Standstill Agreement – Pixelworks Inc.

AGREEMENT

This Agreement, dated as of February 8, 2012, is by and among Pixelworks,
Inc., an Oregon corporation (the “Company“), and Steven R.
Becker, an individual resident of Texas (“Becker“), Matthew A.
Drapkin, an individual resident of New York (“Drapkin“), BC
Advisors, LLC, a Texas limited liability company, Becker Drapkin Management,
L.P., a Texas limited partnership, Becker Drapkin Partners (QP), L.P., a Texas
limited partnership, Becker Drapkin Partners, L.P., a Texas limited partnership,
and BD Partners IV, L.P., a Texas limited partnership (collectively with Becker
and Drapkin, the “Shareholder Group“), and Bradley Shisler, an
individual resident of Texas (“Shisler“).

WHEREAS, the Company and the Shareholder Group have determined that the
interests of the Company and its shareholders would be best served by adding
Becker and Shisler to the Board (as defined below) on the terms and conditions
set forth in this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto hereby
agree as follows:

1. Definitions. For purposes of this Agreement:

(a) The terms “Affiliate” and “Associate”
have the respective meanings set forth in Rule 12b-2 promulgated by the
Securities and Exchange Commission (the “SEC“) under the
Securities Exchange Act of 1934, as amended (the “Exchange
Act“), provided that neither “Affiliate” nor “Associate” shall
include (i) any person that is a publicly held concern and is otherwise an
Affiliate or Associate by reason of the fact that a principal of any member of
the Shareholder Group serves as a member of the board of directors or similar
governing body of such concern, (ii) such principal in its capacity as a member
of the board of directors or other similar governing body of such concern or
(iii) any entity which is an Associate solely by reason of clause (a) of the
definition of Associate in Rule 12b-2 and is not an Affiliate.

(b) The terms “beneficial owner” and “beneficial
ownership” shall have the respective meanings as set forth in Rule
13d-3 promulgated by the SEC under the Exchange Act.

(d) “Common Stock” means the common stock of the Company,
par value $0.001 per share.

(e) “Ownership Interest” means, with respect to the Common
Stock, having beneficial ownership of the Common Stock.

(f) The terms “person” or “persons” shall
mean any individual, corporation (including not-for-profit), general or limited
partnership, limited liability company, joint venture, the media, estate, trust,
association, organization or other entity of any kind or nature, including any
governmental authority.

(g) “Standstill Period” means the period from the date
hereof until the later of (i) thirty (30) days after the date on which
neither Becker nor Shisler (nor, as applicable, any replacement director(s)
appointed pursuant to Section 5 hereof) continue to serve as a member of the
Board, and (ii) the earlier of:

(A) February 8, 2014, and

(B) thirty (30) days after the date on which the Board has accepted the
resignation of both Becker and Shisler (and, as applicable, any replacement
director(s) appointed pursuant to Section 5 hereof) as directors pursuant to
Section 6(a)(i) hereof;

provided that the Standstill Period shall end on such date, if any,
as the Company has breached in any material respect any of its representations,
warranties, commitments or obligations set forth in Sections 2, 4, 5 or 14
hereof and such breach has not been cured within thirty (30) days following
written notice of such breach, so long as such breach is curable.

2. Representations and Warranties of the Company. The
Company represents and warrants as follows as of the date hereof:

(a) The Company has the corporate power and authority to execute, deliver and
carry out the terms and provisions of this Agreement and to consummate the
transactions contemplated hereby.

(b) This Agreement has been duly and validly authorized, executed and
delivered by the Company, constitutes a valid and binding obligation and
agreement of the Company, and is enforceable against the Company in accordance
with its terms, except as enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws affecting the rights of creditors and subject to general equity
principles.

(c) The execution, delivery and performance of this Agreement by the Company
does not and will not (i) violate or conflict with any law, rule, regulation,
order, judgment or decree, in each case that is applicable to the Company, or
(ii) result in any material breach or material violation of, or constitute a
material default (or an event which with notice or lapse of time or both could
become a material default) under or pursuant to, or result in the loss of a
material benefit under, or give any right of termination, amendment,
acceleration or cancellation of, (A) any organizational document of the Company
or (B) any agreement, contract, commitment, understanding or arrangement, in
each case to which the Company is a party or by which it is bound and which is
material to the Company’s business or operations.

3A. Representations and Warranties of the Shareholder
Group. Each member of the Shareholder Group severally, and not jointly,
represents and warrants with respect to himself or itself as follows as of the
date hereof:

(a) Such member has the power and authority to execute, deliver and carry out
the terms and provisions of this Agreement and to consummate the transactions
contemplated hereby. Such member, if an entity, has the corporate, limited
partnership or limited liability company power and authority, as applicable, to
execute, deliver and carry out the terms and provisions of this Agreement and to
consummate the transactions contemplated hereby.

