SIGMA DESIGNS INC (Form: 8-K, Received: 08/03/2012 09:01:15)

SETTLEMENT AGREEMENT

This Settlement Agreement (this “ Agreement ”) is made and entered into as of August 2, 2012, by and among Sigma Designs, Inc. (the “ Company ”) and the entities and natural persons listed on Exhibit A hereto and their respective Affiliates (collectively, “ Potomac ”) (each of the Company and Potomac, a “ Party ” to this Agreement, and collectively, the “ Parties ”).

RECITALS

WHEREAS, the Company and Potomac have engaged in various discussions and communications concerning the Company’s business, financial performance and strategic plans;

WHEREAS, Potomac is deemed to beneficially own shares of common stock of the Company (the “ Common Stock ”) totaling, in the aggregate, 2,594,783 shares, or approximately 7.9%, of the Common Stock issued and outstanding on the date hereof;

WHEREAS, Potomac duly submitted a nomination letter to the Company on April 5, 2012 (the “ Nomination Letter ”) nominating a slate of three (3) director candidates for election to the Company’s board of directors (the “ Board ”) at the 2012 annual meeting of shareholders of the Company (including any adjournment or postponement thereof (the “ 2012 Annual Meeting ”);

WHEREAS, on June 20, 2012, Potomac filed a definitive proxy statement on Schedule 14A with the Securities and Exchange Commission (the “ SEC ”) related to the matters set forth in the Nomination Letter; and

WHEREAS the Company and the members of Potomac have determined to come to an agreement with respect to the election of members of the Company’s board of directors (the “ Board ”) at the 2012 Annual Meeting, certain matters related to the 2012 Annual Meeting and certain other matters, as provided in this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound hereby, agree as follows:

1. Board Matters; 2012 Annual Meeting; Committees .

(a) The Company and Potomac have agreed that following the 2012 Annual Meeting the Board shall be composed of five (5) directors, including ( i ) two (2) director candidates nominated by Potomac, Eric B. Singer and Mark J. Bonney (the “ Potomac Nominees ”), ( ii ) two (2) director candidates nominated by the Company, Thinh Q. Tran and Lung C. Tsai (the “ Company Nominees ”) and ( iii ) Maury Austin, an independent director candidate deemed mutually agreeable to both the Company and Potomac.

(b) The Company and Potomac have agreed that the 2012 Annual Meeting shall be held on August 7, 2012, and in order to effectuate the election of the Potomac Nominees and the Company Nominees at the 2012 Annual Meeting in accordance with Section 1( a ) and with respect to the proposal relating to the election of directors, ( i ) at least one of Eric B. Singer or Paul J. Solit, the Potomac proxyholders, shall appear in person at the 2012 Annual Meeting and cumulatively vote all shares of Common Stock of the Company represented by properly executed GOLD proxy cards only in favor of the election of the Potomac Nominees, unless any such properly executed GOLD proxy cards instruct otherwise so as to withhold authority to cumulate votes in such manner or any such properly executed GOLD proxies are marked “ WITHHOLD ” with respect to the election of one or more of the Potomac Nominees, in which case the shares represented by such proxies shall not be cumulated with respect to the director candidate(s) so indicated, but only to the extent so indicated, and ( ii ) at least one of Thinh Q. Tran and Thomas E. Gay III, the Company’s proxyholders, shall appear in person at the 2012 Annual Meeting and cumulatively vote all shares of Common Stock of the Company represented by properly executed WHITE proxy cards only in favor of the election of the Company Nominees, unless any such properly executed WHITE proxy cards instruct otherwise so as to withhold authority to cumulate votes in such manner or any such properly executed WHITE proxies are marked “ WITHHOLD ” with respect to the election of one or more of the Company’s director nominees, in which case the shares represented by such proxies shall not be cumulated with respect to the director candidate(s) so indicated, but only to the extent so indicated. To the extent Potomac votes the shares of Common Stock that it beneficially owns at the 2012 Annual Meeting and not by way of a GOLD proxy card, Potomac agrees to vote all such shares with respect to the proposal relating to the election of directors only in favor of the election of the Potomac Nominees.

(c) If the preliminary voting results at the 2012 Annual Meeting indicate that the Potomac Nominees and the Company Nominees have been elected to the Board, then Potomac and the Company agree to waive any right to a challenge or review the voting results tabulated by the Independent Inspector of Elections and will consent to the certification of the voting results electing the Potomac Nominees and the Company Nominees as of the date of the Annual Meeting.

(d) The Company hereby confirms that the Board and all applicable committees of the Board have taken all necessary action such that effective immediately following the conclusion of the 2012 Annual Meeting the Board shall be increased to five (5) members.

(e) Prior to the execution of this Agreement, the Corporate Governance and Nominating Committee of the Board shall have reviewed and reasonably approved, in accordance with the Company’s corporate governance guidelines and the charter of the Corporate Governance and Nominating Committee, the qualifications of Mr. Austin to serve as a member of the Board and recommended to the Board that immediately following the 2012 Annual Meeting the Board appoint Mr. Austin to fill the vacancy created pursuant to Section 1( d ) to serve as a director, in accordance with Section 1( a ).

(f) The Company and Potomac each agree to take such other actions as are within its power to cause the newly-elected Board to appoint Maury Austin to fill the vacancy created pursuant to Section 1( d ) to serve as a director of the Board for a term to expire at the 2013 annual meeting of shareholders of the Company (the “ 2013 Annual Meeting ”), including the holding of a formal board meeting immediately following the 2012 Annual Meeting for the purpose of approving such appointment.

(g) The Parties agree that if ( i ) for any reason the 2012 Annual Meeting is postponed or adjourned beyond August 17, 2012 or ( ii ) the voting at the 2012 Annual Meeting does not result in the election of the Potomac Nominees and the Company Nominees in accordance with Section 1( a ), the Parties will, in good faith and as promptly as practicable, take any actions that may be required by either Party in order to reconstitute the Board to five (5) members in a manner consistent with the composition of the Board as set forth in Section 1( a ).

(h) At least one of Eric B. Singer or Paul J. Solit, the Potomac proxyholders, shall appear in person at the 2012 Annual Meeting and vote all shares of Common Stock of the Company represented by properly executed GOLD proxy cards and all shares of Common Stock beneficially owned by Potomac in favor of (i) the ratification of the Company’s independent registered public accounting firm and (ii) the advisory vote on the executive compensation of the Company’s named executive officers, which is consistent with the recommendation of Institutional Shareholder Services Inc. on such proposals, unless any such properly executed GOLD proxy cards instruct otherwise.

(i) The Company and Potomac agree that upon the execution of this Agreement and prior to the conclusion of the 2012 Annual Meeting neither Party will take any actions inconsistent with either the spirit of this Agreement or the purpose of effecting the composition of the Board as set forth in Section 1( a ).

