PIXELWORKS, INC. TRANSITION EMPLOYMENT AGREEMENT
Exhibit 10.11
This Agreement (the “Agreement”) is made and entered into effective as of December 12, 2006
(the “Effective Date”), by and between Xxxx Xxxxx (the “Executive”) and Pixelworks, Inc., an Oregon
corporation (the “Company”). Certain capitalized terms used in this Agreement are defined in
Section 1 below.
R E C I T A L S
A. The Company’s founding CEO has recently decided he will step down as CEO of the Company,
effective December 31, 2006. The Company’s Board of Directors (“Board”) consequently expects to
initiate a search for a new CEO.
B. The Company wishes Executive to serve as Interim CEO from January 1, 2007 until a permanent
CEO is identified and hired. Executive is willing to serve in this interim role, on the
understanding that he will hold and exercise the full authority as CEO during this period.
Executive also understands that he may elect to be a candidate for the full time position if he so
chooses, but has received no assurances that he will be selected, and has sought none.
C. The Company also is undergoing a substantial reorganization that includes moving and
consolidating a variety of functions, closing certain sites, and bringing up lead competence in
other sites for key company functions.
D. Through both the Company’s leadership transition period and the period of organizational
transition, Company will particularly rely on Executive’s knowledge of the organization and its
people, as well as his organizational and executive skills, to achieve the expense reductions and
other benefits the Company seeks to achieve for shareholders and to assure an excellent transition
to the Company’s new executive leadership. Company wishes to provide Executive with additional
incentives for fulfilling the 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 have
the following meanings:
(a) Cause. “Cause” shall mean any one or more of the following: (i) a material act
of dishonesty, fraud, or misconduct by the Executive that is in connection with Executive’s
responsibilities as an Executive of the Company; (ii) Executive’s commission of acts constituting a
felony which the Board reasonably believes has had or will have a material detrimental effect on
the Company’s reputation or business; or (iii) repeated willful failure by the Executive to perform
Executive’s duties as an employee of the Company after there has been
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delivered to the Executive a written demand for performance from the Company which describes
the basis for the Company’s belief that the Executive has not substantially performed Executive’s
duties and had a 30-day opportunity to cure, no cure having been made.
(b) Change of Control. “Change of Control” shall mean the occurrence of any of the
following 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 Company
with any other corporation, or of a subsidiary of the Company with any other corporation, other
than a merger or consolidation which would result in effective voting control over the voting
securities of the Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the surviving entity) more
than fifty percent (50%) of the total voting power represented by the voting securities of the
Company or such surviving entity outstanding immediately after such merger or consolidation;
(ii) the approval by the shareholders of the Company of a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or substantially all of
the Company’s assets;
(iii) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) becoming the “beneficial owner” (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of the Company representing 50% or more of the
total 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 of
the 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 either
identified 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 or
responsibilities; (ii) without the Executive’s express written consent, a reduction by the 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 a
location more than fifty (50) miles from the Executive’s current work location; or (iv) the failure
of the Company to obtain the assumption of this Agreement by any successors contemplated in Section
8 below.
(d) Involuntary Termination. “Involuntary Termination” shall mean (i) any termination
of the Executive’s employment by the Company which is not effected for valid Cause; or (ii) any
termination 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.
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(f) Termination Date. “Termination Date” shall mean the effective date of any notice
of termination delivered by one party to the other hereunder.
(g) Transition End Date. “Transition End Date” shall be the Transition End Date
specified on Exhibit A hereto.
2. At-Will Employment. The Company and the Executive acknowledge that the Executive’s
employment is and shall continue to be at-will, as defined under applicable law. Company or
Executive may terminate this Agreement by written notice pursuant to Section 10(b) hereof. If the
Executive’s employment terminates for any reason, the Executive shall not be entitled to any
payments, benefits, damages, awards or compensation other than as provided by this Agreement, or as
may otherwise be established under the Company’s then existing employee 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 through
the Transition End Date, unless earlier terminated as provided herein or except as Exhibit A
continues any benefit past the Transition End Date. With respect to any Good Reason Event occurring
on or before the Transition End Date and as to which the relevant time periods have not expired as
of the Transition End Date, this Agreement shall terminate on the expiration of all relevant time
periods arising therefrom. All benefits accrued as of the termination date of this Agreement shall
remain due and payable, and dispute resolution provisions of this Agreement shall survive for
purposes of enforcing rights to benefits.
