Document:

Exhibit 10.3

 

PIXELWORKS,
INC.

 

2000 EMPLOYEE
STOCK PURCHASE PLAN

 

As Amended

 

The following constitute
the provisions of the 2000 Employee Stock Purchase Plan of Pixelworks, Inc., as
amended

 

1.                                       Purpose. 
The purpose of the Plan is to provide employees of the Company and its
Designated Subsidiaries with an opportunity to purchase Common Stock of the
Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an “Employee Stock Purchase Plan” under
Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that
section of the Code.

 

2.                                       Definitions.

 

a.                                       “Board” shall mean the Board of
Directors of the Company.

 

b.                                      “Code” shall mean the Internal
Revenue Code of 1986, as amended.

 

c.                                       “Common Stock” shall mean the common
stock of the Company.

 

d.                                      “Company” shall mean Pixelworks,
Inc., an Oregon corporation, and any Designated Subsidiary of the Company.

 

e.                                       “Compensation” shall mean all base
straight time gross earnings and commissions, but exclusive of payments for
overtime, shift premium, incentive compensation, incentive payments, bonuses
and other compensation.

 

f.                                         “Designated Subsidiary” shall mean
any Subsidiary which has been designated by the Board from time to time in its
sole discretion as eligible to participate in the Plan.

 

g.                                      “Employee” shall mean any individual
who is an Employee of the Company for tax purposes whose customary employment
with the Company is at least twenty (20) hours per week and more than five (5)
months in any calendar year. For purposes of the Plan, the employment
relationship shall be treated as continuing intact while the individual is on
sick leave or other leave of absence approved by the Company. Where the period
of leave exceeds 90 days and the individual’s right to re-employment is not
guaranteed either by statute or by contract, the employment relationship shall
be deemed to have terminated on the 91st day of such leave.

 

h.                                      “Enrollment Date” shall mean the
first Trading Day of each Offering Period.

 

i.                                          “Exercise Date” shall mean the last
Trading Day of each Purchase Period.

 

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j.                                          “Fair Market Value” shall mean, as
of any date, the value of Common Stock determined as follows:

 

(1)                                  If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day on or before the date of
such determination, as reported in The Wall Street Journal or such other source
as the Board deems reliable;

 

(2)                                  If the Common Stock is regularly
quoted by a recognized securities dealer but selling prices are not reported,
its Fair Market Value shall be the mean of the closing bid and asked prices for
the Common Stock for the last quotation day on or before the date of such
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable;

 

(3)                                  In the absence of an established
market for the Common Stock, the Fair Market Value thereof shall be determined
in good faith by the Board; or

 

(4)                                  For purposes of the Enrollment Date
of the first Offering Period under the Plan, the Fair Market Value shall be the
initial price to the public as set forth in the final prospectus included
within the registration statement in Form S-1 filed with the Securities and
Exchange Commission for the initial public offering of the Company’s Common
Stock (the “Registration Statement”).

 

k.                                       “Offering Periods” shall mean the
periods of approximately six (6) months during which an option granted pursuant
to the Plan may be exercised, commencing on the first Trading Day on or after
February 1 and August 1 of each year and terminating on the last
Trading Day in the periods ending six months later, provided, however, that (i)
the first Offering Period under the Plan shall commence with the first Trading
Day on or after the date on which the Securities and Exchange Commission
declares the Company’s Registration Statement effective and ending on the last
Trading Day on or before January 31, 2002; and (ii) that with respect to
any option granted pursuant to the Plan on or before March 9, 2004,
“Offering Periods” shall mean the periods of approximately twenty-four (24)
months during which such option may be exercised, commencing on the first
Trading Day on or after February 1 and August 1 of each year and
terminating on the last Trading Day in the periods ending twenty-four months later.
The duration and timing of Offering Periods may be changed pursuant to
Section 4 of this Plan.

 

l.                                          “Plan” shall mean this 2000 Employee
Stock Purchase Plan.

 

m.                                    “Purchase Period” shall mean the
approximately six month period commencing after one Exercise Date and ending
with the next Exercise Date, except that the first Purchase Period of any
Offering Period shall commence on the Enrollment Date and end with the next
Exercise Date.

 

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n.                                      “Purchase Price” shall mean 85% of
the Fair Market Value of a share of Common Stock on the Enrollment Date or on
the Exercise Date, whichever is lower; provided however, that the Purchase
Price may be adjusted by the Board pursuant to Section 20.

 

o.                                      “Reserves” shall mean the number of
shares of Common Stock covered by each option under the Plan which have not yet
been exercised and the number of shares of Common Stock which have been
authorized for issuance under the Plan but not yet placed under option.

 

p.                                      “Subsidiary” shall mean a
corporation, domestic or foreign, of which not less than 50% of the voting
shares are held by the Company or a Subsidiary, whether or not such corporation
now exists or is hereafter organized or acquired by the Company or a
Subsidiary.

 

q.                                      “Trading Day” shall mean a day on
which national stock exchanges and the Nasdaq System are open for trading.