(j) The Company agrees that prior to the 2013 Annual Meeting, if either or both of the Potomac Nominees is unable to serve as a director, resigns as a director or is removed as a director, and at such time Potomac beneficially owns in the aggregate at least the lesser of 5.0% of the Company’s then outstanding Common Stock and 1,645,224 shares of Common Stock (subject to adjustment for stock splits, reclassifications, combinations and similar adjustments), Potomac shall have the ability to recommend a substitute person(s), who will qualify as “independent” pursuant to the listing standards of NASDAQ Stock Market, to fill the resulting vacancy or vacancies, subject to the approval of the Corporate Governance and Nominating Committee after consideration in good faith and exercising its fiduciary duties, which approval shall not be unreasonably withheld (any such replacement nominee(s) appointed in accordance with the provisions of this Section 1( j ) shall be referred to individually as the “ Potomac Replacement Director ”). In the event the Corporate Governance and Nominating Committee does not accept a substitute person recommended by Potomac, Potomac will have the right to recommend additional substitute person(s), subject to the terms of this Section 1( j ), for consideration by the Corporate Governance and Nominating Committee. Upon the acceptance of a Potomac Replacement Director nominee by the Corporate Governance and Nominating Committee, the Board will appoint such Potomac Replacement Director to the Board no later than five (5) business days after the Corporate Governance and Nominating Committee’s recommendation of such Potomac Replacement Director.

(k) If, prior to the 2013 Annual Meeting, Lung Tsai is unable to serve as a director, resigns as a director or is removed as a director, then the Board shall work to identify a replacement director candidate who will qualify as “independent” pursuant to the listing standards of NASDAQ Stock Market, to fill the resulting vacancy, subject to the approval of the Corporate Governance and Nominating Committee after consideration in good faith and exercising its fiduciary duties (any such replacement nominee appointed in accordance with the provisions of this Section 1( k ) shall be referred to individually as the “ Replacement Director ”). As part of this process, the Corporate Governance and Nominating Committee and the Board shall take into account and consider in good faith any director candidate recommended by the remaining Company Nominee. Upon the acceptance of a Replacement Director nominee by the Corporate Governance and Nominating Committee, the Board will appoint such Company Replacement Director to the Board no later than five (5) business days after the Corporate Governance and Nominating Committee’s recommendation of such Replacement Director.

(l) The Company agrees that the size of the Board shall not be increased to more than five (5) directors prior to the conclusion of the 2013 Annual Meeting without the approval of the Board, including the unanimous approval of the Potomac Nominees.

(m) The Parties hereto acknowledge that the only matters that may be presented by the Company for consideration at the 2012 Annual Meeting are ( i ) the election of directors, ( ii ) the ratification of the Company’s independent registered public accounting firm and ( iii ) the advisory vote on the executive compensation of the Company’s named executive officers.

(n) The Company agrees that from the date hereof through the first date that the Board is composed of the five (5) directors specified in Section 1( a ), the Company will not ( i ) enter into any new, or modify any existing, employment, consulting or severance agreements or arrangements with any of the Company’s officers, directors or consultants or ( ii ) take any action to limit or restrict the rights of its shareholders by amending the Company’s Amended and Restated Bylaws (the “ Bylaws ”) or otherwise.

(o) Potomac agrees that it will cause its Affiliates and Associates to comply with the terms of this Agreement. As used in this Agreement, the terms “Affiliate” and “Associate” shall have the respective meanings set forth in Rule 12b-2 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, or the rules or regulations promulgated thereunder (the “ Exchange Act ”) and shall include all persons or entities that at any time during the term of this Agreement become Affiliates or Associates of any person or entity referred to in this Agreement.

(p) Upon the conclusion of the 2012 Annual Meeting, the Board shall work with management of the Company to promptly develop a plan to improve efficiencies within the organization and to bring expenses in line with revenue.

(q) Effective immediately following the conclusion of the 2012 Annual Meeting, Lung C. Tsai will be appointed as Chairman of the Board in accordance with Article V of the Bylaws, until such time as Mr. Tsai’s replacement as Chairman of the Board is appointed by the Board or Mr. Tsai is no longer serving as a director on the Board.

(r) As promptly as practicable following the conclusion of the 2012 Annual Meeting, the Company shall, in accordance with Section 311 of the Corporations Code of California and Article IV of the Bylaws, take all necessary action in furtherance of reconstituting the committees of the Board as follows:

Compensation Committee	Audit Committee	Corporate Governance and Nominating Committee
Maury Austin	Maury Austin*	Maury Austin
Eric B. Singer*	Mark J. Bonney	Mark J. Bonney*
Lung C. Tsai	Lung C. Tsai	Eric B. Singer
		Lung C. Tsai

* Chairman

2. Standstill Provisions .

(a) Potomac agrees that, from the date of this Agreement until the earlier of ( i ) the date that is (ten) 10 business days prior to the deadline for the submission of shareholder nominations for the 2013 Annual Meeting pursuant to the Company’s bylaws and ( ii ) the date that is one-hundred (100) days prior to the first anniversary of the 2012 Annual Meeting (the “ Standstill Period ”), neither it nor any of its Affiliates or Associates under its control or direction will, and it will cause each of its Affiliates and Associates under its control not to, directly or indirectly, in any manner:

(i) solicit, or encourage or in any way engage in any solicitation of, any proxies or consents or become a “participant” in a “solicitation” as such terms are defined in Regulation 14A under the Exchange Act of proxies or consents (including, without limitation, any solicitation of consents that seeks to call a special meeting of shareholders), in each case, with respect to securities of the Company;

(ii) advise, encourage, support or influence any person with respect to the voting or disposition of any securities of the Company at any annual or special meeting of shareholders, except in accordance with Section 1, or seek to do so;

(iii) form, join or in any way participate in any “group” (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to the Common Stock (other than a “group” that includes all or some of the persons identified on Exhibit A , but does not include any other entities or persons not identified on Exhibit A as of the date hereof); provided, however, that nothing herein shall limit the ability of an Affiliate of Potomac to join the “group” following the execution of this Agreement, so long as any such Affiliate agrees to be bound by the terms and conditions of this Agreement;

(iv) deposit any Common Stock in any voting trust or subject any Common Stock to any arrangement or agreement with respect to the voting of any Common Stock, other than any such voting trust, arrangement or agreement solely among the members of Potomac and otherwise in accordance with this Agreement;

(v) seek or encourage any person to submit nominations in furtherance of a “contested solicitation” for the election or removal of directors with respect to the Company; provided, however, that nothing herein will limit the ability of Potomac to recommend a Potomac Replacement Director(s) in accordance with Section 1( j );

(vi) ( A ) make any proposal for consideration by shareholders at any annual or special meeting of shareholders of the Company or ( B ) make any offer or proposal (with or without conditions) with respect to a merger, acquisition, disposition or other business combination involving Potomac and the Company or any subsidiary or Affiliate of the Company, or encourage, initiate or support any other third party in any such related activity or ( C ) make any public communication in opposition to any Company acquisition or disposition activity approved by the Board;

(vii) seek, alone or in concert with others, representation on the Board, except as specifically contemplated in Section 1;

(viii) enter into any discussions, negotiations, arrangements or understandings with any third party with respect to the matters set forth in this Section 2; or

(ix) take any action which could cause or require the Company or any Affiliate of the Company to make a public announcement regarding any of the foregoing, publicly seek or request permission to do any of the foregoing, publicly make any request to amend, waive or terminate any provision of this Section 2 (including, without limitation, this Section 2(a)(ix), or make or seek permission to make any public announcement with respect to any of the foregoing.