4. Retention Pay on Transition End Date. Provided the Executive signs the release of
claims pursuant to Section 9 hereof, and following the expiration of any waiver period applicable
to the release of claims, and provided the Executive is employed by the Company on the Transition
End Date, Company will pay Executive the Retention Pay (less applicable withholding) on the
Transition End Date.
5. Transition Termination Benefits. Upon the Termination Date, provided the
Executive’s employment has ended as a result of an Involuntary Termination and provided the
Executive signs the release of claims pursuant to Section 9 hereof, and following the expiration of
any waiver period applicable to the release of claims, Executive shall be entitled to the following
benefits, 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 the
Retention Pay.
(b) Option Acceleration if on Change of Control. If the Termination Date is within
twelve (12) months after a Change of Control, all stock options granted by the Company to the
Executive prior to the Change of Control, and that absent the Involuntary Termination would have
become exercisable during the twelve months immediately following the Change of Control, shall if
not already vested and exercisable accelerate and become vested and exercisable, and all stock
subject to a right of repurchase by the Company (or its successor) that was purchased prior to the
Change of Control shall have such right of repurchase lapse with respect to that number of shares
which would have had such right of repurchase lapse under the
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applicable agreement within twelve (12) months following the date of Change of Control as if
the Executive had remained employed through such date.
(c) Medical Continuation. Executive’s insured group medical and dental benefits will
continue to be effective through the later of Executive’s Termination Date or the Transition End
Date.
(d) COBRA Extension. Company will pay all COBRA premiums for an extension of COBRA
for an additional twelve months, tacked on to the end of any other coverage period owing to
Executive hereunder.
6. Accrued Wages and Vacation; Expenses. Without regard to the reason for, or the
timing of, Executive’s termination of employment: (i) the Company shall pay the Executive any
unpaid base salary due for periods prior to the Termination Date; (ii) the Company shall pay the
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 reimburse
the Executive for all expenses reasonably and necessarily incurred by the Executive in connection
with the business of the Company prior to the Termination Date. These payments shall be made
promptly upon termination and within the period of time mandated by law.
7. Limitation on Payments. In the event that the severance and other benefits
provided for in this Agreement or otherwise payable to the Executive (i) constitute “parachute
payments” 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 being
subject to the Excise Tax,
whichever of the foregoing amounts, taking into account the applicable federal, state and
local 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 may
be taxable under Section 4999 of the Code.
Unless the Company and the Executive otherwise agree in writing, any determination required
under 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 the
Company for all purposes. For purposes of making the calculations required by this section, the
Accountants may make reasonable assumptions and approximations concerning applicable taxes and may
rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999
of the Code. The Company and the Executive shall furnish to the Accountants such information and
documents as the Accountants may reasonably request in order to make a determination under this
section. The Company shall bear all costs the Accountants may reasonably incur in connection with
any calculations contemplated by this section.
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8. Successors.
(a) Company’s Successors. Any successor to the Company (whether direct or indirect
and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or
substantially all of the Company’s business and/or assets shall assume the Company’s obligations
under this Agreement and agree expressly to perform the Company’s obligations under this Agreement
in the same manner and to the same extent as the Company would be required to perform such
obligations 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 and
delivers the assumption agreement described in this subsection (a) or which becomes bound by the
terms of this Agreement by operation of law.
(b) Executive’s Successors. Without the written consent of the Company, Executive may
not assign or transfer this Agreement or any right or obligation under this Agreement to any other
person or entity. Notwithstanding the foregoing, the terms of this Agreement and all rights of
Executive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or
legal representatives, executors, administrators, successors, heirs, distributees, devisees and
legatees.