(b) This Agreement has been duly and validly authorized, executed, and
delivered by such member, constitutes a valid and binding obligation and
agreement of such member, and is enforceable against such member in accordance
with its terms, except as enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws affecting the rights of creditors and subject to general equity
principles.

(c) The execution, delivery and performance of this Agreement by such member
does not and will not (i) violate or conflict with any law, rule, regulation,
order, judgment or decree applicable to such member, or (ii) result in any
material breach or material violation of, or constitute a material default (or
an event which with notice or lapse of time or both could become a material
default) under or pursuant

to, or result in the loss of a material benefit under, or give any right of
termination, amendment, acceleration or cancellation of, (A) any organizational
document, if an entity, or (B) any agreement, contract, commitment,
understanding or arrangement, in each case to which such member is a party or by
which such member is bound and which is material to such member.

(d) As of the date hereof, such member is the beneficial owner of the number
of shares of Common Stock as set forth on the applicable cover page (including
any cross-referenced information) relating to such member in the report of
beneficial ownership of Common Stock on Amendment No. 2 to Schedule 13D filed by
members of the Shareholder Group with the SEC on January 9, 2012
(“Schedule 13D“). As of the date hereof, the members of the
Shareholder Group and their Affiliates and Associates own in the aggregate
2,686,185 shares of Common Stock. Except for those Affiliates and Associates of
such member with respect to whom a cover page is included in the Schedule 13D,
no other Affiliate or Associate of such member beneficially owns any shares of
Common Stock.

(e) In addition, Becker consents and agrees to serve as a director of the
Company as of the date hereof in accordance with the terms of this Agreement.

3B Representations and Warranties of Shisler. Shisler
represents and warrants with respect to himself as follows as of the date
hereof:

(a) Shisler has the power and authority to execute, deliver and carry out the
terms and provisions of this Agreement and to consummate the transactions
contemplated hereby.

(b) This Agreement has been duly and validly authorized, executed, and
delivered by Shisler, constitutes a valid and binding obligation and agreement
of Shisler, and is enforceable against Shisler in accordance with its terms,
except as enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar laws
affecting the rights of creditors and subject to general equity principles.

(c) The execution, delivery and performance of this Agreement by Shisler does
not and will not (i) violate or conflict with any law, rule, regulation, order,
judgment or decree applicable to Shisler, or (ii) result in any material breach
or material violation of, or constitute a material default (or an event which
with notice or lapse of time or both could become a material default) under or
pursuant to, or result in the loss of a material benefit under, or give any
right of termination, amendment, acceleration or cancellation of, any agreement,
contract, commitment, understanding or arrangement to which Shisler is a party
or by which Shisler is bound and which is material to Shisler.

(d) As of immediately prior to the execution of this Agreement, neither
Shisler, nor any Affiliate or Associate of Shisler, is the beneficial owner of
any shares of Common Stock. Upon execution of this Agreement, Shisler may be
deemed to have formed a “group” (within the meaning of Section 13(d)(3) of the
Exchange Act) with the Shareholder Group with respect to the Common Stock.

(e) In addition, Shisler consents and agrees to serve as a director of the
Company as of the date hereof in accordance with the terms of this Agreement.

4. Appointment of Directors; Related Matters. (a) Provided
that the Shareholder Group’s Ownership Interest and Shisler’s Ownership Interest
is, in the aggregate as of the Appointment Date, at least equal to 5% of the
outstanding Common Stock (based on the latest annual or quarterly report of the
Company filed with the SEC pursuant to Section 13 or 15(d) of the Exchange Act)
(“Ownership Test“) and a Shareholder Group Breach has not
occurred and is continuing, as soon as reasonably practicable,

but in any event, no later than at the meeting of the Board scheduled for
February 10, 2012 (the “Appointment Date“), the Board shall:

(i) appoint Becker to the Board as a Class II director (with a term expiring
at the Annual Meeting to be held in 2012) and adopt a resolution appointing him
to the Compensation Committee of the Board, in each case effective as of the
Appointment Date; and

(ii) appoint Shisler to the Board as a Class II director (with a term
expiring at the Annual Meeting to be held in 2012) and adopt a resolution
appointing him to the Corporate Governance and Nominating Committee of the
Board, in each case effective as of the Appointment Date; and

(iii) adopt a resolution in accordance with the Company’s Articles of
Incorporation and Bylaws increasing the size of the Board to a total of eight
(8) directors in order to accommodate Becker’s and Shisler’s appointment as
directors of the Company pursuant to Section 4(a)(i) and (ii) hereof, effective
as of the Appointment Date.