 

3.                                       Eligibility.

 

a.                                       Any Employee who shall be employed
by the Company on a given Enrollment Date shall be eligible to participate in
the Plan.

 

b.                                      Any provisions of the Plan to the
contrary notwithstanding, no Employee shall be granted an option under the Plan
(i) to the extent that, immediately after the grant, such Employee (or any
other person whose stock would be attributed to such Employee pursuant to Section 424(d)
of the Code) would own capital stock of the Company and/or hold outstanding
options to purchase such stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent that his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the fair market value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.

 

4.                                       Offering Periods. The Plan shall be implemented by
consecutive, overlapping Offering Periods with a new Offering Period commencing
on the first Trading Day on or after February 1 and August 1 each
year, or on such other date as the Board shall determine, and continuing
thereafter until terminated in accordance with Section 20 hereof,
provided, however, that the first Offering Period under the Plan shall commence
with the first Trading Day on or after the date on which the Securities and
Exchange Commission declares the Company’s Registration Statement effective and
ending on the last Trading Day on or before January 31, 2002. The Board
shall have the power to change the duration of Offering Periods (including the
commencement dates thereof) with respect to future offerings without
shareholder approval if such change is announced at least five (5) days prior to
the scheduled beginning of the first Offering Period to be affected thereafter.

 

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5.                                       Participation.

 

a.                                       An eligible Employee may become a
participant in the Plan by completing a subscription agreement authorizing
payroll deductions in the form of Exhibit A to this Plan and filing it with the
Company’s payroll office prior to the applicable Enrollment Date.

 

b.                                      Payroll deductions for a participant
shall commence on the first payroll following the Enrollment Date and shall end
on the last payroll in the Offering Period to which such authorization is
applicable, unless sooner terminated by the participant as provided in
Section 10 hereof.

 

6.                                       Payroll Deductions.

 

a.                                       At the time a participant files his
or her subscription agreement, he or she shall elect to have payroll deductions
made on each pay day during the Offering Period in one percent (1%) increments
of not less than two percent (2%) or greater than ten percent (10%) of the
Compensation which he or she receives on each pay day during the Offering
Period.

 

b.                                      All payroll deductions made for a
participant shall be credited to his or her account under the Plan and shall be
withheld in whole percentages only. A participant may not make any additional
payments into such account.

 

c.                                       A participant may discontinue his or
her participation in the Plan as provided in Section 10 hereof, or may
increase or decrease the rate of his or her payroll deductions during the
Offering Period by completing or filing with the Company a new subscription
agreement authorizing a change in payroll deduction rate. The Board may, in its
discretion, limit the number of participation rate changes during any Offering
Period. The change in rate shall be effective with the first full payroll period
following five (5) business days after the Company’s receipt of the new
subscription agreement unless the Company elects to process a given change in
participation more quickly. A participant’s subscription agreement shall remain
in effect for successive Offering Periods unless terminated as provided in
Section 10 hereof.

 

d.                                      Notwithstanding the foregoing, to
the extent necessary to comply with Section 423(b) (8) of the Code and
Section 3(b) hereof, a participant’s payroll deductions may be decreased to
zero percent (0%) at any time during a Purchase Period. Payroll deductions
shall recommence at the rate provided in such participant’s subscription
agreement at the beginning of the first Purchase Period which is scheduled to
end in the following calendar year, unless terminated by the participant as
provided in Section 10 hereof.

 

e.                                       At the time the option is exercised,
in whole or in part, or at the time some or all of the Company’s Common Stock
issued under the Plan is disposed of, the participant must make adequate
provision for the Company’s federal, state, or other tax withholding
obligations, if any, which arise upon the exercise of the option or the
disposition of the Common Stock. At any time, the Company may, but shall not be
obligated to, withhold from the participant’s compensation the amount necessary
for the Company to meet applicable withholding obligations, including any
withholding required to make available to the Company any tax deductions or
benefits attributable to sale or early disposition of Common Stock by the
Employee.

 

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7.                                       Grant of Option. 
On the Enrollment Date of each Offering Period, each eligible Employee
participating in such Offering Period shall be granted an option to purchase on
each Exercise Date during such Offering Period (at the applicable Purchase
Price) up to a number of shares of the Company’s Common Stock determined by
dividing such Employees payroll deductions accumulated prior to such Exercise
Date and retained in the Participant’s account as of the Exercise Date by the
applicable Purchase Price; provided that in no event shall an Employee be
permitted to purchase during each Purchase Period more than two thousand five
hundred (2,500) shares of the Company’s Common Stock (subject to any adjustment
pursuant to Section 19), and provided further that such purchase shall be
subject to the limitations set forth in Sections 3(b), 8(b) and 12 hereof. The
Board may, for future Offering Periods, increase or decrease, in its absolute
discretion, the maximum number of shares of the Company’s Common Stock an
Employee may purchase during each Purchase Period of such Offering Period.
Exercise of the option shall occur as provided in Section 8 hereof, unless
the participant has withdrawn pursuant to Section 10 hereof. The option
shall expire on the last day of the Offering Period.