9. Execution of Release Agreement upon Termination. As a condition of entering into
this Agreement and receiving the benefits under Sections 4 or 5 of this Agreement, the Executive
shall within such time period as required by the Company, execute and not revoke a general release
of claims against the Company in form satisfactory to the Company.
10. Notices.
(a) General. Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when personally delivered or when
mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the
case of the Executive, mailed notices shall be addressed to Executive at the home address which
Executive most recently communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall be directed to the
attention of its Secretary.
(b) Notice of Termination; Effective Date.
(i) By Company. If the Company terminates Executive’s employment, to be effective the
termination must be communicated by a written notice of termination to Executive delivered not
more 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 detail
the facts and circumstances claimed to provide a basis for “for Cause” termination.
(ii) By Executive. If the Executive voluntarily (and not for Good Reason) terminates
Executive’s employment, the termination must be communicated by a written notice of termination to
Company, which notice identifies the Termination Date. A voluntary termination will be effective on
the identified Termination Date. If Executive wishes to terminate his employment for Good Reason,
he must give a written Notice of Good Reason
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Termination within thirty days next following the Good Reason Event. His Notice of Good
Reason Termination must (x) identify the Good Reason Event and its date; (y) invite the Company to
reverse the Good Reason Event, and (z) state the Executive’s intention to terminate his employment
for Good Reason as of a Termination Date no earlier than ten and no more than thirty days following
the date of the Notice of Good Reason Termination unless the Company reverses the Good Reason
Event. A Termination for Good Reason will be effective on the Termination Date stated in the
Notice of Good Reason Termination, unless before that date the Company has reversed the Good Reason
Event and provided the Executive with written confirmation that it has done so.
(iii) Constructive Termination. If during the term of this agreement after January 1,
2007, Executive is removed from the position of CEO without being assigned the position of Chief
Operating Officer in its place, or removed from the position of Chief Operating Officer except to
be assigned the position of CEO in its place, and he has not given his written consent to the
change, then the removal shall, at Executive’s option exercised within thirty days of the change,
be regarded as termination of the Executive’s employment by the Company which is not effected for
valid Cause, under this Agreement and under the Executive’s Severance Agreement.
11. Arbitration.
(a) Any dispute or controversy arising out of, relating to, or in connection with this
Agreement, or the interpretation, validity, construction, performance, breach, or termination
thereof, shall be settled by binding arbitration to be held in Portland, Oregon in accordance with
the National Rules for the Resolution of Employment Disputes then in effect of the American
Arbitration Association (the “Rules”). The arbitrator may grant injunctions or other relief in
such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding
on the parties to the arbitration. Judgment may be entered on the arbitrator’s decision in any
court having jurisdiction.
(b) The arbitrator(s) shall apply Oregon law to the merits of any dispute or claim, without
reference to conflicts of law rules. The arbitration proceedings shall be governed by federal
arbitration law and by the Rules, without reference to state arbitration law. Executive hereby
consents to the personal jurisdiction of the state and federal courts located in Oregon for any
action or proceeding arising from or relating to this Agreement or relating to any arbitration in
which the parties are participants.
(c) Executive understands that nothing in this Section modifies Executive’s at-will employment
status. 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. EXECUTIVE
UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS
AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION
THEREOF TO BINDING ARBITRATION, CONSTITUTES A WAIVER OF EXECUTIVE’S RIGHT TO A JURY TRIAL AND
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RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EXECUTIVE
RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:
(i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS
AND IMPLIED; BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED;
NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL
MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC
ADVANTAGE; 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, THE
AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR
LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION 201, et
seq; and
(iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONS RELATING TO EMPLOYMENT
OR EMPLOYMENT DISCRIMINATION.
12. Miscellaneous Provisions.
(a) Effect of Any Statutory Benefits. To the extent that any severance benefits are
required to be paid to the Executive upon termination of employment with the Company as a result of
any requirement of law or any governmental entity in any applicable jurisdiction, the aggregate
amount 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 are
required to be paid to the Executive upon termination of employment with the Company as a result of
any standard Company policy, Executive shall be entitled to the greater of benefits available under
such policy or under this Agreement, but not both.