(b) Nothing in this Section 2 shall prevent ( i ) Potomac from voting its shares of Common Stock and all shares of Common Stock represented by properly executed GOLD proxy cards in favor of the Potomac Nominees at the 2012 Annual Meeting in accordance with Section 1, ( ii ) Potomac from taking any actions as contemplated in Section 1( f ) in furtherance of reconstituting the Board in a manner consistent with the composition of the Board as set forth in Section 1( a ) or ( iii ) either of the Potomac Nominees, or their respective Potomac Replacement Director, as applicable, from taking any action in their capacity as directors of the Company in accordance with their respective fiduciary duties.

3. Representations and Warranties of the Company .

The Company represents and warrants to Potomac that (a) the Company has the corporate power and authority to execute this Agreement and to bind it thereto, (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 generally affecting the rights of creditors and subject to general equity principles and (c) the execution, delivery and performance of this Agreement by the Company does not and will not violate or conflict with (i) any law, rule, regulation, order, judgment or decree applicable to the Company, or (ii) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both could constitute such a breach, violation or 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 organizational document, agreement, contract, commitment, understanding or arrangement to which the Company is a party or by which it is bound.

4. Representations and Warranties of Potomac .

Potomac represents and warrants to the Company that (a) the authorized signatory of Potomac set forth on the signature page hereto has the power and authority to execute this Agreement and any other documents or agreements to be entered into in connection with this Agreement and to bind it thereto, (b) this Agreement has been duly authorized, executed and delivered by Potomac, and is a valid and binding obligation of Potomac, enforceable against Potomac in accordance with its terms, except as enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws generally affecting the rights of creditors and subject to general equity principles, (c) the execution of this Agreement, the consummation of any of the transactions contemplated hereby, and the fulfillment of the terms hereof, in each case in accordance with the terms hereof, will not conflict with, or result in a breach or violation of the organizational documents of Potomac as currently in effect, (d) the execution, delivery and performance of this Agreement by Potomac does not and will not violate or conflict with (i) any law, rule, regulation, order, judgment or decree applicable to Potomac, or (ii) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both could constitute such a breach, violation or 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 organizational document, agreement, contract, commitment, understanding or arrangement to which such member is a party or by which it is bound, and (e) as of the date of this Agreement, (i) Potomac is deemed to beneficially own in the aggregate 2,594,783 shares of Common Stock and (ii) Potomac does not currently have, and does not currently have any right to acquire, any interest in any other securities of the Company or any Other Equity Rights.

5. Press Release .

Promptly following the execution of this Agreement, the Company and Potomac shall jointly issue a mutually agreeable press release (the “ Mutual Press Release ”) announcing certain terms of this Agreement, in the form attached hereto as Exhibit B . Concurrent with the issuance of the Mutual Press Release, the Company shall file a Current Report on Form 8-K, in the form previously provided to Potomac or its counsel, with the Securities and Exchange Commission describing the terms of this Agreement and attaching this Agreement as an exhibit thereto. Prior to the issuance of the Mutual Press Release, neither the Company nor Potomac shall issue any press release or public announcement regarding this Agreement without the prior written consent of the other Party. During the Standstill Period, neither the Company nor Potomac or the Potomac Nominees shall make any public announcement or statement that is inconsistent with or contrary to the statements made in the Mutual Press Release, except as required by law or the rules of any stock exchange or with the prior written consent of the other Party.

6. Specific Performance .

Each of the members of Potomac, on the one hand, and the Company, on the other hand, acknowledges and agrees that irreparable injury to the other party hereto 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 and that such injury would not be adequately compensable by the remedies available at law (including the payment of money damages). It is accordingly agreed that Potomac (or any of the entities and natural persons listed on Exhibit A ), on the one hand, and the Company, on the other hand (the “ Moving Party ”), shall each be entitled to specific enforcement of, and injunctive relief to prevent any violation of, the terms hereof, and the other party hereto will not take action, directly or indirectly, in opposition to the Moving Party seeking such relief on the grounds that any other remedy or relief is available at law or in equity.

7. Expenses .

The Company shall reimburse Potomac for its reasonable, documented out-of-pocket fees and expenses (including legal expenses) incurred in connection with the matters related to the 2012 Annual Meeting, including, without limitation, the Nomination Letter and activities in connection therewith, Potomac’s proxy solicitation and activities in connection therewith, the filing of a Schedule 13D in connection with this Agreement and the negotiation and execution of this Agreement, provided that such reimbursement shall not exceed $400,000 in the aggregate.

8. Severability .

If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. It is hereby stipulated and declared to be the intention of the Parties that the Parties would have executed the remaining terms, provisions, covenants and restrictions without including any of such which may be hereafter declared invalid, void or unenforceable. In addition, the Parties agree to use their best efforts to agree upon and substitute a valid and enforceable term, provision, covenant or restriction for any of such that is held invalid, void or enforceable by a court of competent jurisdiction.

9. Notices .

Any notices, consents, determinations, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one business day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

If to the Company:	Sigma Designs, Inc. 1778 McCarthy Blvd. Milpitas, California 95035 Attention: Secretary Telephone: (408) 262-9003 Facsimile: (408) 957-9740
with a copy (which shall not constitute notice) to:	Pillsbury Winthrop Shaw Pittman LLP 2475 Hanover Street Palo Alto, California 94304-1114 Attention: James J. Masetti and Stephen R. Rusmisel Telephone: (650) 233-4754 / (212) 858-1442 Facsimile: (650) 233-4545 / (212) 858-1500
If to Potomac:	Potomac Capital Management LLC 825 Third Avenue, 33 rd Floor New York, New York 10022 Attention: Paul J. Solit Telephone: (212) 257-6083 Facsimile: (917) 464-8048
With a copy (which shall not constitute notice) to:	Olshan Frome Wolosky LLP Park Avenue Tower 65 East 55th Street New York, New York 10022 Attention: Steve Wolosky Telephone: (212) 451-2333 Facsimile: (212) 451-2222

10. Applicable Law; Jurisdiction . This Agreement shall be governed in all respects, including validity, interpretation and effect, by the laws of the State of California applicable to contracts executed and to be performed wholly within such state, without giving effect to the choice of law principles of such state. 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 in the 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 9 of this Agreement 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, 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 in the 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.

11. Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the Parties and delivered to the other Party (including by means of electronic delivery or facsimile).

12. Entire Agreement; Amendment and Waiver; Successors and Assigns; Third Party Beneficiaries .

This Agreement contains the entire understanding of the Parties hereto with respect 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. No modifications of this Agreement can be made except in writing signed by an authorized representative of each the Company and Potomac. 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 permitted assigns. No party shall assign this Agreement or any rights or obligations hereunder without, with respect to any member of Potomac, the prior written consent of the Company, and with respect to the Company, the prior written consent of Potomac. This Agreement is solely for the benefit of the Parties hereto and is not enforceable by any other persons.

13. Mutual Non-Disparagement .

Each of the Parties covenants and agrees that, during the Standstill Period, neither it nor any of its respective agents, subsidiaries, Affiliates, successors, assigns, officers, key employees or directors and with respect to Potomac the Potomac Nominees and Potomac Replacement Directors, shall in any way disparage, call into disrepute, or otherwise defame or slander the other Parties or such other Parties’ subsidiaries, Affiliates, successors, assigns, officers (including any current officer of a Party or a Parties’ subsidiaries who no longer serves in such capacity following the 2012 Annual Meeting), directors (including any current director of a Party or a Parties’ subsidiaries who no longer serves in such capacity following the 2012 Annual Meeting), employees, stockholders, agents, attorneys or representatives, or any of their products or services, in any manner that would damage the business or reputation of such other Parties, their products or services or their subsidiaries, Affiliates, successors, assigns, officers (or former officers), directors (or former directors), employees, stockholders, agents, attorneys or representatives.

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized signatories of the Parties as of the date hereof.

SIGMA DESIGNS, INC.

By:	/s/ Thinh Q. Tran
Name:	Thinh Q. Tran
Title:	President and Chief Executive Officer

POTOMAC:

	POTOMAC CAPITAL PARTNERS III, L.P.

	By:	Potomac Capital Management III, L.L.C.
		General Partner

	By:	/s/ Paul J. Solit
	Name:	Paul J. Solit
	Title:	Co-Managing Member

	POTOMAC CAPITAL MANAGEMENT III, L.L.C.

	By:	/s/ Paul J. Solit
	Name:	Paul J. Solit
	Title:	Co-Managing Member

	POTOMAC CAPITAL PARTNERS L.P.

	By:	Potomac Capital Management, L.L.C.
		General Partner

	By:	/s/ Paul J. Solit
	Name:	Paul J. Solit
	Title:	Managing Member

	POTOMAC CAPITAL MANAGEMENT, L.L.C.

	By:	/s/ Paul J. Solit
	Name:	Paul J. Solit
	Title:	Managing Member

	/s/ Paul J. Solit
	PAUL J. SOLIT

	/s/ Eric Singer
	ERIC SINGER

[Signature Page to Agreement]

EXHIBIT A

Potomac

POTOMAC CAPITAL PARTNERS III, L.P.

POTOMAC CAPITAL MANAGEMENT III, L.L.C.

POTOMAC CAPITAL PARTNERS L.P.

POTOMAC CAPITAL MANAGEMENT, L.L.C.

PAUL J. SOLIT

ERIC B. SINGER

EXHIBIT B

PRESS RELEASE

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (“Agreement”) is made as of this __ day of ____________, 2012, by and between Sigma Designs, Inc., a California corporation (the “Company”), and _____________________ (“Indemnitee”).

WHEREAS, the Company and Indemnitee recognize the difficulty in obtaining directors and officers liability insurance that fully and adequately covers directors and officers for their acts and omissions on behalf of the Company and its subsidiaries;

WHEREAS, the Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting officers and directors to expensive litigation risks that may not be fully covered by liability insurance;

WHEREAS, Indemnitee does not regard the current protection available as adequate under the present circumstances, and Indemnitee and other officers and directors of the Company may not be willing to continue to serve as officers and directors without additional protection; and

WHEREAS, the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to serve as officers and directors of the Company and to indemnify its officers and directors so as to provide them with the maximum protection permitted by law.

NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:

Section 1. Services by Indemnitee . Indemnitee hereby agrees to serve or continue to serve, at the will of the Company, as a director, officer or key employee of the Company, for as long as Indemnitee is duly elected or appointed, as the case may be, or until Indemnitee tenders his or her resignation or is removed. For avoidance of doubt, the Company’s obligations under this Agreement shall continue to the extent provided for in this Agreement, notwithstanding that Indemnitee may have ceased to be a director, officer or key employee of the Company.

Section 2. Indemnification .

(a) Third Party Proceedings . In connection with any Proceeding other than those instituted by or in the right of the Company, the Company shall indemnify Indemnitee against any and all Expenses and Liabilities, in either case, actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf by reason of Indemnitee’s Corporate Status unless the Company shall establish, in accordance with the procedures described in Section 3 of this Agreement, that Indemnitee did not act in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the Company, and, with respect to any criminal Proceeding, had no reasonable cause to believe Indemnitee’s conduct was unlawful.

(b) Proceedings by or in the Right of the Company . In connection with any Proceeding instituted by or in the right of the Company, the Company shall indemnify Indemnitee against any and all Expenses and, to the fullest extent permitted by law, amounts paid in settlement, in each case to the extent actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf by reason of Indemnitee’s Corporate Status unless the Company shall establish, in accordance with the procedures described in Section 3 of this Agreement, that Indemnitee did not act in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the Company and its shareholders, except that no indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Company in the performance of Indemnitee’s duty to the Company or any Subsidiary of the Company unless and only to the extent that the court in which such Proceeding is or was pending shall determine upon application that, in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for Expenses or amounts paid in settlement and then only to the extent that the court shall determine.

(c) Witness Expenses . Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his or her Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he or she shall be indemnified against all Expenses incurred by Indemnitee or on his or her behalf in connection therewith.