 

8.                                       Exercise of Option.

 

a.                                       Unless a participant withdraws from
the Plan as provided in Section 10 hereof, his or her option for the
purchase of shares shall be exercised automatically on the Exercise Date, and
the maximum number of full shares subject to option shall be purchased for such
participant at the applicable Purchase Price with the accumulated payroll
deductions in his or her account; provided that in no event shall an Employee
be permitted to purchase during each Purchase Period more than two hundred
percent (200%) of the number of shares that the Employee could purchase if the
Purchase Price was limited to eight-five percent (85%) of the Fair Market Value
of a share of Common Stock on the Enrollment Date. No fractional shares shall
be purchased; any payroll deductions accumulated in a participant’s account
which are not sufficient to purchase a full share shall be retained in the
participant’s account for the subsequent Purchase Period or Offering Period,
subject to earlier withdrawal by the participant as provided in Section l0
hereof. Any other monies leftover in a participant’s account after the Exercise
Date shall be returned to the participant. During a participant’s lifetime, a
participant’s option to purchase shares hereunder is exercisable only by him or
her.

 

b.                                      If the Board determines that, on a
given Exercise Date, the number of shares with respect to which options are to
be exercised may exceed (i) the number of shares of Common Stock that were
available for sale under the Plan on the Enrollment Date of the applicable
Offering Period, or (ii) the number of shares available for sale under the Plan
on such Exercise Date, the Board may in its sole discretion (x) provide that
the Company shall make a pro rata allocation of the shares of Common Stock
available for purchase on such Enrollment Date or Exercise Date, as applicable,
in as uniform a manner as shall be practicable and as it shall determine in its
sole discretion to be equitable among all participants exercising options to
purchase Common Stock on such Exercise Date, and continue all Offering Periods
then in effect, or (y) provide that the Company shall make a pro rata
allocation of the shares available for purchase on such Enrollment Date or
Exercise Date, as applicable, in as uniform a manner as shall be practicable
and as it shall determine in its sole discretion to be equitable among all
participants exercising options to purchase Common Stock on such Exercise Date,
and terminate any or all Offering Periods then in effect pursuant to
Section 20 hereof. The Company may make pro rata allocation of the shares
available on the Enrollment Date of any applicable Offering

 

5

 

Period
pursuant to the preceding sentence, notwithstanding any authorization of
additional shares for issuance under the Plan by the Company’s shareholders
subsequent to such Enrollment Date.

 

9.                                       Delivery. 
As promptly as practicable after each Exercise Date on which a purchase
of shares occurs, the Company shall arrange the delivery to each participant,
as appropriate, of a certificate representing the shares purchased upon
exercise of his or her option.

 

10.                                 Withdrawal.

 

a.                                       A participant may withdraw all but
not less than all the payroll deductions credited to his or her account and not
yet used to exercise his or her option under the Plan at any time by giving
written notice to the Company in the form of Exhibit B to this Plan. All of the
participant’s payroll deductions credited to his or her account shall be paid
to such participant promptly after receipt of notice of withdrawal and such
participant’s option for the Offering Period shall be automatically terminated,
and no further payroll deductions for the purchase of shares shall be made for
such Offering Period. If a participant withdraws from an Offering Period,
payroll deductions shall not resume at the beginning of the succeeding Offering
Period unless the participant delivers to the Company a new subscription
agreement.

 

b.                                      A participant’s withdrawal from an
Offering Period shall not have any effect upon his or her eligibility to
participate in any similar plan which may hereafter be adopted by the Company
or in succeeding Offering Periods which commence after the termination of the
Offering Period from which the participant withdraws.

 

11.                                 Termination of Employment.

 

Upon a participant’s
ceasing to be an Employee, for any reason, he or she shall be deemed to have elected
to withdraw from the Plan and the payroll deductions credited to such
participant’s account during the Offering Period but not yet used to exercise
the option shall be returned to such participant or, in the case of his or her
death, to the person or persons entitled thereto under Section 15 hereof,
and such participant’s option shall be automatically terminated. The preceding
sentence notwithstanding, a participant who receives payment in lieu of notice
of termination of employment shall be treated as continuing to be an Employee
for the participant’s customary number of hours per week of employment during
the period in which the participant is subject to such payment in lieu of
notice.

 

12.                                 Interest. 
No interest shall accrue on the payroll deductions of a participant in
the Plan.

 

13.                                 Stock.

 

a.                                       Subject to adjustment upon changes
in capitalization of the Company as provided in Section 19 hereof, the
maximum number of shares of the Company’s Common Stock which shall be made
available for sale under the Plan shall be one million (1,000,000) shares, plus
an annual increase to be added on the first day of the Company’s fiscal year
beginning in 2005 equal to the lesser of (i) 900,000 shares of Common Stock;
(ii) the number of shares of Common Stock issued pursuant to the Plan during
the immediately preceding fiscal year of the Company, (iii) two percent (2%) of
the outstanding shares of Common Stock on the first day of

 

6

 

the Company’s
fiscal year for which the increase is being made or (iv) a lesser amount
determined by the Board.

 

b.                                      The participant shall have no
interest or voting right in shares covered by his option until such option has
been exercised.

