SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. ______________)
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/ / Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
SIGMA DESIGNS, INC.
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(Name of Registrant as Specified in Its Charter)
SIGMA DESIGNS, INC.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies: N/A
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(2) Aggregate number of securities to which transactions applies: N/A
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11: N/A
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(4) Proposed maximum aggregate value of transaction: N/A
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(5) Total fee paid: N/A
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid: N/A
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(2) Form, Schedule or Registration Statement No.: N/A
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(3) Filing party: N/A
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(4) Date filed: N/A
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SIGMA DESIGNS, INC.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 6, 1997
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Sigma
Designs, Inc., a California corporation (the "Company"), will be held on Friday,
June 6, 1997 at 2:00 p.m., local time, at the principal executive offices of the
Company at 46501 Landing Parkway, Fremont, California 94538, for the following
purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To ratify and approve the amendment to the Company's 1994 Stock Plan to
increase the number of shares available for grant thereunder by 1,000,000 to a
total of 3,400,000.
3. To ratify and approve the amendment to the Company's 1994 Director Option
Plan to provide for an increase in the automatic option grant to outside
directors by 10,000 shares to a total of 20,000 shares.
4. To ratify the appointment of Deloitte & Touche LLP as independent auditors
of the Company for the fiscal year ending January 31, 1998.
5. To transact such other business as may properly come before the meeting or
any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on April 9, 1997 are
entitled to receive notice of, to attend and to vote at the meeting and any
adjournment thereof.
All shareholders are cordially invited to attend the meeting in person. Any
shareholder attending the meeting may vote in person even if such shareholder
returned a proxy.
FOR THE BOARD OF DIRECTORS
Thinh Q. Tran
Chairman of the Board of Directors,
President and Chief Executive Officer
Fremont, California
May 9, 1997
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IMPORTANT: WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
IN ORDER TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
MAILED IN THE UNITED STATES.
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SIGMA DESIGNS, INC.
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PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
The enclosed Proxy is solicited on behalf of the Board of Directors of Sigma
Designs, Inc. (the "Company") for use at the Company's Annual Meeting of
Shareholders (the "Annual Meeting") to be held Friday, June 6, 1997, at 2:00
p.m., local time, or at any adjournment(s) or postponement(s) thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting of
Shareholders. The Annual Meeting will be held at the principal executive offices
of the Company at 46501 Landing Parkway, Fremont, California 94538. The
Company's telephone number is (510) 770-0100.
These proxy solicitation materials were mailed on or about May 9, 1997 to all
shareholders entitled to vote at the Annual Meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
PURPOSES OF THE ANNUAL MEETING
The purposes of the Annual Meeting are (i) to elect four (4) directors to
serve for the ensuing year and until their successors are duly elected and
qualified; (ii) to ratify and approve an amendment to the Company's 1994 Stock
Plan to increase the number of shares available for grant thereunder by
1,000,000 to a total of 3,400,000; (iii) to ratify and approve an amendment to
the Company's 1994 Director Option Plan to provide for an increase in the
automatic option grant to outside directors by 10,000 shares to a total of
20,000 shares; (iv) to ratify the appointment of Deloitte & Touche LLP as
independent auditors of the Company for the fiscal year ending January 31, 1998;
and (v) to transact such other business as may properly come before the meeting
or any adjournment thereof.
RECORD DATE AND SHARES OUTSTANDING
Shareholders of record at the close of business on April 9, 1997 (the "Record
Date") are entitled to notice of, and to vote at the Annual Meeting. At the
Record Date, 11,095,786 shares of the Company's Common Stock were outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the Annual Meeting and voting in person. Attending the
Annual Meeting in and of itself will not constitute a revocation of proxy.
VOTING AND SOLICITATION
Every shareholder voting in the election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the number
of directors to be elected multiplied by the number of votes to which the
shareholder's shares are entitled, or distribute such shareholder's votes on the
same principle among as many candidates as the shareholder may select, provided
that votes cannot be cast for more than four (4) candidates. However, no
shareholder shall be entitled to cumulate votes unless the candidate's name has
been placed in nomination prior to the voting and the shareholder, or any other
shareholder, has given notice at the Annual Meeting prior to the voting of the
intention to cumulate the shareholder's votes. On all other matters, each share
has one vote.