(b) Provided that the Ownership Test has been met, a Shareholder Group Breach
has not occurred and is continuing and Becker and Shisler consent to serve, the
Board and the Corporate Governance and Nominating Committee shall nominate
Becker and Shisler for re-election as directors in Class II (with terms expiring
at the Annual Meeting to be held in 2014) when their respective terms expire at
the Annual Meeting to be held in 2012. In addition, the Company shall recommend
that the Company’s shareholders vote, and shall solicit proxies, in favor of the
election of Becker and Shisler at such Annual Meeting and otherwise support
Becker and Shisler for election in a manner no less rigorous and favorable than
the manner in which the Company supports its other nominees. In addition, if
elected at such Annual Meeting, Becker and Shisler shall continue to serve on
the Compensation Committee and the Corporate Governance and Nominating
Committee, respectively, so long as Becker and Shisler continue to meet all the
charter, legal and listing requirements for service on such committees.

(c) Provided that a Shareholder Group Breach has not occurred and is
continuing, the Company agrees that, during the Standstill Period, the Company
will not change the Class year of Becker or Shisler as a director unless (i) the
Shareholder Group has consented to such change or (ii) such change would extend
the term of Becker’s or Shisler’s, as applicable, term as a director. Provided
that the Ownership Test has been met and a Shareholder Group Breach has not
occurred and is continuing, the Company agrees that, during the Standstill
Period, the Company will not remove Becker from the Compensation Committee or
Shisler from the Corporate Governance and Nominating Committee without the prior
consent of the Shareholder Group, as the case may be, so long as Becker and
Shisler continue to serve on the Board and meet all the charter, legal and
listing requirements for service on such committees.

(d) If the Corporate Governance and Nominating Committee and the Board have
resolved to recommend Becker and/or Shisler for election to the Board at an
Annual Meeting, as long as a Shareholder Group Breach has not occurred and is
continuing and Becker and/or Shisler, as applicable, consent to serve, the
Company shall recommend that the Company’s shareholders vote, and shall solicit
proxies, in favor of the election of Becker and/or Shisler, as applicable, at
such Annual Meeting and otherwise support Becker and/or Shisler, as applicable,
for election in a manner no less rigorous and favorable than the manner in which
the Company supports its other nominees.

5. Replacement Directors. So long as a Shareholder Group
Breach has not occurred and is continuing and the Ownership Test has been met,
if at any time during the Standstill Period, Becker or Shisler is unable or
unwilling to serve as a director of the Company, other than as a result of
Becker’s or Shisler’s resignation pursuant to Section 6 or 19 hereof, the
Shareholder Group and the Board (excluding Becker and Shisler) shall appoint a
mutually agreeable replacement for Becker or Shisler, as applicable

(in which case all references in this Agreement to “Shisler” shall also refer
to any such replacement, provided that references in this Agreement to
“Shareholder Group” will not include such person unless they are otherwise
already a member), within 90 days of Becker or Shisler validly tendering his
resignation from the Board. The mechanism for selection of the replacement shall
be as follows: the Shareholder Group shall propose at least three candidates for
consideration by the Board (excluding Becker and Shisler) and the Board
(excluding Becker and Shisler) shall have the option of either (a) selecting one
of such candidates for appointment as the replacement or (b) rejecting all three
and requesting the Shareholder Group to propose another three candidates for
consideration by the Board (excluding Becker and Shisler), which process shall
continue until a replacement is selected by the Board (excluding Becker and
Shisler). Prior to any such appointment, a replacement candidate shall complete
the process set forth in the Company’s Corporate Governance Policy and shall
execute and deliver to the Company a counterpart to this Agreement agreeing to
be bound by the terms hereof, including without limitation Sections 6, 9, 10 and
19.

6. Minimum Ownership. (a) Becker and Shisler each hereby
irrevocably tenders his resignation as director effective as of the date that
(i) the Ownership Interest of the Shareholder Group and Shisler, in the
aggregate, falls below 5% of the outstanding Common Stock (based on the latest
annual or quarterly report of the Company filed with the SEC pursuant to Section
13 or 15(d) of the Exchange Act) or (ii) the Shareholder Group and/or Shisler
breaches its obligation under Section 6(b) and such breach has not been cured
within five (5) days following written notice of such breach. The Board may
accept either or both such resignations, in its sole discretion, by a majority
vote (excluding Becker and Shisler). For the avoidance of doubt, in the event
Becker or Shisler resign from the Board and a replacement director(s) is
appointed pursuant to Section 5 hereof, this Section 6(a) shall apply to such
replacement director(s), and the Shareholder Group, Shisler and their respective
Affiliates and Associates shall cause such replacement director(s) to fulfill
such obligation.