 

c.                                       Shares to be delivered to a
participant under the Plan shall be registered in the name of the participant
or in the name of the participant and his or her spouse.

 

14.                                 Administration. 
The Plan shall be administered by the Board or a committee of members of
the Board appointed by the Board. The Board or its committee shall have full
and exclusive discretionary authority to construe, interpret and apply the
terms of the Plan, to determine eligibility and to adjudicate all disputed
claim filed under the Plan. Every finding, decision and determination made by
the Board or its committee shall to the full extent permitted by law, be final
and binding upon all parties.

 

15.                                 Designation of Beneficiary.

 

a.                                       A participant may file a written
designation of a beneficiary who is to receive any shares and cash, if any,
from the participant’ s account under the Plan in the event of such
participant’s death subsequent to an Exercise Date on which the option is
exercised but prior to delivery to such participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant’s account under the Plan in the event
of such participant’s death prior to exercise of the option. If a participant
is married and the designated beneficiary is not the spouse, spousal consent
shall be required for such designation to be effective.

 

b.                                      Such designation of beneficiary may
be changed by the participant at any time by written notice. In the event of
the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant’s
death, the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the
Company, in its discretion, may deliver such shares and/or cash to the spouse
or to any one or more dependents or relatives of the participant or if no
spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.

 

16.                                 Transferability. 
Neither payroll deductions credited to a participant’s account nor any
rights with regard to the exercise of an option or to receive shares under the
Plan may be assigned, transferred, pledged or otherwise disposed of in any way
(other than by will, the laws of descent and distribution or as provided in
Section 15 hereof) by the participant. Any such attempt at assignment,
transfer, pledge or other disposition shall be without effect except that the
Company may treat such act as an election to withdraw funds from an Offering
Period in accordance with Section 10 hereof.

 

17.                                 Use of Funds. 
All payroll deductions received or held by the Company under the Plan
may be used by the Company for any corporate purpose, and the Company shall not
be obligated to segregate such payroll deductions.

 

7

 

18.                                 Reports. 
Individual accounts shall be maintained for each participant in the
Plan. Statements of account shall be given to participating Employees at least
annually, which statements shall set forth the amounts of payroll deductions,
the Purchase Price, the number of shares purchased and the remaining cash
balance, if any.

 

19.                                 Adjustments Upon Changes in
Capitalization, Dissolution, Liquidation, Merger of Asset Sale.

 

a.                                       Changes in Capitalization. 
Subject to any required action by the shareholders of the Company, the
Reserves, the maximum number of shares each participant may purchase each
Purchase Period (pursuant to Section 7), as well as the price per share
and the number of shares of Common Stock covered by each option under the Plan
which has not yet been exercised shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of shares of Common Stock effected without receipt of consideration by
the Company, provided, however, that conversion of any convertible securities
of the Company shall not be deemed to have been “effected without receipt of
consideration.”  Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option.

 

b.                                      Dissolution or Liquidation.  
In the event of the proposed dissolution or liquidation of the Company,
the Offering Period then in progress shall be shortened by setting a new
Exercise Date (the “New Exercise Date”), and shall terminate immediately prior
to the consummation of such proposed dissolution or liquidation, unless
provided otherwise by the Board. The New Exercise Date shall be before the date
of the Company’s proposed dissolution or liquidation. The Board shall notify
each participant in writing, at least ten (10) business days prior to the New
Exercise Date, that the Exercise Date for the participant’s option has been
changed to the New Exercise Date and that the participant’s option shall be
exercised automatically on the New Exercise Date, unless prior to such date the
participant has withdrawn from the Offering Period as provided in
Section 10 hereof.

 

c.                                       Merger or Asset Sale.  In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, each outstanding
option shall be assumed or an equivalent option substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the
event that the successor corporation refuses to assume or substitute for the
option, any Purchase Periods then in progress shall be shortened by setting a
new Exercise Date (the “New Exercise Date”) and any Offering Periods then in
progress shall end on the New Exercise Date. The New Exercise Date shall be
before the date of the Company’s proposed sale or merger. The Board shall
notify each participant in writing, at least ten (10) business days prior to
the New Exercise Date, that the Exercise Date for the participant’s option has
been changed to the New Exercise Date and that the participant’s option shall
be exercised automatically on the New Exercise Date, unless prior

 

8

 

to such date
the participant has withdrawn from the Offering Period as provided in
Section 10 hereof.

 

20.                                 Amendment or Termination.

 

a.                                       The Board of Directors of the
Company may at any time and for any reason terminate or amend the Plan. Except
as provided in Section 19 hereof, no such termination can affect options
previously granted, provided that an Offering Period may be terminated by the
Board of Directors on any Exercise Date if the Board determines that the termination
of the Offering Period or the Plan is in the best interests of the Company and
its shareholders. Except as provided in Section 19 and this
Section 20 hereof, no amendment may make any change in any option
theretofore granted which adversely affects the rights of any participant. To
the extent necessary to comply with Section 423 of the Code (or any
successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain shareholder approval in such a manner
and to such a degree as required.

