parties to the arbitration. Judgment may be entered on the arbitrator’s decision in anycourt having jurisdiction.          (b) The arbitrator(s) shall apply Oregon law to the merits of any dispute or claim, withoutreference to conflicts of law rules. The arbitration proceedings shall be governed by federalarbitration law and by the Rules, without reference to state arbitration law. Executive herebyconsents to the personal jurisdiction of the state and federal courts located in Oregon for anyaction or proceeding arising from or relating to this Agreement or relating to any arbitration inwhich the parties are participants.          (c) Executive understands that nothing in this Section modifies Executive’s at-will employmentstatus. Either Executive or the Company can terminate the employment relationship at any time,with or without Cause.PAGE 7– CHANGE OF CONTROL SEVERANCE AGREEMENT
 

 
          (d) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. EXECUTIVEUNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THISAGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATIONTHEREOF TO BINDING ARBITRATION, CONSTITUTES A WAIVER OF EXECUTIVE’S RIGHT TO A JURY TRIAL ANDRELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EXECUTIVERELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:               (i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESSAND IMPLIED; BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED;NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONALMISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMICADVANTAGE; AND DEFAMATION.               (ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR MUNICIPAL CONSTITUTION ORSTATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTSACT OF 1991, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACTOF 1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND THECALIFORNIA LABOR CODE (except for claims for underlying workers’ compensation benefits); and               (iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONS RELATING TO EMPLOYMENTOR EMPLOYMENT DISCRIMINATION.     12. Proprietary Information and Inventions Assignment Agreement. Executive shallexecute and comply with the terms of the Company’s standard Proprietary Information and InventionsAssignment Agreement.     13. Miscellaneous Provisions.          (a) Effect of Any Statutory Benefits. If any severance benefits are required to bepaid to the Executive upon termination of employment with the Company as a result of anyrequirement of law or any governmental entity in any applicable jurisdiction, the aggregate amountpayable pursuant to Section 4 hereof shall be reduced by such amount.          (b) Effect of Standard Company Policy or Other Agreements. To the extent that anyseverance benefits or payments are required to be paid to the Executive upon termination ofemployment with the Company as a result of any standard Company policy or other existingagreement(s), Executive shall be entitled to the most favorable of any given benefit (e.g., cash,option vesting, health benefits) available under any one such source, but shall not be entitledalso to cumulate the same kind of benefit from multiple agreements or policies.PAGE 8– CHANGE OF CONTROL SEVERANCE AGREEMENT
 

 
          (c) No Duty to Mitigate. The Executive shall not be required to mitigate the amountof any payment contemplated by this Agreement, nor shall any such payment be reduced by anyearnings that the Executive may receive from any other source.          (d) Waiver. No provision of this Agreement may be modified, waived or dischargedunless the modification, waiver or discharge is agreed to in writing and signed by the Executiveand by an authorized officer of the Company (other than the Executive). No waiver by either partyof any breach of, or of compliance with, any condition or provision of this Agreement by the otherparty shall be considered a waiver of any other condition or provision or of the same condition orprovision at another time.          (e) Integration. This Agreement and any agreements referenced herein represent theentire agreement and understanding between the parties as to the subject matter herein andcollectively supersede all prior or contemporaneous agreements, whether written or oral, withrespect to the same subject matter, *provided that*, for clarification purposes, this Agreement shallnot affect any agreements between the Company and Executive regarding intellectual property mattersor confidential information of the Company.          (f) Choice of Law. The validity, interpretation, construction and performance of thisAgreement shall be governed by the internal substantive laws, but not the conflicts of law rules,of the State of Oregon.          (g) Severability. The invalidity or unenforceability of any provision or provisionsof this Agreement shall not affect the validity or enforceability of any other provision hereof,which shall remain in full force and effect.          (h) Employment Taxes. All payments made pursuant to this Agreement shall be subjectto withholding of applicable income and employment taxes.          (i) Counterparts. This Agreement may be executed in counterparts, each of which shallbe deemed an original, but both of which together will constitute one and the same instrument.     IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of theCompany by its duly authorized officer, as of the day and year first above written.       **Pixelworks, Inc.**   **Executive**         By: /s/ Bruce Walicek              Bruce Walicek, CEO   /s/ Tzoyao Chan Tzoyao Chan  PAGE 9– CHANGE OF CONTROL SEVERANCE AGREEMENT