**Exhibit 10.13****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 Michael Yonker (the “Executive”) and Pixelworks, Inc., anOregon corporation (the “Company”). Certain capitalized terms used in this Agreement are definedin Section 1 below.R E C I T A L S     A. The Company also is undergoing a substantial reorganization that includes moving andconsolidating a variety of functions, closing certain sites, and bringing up lead competence inother sites for key company functions.     B. Through the period of organizational transition, Company will particularly rely onExecutive’s knowledge of the organization and its people, as well as his organizational andexecutive skills, to achieve the expense reductions and other benefits the Company seeks to achievefor shareholders. Company wishes to provide Executive with additional incentives for fulfillingthe 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 havethe following meanings:          (a) Cause. “Cause” shall mean any one or more of the following: (i) a material actof dishonesty, fraud, or misconduct by the Executive that is in connection with Executive’sresponsibilities as an Executive of the Company; (ii) Executive’s commission of acts constituting afelony which the Board reasonably believes has had or will have a material detrimental effect onthe Company’s reputation or business; or (iii) repeated willful failure by the Executive to performExecutive’s duties as an employee of the Company after there has been delivered to the Executive awritten demand for performance from the Company which describes the basis for the Company’s beliefthat the Executive has not substantially performed Executive’s duties and had a 30-day opportunityto cure, no cure having been made.          (b) Change of Control. “Change of Control” shall mean the occurrence of any of thefollowing 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 Companywith any other corporation, or of a subsidiary of the Company with any other corporation, otherthan a merger or consolidation which would result in effective voting control over the votingsecurities of the Company outstanding immediately prior thereto continuing to represent (either byremaining outstanding or by being converted into votingPAGE 1 — Transition Employment Agreement (Michael Yonker)
 

 
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 reduction of the Executive’s duties, position orresponsibilities; (ii) without the Executive’s express written consent, a reduction by the Companyof the Executive’s base salary; (iii) without the Executive’s express written consent, theimposition 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; or (iv) the failureof the Company to obtain the assumption of this Agreement by any successors contemplated in Section8 below.          (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) Retention Pay. The “Retention Pay” is the sum defined on Exhibit A hereto,payable as provided in this Agreement.          (f) Termination Date. “Termination Date” shall mean the effective date of any noticeof termination delivered by one party to the other hereunder.          (g) Transition End Date. “Transition End Date” shall be the Transition End Datespecified on Exhibit A hereto.     2. 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. Company orExecutive may terminate this Agreement by written notice pursuant to Section 10(b) hereof. If theExecutive’s employment terminates for any reason, the Executive shall not be entitled to anypayments, benefits, damages, awards or compensation other than as providedPAGE 2 — Transition Employment Agreement (Michael Yonker)
 

 
by this Agreement, or as may otherwise be established under the Company’s then existingemployee 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 throughthe Transition End Date, unless earlier terminated as provided herein. With respect to any GoodReason Event occurring on or before the Transition End Date and as to which the relevant timeperiods have not expired as of the Transition End Date, this Agreement shall terminate on theexpiration of all relevant time periods arising therefrom. All benefits accrued as of thetermination date of this Agreement shall remain due and payable, and dispute resolution provisionsof this Agreement shall survive for purposes of enforcing rights to benefits.     4. Retention Pay on Transition End Date. Provided the Executive signs the release ofclaims pursuant to Section 9 hereof, and following the expiration of any waiver period applicableto the release of claims, and provided the Executive is employed by the Company on the TransitionEnd Date, Company will pay Executive the Retention Pay (less applicable withholding) on theTransition End Date.     5. Transition Termination Benefits. Upon the Termination Date, provided theExecutive’s employment has ended as a result of an Involuntary Termination and provided theExecutive signs the release of claims pursuant to Section 9 hereof, and following the expiration ofany waiver period applicable to the release of claims, Executive shall be entitled to the followingbenefits, 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 theRetention Pay.          (b) Option Acceleration if on Change of Control. If the Termination Date is withintwelve (12) months after a Change of Control, all stock options granted by the Company to theExecutive prior to the Change of Control, and that absent the Involuntary Termination would havebecome exercisable during the twelve months immediately following the Change of Control, shall ifnot already vested and exercisable accelerate and become vested and exercisable, and all stocksubject to a right of repurchase by the Company (or its successor) that was purchased prior to theChange of Control shall have such right of repurchase lapse with respect to that number of shareswhich would have had such right of repurchase lapse under the applicable agreement within twelve(12) months following the date of Change of Control as if the Executive had remained employedthrough such date.          (c) Medical Continuation. Executive’s insured group medical and dental benefits willcontinue to be effective through the later of Executive’s Termination Date or the Transition EndDate.          (d) COBRA Extension. Company will pay all COBRA premiums for an extension of COBRAfor an additional twelve months, tacked on to the end of any other coverage period owing toExecutive hereunder.     6. 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 anyPAGE 3 — Transition Employment Agreement (Michael Yonker)
 