(b) For purposes of this Agreement, the Ownership Interest of the Shareholder
Group and Shisler shall be determined based on the latest public filing made by
the Shareholder Group and/or Shisler with the SEC with respect to its Ownership
Interest; provided that if at any time the Shareholder Group or Shisler
is no longer required to publicly disclose its Ownership Interest through public
filings made with the SEC, the Shareholder Group or Shisler, as applicable,
shall (i) promptly (and in any event within five (5) days) inform the Company of
any change in its Ownership Interest, (ii) disclose its Ownership Interest to
the Company on a quarterly basis, and (iii) at the Company’s request, produce
documentary evidence reasonably necessary to verify that its Ownership Interest
reported to the Company is accurate.

7. Voting. At all shareholder meetings where the matters
described in this Section 7 will be voted on during the Standstill Period, each
member of the Shareholder Group and Shisler shall cause all shares of Common
Stock owned of record or beneficially owned by it or its respective Affiliates
or Associates to be present for quorum purposes and to be voted in favor of all
directors nominated by the Board for election, against any Sale Transaction
(defined below) that is not approved by a majority of the Board,
provided that neither members of the Shareholder Group nor Shisler
shall be required to vote in favor of a Sale Transaction that was approved by
the Board.

8. Standstill. Each member of the Shareholder Group and
Shisler agrees that, other than as may be required by applicable law, order or
regulation, during the Standstill Period, he or it will not, and he or it will
cause each of such person’s respective Affiliates, Associates and agents and any
other persons acting on his or its behalf not to:

(a) acquire, offer to acquire or agree to acquire, alone or in concert with
any other person, individual or entity, by purchase, tender offer, exchange
offer, agreement or business combination or any other manner, beneficial
ownership of shares of the Common Stock or any other securities of the

Company or any securities of any Affiliate of the Company (other than (i) the
acquisition of equity-based compensation pursuant to Section 12 hereof and the
exercise of any options or conversion of any convertible securities comprising
such equity-based compensation and (ii) the direct acquisition by Shisler of up
to an aggregate of 10,000 shares of Common Stock in addition to the acquisition
or exercise of any equity-based compensation he may receive pursuant to Section
12);

(b) submit any shareholder proposal (pursuant to Rule 14a-8 promulgated by
the SEC under the Exchange Act or otherwise) or any notice of nomination or
other business for consideration, or nominate any candidate for election to the
Board or oppose the directors nominated by the Board, other than as expressly
permitted by this Agreement;

(c) form, join in or in any other way participate in a “partnership, limited
partnership, syndicate or other group” within the meaning of Section 13(d)(3) of
the Exchange Act with respect to the Common Stock or deposit any shares of
Common Stock in a voting trust or similar arrangement or subject any shares of
Common Stock to any voting agreement or pooling arrangement, other than solely
with other members of the Shareholder Group, Shisler or one or more of their
respective Affiliates with respect to the Common Stock or to the extent such a
group may be deemed to result with the Company or any of its Affiliates as a
result of this Agreement;

(d) engage in discussions with other shareholders of the Company, solicit
proxies or written consents of shareholders, or otherwise conduct any nonbinding
referendum with respect to the Common Stock, or make, or in any way encourage,
influence or participate in, any “solicitation” of any “proxy” within the
meaning of Rule 14a-1 promulgated by the SEC under the Exchange Act to vote, or
advise, encourage or influence any person with respect to voting or tendering,
any shares of Common Stock with respect to any matter, including without
limitation, any Sale Transaction that is not approved by a majority of the
Board, or become a “participant” in any contested “solicitation” for the
election of directors with respect to the Company (as such terms are defined or
used under the Exchange Act and the rules promulgated by the SEC thereunder),
other than a “solicitation” or acting as a “participant” in support of all of
the nominees of the Board at any shareholder meeting;

(e) call, seek to call, or to request the calling of, a special meeting of
the shareholders of the Company, or seek to make, or make, a shareholder
proposal at any meeting of the shareholders of the Company or make a request for
a list of the Company’s shareholders (or otherwise induce, encourage or assist
any other person to initiate or pursue such a proposal or request) or otherwise
acting alone, or in concert with others, seek to control or influence the
governance or policies of the Company;