Shares of Common Stock represented by properly executed proxies will, unless
such proxies have been previously revoked, be voted in accordance with the
instructions indicated thereon. In the absence of specific instructions to the
contrary, properly executed proxies will be voted: (i) FOR the election of each
of the Company's nominees as a director; (ii) FOR the ratification and approval
of an amendment to the Company's 1994 Stock Plan; (iii) FOR the ratification and
approval of an amendment to the
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Company's 1994 Director Option Plan; and (iv) FOR ratification of the
appointment of Deloitte & Touche LLP as independent auditors for the fiscal year
ending January 31, 1998. No business other than that set forth in the
accompanying Notice of Annual Meeting of Shareholders is expected to come before
the Annual Meeting. Should any other matter requiring a vote of shareholders
properly arise, the persons named in the enclosed form of proxy will vote such
proxy as the Board of Directors may recommend.
The cost of this solicitation will be borne by the Company. The Company may
reimburse brokerage firms and other persons representing beneficial owners of
shares for their expenses in forwarding solicitation material to such beneficial
owners. Proxies may also be solicited by certain of the Company's directors,
officers and regular employees, without additional compensation, personally or
by telephone, telegram or letter.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the shares of Common Stock outstanding on the Record Date. Shares
that are voted "FOR" or "AGAINST" a matter are treated as being present at the
meeting for purposes of establishing a quorum and are also treated as votes
eligible to be cast by the Common Stock present in person or represented by
proxy at the Annual Meeting and "entitled to vote on the subject matter" (the
"Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in California as
to the proper treatment of abstentions or broker non-votes, the Company believes
that both abstentions and broker non-votes should be counted for purposes of
determining the presence or absence of a quorum for the transaction of business.
The Company further believes that neither abstentions nor broker non-votes
should be counted as shares "represented and voting" with respect to a
particular matter for purposes of determining the total number of Votes Cast
with respect to such matter. In the absence of controlling precedent to the
contrary, the Company intends to treat abstentions and broker non-votes in this
manner. Accordingly, abstentions and broker non-votes will not affect the
determination as to whether the requisite majority of Votes Cast has been
obtained with respect to a particular matter.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company which are intended to be presented
by such shareholders at the Company's 1998 Annual Meeting must be received by
the Company no later than December 31, 1997 in order to be included in the proxy
statement and form of proxy relating to that meeting.
FISCAL YEAR END
The Company's fiscal year ends on January 31. The Company's fiscal year 1997
ended January 31, 1997, and is referred to herein as the "Last Fiscal Year."
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
A board of four (4) directors is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's four (4) nominees named below, all of whom are presently
directors of the Company. Upon election of the nominees, there shall be one (1)
vacancy on the Board of Directors. The Board of Directors presently intends to
fill such vacancy with an additional outside director, to serve until the next
Annual Meeting of Shareholders or until his or her successor has been elected
and qualified. In the event that any nominee of the Company is unable or
declines to serve as a director at the time of the Annual Meeting, the proxies
will be voted for any nominee who shall be designated by the current Board of
Directors to fill the vacancy. In the event that additional persons are
nominated for election as directors, the proxy holders intend to vote all
proxies received by them in such a manner in accordance with cumulative voting
as will ensure the election of as
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many of the nominees listed below as possible. In such event, the specific
nominees for whom such votes will be cumulated will be determined by the proxy
holders. The term of office of each person elected as a director will continue
until the next Annual Meeting of Shareholders or until his or her successor has
been elected and qualified. It is not expected that any nominee will be unable
or will decline to serve as a director.
The name of and certain information regarding each nominee is set forth
below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- ---------------------- ----- ------------------------------------------ ----------
<S> <C> <C> <C>
Thinh Q. Tran ......... 43 Chairman of the Board, President and Chief 1982
Executive Officer of the Company
Julien Nguyen ......... 39 Chairman of the Board and Chief Executive 1993
Officer of Novita Communications, Inc.
William J. Almon(1)(2). 64 Chairman of the Board and Chief Executive 1994
Officer of StorMedia, Inc.
William Wang(1)(2) ... 33 Chairman of the Board, Chief Executive 1995
Officer and President of Diva Technology
<FN>
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
</FN>
</TABLE>
Except as set forth below, each of the nominees has been engaged in his
principal occupation described above during the past five (5) years. There are
no family relationships among the directors or executive officers of the
Company.