 

b.                                      Without shareholder consent and
without regard to whether any participant rights may be considered to have been
“adversely affected,” the Board (or its committee) shall be entitled to change
the Offering Periods, limit the frequency and/or number of changes in the
amount withheld during an Offering Period, establish the exchange ratio
applicable to amounts withheld in a currency other than U.S. dollars, permit
payroll withholding in excess of the amount designated by a participant in
order to adjust for delays or mistakes in the Company’s processing of properly
completed withholding elections, establish reasonable waiting and adjustment
periods and/or accounting and crediting procedures to ensure that amounts
applied toward the purchase of Common Stock for each participant properly
correspond with amounts withheld from the participant’s Compensation, and
establish such other limitations or procedures as the Board (or its committee)
determines in its sole discretion advisable which are consistent with the Plan.

 

c.                                       In the event the Board determines
that the ongoing operation of the Plan may result in unfavorable financial
accounting consequences, the Board may, in its discretion and, to the extent
necessary or desirable, modify or amend the Plan to reduce or eliminate such
accounting consequence including, but not limited to:

 

(1)                                  altering the Purchase Price for any
Offering Period including an Offering Period underway at the time of the change
in Purchase Price;

 

(2)                                  shortening any Offering Period so
that Offering Period ends on a new Exercise Date, including an Offering Period
underway at the time of the Board action; and

 

(3)                                  allocating shares.

 

Such modifications or
amendments shall not require stockholder approval or the consent of any Plan
participants.

 

21.                                 Notices. 
All notices or other communications by a participant to the Company
under or in connection with the Plan shall be deemed to have been duly given
when received in

 

9

 

the form
specified by the Company at the location, or by the person, designated by the
Company for the receipt thereof.

 

22.                                 Conditions Upon Issuance of Shares. 
Shares shall not be issued with respect to an option unless the exercise
of such option and the issuance and delivery of such shares pursuant thereto
shall comply with all applicable provisions of law, domestic or foreign,
including, without limitation, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

 

As a condition to the
exercise of an option, the Company may require the person exercising such
option to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present
intention to sell or distribute such shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
applicable provisions of law.

 

23.                                 Term of Plan. 
The Plan shall become effective upon the earlier to occur of its
adoption by the Board of Directors or its approval by the shareholders of the
Company. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 20 hereof

 

24.                                 Automatic Transfer to Low Price
Offering Period.  To the extent permitted by any applicable
laws, regulations, or stock exchange rules if the Fair Market Value of the
Common Stock on any Exercise Date in an Offering Period is lower than the Fair
Market Value of the Common Stock on the Enrollment Date of such Offering
Period, then all participants in such Offering Period shall be automatically
withdrawn from such Offering Period immediately after the exercise of their
option on such Exercise Date and automatically re-enrolled in the immediately
following Offering Period as of the first day thereof.

 

10

 

EXHIBIT A

 

PIXELWORKS,
INC.

 

2000 EMPLOYEE
STOCK PURCHASE PLAN

 

SUBSCRIPTION
AGREEMENT

 

	
   

  	
  Original Application

  	
  Enrollment Date:

  
	
   

  	
  Change in Payroll Deduction Rate

  	
   

  
	
   

  	
  Change of Beneficiary(ies)

  	
   

  

 

1.                                                                               
hereby elects to participate in the Pixelworks, Inc. 2000 Employee Stock
Purchase Plan (the “Employee Stock Purchase Plan”) and subscribes to purchase
shares of the Company’s Common Stock in accordance with this Subscription
Agreement and the Employee Stock Purchase Plan.

 

2.                                       I
hereby authorize payroll deductions from each paycheck in the amount of
             %
of my Compensation on each payday (from 2% to 10%) during the Offering Period
in accordance with the Employee Stock Purchase Plan. (Please note that no
fractional percentages are permitted.)

 

3.                                       I
understand that said payroll deductions shall be accumulated for the purchase
of shares of Common Stock at the applicable Purchase Price determined in accordance
with the Employee Stock Purchase Plan. I understand that if I do not withdraw
from an Offering Period, any accumulated payroll deductions will be used to
automatically exercise my option.

 

4.                                       I
have received a copy of the complete Employee Stock Purchase Plan. I understand
that my participation in the Employee Stock Purchase Plan is in all respects
subject to the terms of the Plan. I understand that my ability to exercise the
option under this Subscription Agreement is subject to shareholder approval of
the Employee Stock Purchase Plan.