(f) effect or seek to effect (including, without limitation, by entering into
any discussions, negotiations, agreements or understandings with any third
person), offer or propose (whether publicly or otherwise) to effect, or cause or
participate in, or in any way assist, solicit, encourage or facilitate any other
person to effect or seek, offer or propose (whether publicly or otherwise) to
effect or cause or participate in (including by tendering or selling into) (i)
any acquisition of any material assets or businesses of the Company or any of
its subsidiaries, (ii) any transfer or acquisition of shares of the Common Stock
or other securities of the Company or any securities of any Affiliate of the
Company if, after completion of such transfer or acquisition or proposed
transfer or acquisition, a person or group would beneficially own, or have the
right to acquire beneficial ownership of, more than 4.9% of the outstanding
shares of Common Stock (based on the latest annual or quarterly report of the
Company filed with the SEC pursuant to Section 13 or 15(d) of the Exchange Act);
provided that open market sales of securities through a broker
by the Shareholder Group or Shisler which are not actually known by the
Shareholder Group or Shisler, respectively, to result in any transferee
acquiring beneficial ownership of more than 4.9% of the outstanding shares of
Common Stock shall not be included in this clause (ii) or constitute a breach of
this Section 8, (iii) any tender offer or exchange offer, merger, change of
control,

acquisition or other business combination involving the Company or any of its
subsidiaries, or (iv) any recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with respect to the Company or
any of its subsidiaries (any of the transactions or events described in (i)
through (iv) above are referred to as a “Sale Transaction“),
unless such Sale Transaction is approved by a majority of the Board;
provided that this paragraph shall not require members of the
Shareholder Group or Shisler to vote in favor of a Sale Transaction that was
approved by the Board;

(g) publicly disclose, or cause or facilitate the public disclosure
(including without limitation the filing of any document or report with the SEC
or any other governmental agency or any disclosure to any journalist, member of
the media or securities analyst) of, any intent, purpose, plan or proposal to
obtain any waiver, or consent under, or any amendment of, any of the provisions
of Section 7 hereof or this Section 8, or otherwise seek (in any manner that
would require public disclosure by any of the members of the Shareholder Group,
Shisler or their respective Affiliates or Associates) to obtain any waiver,
consent under, or amendment of, any provision of this Agreement;

(h) publicly disparage any member of the Board or management of the Company,
provided that this provision shall not apply to compelled testimony,
either by legal process, subpoena or otherwise, or to communications that are
required by an applicable legal obligation and are subject to contractual
provisions providing for confidential disclosure;

(i) engage in any short sale or any purchase, sale or grant of any option,
warrant, convertible security, stock appreciation right, or other similar right
(including, without limitation, any put or call option or “swap” transaction)
with respect to any security (other than a broad-based market basket or index)
that includes, relates to or derives any significant part of its value from a
decline in the market price or value of the Company’s securities;

(j) enter into any arrangements, understandings or agreements (whether
written or oral) with, or advise, finance, assist or encourage, any other person
that engages, or offers or proposes to engage, in any of the foregoing; or

(k) take or cause or induce or assist others to take any action inconsistent
with any of the foregoing.

Notwithstanding the foregoing, it is understood and agreed that this
Agreement shall not be deemed to prohibit Becker or Shisler from engaging in any
lawful act in his capacity as a director of the Company that is either expressly
approved by the Board or required in order to comply with his fiduciary duties
as a director.

9. Company Policies. (a) By the Appointment Date, each of
Becker and Shisler will have reviewed the Company’s Code of Business Conduct and
Ethics, Corporate Governance Guidelines, Whistleblower Policy and all other
Company policies concerning confidentiality, disclosure, insider trading, window
periods and material non-public information, and the charters of the
Compensation Committee and the Corporate Governance and Nominating Committee
(collectively, the “Company Policies“), and each of Becker and
Shisler agree to abide by the provisions of the Company Policies, as they may be
amended from time to time, during his service as a director of the Company and
for such period of time thereafter as may be set forth in the Company Policies.

(b) Until the date Company files its next annual or quarterly report pursuant
to Section 13 or 15(d) of the Exchange Act following the date on which no member
of the Shareholder Group (nor any replacement director(s) appointed pursuant to
Section 5 hereof who is an Affiliate, Associate or employee of any member of the
Shareholder Group) continues to serve as a member of the Board, the Shareholder

Group will and will cause its Affiliates and Associates and all related
persons to abide by all Company Policies concerning confidentiality, insider
trading, window periods and material non-public information.

(c) Until the date Company files its next annual or quarterly report pursuant
to Section 13 or 15(d) of the Exchange Act following the date on which Shisler
no longer continues to serve as a member of the Board, Shisler will and will
cause his Affiliates and Associates and all related persons to abide by all
Company Policies concerning confidentiality, insider trading, window periods and
material non-public information.

(d) The members of the Shareholder Group and Shisler acknowledge that they
are aware that United States securities laws prohibit any person who has
material non-public information about a company from purchasing or selling any
securities of such company, or from communicating such information to any other
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities.