Mr. Tran, a founder of the Company, has served as Chairman of the Board,
President and Chief Executive Officer since February 1982. Prior to joining the
Company, Mr. Tran was employed by Amdahl Corporation and Trilogy Systems
Corporation, both of which were involved in the IBM-compatible mainframe
computer market.
Mr. Nguyen has served as a Director since October 1993. Since November 1996,
Mr. Nguyen has served as Chairman and Chief Executive Officer of Novita
Communications, Inc., a private Java software company. From February 1995 to
October 1996, he served as Co-Chairman and Chief Technical Officer of the
Company. From August 1993 until January 1995, he served as the Vice President,
Engineering and Chief Technical Officer of the Company. From May 1992 until
October 1993, Mr. Nguyen was President and Chief Executive Officer of EMI. From
June 1991 to May 1992, Mr .Nguyen served as the Chairman of Photon Machines.
From 1986 to 1991, Mr. Nguyen worked at Radius Inc. as Director of Product
Development.
Mr. Almon has served as a Director of the Company since April 1994. In May
1994, he became President and Chief Executive Officer and a Director of
StorMedia Inc., a manufacturer of thin film disks. From December 1989 until
February 1993, Mr. Almon served as President of Conner Peripherals, Inc., a
manufacturer of computer disk drives and storage management devices. From 1958
until 1987, Mr. Almon held various management positions with IBM Corporation,
most recently as Vice President, Low End Storage Products. Mr. Almon also serves
as a Director of Read-Rite Corporation.
Mr. Wang has served as a Director of the Company since December 1995. From
January 1995 to the present, Mr. Wang has served as Chairman of the Board, Chief
Executive Officer and President of Diva Technology and has served since January
1996 as a Director of Diva LABS. From 1990 to April 1997, Mr. Wang served as
Chairman of the Board and Chief Executive Officer of MAG Innovision Co., Inc., a
supplier of computer monitors. From 1986 until 1990, Mr. Wang worked at Tatung
Company of America in the Video Display Division.
REQUIRED VOTE
The four (4) nominees receiving the highest number of affirmative votes of
the shares present or represented and entitled to be voted for them shall be
elected as directors. Votes withheld from any
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director are counted for purposes of determining the presence or absence of a
quorum for the transaction of business, but have no further legal effect in the
election of directors under California law.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of four (4) meetings
during the Last Fiscal Year. No incumbent director attended less than 75% of the
aggregate of all meetings of the Board of Directors and any committees of the
Board on which he served, if any, during his tenure as a director. The Board of
Directors has an Audit Committee and a Compensation Committee. It does not have
a nominating committee or a committee performing the functions of a nominating
committee.
The Audit Committee of the Board of Directors, currently consisting of Mr.
Almon and Mr. Wang, met one (1) time during the Last Fiscal Year. The Audit
Committee recommends engagement of the Company's independent auditors, and is
primarily responsible for approving the services performed by the Company's
independent auditors and for reviewing and evaluating the Company's accounting
policies and its systems of internal accounting controls.
The Compensation Committee of the Board of Directors, currently consisting of
Mr. Almon and Mr. Wang, met one (1) time during the Last Fiscal Year. The
Compensation Committee reviews and makes recommendations to the Board concerning
the Company's executive compensation policy.
COMPENSATION OF DIRECTORS
Members of the Board of Directors are currently compensated at the rate of
$500 per Board meeting attended plus out-of-pocket expenses related to the
attendance at such meetings. During the Last Fiscal Year, Mr. Almon and Mr. Wang
were automatically granted options to purchase 2,500 shares of the Company's
Common Stock at an exercise price of $9.38 per share pursuant to the Company's
1994 Director Option Plan. See "Proposal No. 3 -- Approval of Amendment to the
1994 Director Option Plan."
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE
NOMINEES LISTED ABOVE.
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO THE 1994 STOCK PLAN
GENERAL
The 1994 Stock Plan (the "Stock Plan") was approved in April 1994 by the
Board of Directors and in June 1994 by the shareholders of the Company. There
are currently a total of 2,400,000 shares of Common Stock reserved for issuance
under the Stock Plan. As of January 31, 1997, options to purchase approximately
1,592,379 shares were outstanding under the Stock Plan and an aggregate of
873,473 shares were available for future grant thereunder.