 

5.                                       Shares
purchased for me under the Employee Stock Purchase Plan should be issued in the
name(s) of (Employee or Employee and Spouse only):

 

 

6.                                       I
understand that if I dispose of any shares received by me pursuant to the Plan
within 2 years after the Enrollment Date (the first day of the Offering Period
during which I purchased such shares) or one year after the Exercise Date, I
will be treated for federal income tax purposes as having received ordinary
income at the time of such disposition in an amount equal to the excess of the
fair market value of the shares at the time such shares were purchased by me
over the price which I paid for the shares. 
I agree to notify the
Company in writing within 30 days after the date of any disposition of my
shares (except when disposed of through ETrade) and I will make adequate
provision for Federal, state or other tax withholding obligations, if any,
which arise upon the

 

 

disposition of the Common Stock.  The Company may, but will not be obligated
to, withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to sale or early disposition
of Common Stock by me. If I dispose of such shares at any time after the
expiration of the 2-year and 1-year holding periods, I understand that I will
be treated for federal income tax purposes as having received income only at
the time of such disposition, and that such income will be taxed as ordinary
income only to the extent of an amount equal to the lesser of (1) the excess of
the fair market value of the shares at the time of such disposition over the
purchase price which I paid for the shares, or (2) 15% of the fair market value
of the shares on the first day of the Offering Period. The remainder of the
gain, if any, recognized on such disposition will be taxed as capital gain.

 

7.                                       I
hereby agree to be bound by the terms of the Employee Stock Purchase Plan. The
effectiveness of this Subscription Agreement is dependent upon my eligibility
to participate in the Employee Stock Purchase Plan.

 

8.                                       In
the event of my death, I hereby designate the following as my beneficiary(ies)
to receive all payments and shares due me under the Employee Stock Purchase
Plan:

 

	
  NAME: (Please print)

  	
   

  
	
   

  	
  (First)

  	
  (Middle)

  	
  (Last)

  

 

	
   

  	
   

  	
   

  
	
  Relationship

  
	
   

  
	
   

  	
   

  
	
   

  	
  (Address)

  
	
   

  	
   

  
	
  Employee’s Social Security Number:

  	
   

  
	
   

  
	
  Employee’s Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  
	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
  Signature of Employee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Spouse’s Signature (If beneficiary other than spouse)

  
						

 

 

EXHIBIT B

 

PIXELWORKS,
INC.

 

2000 EMPLOYEE
STOCK PURCHASE PLAN

 

NOTICE OF
WITHDRAWAL

 

The undersigned
participant in the Offering Period of the Pixelworks, Inc. 2000 Employee Stock
Purchase Plan which began on
                                            
        ,
20      (the “Enrollment Date”) hereby notifies the
Company that he or she hereby withdraws from the Offering Period. He or she
hereby directs the Company to pay to the undersigned as promptly as practicable
all the payroll deductions credited to his or her account with respect to such
Offering Period. The undersigned understands and agrees that his or her option
for such Offering Period will be automatically terminated. The undersigned
understands further that no further payroll deductions will be made for the
purchase of shares in the current Offering Period and the undersigned shall be
eligible to participate in succeeding Offering Periods only by delivering to
the Company a new Subscription Agreement.

 

	
   

  	
  Name and Address of Participant:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Date:Exhibit 10.1

 

AMENDMENT No. 1

TO

AMENDED AND RESTATED CREDIT AGREEMENT

 

This Amendment No. 1 to Amended and Restated
Credit Agreement, dated as of April 1, 2004 (the
“Amendment”), among FARGO ELECTRONICS, INC., a Delaware corporation (“Company”),
the financial institutions that are or may from time to time become parties
hereto (together with their respective successors and assigns, the “Banks”),
LASALLE BANK NATIONAL ASSOCIATION (in its individual capacity, “LaSalle”),
as Agent for the Banks and as the Issuing Bank, (the Banks, the Issuing Bank
and the Agent being collectively referred to herein as the “Lender Parties”) to
that certain Amended and Restated Credit Agreement dated as of
December 18, 2002, among the Company, LaSalle, in its capacities as Agent,
Issuing Bank, and as the sole Bank (the “Original Agreement”).

 

RECITALS:

 

A.                                   The
Company has requested that the Lender Parties amend certain Sections of
the Original Agreement.

 

B.                                     Subject
to the terms and conditions of this Amendment, the Lender Parties will agree to
the foregoing request of the Company.

 

NOW, THEREFORE, the
parties agree as follows:

 

1.                                       Defined Terms.  All capitalized terms used in this Amendment
shall, except where the context otherwise requires, have the meanings set forth
in the Original Agreement as amended hereby.

 

2.                                       Amendment.  The Original Agreement is hereby amended as
follows:

 

(a)                                  The definitions of “Cash
Equivalent Investment” and “Termination Date” appearing in Section 1
are amended in their respective entireties to read as follows:

 

“Cash Equivalent Investment means, at
any time, (a) any evidence of Debt, maturing not more than eighteen months
after such time, issued or guaranteed by the United States Government or any
agency thereof, (b) commercial paper, maturing not more than one year from the
date of issue, or corporate demand notes, in each case (unless issued by a Bank
or its holding company) rated at least A-l by Standard & Poor’s Ratings
Group or P-l by Moody’s Investors Service, Inc., (c) any deposit account, certificate
of deposit (or time deposits represented by such certificates of deposit) or
banker’s acceptance,

 

1

 

maturing not more than one year after such time, or overnight Federal
Funds transactions that are issued or sold by any Bank or its holding company
or by a commercial banking institution that is a member of the Federal Reserve
System and has a combined capital and surplus and undivided profits of not less
than $500,000,000 and (d) any repurchase agreement entered into with any Bank
(or other commercial banking institution of the stature referred to in clause
(c)) which (i) is secured by a fully perfected security interest in any
obligation of the type described in any of clauses (a) through (c)
and (ii) has a market value at the time such repurchase agreement is entered
into of not less than 100% of the repurchase obligation of such Bank (or other
commercial banking institution) thereunder.