10. Confidentiality. (a) Becker and Shisler, in their
capacity as directors, and Drapkin will have access to and be provided with
Confidential Information (as defined below). Each of Becker, Drapkin and Shisler
acknowledges the confidential and proprietary nature of the Confidential
Information and agrees that until the first anniversary of the date on which
such person’s tenure as director of the Company ends, he will (i) keep the
Confidential Information strictly confidential, (ii) use the Confidential
Information solely for the purpose of serving as directors, (iii) use the same
degree of care to protect the Confidential Information from unauthorized use or
disclosure as he would use to protect his own confidential information of a
similar nature, but in no event with less than reasonable care, and (iv) not
disclose the Confidential Information in any manner whatsoever to any person,
except (A) with the specific prior written consent of the Company, (B) to
Becker’s or Shisler’s respective legal counsel or accountants who need to know
such information to assist Becker or Shisler in their duties as directors
(provided such parties agree to keep such Confidential Information
confidential and Becker, Drapkin and/or Shisler, as the case may be, shall be
responsible for any breach of the provisions of Section 10 by any person to whom
he discloses Confidential Information), or (C) to the extent provided in Section
10(c) below. For the avoidance of doubt, Becker, Drapkin and Shisler may discuss
Confidential Information with one another. The duties and obligations in this
Section 10 shall be in addition to, and shall in no way limit, any duty or
obligation of a director otherwise provided under applicable law.

(b) As used in this Agreement, the term “Confidential
Information” means and includes all information disclosed, furnished or
made available (whether before or after the date of this Agreement) by the
Company or its directors, officers, employees, agents, consultants, advisors or
other representatives, including legal counsel, accountants and financial
advisors (collectively, “Representatives“) to Becker, Drapkin
or Shisler, including but not limited to business plans, financial reports,
financial data, employee data, customer lists, forecasts, strategies, and all
other business information, together with any copies, notes, abstracts,
analyses, compilations, studies, interpretations, documents or records and other
tangible embodiments that are based on, derived from, refer or relate to or
contain any of such information, whether made by the Company, Becker, Drapkin or
Shisler or any other person. Confidential Information may be that of or concern
the Company or third parties. “Confidential Information” shall not include
information that is or was (i) in the public domain or was or becomes generally
available to the public other than as a result of disclosure by (x) Becker,
Drapkin, Shisler or any person to whom either of them disclose Confidential
Information or (y) any other person prohibited from transmitting the information
to the public by a contractual, legal, fiduciary or other binding obligation
with or to the Company, (ii) independently acquired by Becker, Drapkin or
Shisler without use of the Confidential Information or violation of any of their
obligations under this Agreement or any other contractual, legal, fiduciary or
other binding obligation of Becker, Drapkin, Shisler or any person to whom any
of them discloses Confidential Information, or (iii) was available, or becomes
available, to Becker, Drapkin or Shisler on a

non-confidential basis other than as a result of its disclosure to Becker,
Drapkin or Shisler by the Company or any Representative of the Company, but only
if the source of such information is not prohibited from transmitting the
information to Becker, Drapkin or Shisler by a contractual, legal, fiduciary or
other binding obligation.

(c) In the event either Becker, Drapkin and Shisler is requested or required
(by deposition, interrogatory, request for information or documents in legal
proceedings, subpoena, civil investigative demand or other similar process)
pursuant to court order, law, regulation, rule, governmental, judicial,
legislative, administrative, regulatory or self-regulatory body or legal process
(collectively, “Law“) to disclose any of the Confidential
Information, he shall, unless otherwise expressly prohibited by Law, provide the
Company with prompt written notice of any such request or requirement so that
the Company may seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this Agreement. If, in the absence of a
protective order or other remedy or the receipt of a waiver by the Company,
Becker, Drapkin or Shisler is nonetheless, in the opinion of his legal counsel,
required by Law to disclose Confidential Information, Becker, Drapkin or Shisler
may, without liability hereunder, disclose to such tribunal only that portion of
the Confidential Information that such counsel advises is required by Law to be
disclosed, provided that Becker, Drapkin and Shisler exercise his
reasonable efforts to preserve the confidentiality of the Confidential
Information, including without limitation by cooperating with the Company to
obtain an appropriate protective order or other reliable assurance, in each case
at the Company’s expense, that confidential treatment will be accorded the
Confidential Information. In no event will Becker or Drapkin or any other member
of the Shareholder Group or Shisler oppose (and they will cause their respective
Affiliates and Associates not to oppose) any action by the Company to obtain a
protective order or other relief to prevent the disclosure of such information
or to obtain reliable assurance that confidential treatment will be afforded
such information.

11. Questionnaires. By the Appointment Date, each of Becker
and Shisler will have accurately completed the form of questionnaire provided by
the Company for its use in connection with their appointment to the Board and
preparation of the Company’s proxy statement and other reports filed with the
SEC.

12. Compensation. Each of Becker and Shisler shall be
compensated for his service as a director and shall be reimbursed for his
expenses on the same basis as all other non-employee directors of the Company
and shall be eligible to be granted equity-based compensation on the same basis
as all other non-employee directors of the Company.