PROPOSAL
In March 1997, the Board of Directors approved an amendment to the Stock Plan
to increase the number of shares reserved for issuance thereunder by an
additional 1,000,000 shares, for an aggregate of 3,400,000 shares reserved for
issuance thereunder. At the Annual Meeting, the shareholders are being requested
to approve this amendment. The amendment to increase the number of shares
reserved under the Stock Plan is proposed in order to give the Board of
Directors flexibility to grant stock options. The Company believes that grants
of stock options motivate high levels of performance and provide an effective
means of recognizing employee contributions to the success of the Company. At
present, all newly hired full-time employees are granted options. The Company
believes that this policy is of great value in recruiting and retaining highly
qualified technical and other key personnel who are in great
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demand. The Board of Directors believes that the ability to grant options will
be important to the future success of the Company by allowing it to remain
competitive in attracting and retaining such key personnel.
DESCRIPTION OF THE 1994 STOCK PLAN
PURPOSE
The purpose of the Stock Plan is to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentives to employees and consultants of the Company and to promote the
success of the Company's business.
Administration
The Stock Plan may be administered by the Board of Directors of the Company
or by a committee of the Board. All stock option grants are currently being
administered by the Board of Directors, except for grants to executive officers,
which are currently being administered by the Compensation Committee of the
Board of Directors. All questions of interpretation of the Stock Plan are
determined by the Board of Directors or its committee, and such determinations
are final and binding upon all participants.
Eligibility
The Stock Plan permits participation by employees and consultants of the
Company or its majority- owned subsidiaries. Incentive Stock Options may be
granted only to employees, including officers. Nonstatutory Stock Options may be
granted to employees or consultants of the Company.
Terms of Options Granted to Employees and Consultants
The terms of options granted under the Stock Plan may be determined by the
Board of Directors or its committee and are currently being determined by the
Board of Directors, except for options granted to executive officers, which are
currently being determined by the Compensation Committee of the Board of
Directors. Each option is evidenced by a stock option agreement between the
Company and the employee or consultant to whom such option is granted and is
normally subject to the following additional terms and conditions:
(a) Exercise of the Option: The Board of Directors of the Company or its
committee determines the vesting terms of the options granted to employees
and consultants under the Stock Plan. The current form of option agreement
for new employees provides that options may be exercised at the rate of
twenty percent (20%) of the shares granted at the end of the first year after
commencement of employment and one-sixtieth ( 1/60 ) of the shares at the end
of each month thereafter, for a total vesting period of five (5) years. The
Board or its committee may at any time or from time to time accelerate the
vesting of any outstanding option. An option is exercised by giving written
notice of exercise to the Company, specifying the number of full shares of
Common Stock to be purchased, and tendering payment to the Company of the
purchase price. The purchase price of the shares purchased upon exercise of
any option shall be paid in consideration of such form as is determined by
the Board of Directors or its committee, and such form of consideration may
vary for each option.
(b) Option Price: The price of option grants under the Stock Plan is
determined by the Board of Directors of the Company or its committee. In the
case of an incentive stock option granted to an employee, the option price
must not be less than 100% of the fair market value of the Common Stock on
the date the option is granted, with the exception that in the case of an
option granted to a shareholder who, immediately prior to such grant, owns
stock representing more than 10% of the voting power or value of all classes
of stock of the Company, the exercise price must not be less than 110% of
such fair market value. In the case of a nonstatutory option granted to any
other eligible person, the per share exercise price shall be no less than 85%
of fair market value per share on the date of grant.
(c) Termination of Employment: If the optionee's status as an employee or
consultant terminates for any reason other than death or disability, options
under the Stock Plan may be exercised
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within such period of time after such termination as the Board or its
committee may determine, up to ninety (90) days in the case of incentive and
nonstatutory stock options, and may be exercised only to the extent the
option was exercisable on the date of termination.
(d) Disability of Optionee: If an optionee should become totally and
permanently disabled while employed by the Company, options may be exercised
within twelve (12) months from the date of termination, but only to the
extent such options were exercisable on the date of termination and in no
event later than the expiration of the term of such options.