(d) Additional Maximum Indemnification. California Corporations Code Section 317(g) provides that a corporation may provide additional rights to indemnification for breach of duty to the corporation and its shareholders while acting in the capacity of a director or office of the corporation beyond those expressly authorized by Corporations Code Section 317. In accordance with Sections 317(g) and 204(11) of the California Corporations Code, the Company’s Articles of Incorporation in effect at the time this Indemnification Agreement is entered into provide that the Company is authorized to provide indemnification in excess of the indemnification otherwise permitted by Section 317, subject only to the applicable limits set forth in Section 204 of the California Corporations Code. The Company hereby agrees to indemnify Indemnitee to the fullest extent permitted by law, subject solely to Section 10(a) below, even if such indemnification is not specifically authorized by the other provisions of this Agreement or any other agreement, the Company’s Articles, the Company’s Bylaws or by statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of a California corporation to indemnify a member of its Board of Directors or an officer, Shareholder, employee, controlling person, agent or fiduciary, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change in the Company’s Articles of Incorporation or any applicable law, statute or rule which narrows the right of a California corporation to indemnify a member of its Board of Directors or an officer, Shareholder, employee, agent or fiduciary, such change shall have no effect on this Agreement or the parties rights hereunder.

(e) Mandatory Payment of Expenses. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise, including, without limitation , the dismissal of an action without prejudice, in the defense of any action, suit, proceeding, inquiry or investigation referred to in Section 1(a) hereof or in the defense of any claim, issue or matter therein, each Indemnitee shall be indemnified against all Expenses incurred by such Indemnitee in connection herewith.

(f) Spousal and Domestic Partner Extension. If a Proceeding for which Indemnitee is entitled to be indemnified hereunder asserts a claim against (i) the lawful spouse or legally recognized domestic partner of Indemnitee or (ii) a property interest of such spouse or domestic partner, then indemnification shall be extended to such spouse or domestic partner or for the protection of the property of such spouse or domestic partner to the extent that the Proceeding does not arise from any actual or alleged act, error or omission of such spouse or domestic partner.

Section 3. Advancement of Expenses; Indemnification Procedure.

(a) Advancement of Expenses . The Company shall advance all Expenses incurred by Indemnitee in connection with any Proceeding referenced in Section 2 of this Agreement (but not amounts actually paid in settlement of any such Proceeding). Indemnitee hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Company as authorized hereby. The advances to be made hereunder shall be paid by the Company to Indemnitee within 20 days following delivery of a written request therefor by Indemnitee to the Company. Advances shall be unsecured and interest free. Advances shall be made without regard to Indemnitee’s ability to repay such amounts and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement. Advances shall include any and all Expenses incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed.

(b) Notice by Indemnitee . Indemnitee shall give the Company notice in writing as soon as practicable of any Proceeding in respect of which Indemnitee intends to seek indemnification or advancement of Expenses hereunder. Notice to the Company shall be directed to the Chief Financial Officer of the Company at the address shown in Section 15(a) of this Agreement (or such other address as the Company shall designate in writing to Indemnitee). The omission by Indemnitee to so notify the Company will not relieve the Company from any liability that it may have to Indemnitee hereunder or otherwise.

(i) Where there has been a written notice by Indemnitee for indemnification pursuant to Section 3(b), then as soon as is reasonably practicable (but in any event not later than 60 days) after final disposition of the relevant Proceeding, the Company shall make a determination, if and in the manner required by applicable law, with respect to Indemnitee’s entitlement thereto; provided, however, that, if a Change in Control shall have occurred, the determination shall be made by an Independent Counsel (selected pursuant to Section 3(c)(ii)) in a written opinion to the Company’s Board of Directors, a copy of which shall be delivered to Indemnitee. If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall reasonably cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information that is not privileged or otherwise protected from disclosure and that is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys’ fees and disbursements) actually and reasonably incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification).

(ii) If entitlement to indemnification is to be determined by an Independent Counsel after a Change in Control pursuant to Section 3(c)(i), such Independent Counsel shall be selected by Indemnitee, and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. Within 10 days after such written notice of selection shall have been received, the Company may deliver to Indemnitee a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 12(a) of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as the Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as the Independent Counsel unless and until such objection is withdrawn or a court of competent jurisdiction has determined that such objection is without merit. If, within 20 days after the final disposition of the Proceeding, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Company to Indemnitee’s selection of the Independent Counsel and/or for the appointment as the Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as the Independent Counsel under Section 3(c)(i) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 4(a) of this Agreement, the Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

(iii) The Company agrees to abide by the opinion and to pay the reasonable fees of the Independent Legal Counsel referred to above and to fully indemnify such counsel against any and all expenses (including attorneys’ fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

(d) Presumptions and Burdens of Proof .

(i) In making any determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall, to the fullest extent not prohibited by law, presume that Indemnitee is entitled to indemnification under this Agreement, and the Company shall have, to the fullest extent not prohibited by law, the burden of proof to overcome that presumption in connection with the making of any determination contrary to that presumption. Neither the failure of the person, persons or entity to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the person, persons or entity that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(ii) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner that he or she reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

(iii) For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is in good faith reliance on the records or books of account of any Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of such Enterprise in the course of their duties, or on the advice of legal counsel for such Enterprise or on information or records given or reports made to such Enterprise by an independent certified public accountant or by an appraiser, investment banker, compensation consultant or other expert selected by such Enterprise. The provisions of this Section 3(d)(iii) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed or found to have met the applicable standard of conduct set forth in this Agreement.

(iv) If any Indemnitee acted in good faith and in a manner such Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, such Indemnitee shall be deemed to have acted in a manner not opposed to the best interests of the Company as referred to in this Agreement.

(v) The knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Corporation or the Corporation itself shall not be imputed to Indemnitee for purposes of determining any rights under this Agreement.

(e) Notice to Insurers . If, at the time of the receipt of a notice of a Proceeding pursuant to Section 3(b) of this Agreement, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies. Thereafter, the Company shall take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies. The Company shall indemnify Indemnitee for Expenses incurred by Indemnitee in connection with action brought by Indemnitee for recovery under any insurance policy referred to in this Section, and shall advance to Indemnitee the Expenses of such action; provided, however, that by executing this Agreement Indemnitee hereby undertakes to promptly re-pay the Company for any such advanced Expenses if a court of competent jurisdiction finds that all of the claims brought by the Indemnitee were frivolous and not in good faith.

(f) Relationship to Other Sources . The Company hereby acknowledges that Indemnitee may have certain rights to indemnification, advancement of expenses and/or insurance provided by an investment fund with which Indemnitee is affiliated and certain of such fund’s affiliates (collectively, the “Fund Indemnitors”). The Company hereby agrees (i) that it is the indemnitor of first resort (i.e., its obligations to Indemnitee are primary and any obligation of the Fund Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Indemnitee are secondary), (ii) that it shall be required to advance the full amount of Expenses incurred by Indemnitee and shall be liable for the full amount of all Expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of this Agreement and the Articles of Incorporation or Bylaws of the Company (or any other agreement between the Company and Indemnitee), without regard to any rights Indemnitee may have against the Fund Indemnitors, and, (iii) that it irrevocably waives, relinquishes and releases the Fund Indemnitors from any and all claims against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Fund Indemnitors on behalf of Indemnitee with respect to any claim for which Indemnitee has sought indemnification from the Company shall affect the foregoing and the Fund Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Company. The Company and Indemnitee agree that the Fund Indemnitors are express third party beneficiaries of the terms of this Section 3(f). Indemnitee shall not be required to exercise any rights against any other parties (for example, under any insurance policy purchased by the Company, Indemnitee or any other person or entity) before Indemnitee enforces this Agreement. However, to the extent the Company actually indemnifies Indemnitee or advances Expenses, the Company shall be entitled to enforce any such rights that Indemnitee may have against third parties other than Fund Indemnitors. Indemnitee shall assist the Company in enforcing those rights if the Company pays Indemnitee’s reasonable costs and expenses of doing so.