(c) Effect of Standing Severance Agreement. To the extent that any cash severance
benefits 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 amount
of any payment contemplated by this Agreement, nor shall any such payment be reduced by any
earnings that the Executive may receive from any other source.
(e) Waiver. No provision of this Agreement may be modified, waived or discharged
unless the modification, waiver or discharge is agreed to in writing and signed by the Executive
and by an authorized officer of the Company (other than the Executive). No waiver
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by either party of any breach of, or of compliance with, any condition or provision of this
Agreement by the other party shall be considered a waiver of any other condition or provision or of
the same condition or provision at another time.
(f) Integration. This Agreement and any agreements referenced herein represent the
entire agreement and understanding between the parties as to the subject matter herein and
collectively supersede all prior or contemporaneous agreements, whether written or oral, with
respect to the same subject matter, provided that, for clarification purposes, this Agreement shall
not affect any agreements between the Company and Executive regarding intellectual property matters
or confidential information of the Company.
(g) Choice of Law. The validity, interpretation, construction and performance of this
Agreement 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 provisions
of this Agreement shall not affect the validity or enforceability of any other provision hereof,
which shall remain in full force and effect.
(i) Employment Taxes. All payments made pursuant to this Agreement shall be subject
to withholding of applicable income and employment taxes.
(j) Counterparts. This Agreement may be executed in counterparts, each of which shall
be 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 the
Company by its duly authorized officer, as of the day and year first above written.
| COMPANY: | PIXELWORKS, INC. | |||||
| By: | /s/ Xxxxx Xxxx
|
|||||
| Title: | Director | |||||
| EXECUTIVE: | /s/ Xxxx Xxxxx | |||||
| Xxxx Xxxxx | ||||||
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EXHIBIT A
Executive: Xxxx Xxxxx
Executive: Xxxx Xxxxx
Transition End Date:
|
Xxxxx 00, 0000 | |
Xxxxxxxxx Pay:
|
Until March 31, 2007, the Retention Pay is equal to Executive’s annual base pay. On that date, the Retention Pay will be increased by 1/12 of the difference between $500,000 and Executive’s then annual base pay. This incremental amount will also be added to the Retention Pay on the last day of each succeeding month through February of 2008, so that on February 29, 2008 and thereafter, the Retention Pay will equal $500,000. | |
Written Assent to Remote Location:
|
Executive agrees to establish an office at the Company’s place of business in San Jose, California, and if and as needed to operate from that office as his primary place of business. Company will provide Executive with the following remote location benefits for that purpose: for so long as Executive chooses to maintain his primary dwelling in Vancouver Washington, Company will provide him with an allowance for the actual cost of an apartment or suitable dwelling selected by Executive in or near San Xxxx, not to exceed $5,000 per month; a furniture allowance for furnishing that dwelling not to exceed $20,000; and a car purchase or lease allowance for a car and insurance thereon for his and/or his family’s personal use in San Xxxx of not to exceed $750 per month, and in addition to airfare needed for business reasons, personal round trip airfare (coach class) between Portland International Airport (PDX) and Mineta San Xxxx International Airport (SFO) up to four round trips per month, usable by Executive or any member of Executive’s family. Following the Termination Date, Executive may elect by Notice to Company either 1) to retain the San Xxxx dwelling, car, and furnishings, retaining also any remaining liability under any applicable lease, or 2) to surrender the San Xxxx dwelling, car, and furnishings to Company, and be held harmless with respect to a maximum of twelve months of remaining liability under any applicable lease. This benefit will continue past the Transition End Date for so long as Executive is required by the Company to operate with San Jose, California as his primary place of business and maintains his primary dwelling in Vancouver Washington. |
| COMPANY: | PIXELWORKS, INC. | |||||
| By: | ||||||
| Title: | ||||||
EXECUTIVE: |
||||||
| Xxxx Xxxxx | ||||||
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