(e) Death of Optionee: If an optionee should die while employed by the
Company, options may be exercisable at any time within twelve (12) months
after death, but only to the extent the options would have been exercisable
had the optionee continued living and remained employed by the Company and in
no event later than the expiration of the term of such options.
(f) Termination of Options: Options granted under the Stock Plan expire
ten (10) years from the date of grant or such shorter term as may be provided
in the notice of grant. However, in the case of an option granted to an
employee who at the time the option is granted owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any parent or subsidiary, the term of an incentive stock option
shall not be greater than five (5) years from the date of the grant or such
shorter term as may be provided in the notice of grant. No option may be
exercised by any person after such expiration.
(g) Non-transferability of Options: An option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner, other than
by will or the laws of descent or distribution, and may be exercised only by
the optionee during his lifetime or, in the event of death, by a person who
acquires the right to exercise the option by bequest or inheritance or by
reason of the death of the optionee.
(h) Other Provisions: The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Stock Plan as may be
determined by the Board of Directors or its committee.
Adjustments Upon Changes in Capitalization
In the event any change is made in the Company's capitalization which results
from a stock split or payment of a stock dividend or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration, appropriate adjustment shall be made with respect to shares and
options available under the Stock Plan. In the event of the proposed dissolution
or liquidation of the Company, to the extent that an option has not been
previously exercised, it will terminate immediately prior to the consummation of
the proposed action, unless otherwise provided for by the Board in its sole
discretion. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, the option shall be assumed or an equivalent option or right shall
be substituted by the successor corporation unless the Board makes the option
fully exercisable prior to the merger. If the Board makes an option exercisable
in lieu of assumption or substitution in the event of a merger or sale of
assets, the Board shall notify the participant that the option shall be fully
exercisable for a period of fifteen (15) days from the date of such notice and
the option will terminate upon the expiration of such period.
Amendment and Termination
The Board of Directors may at any time or from time to time amend, alter,
suspend or terminate the Stock Plan without the approval of the shareholders;
provided, however, that shareholder approval is required to the extent necessary
to comply with Rule 16b-3 under the Securities Exchange Act of 1934, as amended,
or applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), or any successor rule or provision or any other applicable law or
regulation. Such shareholder approval, if required, shall be obtained in such a
manner and to such a degree as is required by applicable law, rule or
regulation. No action by the Board or shareholders may unilaterally alter or
impair any rights previously granted under the Stock Plan without the written
consent of the optionee.
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Tax Information Regarding Stock Options
Options granted under the Stock Plan may be either "incentive stock options,"
as defined in Section 422 of the Code, or "nonstatutory stock options."
If an option granted under the Stock Plan is an incentive stock option, the
optionee will recognize no income upon grant of the incentive stock option and
incur no tax liability due to the exercise unless the optionee is subject to the
alternative minimum tax. Upon the sale or exchange of the shares at least two
(2) years after grant of the option and one (1) year after receipt of the shares
by the optionee, any gain or loss will be treated as long-term capital gain or
loss. If these holding periods are not satisfied, the optionee will recognize
ordinary income equal to the difference between the exercise price and the lower
of the fair market value of the stock at the date of the option exercise or the
sale price of the stock. A different rule for measuring ordinary income upon
such a premature disposition may apply if the optionee is also an officer,
director or 10% shareholder of the Company. The Company will be entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Any gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income will be characterized as
long-term, or short-term capital gain or loss, depending on the holding period.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory stock options. An optionee will not recognize any
taxable income at the time he is granted a nonstatutory option. However, upon
its exercise, the optionee will recognize ordinary income for tax purposes
measured by the excess of the then fair market value of the shares over the
option price. In certain circumstances, where the shares are subject to a
substantial risk of forfeiture when acquired or where the optionee is an
officer, director or 10% shareholder of the Company, the date of taxation may be
deferred if the optionee files an election with the Internal Revenue Service
under Section 83(b) of the Code. The income recognized by an optionee who is
also an employee of the Company will be subject to tax withholding by the
Company by payment in cash or out of the current earnings paid to the optionee.
Upon resale of such shares by the optionee, any difference between the sales
price and the exercise price, to the extent not recognized as ordinary income as
provided above, will be treated as capital gain or loss.