(g) Defense of Claims; Selection of Counsel .

(i) The Company shall not settle any action, claim, or Proceeding (in whole or in part) that would impose any Expense, judgment, fine, penalty or limitation on Indemnitee, without Indemnitee’s prior written consent; provided, however, that, with respect to settlements requiring solely the payment of money either by the Company or by Indemnitee for which the Company is obligated to reimburse Indemnitee promptly and completely, in either case without recourse to Indemnitee, no such consent of Indemnitee shall be required. Indemnitee shall not settle any action, claim or Proceeding (in whole or in part) that would impose any Expense, judgment, fine, penalty or limitation on the Company without the Company’s prior written consent, such consent not to be unreasonably withheld.

(ii) The Corporation shall not, on its own behalf, settle any part of any Proceeding to which Indemnitee is party with respect to other parties (including the Corporation) without the written consent of Indemnitee if any portion of such settlement is to be funded from insurance proceeds if any portion of the settlement is to be funded from insurance unless approved by (i) the written consent of Indemnitee or (ii) a majority of the Continuing Directors of the board.

(iii) In the event the Company shall be obligated under Section 3(a) of this Agreement to pay the Expenses of any Proceeding against Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by Indemnitee, which approval shall not be unreasonably withheld, upon the delivery to Indemnitee of written notice of its election so to do. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same Proceeding, provided that (i) Indemnitee shall have the right to employ Indemnitee’s own counsel in any such Proceeding at Indemnitee’s expense; and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have concluded in good faith that there may be a conflict of interest between the Company and Indemnitee or between Indemnitee and any other persons represented by the same counsel, in the conduct of any such defense, or (C) the Company, in fact, shall not have employed counsel to assume the defense of such Proceeding, then the reasonable fees and expenses of Indemnitee’s counsel shall be at the expense of the Company.

(iv) If the Indemnitee is the subject of or is implicated in any way during an investigation, whether formal or informal, the Company shall share with Indemnitee any information it has turned over to any third parties concerning the investigation (“Shared Information”). By executing this agreement, Indemnitee agrees that such Shared Information is material non-public information that Indemnitee is obligated to hold in confidence and may not disclose publicly; provided, however, that Indemnitee is permitted to use the Shared Information and to disclose such Shared information to Indemnitee’s legal counsel and legal counsel may disclose such Shared information solely in connection with defending Indemnitee from legal liability.

Section 4. Remedies of Indemnitee .

(a) In the event (i) a determination is made pursuant to Section 3(c) of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 3(a) of this Agreement, (iii) payment of indemnification pursuant to Section 3(c) of this Agreement is not made within 10 days after a determination has been made that Indemnitee is entitled to indemnification, (iv) no determination as to entitlement to indemnification is timely made pursuant to Section 3(c) of this Agreement, or (v) a contribution payment is not made in a timely manner pursuant to Section 9 of this Agreement), then Indemnitee shall be entitled to an adjudication by a court of Indemnitee’s entitlement to such indemnification, contribution or advancement. Alternatively, in such case, Indemnitee, at Indemnitee’s option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

(b) In the event that a determination shall have been made pursuant to Section 3(c) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 4 shall be conducted in all respects as a de novo trial, or arbitration, on the merits, and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 4, the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be, and the Company may not refer to or introduce into evidence any determination pursuant to Section 3(c) of this Agreement adverse to Indemnitee for any purpose. If Indemnitee commences a judicial proceeding or arbitration pursuant to this Section 4, Indemnitee shall not be required to reimburse the Company for any advances pursuant to Section 3(a) until a final determination is made with respect to Indemnitee’s entitlement to indemnification (as to which all rights of appeal have been exhausted or lapsed).

(c) If a determination shall have been made pursuant to Section 3(c) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 4, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with such determination of Indemnitee’s entitlement to indemnification, or (ii) a prohibition of such indemnification under applicable law.

(d) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 4 that the procedures and presumptions of this Agreement are not valid, binding or enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.

(e) The Company shall indemnify Indemnitee to the fullest extent permitted by law against all Expenses incurred by Indemnitee, and shall advance to Indemnitee payment for such Expenses as they are incurred, in connection with any judicial proceeding or arbitration brought by Indemnitee for (i) indemnification, contribution or advances of Expenses by the Company (or otherwise for the enforcement, interpretation or defense of his or her rights) under this Agreement or any other agreement, including any other indemnification, contribution or advancement agreement, or any provision of the Company’s Articles of Incorporation or By-laws now or hereafter in effect or (ii) recovery or advances under any directors and officers liability insurance policy maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, contribution, advancement or insurance recovery, as the case may be; provided, however, that this Section 4(e) shall not apply if, as part of such judicial proceeding or arbitration, the court of competent jurisdiction or the arbitrator, as the case may be, determines that the material assertions made by Indemnitee as a basis for such judicial proceeding or arbitration were not made in good faith or were frivolous.

Section 5. Nonexclusivity . The rights of indemnification, contribution and advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any rights to which Indemnitee may be entitled under the Company’s Articles of Incorporation, its By-Laws, any agreement, any vote of shareholders or disinterested directors, the General Corporation Law of the State of California, or otherwise, both as to action in Indemnitee’s official capacity and as to action or inaction in another capacity while holding such office. The indemnification provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though Indemnitee may have ceased to serve in such capacity at the time of any covered Proceeding is commenced.

Section 6. Partial Indemnification . If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses and Liabilities actually or reasonably incurred by Indemnitee in any Proceeding, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such Expenses and Liabilities to which Indemnitee is entitled.