 

Termination Date
means the earlier to occur of (a) April 1, 2005, as such stated date may
be extended from time to time pursuant to Section 2.6; or (b) such
other date on which the Commitments terminate pursuant to Section 6
or 12.”

 

(b)                                 Section 1
is further amended by (i) deleting the definitions of “Capital  Expenditures”
“Computation Period”, “Fixed Charge Coverage Ratio”, “Non-Use
Fee Rate” and “Total Debt to EBITDA Ratio” and (ii) inserting a new
definition of “Notice Date” in the appropriate alphabetical order to
read as follows:

 

“Notice Date – see Section 2.6.”

 

(c)                                  Section 2 is
amended by adding a new Section 2.6 to read as follows:

 

“2.6                         Modification
of Termination Date. The Banks agree that, unless (a) the Agent, on
behalf of the Banks, delivers to the Company, or (b) the Company delivers to
the Agent, a written non-renewal notice by December 15, of any year (the
“Notice Date”), commencing December 15, 2004, then the stated Termination
Date shall automatically be extended by a period of 364 days; provided, however,
that any such extension shall only become effective upon the execution and
delivery by the Company, the Agent and the Banks of an amendment to this
Agreement in the form provided by Agent, such form to be delivered to Company
by no later than the relevant Notice Date, and the satisfaction of all conditions
precedent set forth in such amendment.”

 

(d)                                 Section 5.1
is amended in its entirety to read as follows:

 

“5.1                         Intentionally
deleted.”

 

(e)                                  Sections 10.6.1,
10.6.2, and 10.6.3 are amended their respective entireties to read as
follows:

 

“10.6.1        Minimum EBITDA.  Not permit the Company’s EBITDA for any
Fiscal Quarter to be less than $150,000.00.

 

10.6.2              Intentionally
deleted.

 

2

 

10.6.3              Intentionally
deleted.”

 

(f)                                    The Pricing
Schedule attached to the Original Agreement is amended in its entirety to
conform to the form of Pricing Schedule (Amended/April, 2004) attached
hereto.

 

(g)                                 Exhibit B attached to
the Original Agreement is amended in its entirety to conform to the form of
Exhibit B (Amended/April, 2004) attached hereto.

 

3.                                       Conditions to Effectiveness.  This Amendment shall become effective on the
date (the “Effective Date”) when, and only when, the Agent shall have received:

 

(a)                                  Counterparts of this
Amendment executed by the Company and the Lender Parties; and

 

(b)                                 a Certificate of Good
Standing for the Company of recent date issued by the Secretary of State of the
state of Company’s incorporation and each other state required by the Agent.

 

4.                                       Representations and Warranties.  To induce the Lender Parties to enter into
this Amendment, the Company represents and warrants to the Lender Parties as
follows:

 

(a)                                  The execution,
delivery and performance by the Company of this Amendment and any other
documents to be executed and/or delivered by the Company in connection herewith
have been duly authorized by all necessary corporate action, do not require any
approval or consent of, or any registration, qualification or filing with, any
government agency or authority or any approval or consent of any other person
(including, without limitation, any stockholder), do not and will not conflict
with, result in any violation of or constitute any default under, any provision
of the Company’s articles of incorporation or bylaws, any agreement binding on
or applicable to the Company or any of the Company’s property, or any law or
governmental regulation or court decree or order, binding upon or applicable to
the Company or of any of the Company’s property and will not result in the
creation or imposition of any security interest or other lien or encumbrance in
or on any of its property pursuant to the provisions of any agreement
applicable to the Company or any of the Company’s property except pursuant to
the Loan Documents;

 

(b)                                 The representations
and warranties contained in the Original Agreement are true and correct as of
the date hereof as though made on that date except to the extent that such
representations and warranties relate solely to an earlier date;

 

(c)                                  No events have taken
place and no circumstances exist at the date hereof which would give the
Company the right to assert a defense, offset or counterclaim to any claim by
any Lender Party for payment of any obligation (monetary or otherwise) of
Company under the Amended and Restated Credit Agreement, any Note, or any other
Loan Document or any other document or instrument executed in connection
therewith and all Hedging Obligations owed to any Lender Party, in each case
howsoever created,

 

3

 

arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing, or due or to become due; and

 

(d)                                 The Original Agreement
as amended by this Amendment and the other Loan Documents to which the Company
is a party remain in full force and effect and are the legal, valid and binding
obligations of the Company and are enforceable in accordance with their
respective terms, subject to limitations as to enforceability which might
result from bankruptcy, insolvency, moratorium and other similar laws affecting
creditors’ rights generally and subject to limitations on the availability of
equitable remedies.