The Company will be entitled to a tax deduction in the amount and at the time
that the optionee recognizes ordinary income with respect to shares acquired
upon exercise of a nonstatutory stock option.
The foregoing is only a summary of the effect of federal income taxation upon
the optionee and the Company with respect to the grant and exercise of options
under the Stock Plan, does not purport to be complete, and does not discuss the
income tax laws of any municipality, state or foreign country in which an
optionee may reside.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of the holders of a majority of the Common Stock present
or represented at the meeting is required to approve the foregoing amendment to
the Stock Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE AMENDMENT TO
THE STOCK PLAN.
PROPOSAL NO. 3
APPROVAL OF AN AMENDMENT TO THE 1994 DIRECTOR OPTION PLAN
GENERAL
The 1994 Director Option Plan (the "Director Plan") was approved in April
1994 by the Board of Directors and in June 1994 by the shareholders of the
Company. There are currently a total of 100,000 shares reserved for issuance
under the Director Plan.
PROPOSAL
In April 1997, the Board of Directors approved an amendment to the Director
Plan to provide for an increase in the automatic option grant to outside
directors of the Company by 10,000 shares to a total
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automatic option grant of 20,000 shares. The Board of Directors considers this
increase in the number of shares underlying the automatic option grant to be an
important factor in attracting and retaining the best available personnel for
service as non-employee directors of the Company ("Outside Directors") and
closely aligning their interests directly with those of the shareholders.
DESCRIPTION OF THE 1994 DIRECTOR OPTION PLAN
PURPOSE
The purposes of the Director Plan are to attract and retain the best
available personnel for service as Outside Directors of the Company, to provide
additional incentive to the Outside Directors of the Company to serve on the
Board and to encourage their continued service on the Board of Directors.
Administration
The Director Plan provides that all grants of options to Outside Directors
thereunder ("Director Options") shall be automatic and nondiscretionary and
shall be made strictly in accordance with the terms thereof.
Eligibility
The Director Plan provides that Director Options may be granted only to
Outside Directors. Non- employee directors who were previously employed by the
Company are eligible for participation in the Director Plan. All grants are
automatic and are not subject to the discretion of any person, except that an
Outside Director may decline to accept Director Options. An Outside Director who
has been granted a Director Option may, if he or she is otherwise eligible, be
granted an additional Director Option or Options in accordance with such
provisions.
Automatic Grant of Director Options
Each Outside Director, on the date of his or her appointment or election to
the Board of Directors, shall be automatically granted a Director Option to
purchase 20,000 shares (the "First Director Option") of the Common Stock of the
Company. In addition, each Outside Director who has received a First Director
Option to purchase 10,000 shares of the Common Stock of the Company shall, upon
approval of the amendment to the Director Plan by the shareholders, receive an
additional Director Option to purchase 10,000 shares of the Common Stock of the
Company. Each First Director Option is exercisable in installments cumulatively
with respect to twenty-five percent (25%) of the shares on the first day of the
first year after the date of the grant of such First Director Option and with
respect to twenty-five percent (25%) of the shares for each subsequent
anniversary of the grant of such First Director Option. An Outside Director who
was previously employed by the Company receives a First Director Option upon
becoming an Outside Director.
After receiving a First Director Option, an Outside Director is automatically
granted an additional Director Option to purchase 2,500 shares of the Common
Stock of the Company under the Director Plan. (the "Subsequent Director Option")
on July 1 of each year, if on such date, he or she shall have served on the
Board of Directors for at least six (6) months. Each Subsequent Director Option
is exercisable in installments cumulatively with respect to twenty-five percent
(25%) of the shares on the first day of the first year after the date of the
grant of such Subsequent Director Option and with respect to twenty-five percent
(25%) of the shares for each subsequent anniversary of the grant of such
Subsequent Director Option.
Terms of Director Options
The terms of Director Options granted under the Director Plan are as set
forth in the Director Plan. Director Options granted under the Director Plan
have a term of ten (10) years from the date of the grant. Each Director Option
granted under the Director Plan is evidenced by a written stock option agreement
between the Company and the Outside Director to whom such Director Option was
granted and is subject to the following additional terms and conditions:
(a) Exercise of the Option: The Director Options become exercisable as
described above under "Automatic Grant of Director Options." A Director
Option is exercised by giving written
8
<PAGE>
notice of exercise to the Company and tendering full payment of the exercise
price to the Company. Payment for shares issued upon exercise of a Director
Option may consist entirely of cash, check, or other shares of Common Stock
having a fair market value on the date of surrender equal to the aggregate
exercise price of the shares as to which said Director Option shall be
exercised, or any combination of such methods of payment.