Section 7. Directors and Officers Liability Insurance . The Company, from time to time, shall make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the officers and directors of the Company with coverage for losses from wrongful acts or to ensure the Company’s performance of its indemnification obligations under this Agreement. Among other considerations, the Company will weigh the costs of obtaining such insurance coverage against the protection afforded by such coverage. In all policies of directors and officers liability insurance, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s directors, if Indemnitee is a director; or of the Company’s officers, if Indemnitee is not a director of the Company but is an officer. Notwithstanding the foregoing, in the event of a Change in Control or the Company’s becoming insolvent—including being placed into receivership or entering the federal bankruptcy process and the like--the Company shall maintain in force any and all insurance policies then maintained by the Company in providing insurance--directors’ and officers’ liability, fiduciary, employment practices or otherwise--in respect of Indemnitee, for a period of six years thereafter (a “Tail Policy”). Such coverage shall be with the incumbent insurance carriers using the policies that were in place at the time of the change of control event (unless the incumbent carriers will not offer such policies, in which case the Tail Policy shall be substantially comparable in scope and amount as the expiring policies, and the insurance carriers for the Tail Policy shall have an AM Best rating that is the same or better than the AM Best ratings of the expiring policies).

Section 8. Contribution . To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for Liabilities and/or for Expenses, in connection with any Proceeding relating to an indemnifiable event under this Agreement, liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Indemnitee, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Indemnitee in connection with the action or inaction which resulted in such losses, claims, damages, expenses or liabilities, as well as any other relevant equitable considerations. The Company and the Indemnitee agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata or per capita allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph

Section 9. Severability . Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company’s inability, pursuant to court order, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. The provisions of this Agreement shall be severable as provided in this Section 9. If this Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in accordance with its terms.

Section 10. Exceptions . Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:

(a) Unlawful Indemnification. To indemnify an Indemnitee if a final decision by a court having jurisdiction in the matter shall determine that such indemnification is not lawful.

(b) Claims Initiated by Indemnitee . To indemnify or advance Expenses to Indemnitee with respect to any Proceeding initiated or brought voluntarily by Indemnitee and not by way of defense, except with respect to Proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Section 317 of the California General Corporation Law, but such indemnification or advancement of Expenses may be provided by the Company in specific cases if the Company’s Board of Directors has approved the initiation or bringing of such Proceeding; or

(c) Lack of Good Faith . To indemnify Indemnitee for any Expenses incurred by the Indemnitee with respect to any Proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that the material assertions made by the Indemnitee in such Proceeding were not made in good faith or were frivolous; or

(d) Insured Claims . To indemnify Indemnitee for Expenses or Liabilities that have been paid directly to Indemnitee by an insurance carrier under a policy of directors and officers liability insurance maintained by the Company; or

(e) Claims under Section 16(b) . To indemnify Indemnitee for Expenses and the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Exchange Act or any similar successor statute; or

(f) Claims under Sarbanes-Oxley and Dodd-Frank Acts . To indemnify Indemnitee for (i) any reimbursement of the Company by Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, (2) the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act of 2002), or (3) any forfeiture of incentive-based compensation (including stock options awarded as compensation) as required by Section 954 of the Dodd-Frank Act of 2010.

Section 11. Effectiveness of Agreement . This Agreement shall be effective as of the date set forth on the first page and shall apply to acts or omissions of Indemnitee which occurred prior to such date if Indemnitee was serving in any Corporate Status at the time such act or omission occurred.

Section 12. Construction of Certain Phrases .

(a) As used in this Agreement:

“ Change of Control ” means any one of the following circumstances occurring after the date hereof: (i) there shall have occurred an event required to be reported with respect to the Company in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item or any similar schedule or form) under the Exchange Act, regardless of whether the Company is then subject to such reporting requirement; (ii) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) shall have become, without prior approval of the Company’s Board of Directors by approval of at least a majority of the Continuing Directors, the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 40% or more of the combined voting power of the Company’s then outstanding voting securities (provided that, for purposes of this clause (ii), the term “person” shall exclude (x) the Company, (y) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (z) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company); (iii) there occurs a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 51% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such surviving entity; (iv) all or substantially all the assets of the Company are sold or disposed of in a transaction or series of related transactions; (v) the approval by the stockholders of the Company of a complete liquidation of the Company; or (vi) the Continuing Directors cease for any reason to constitute at least a majority of the members of the Company’s Board of Directors.

“ Continuing Director ” means (i) each director on the Company’s Board of Directors on the date hereof or (ii) any new director whose election or nomination for election by the Company’s stockholders was approved by a vote of at least a majority of the directors then still in office who were directors on the date hereof or whose election or nomination was so approved.

“ Corporate Status ” means the status of a person who is or was a director, officer, trustee, general partner, managing member, fiduciary, board of directors’ committee member, employee or agent of the Company or of any other Enterprise.

“ Enterprise ” means the Company, any Subsidiary and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, trustee, general partner, managing member, fiduciary, board of directors’ committee member, employee or agent.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Expenses ” means all direct and indirect costs (including without limitation attorneys’ fees, retainers, court costs, transcripts, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, automated legal research expenses and all other disbursements or expenses) reasonably and actually incurred in connection with (i) prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding or (ii) seeking to establish or enforce a right to indemnification or contribution under this Agreement, the Company’s Articles of Incorporation or By-Laws, applicable law or otherwise. Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding, including the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent. For the avoidance of doubt, however, Expenses shall not include any Liabilities.

“ Independent Counsel ” means a law firm, or a member of a law firm, that is experienced in matters of corporate law and neither currently is, nor in the five years prior to its selection or appointment has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

“ Liabilities ” means any losses or liabilities, including without limitation any judgments, fines, ERISA excise taxes and penalties, penalties and amounts paid in settlement, arising out of or in connection with any Proceeding (including all interest, assessments and other charges paid or payable in connection with or in respect of any such judgments, fines, ERISA excise taxes and penalties, penalties or amounts paid in settlement).

“ Proceeding ” means any threatened, pending or completed action, derivative action, suit, claim, counterclaim, cross claim, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether civil (including intentional and unintentional tort claims), criminal, administrative or investigative, including any appeal therefrom, and whether instituted by or on behalf of the Company or any other party, or any inquiry or investigation that Indemnitee in good faith believes might lead to the institution of any such action, suit or other proceeding hereinabove listed in which Indemnitee was, is or will be involved as a party, potential party, non-party witness or otherwise by reason of any Corporate Status of Indemnitee, or by reason of any action taken (or failure to act) by him or her or of any action (or failure to act) on his or her part while serving in any Corporate Status.

(b) For purposes of this Agreement:

References to “ Company ” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger that, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that, if Indemnitee is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.

References to “ Subsidiary ” shall include a corporation, company or other entity:

(i) 50% or more of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or

(ii) that does not have outstanding shares or securities (as may be the case in a partnership, joint venture or unincorporated association), but 50% or more of whose ownership interest representing the right to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company, or one or more Subsidiaries.

References to “ other enterprises ” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company that imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants, or beneficiaries.

Section 13. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall constitute an original.