13. Indemnification and Insurance. Each of Becker and
Shisler shall be entitled to the same rights of indemnification and directors
and officers’ liability insurance coverage as the other non-employee directors
of the Company as such rights may exist from time to time.

14. Non-Disparagement. Provided that a Shareholder Group
Breach has not occurred and is continuing, during the Standstill Period the
Company shall not publicly disparage any member of the Shareholder Group or any
member of the management of the Shareholder Group or Shisler, provided
that this provision shall not apply to compelled testimony, either by legal
process, subpoena or otherwise, or to communications that are required by an
applicable legal obligation or are subject to contractual provisions providing
for confidential disclosure.

15. SEC Filings. The members of the Shareholder Group shall
promptly file an amendment to the Schedule 13D reporting the entry into this
agreement, amending applicable items to conform to their obligations hereunder
and appending or incorporating by reference this Agreement as an exhibit
thereto. Such amendment shall also reflect the withdrawal of the letter dated
January 6, 2012 to the Secretary of the Company requesting certain information
(the “Demand Letter“) as described in Section

16 hereof. Such members of the Shareholder Group shall provide the Company
with a reasonable opportunity to review and comment on such amendment in advance
of filing, and shall accept any such reasonable and timely comments of the
Company.

16. Withdrawal of Demand Letter; Form 8-K. The Company
shall provide to Becker and Shisler a reasonable opportunity to review and
comment on its Form 8-K with respect to the execution and delivery of this
Agreement by the parties hereto in advance of its filing, and shall consider in
good faith the reasonable and timely comments of Becker and Shisler. The
Shareholder Group hereby withdraws the Demand Letter, effective upon the
Appointment Date. No member of the Shareholder Group nor Shisler shall make (and
they will cause their respective Affiliates and Associates not to make) any
public statements with respect to the matters covered by this Agreement
(including in any filing with the SEC, any other regulatory or governmental
agency, or any stock exchange, or in any materials that would reasonably be
expected to be filed with the SEC, including pursuant to Exchange Act Rules
14a-6 or 14a-12) that are inconsistent with, or otherwise contrary to, this
Agreement or the statements in any above described press release or Form 8-K
filing.

17. Expenses. All costs and expenses incurred in connection
with this Agreement and all matters related hereto will be paid by the party
incurring such cost or expense.

18. Specific Performance. Each party hereto acknowledges
and agrees, on behalf of itself and its Affiliates, that irreparable harm would
occur in the event any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties will be entitled to specific relief
hereunder, including, without limitation, an injunction or injunctions to
prevent and enjoin breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof in any state or federal court
located in the County of Santa Clara, State of California, in addition to any
other remedy to which they may be entitled at law or in equity. Any requirements
for the securing or posting of any bond with such remedy are hereby waived.

19. Resignation of Directors. Becker and Shisler each
hereby irrevocably tenders his resignation as director effective as of the date,
if any, that any member of the Shareholder Group or Shisler breaches in any
material respect any of their representations, warranties, commitments or
obligations set forth in Sections 3A, 3B, 7, 8, 9, 10, 11 and 16 hereof (which,
for the avoidance of doubt, shall include the failure of any member of the
Shareholder Group or Shisler to cause its respective Affiliates and Associates
to comply with and perform such representations, warranties, commitments or
obligations as if they were a party hereto and bound thereby), and such breach
has not been cured within five (5) business days, with respect to breaches of
Sections 7, 8, 9 and 10, or thirty (30) days, with respect to breaches of other
sections, following written notice of such breach so long as such breach is
curable (any of the above or a breach of Section 6(b), a “Shareholder
Group Breach“). The Board may accept either or both such resignations,
in its sole discretion, by a majority vote (excluding Becker and Shisler). For
the avoidance of doubt, in the event Becker or Shisler resign from the Board,
and a replacement director(s) is appointed pursuant to Section 5 hereof, this
Section 19 shall apply to such replacement director(s), and the Shareholder
Group, Shisler and their respective Affiliates and Associates shall cause such
replacement director(s) to fulfill such obligation. A Shareholder Group Breach
shall be considered to be “continuing” if it is not curable or, if curable, is
not cured within the applicable time frame set forth in this Section 19.

20. Jurisdiction. Each party hereto agrees, on behalf of
itself and its Affiliates, that any actions, suits or proceedings arising out of
or relating to this Agreement or the transactions contemplated hereby will be
brought solely and exclusively in any state or federal court located in the
County of Santa Clara, State of California (and the parties agree on behalf of
themselves and their respective Affiliates not to commence any action, suit or
proceeding relating thereto except in such courts), and further agrees that

service of any process, summons, notice or document by U.S. registered mail
to the respective addresses set forth in Section 24 hereof will be effective
service of process for any such action, suit or proceeding brought against any
party in any such court. Each party, on behalf of itself and its Affiliates,
agrees and consents to the personal jurisdiction of the state and federal courts
located in the County of Santa Clara, State of California, and irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby, in the state or federal courts located in the County of Santa Clara,
State of California, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an improper or
inconvenient forum.