(b) Exercise Price: The per share exercise price of Director Options
granted under the Director Plan is 100% of the fair market value on the date
of grant. For so long as the Company's Common Stock is traded on the Nasdaq
National Market or listed on a stock exchange, the fair market value per
share shall be the closing price on such system or exchange on the date of
grant.
(c) Termination of Status as a Director: The Director Plan provides that
in the event of termination of the Outside Director's continuous status as a
director (other than as a result of death or total and permanent disability),
Director Options may be exercised within three (3) months from the date of
such termination (but in no event later than the expiration of the term of
such Director Options) as to all or part of the shares which the Optionee was
entitled to exercise at the date of termination.
(d) Death of Optionee: In the event of the death of an optionee, the
Director Option may be exercised at any time within twelve (12) months
following the date of death of such optionee (but in no event later than the
expiration of the term of such Director Option), by the optionee's estate or
by a person who acquired the right to exercise the Director Option by bequest
or inheritance, but only to the extent that the optionee was entitled to
exercise the Director Option at the date of death.
(e) Disability of Optionee: In the event that an optionee's status as an
Outside Director terminates as a result of the optionee's disability, the
optionee may exercise his or her Director Option at any time within twelve
(12) months from the date of such termination, but only to the extent that
the optionee was entitled to exercise such Director Option at the date of
such termination (and in no event later than the expiration of the term of
such Director Option).
(f) Termination of Director Options: Director Options granted under the
Director Plan have terms of ten (10) years from the date of grant. In the
event of a "change in control" of the Company, including but not limited to,
a merger of the Company with or into another corporation or a sale of all or
substantially all of the Company's assets, then the Director Plan requires
that each outstanding Director Option be assumed or an equivalent Director
Option be substituted by the successor corporation or purchaser; provided,
however, if such successor or purchaser refuses to assume the then
outstanding Director Options, the Director Plan provides for the full
acceleration of the exercisability of all outstanding Director Options for a
period lasting thirty (30) days from the date of the acceleration event.
(g) Non-transferability of Director Options: A Director Option is not
transferable by the optionee, other than by will or the laws of descent and
distribution, and is exercisable during the Optionee's lifetime only by the
optionee. In the event of the optionee's death, Director Options may be
exercised by a person who acquires the right to exercise the Director Option
by bequest or inheritance.
(h Other Provisions: The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Director Plan as may be
determined by the Board of Directors.
Changes in Capitalization
In the event any change is made in the Company's capitalization which results
from a stock split or payment of a stock dividend or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration, appropriate adjustment shall be made with respect to shares and
options available under the Director Plan. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an option has not
been previously exercised, it will terminate immediately prior to the
consummation of the proposed action. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, the option shall be assumed or an equivalent
option shall be substituted by the successor corporation. If such
9
<PAGE>
option is not assumed or substituted by the successor corporation, then the
option shall become fully exercisable prior to the merger. If an option becomes
fully exercisable in lieu of assumption or substitution in the event of a merger
or sale of assets, the Board shall notify the participant that the option shall
be fully exercisable for a period of fifteen (15) days from the date of such
notice and the option will terminate upon the expiration of such period.
Amendment and Termination
The Board of Directors may amend or terminate the Director Plan at any time
or from time to time, but not more than once every six months, in such respects
as the Board of Directors may deem advisable; provided that, to the extent
necessary and desirable to comply with Rule 16b-3 under the Exchange Act (or any
other applicable law or regulation), the Company shall obtain approval of the
shareholders of the Company in making amendments to the Director Plan to the
extent and in the manner required by such law or regulation. Such shareholder
approval, if required, shall be obtained in such a manner and to such a degree
as is required by applicable law, rule or regulation. No action by the Board or
shareholders may unilaterally alter or impair any rights previously granted
under the Director Plan without the written consent of the optionee.
In any event, the Director Plan shall terminate in April 2004. Any Director
Options outstanding under the Director Plan at the time of its termination shall
remain outstanding until they expire by their terms.