Section 14. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

Section 15. Notice . All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand or recognized courier and receipted for by the party addressee, on the date of such receipt, (ii) if mailed by domestic certified or registered mail with postage prepaid, on the fifth business day after the date postmarked, or (iii) if sent by confirmed facsimile, on the date sent. Notices shall be addressed as follows:

(a) if to the Company:

Sigma Designs, Inc.

1778 McCarthy Blvd.

Milpitas, CA 95035

Attention: Chief Financial Officer

(b) if to Indemnitee, to the address of Indemnitee set forth under Indemnitee’s signature below;

or to such other address or attention of such other person as any party shall advise the other parties in writing.

Section 16. Injunction or Specific Performance. The Company and Indemnitee agree that a monetary remedy for breach of this Agreement may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm. Accordingly, the parties hereto agree that Indemnitee may enforce this Agreement by seeking injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm (having agreed that actual and irreparable harm will result if the Company fails to perform its obligations pursuant to this Agreement) and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which he may be entitled. The Company and Indemnitee further agree that Indemnitee shall be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertaking in connection therewith. The Company acknowledges that in the absence of a waiver, a bond or undertaking may be required of Indemnitee by the Court, and the Company hereby waives any such requirement of a bond or undertaking.

Section 17. Period of Limitations. No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against any Indemnitee, any Indemnitee’s estate, spouse, heirs, executors or personal or legal representatives after the expiration of one (1) year from the date of accrual of such cause of action , and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such one (1) year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action, such shorter period shall govern.

Section 18. Consent to Jurisdiction; Choice of Venue . The Company and Indemnitee each hereby irrevocably consents to the jurisdiction of the courts of the State of California and the federal courts within the State for all purposes in connection with any action or proceeding that arises out of or relates to this Agreement and agrees that any action instituted under this Agreement shall be brought only in the United States District Court for the Northern District of California and any California State court within that District.

Section 19. Choice of Law . This Agreement shall be governed by and its provisions construed in accordance with the laws of the State of California as applied to contracts between California residents entered into and to be performed entirely within California.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

	SIGMA DESIGNS, INC.


	By:
		[Title]

AGREED TO AND ACCEPTED:

INDEMNITEE:



Name:
Address:

California	001-32207	94-2848099
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification Number)

Item 9.01.	Financial Statements and Exhibits.

(d)	Exhibits

Exhibit No.	Description

3.1	Amended and Restated By-laws of Sigma Designs, Inc.

10.1	Settlement Agreement dated August 2, 2012 by and among Sigma Designs, Inc. and the entities and natural persons listed on Exhibit A thereto and their respective Affiliates.

10.2	Form of Director and Officer Indemnification Agreement

99.1	Press release dated August 3, 2012

Exhibit	Description

3.1	Amended and Restated By-laws of Sigma Designs, Inc.

10.1	Settlement Agreement dated August 2, 2012 by and among Sigma Designs, Inc. and the entities and natural persons listed on Exhibit A thereto and their respective Affiliates.

10.2	Form of Director and Officer Indemnification Agreement

99.1	Press release dated August 3, 2012

		Page

Article I CORPORATE OFFICES		1

Section 1.1	Principal Office	1
Section 1.2	Other Offices	1

Article II MEETINGS OF SHAREHOLDERS		1

Section 2.1	Place of Meeting	1
Section 2.2	Annual Meeting	1
Section 2.3	Special Meeting	1
Section 2.4	Notice of Shareholders’ Meetings	2
Section 2.5	Manner of Giving Notice; Affidavit of Notice	2
Section 2.6	Quorum	3
Section 2.7	Adjourned Meeting; Notice	3
Section 2.8	Voting	4
Section 2.9	Validation of Meetings Waiver of Notice Consent	4
Section 2.10	Shareholder Action by Written Consent Without a Meeting	5
Section 2.11	Record Date for Shareholder Notice; Voting; Giving Consents	6
Section 2.12	Proxies	6
Section 2.13	Inspectors of Election	7
Section 2.14	Notice of Nominations and Other Business	7

Article III DIRECTORS		8

Section 3.1	Powers	8
Section 3.2	Number of Directors	8
Section 3.3	Election and Term of Office of Directors	9
Section 3.4	Resignation and Vacancies	9
Section 3.5	Place of Meetings; Meetings by Telephone	9
Section 3.6	Regular Meetings	10
Section 3.7	Special Meetings; Notice	10
Section 3.8	Quorum	10
Section 3.9	Waiver of Notice	11
Section 3.10	Adjournment	11
Section 3.11	Notice of Adjournment	11
Section 3.12	Board Action by Written Consent Without a Meeting	11
Section 3.13	Fees and Compensation of Directors	11
Section 3.14	Approval of Loans to Officers	11

Article IV COMMITTEES		12

Section 4.1	Committees of Directors	12
Section 4.2	Meetings and Action of Committees	12

Article V OFFICERS		13

Section 5.1	Officers	13
Section 5.2	Election of Officers	13

Section 5.3	Subordinate Officers	13
Section 5.4	Removal and Resignation of Officers	13
Section 5.5	Vacancies in Offices	14
Section 5.6	Chairman of the Board	14
Section 5.7	President	14
Section 5.8	Vice Presidents	14
Section 5.9	Secretary	15
Section 5.10	Chief Financial Officer	15
Section 5.11	Administrative Officers	15

Article VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS		16

Section 6.1	Indemnification of Directors and Officers	16
Section 6.2	Indemnification of Others	16
Section 6.3	Payment of Expenses in Advance	16
Section 6.4	Indemnity Not Exclusive	17
Section 6.5	Indemnification Agreements	17
Section 6.6	Amendment	17
Section 6.7	Savings Clause	17

Article VII RECORDS AND REPORTS		17

Section 7.1	Maintenance and Inspection of Share Register	17
Section 7.2	Maintenance and Inspection of Bylaws	18
Section 7.3	Maintenance and Inspection of Other Corporate Records	18
Section 7.4	Inspection By Directors	19
Section 7.5	Annual Report to Shareholders; Waiver	19
Section 7.6	Financial Statements	19
Section 7.7	Representation of Shares of Other Corporations	20

Article VIII GENERAL MATTERS		20

Section 8.1	Record Date for Purposes Other Than Notice and Voting	20
Section 8.2	Checks; Drafts; Evidences of Indebtedness	20
Section 8.3	Corporate Contracts and Instruments: How Executed	20
Section 8.4	Certificates for Shares	21
Section 8.5	Lost Certificates	21
Section 8.6	Construction; Definitions	21

Article IX AMENDMENTS		22

Section 9.1	Amendment By Shareholders	22
Section 9.2	Amendment By Directors	22

Dated: August 3, 2012		SIGMA DESIGNS, INC.


	By:	/s/ Thinh Q. Tran
		Thinh Q. Tran
		President and Chief Executive Officer
		(Principal Executive Officer)