 

5.                                       Reference
to and Effect on the Loan Documents.

 

(a)                                  From and after the
date of this Amendment, each reference in the Original Agreement to “this
Agreement”, “hereunder”, “hereof”, “herein” or words of like import referring
to the Original Agreement, and each reference to the “Agreement”, “thereunder”,
“thereof”, “therein” or words of like import referring to the Original
Agreement in any other Loan Document shall mean and be a reference to the
Original Agreement as amended hereby.

 

(b)                                 The execution,
delivery and effectiveness of this Amendment shall not operate as a waiver of
any right, power or remedy of the any Lender Party under the Original Agreement
or any other Loan Document, nor constitute a waiver of any provision of the
Original Agreement or any such other Loan Document.

 

6.                                      Costs,
Expenses and Taxes.  The Company
agrees to pay on demand all reasonable costs and expenses of the Lender Parties
in connection with the preparation, reproduction, execution and delivery of
this Amendment and the other documents to be delivered hereunder or thereunder,
including their reasonable attorneys’ fees and legal expenses.  In addition, the Company shall pay any and
all stamp and other taxes and fees payable or determined to be payable in
connection with the execution and delivery, filing or recording of this
Amendment and the other instruments and documents to be delivered hereunder,
and agrees to save the Lender Parties harmless from and against any and all
liabilities with respect to, or resulting from, any delay in the Company’s
paying or omission to pay, such taxes or fees.

 

7.                                      Governing
Law.  This Amendment shall be
governed by and construed in accordance with the laws of the State of
Minnesota.

 

8.                                      Headings.  Section headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose.

 

9.                                      Counterparts.  This Amendment may be executed in separate
counterparts and by separate parties in separate counterparts, each of which
shall be an original and all of which taken together shall constitute one and
the same Amendment.

 

4

 

IN WITNESS WHEREOF, the
parties hereto have caused this Amendment to be executed by their respective
officers thereunto duly authorized as of the date first written above.

 

	
   

  	
  FARGO ELECTRONICS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul Stephenson

  	
   

  
	
   

  	
  Its:

  	
  Chief Financial Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Subscribed and sworn to before me

  	
   

  
	
  this 1st day of April, 2004.

  	
   

  
	
   

  	
   

  
	
  /s/ Vicki Lynn Bonadurer

  	
   

  	
   

  
	
  Notary Public

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LASALLE BANK NATIONAL ASSOCIATION, as

  Agent, Issuing Bank and as the sole Bank

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Gatzlaff

  	
   

  
	
   

  	
  Its:

  	
  Senior Vice President

  	
   

  
					

 

5

 

EXHIBIT A TO FIRST AMENDMENT

 

PRICING SCHEDULE (Amended/April, 2004)

 

On and after April 1, 2004, the Eurodollar Margin, the Base Rate
Margin and the LC Fee Rate shall be equal to the applicable rate per annum set
forth in the table below:

 

	
  Eurodollar

  Margin

  	
   

  	
  Base Rate

  Margin

  	
   

  	
  LC Fee

  Rate

  	
   

  
	
  1.50

  	
  %

  	
  0.00

  	
  %

  	
  1.50

  	
  %

  

 

 

EXHIBIT B TO FIRST AMENDMENT

 

Form of Compliance Certificate
(Amended/April, 2004)

 

To:                                                                              LaSalle
Bank National Association, as Agent

 

Please refer to the Amended and Restated Credit Agreement dated as of
December 18, 2002 (as amended or otherwise modified from time to time, the
“Credit Agreement”) among Fargo Electronics, Inc. (the “Company”),
various financial institutions and LaSalle Bank National Association, as
agent.  Terms used but not otherwise
defined herein are used herein as defined in the Credit Agreement.

 

3.                                       I                                            Reports.  Enclosed herewith is a copy of the [annual
audited/quarterly/monthly] report of the Company as at
                       ,
         (the “Computation Date”),
which report fairly presents in all material respects the financial condition
and results of operations [(subject to the absence of footnotes and to normal
year-end adjustments)] of the Company as of the Computation Date and has been
prepared in accordance with GAAP consistently applied.

 

4.                                       II                                        Financial
Tests.  The Company hereby certifies
and warrants to you that the following is a true and correct computation as at
the Computation Date of the following ratios and/or financial restrictions
contained in the Credit Agreement:

 

  A.                              Section 10.6.1 - Minimum EBITDA (computed
for the Fiscal Quarter ending on the Computation Date)

 

	
  1.

  	
  Consolidated Net Income

  	
   

  	
  $

  	
   

  
	
  2.

  	
  Plus:

  	
  Interest Expense

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
  Income tax expense

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
  Depreciation

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
  Amortization

  	
   

  	
  $

  	
   

  
	
  3.

  	
  Total of (1) plus (2) (EBITDA)

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum required

  	
   

  	
  $

  	
  150,000.00

  	
   

  
							

 

 

The Company further certifies to you that no Event of Default or
Unmatured Event of Default has occurred and is continuing.

 

IN WITNESS WHEREOF, the Company has caused this Certificate to be
executed and delivered by its duly authorized officer on
                      ,
        .

 

	
   

  	
  Fargo Electronics, Inc.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Title

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