 
unpaid base salary due for periods prior to the Termination Date; (ii) the Company shall paythe 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 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.     7. 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.     Unless the Company and the Executive otherwise agree in writing, any determination requiredunder this section shall be made in writing by the Company’s independent public accountants (the“Accountants”), whose determination shall be conclusive and binding upon the Executive and theCompany for all purposes. For purposes of making the calculations required by this section, theAccountants may make reasonable assumptions and approximations concerning applicable taxes and mayrely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999of the Code. The Company and the Executive shall furnish to the Accountants such information anddocuments as the Accountants may reasonably request in order to make a determination under thissection. The Company shall bear all costs the Accountants may reasonably incur in connection withany calculations contemplated by this section.     8. 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.PAGE 4 — Transition Employment Agreement (Michael Yonker)
 

 
          (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.     9. Execution of Release Agreement upon Termination. As a condition of entering intothis Agreement and receiving the benefits under Sections 4 or 5 of this Agreement, the Executiveshall within such time period as required by the Company, execute and not revoke a general releaseof claims against the Company in form satisfactory to the Company.     10. Notices.          (a) General. 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.          (b) Notice of Termination; Effective Date.               (i) By Company. If the Company terminates Executive’s employment, to be effective thetermination must be communicated by a written notice of termination to Executive delivered notmore than thirty days before the Termination Date, which notice identifies the Termination Date.If the Company claims Cause, the Company’s notice hereunder shall set forth in reasonable detailthe facts and circumstances claimed to provide a basis for “for Cause” termination.               (ii) By Executive. If the Executive voluntarily (and not for Good Reason) terminatesExecutive’s employment, the termination must be communicated by a written notice of termination toCompany, which notice identifies the Termination Date. A voluntary termination will be effective onthe identified Termination Date. If Executive wishes to terminate his employment for Good Reason,he must give a written Notice of Good Reason Termination within thirty days next following the GoodReason Event. His Notice of Good Reason Termination must (x) identify the Good Reason Event andits date; (y) invite the Company to reverse the Good Reason Event, and (z) state the Executive’sintention to terminate his employment for Good Reason as of a Termination Date no earlier than tenand no more than thirty days following the date of the Notice of Good Reason Termination unless theCompany reverses the Good Reason Event. A Termination for Good Reason will be effective on theTermination Date stated in the Notice of Good Reason Termination, unless before that date theCompany has reversed the Good Reason Event and provided the Executive with written confirmationthat it has done so.     11. Arbitration.PAGE 5 — Transition Employment Agreement (Michael Yonker)
 

 
          (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.          (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 STATUTE, INCLUDING,BUT NOT LIMITED TO, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THEAGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIRLABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION 201, *etseq*; andPAGE 6 — Transition Employment Agreement (Michael Yonker)
 

 
               (iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONS RELATING TO EMPLOYMENTOR EMPLOYMENT DISCRIMINATION.     12. Miscellaneous Provisions.          (a) Effect of Any Statutory Benefits. To the extent that any severance benefits arerequired to be paid to the Executive upon termination of employment with the Company as a result ofany requirement of law or any governmental entity in any applicable jurisdiction, the aggregateamount payable pursuant to Section 5 hereof shall be reduced by such amount.          (b) Effect of Standard Company Policy. To the extent that any severance benefits arerequired to be paid to the Executive upon termination of employment with the Company as a result ofany standard Company policy, Executive shall be entitled to the greater of benefits available undersuch policy or under this Agreement, but not both.          (c) Effect of Standing Severance Agreement. To the extent that any cash severancebenefits are provided for the Executive under any agreement between Executive and the Company,those benefits will be paid in addition to the retention benefits payable hereunder.          (d) 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.          (e) 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.          (f) 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.          (g) 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.          (h) 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.PAGE 7 — Transition Employment Agreement (Michael Yonker)
 

 
          (i) Employment Taxes. All payments made pursuant to this Agreement shall be subjectto withholding of applicable income and employment taxes.          (j) 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.       COMPANY: PIXELWORKS, INC.         By: /s/ Frank Gill            Title: Lead Director         EXECUTIVE: /s/ Michael Yonker       Michael YonkerPAGE 8 — Transition Employment Agreement (Michael Yonker)
 

 
EXHIBIT A