21. Applicable Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Oregon applicable to contracts executed and to be performed wholly
within such state, without giving effect to the choice of law principles of such
state.

22. Counterparts; Facsimile or Electronic Signatures. This
Agreement may be executed in two or more counterparts which together shall
constitute a single agreement. Facsimile or electronic (i.e., PDF) signatures
shall be as effective as original signatures.

23. Entire Agreement; Amendment and Waiver; Successors and
Assigns. This Agreement contains the entire understanding of the parties
hereto with respect to, and supersedes all prior agreements relating to, its
subject matter. There are no restrictions, agreements, promises,
representations, warranties, covenants or undertakings between the parties other
than those expressly set forth herein. This Agreement may be amended only by a
written instrument duly executed by the parties hereto or their respective
successors or assigns. No failure on the part of any party to exercise, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of such right, power or
remedy by such party preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law. The
terms and conditions of this Agreement shall be binding upon, inure to the
benefit of, and be enforceable by the parties hereto and their respective
successors, heirs, executors, legal representatives, and assigns.

24. Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal process in
regard hereto shall be in writing and shall be deemed validly given, made or
served, (a) if given by telecopy, when such telecopy is transmitted to the
telecopy number set forth below, or to such other telecopy number as is provided
by a party to this Agreement to the other parties pursuant to notice given in
accordance with the provisions of this Section 24, and the appropriate
confirmation is received, or (b) if given by any other means, when actually
received during normal business hours at the address specified in this Section
24, or at such other address as is provided by a party to this Agreement to the
other parties pursuant to notice given in accordance with the provisions of this
Section 24:

if to the Company:

Pixelworks, Inc.

224 Airport Parkway, Suite 400

San Jose, California 95110

Facsimile: (408) 200-9299

Attention: Corporate Secretary

with a copy to:

Gibson, Dunn & Crutcher LLP

555 Mission Street, Suite 3000

San Francisco, California 94105

Facsimile: (415) 374-8459

Attention: Michael L. Reed

if to the Shareholder Group or any member thereof:

Becker Drapkin Management, L.P.

300 Crescent Court

Suite 1111

Dallas, Texas 75201

Facsimile: (214) 756 6037

Attention: Steven R. Becker

Attention: Matthew A. Drapkin

with a copy to:

Boies, Schiller & Flexner LLP

575 Lexington Avenue, 7th Floor

New York, New York 10022

Facsimile: (212) 446-2350

Attention: Richard J. Birns, Esq.

if to Shisler:

2100 McKinney Ave

Suite 1770

Dallas, TX 75201

Attention: Bradley Shisler

25. No Third-Party Beneficiaries. Nothing in this Agreement
is intended to confer on any person other than the parties hereto or their
respective successors and assigns, and their respective Affiliates to the extent
provided herein, any rights, remedies, obligations or liabilities under or by
reason of this Agreement.

[Signature page follows]

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized signatories of the parties as of the date first written
above.

COMPANY:

PIXELWORKS, INC.

By: /s/ Steven L. Moore

Steven L. Moore

VP and CFO

[Signature Page to Standstill Agreement]



/s/ Steven R. Becker		/s/ Matthew A. Drapkin
Steven R. Becker		Matthew A. Drapkin

BC ADVISORS, LLC		BECKER DRAPKIN MANAGEMENT, L.P.
		By: BC Advisors, LLC, its general partner
By: /s/ Steven R. Becker		By: /s/ Steven R. Becker
Name: Steven Becker		Name: Steven Becker
Title: Managing Partner		Title: Managing Partner




BECKER DRAPKIN PARNTERS (QP), L.P.		BECKER DRAPKIN PARTNERS, L.P.
By: Becker Drapkin Management, L.P., its general partner		By: Becker Drapkin Management, L.P., its general partner
By: BC Advisors, LLC, its general partner		By: BC Advisors, LLC, its general partner
By: /s/ Steven R. Becker		By: /s/ Steven R. Becker
Name Steven Becker		Name: Steven Becker
Title: Managing Partner		Title: Managing Partner



BD PARTNERS IV, L.P.
By: Becker Drapkin Management, L.P., its general partner
By: BC Advisors, LLC, its general partner
By: /s/ Steven R. Becker
Name Steven Becker
Title: Managing Partner

[Signature Page to Standstill Agreement]

/s/ Bradley Shisler

BRADLEY SHISLER

[Signature Page to Standstill Agreement]

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