Tax Information
The Director Options granted under the Director Plan are deemed "nonstatutory
stock options" under the Code. An optionee will not recognize any taxable income
at the time optionee is granted a nonstatutory stock option. However, upon
exercise of the Director Options, the optionee will recognize ordinary income
for tax purposes generally measured as the excess of the then fair market value
of the shares purchased over the purchase price. Upon resale of such shares by
the optionee, any difference between the sale price and the exercise price, to
the extent not recognized as ordinary income as provided above, will be treated
as long-term or short-term capital gain or loss.
The Company will be entitled to a tax deduction in the same amount as the
ordinary income recognized by the optionee in connection with the exercise of
the nonstatutory stock option.
The foregoing brief summary of the effect of federal income taxation upon the
participant and the Company with respect to the purchase of shares under the
Director Plan does not purport to be complete, and reference should be made to
the applicable provisions of the Code. In addition, this summary does not
discuss the provisions of the income tax laws of any municipality, state or
foreign country in which the participant may reside.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of the holders of a majority of the Common Stock present
or represented at the meeting is required to approve the foregoing amendment to
the Director Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE AMENDMENT TO
THE DIRECTOR PLAN.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP, independent
auditors, to audit the consolidated financial statements of the Company for the
fiscal year ending January 31, 1998 and recommends that shareholders vote for
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
Deloitte & Touche LLP has audited the Company's financial statements for each
fiscal year since the Company's inception. Its representatives are expected to
be present at the meeting, will have the opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
10
<PAGE>
REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of the holders of a majority of the Common Stock present
or represented at the meeting is required to approve the foregoing proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPOINTMENT OF
DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING JANUARY 31, 1998.
OTHER INFORMATION
EXECUTIVE OFFICERS
In addition to Mr. Tran, the following persons were executive officers during
the Last Fiscal Year and executive officers of the Company as of the Record
Date:
NAME AGE POSITION
- ------------------ ----- -------------------------------------------
Silvio Perich ..... 48 Senior Vice President, Worldwide Sales
Jacques Martinella 41 Vice President, Engineering
Dan Chen .......... 47 Senior Vice President, Technology
Prem Talreja ...... 43 Vice President, Marketing
Kit Tsui .......... 47 Director of Finance, Acting Chief Financial
Officer and Secretary
Mr. Perich joined the Company in September 1985 as Director, Sales. In
September 1992, Mr. Perich became Senior Vice President, Worldwide Sales. Mr.
Perich was a co-founder of Costar Incorporated, a manufacturer's representative
organization for high technology products, where he served as partner from
October 1979 to September 1985. From September 1979 until September 1985, Mr.
Perich served in several sales management roles at Siliconix Inc., a specialty
semiconductor manufacturer. In addition, Mr. Perich was the founder of Mondix
Corporation, an international sales management consultant firm, where he served
as President from December 1979 to October 1983.
Mr. Martinella joined the Company in May 1994 as Director, VLSI Engineering.
In December 1995, Mr. Martinella became Vice President, Engineering. From June
1990 to April 1994, Mr. Martinella served in various engineering and management
positions at Weitek, a microchip manufacturer. In addition, Mr. Martinella was
an engineer at National Semiconductor, a semiconductor manufacturer, from June
1982 to June 1990.
Dr. Chen joined the Company in June 1996 as Senior Vice President,
Technology. From May 1995 to May 1996, Dr. Chen was President of Active Design
Corp., a private PC graphics company. From August 1994 to May 1995, Dr. Chen was
Vice President of ASIC technology at Advance Logic, a custom chip design
company. From May 1991 to August 1994, Dr. Chen was Technical Director in charge
of the Windows graphics accelerator product line at Trident Microsystems, Inc.,a
graphics chip design company. From August 1985 to April 1991, Dr. Chen was a
Technical Director at GM Hughes Electronics, a defense electronics company. From
1978 to 1985, Dr. Chen held various senior engineering positions at Mattel
Electronics and Xerox Corporation.
Mr. Talreja joined the Company in March 1996 as Vice President, Marketing.
From June 1994 to February 1996, Mr. Talreja was Director, Marketing of OPTi,
Inc., an ASIC design company. From April 1991 to May 1994, Mr. Talreja was
Marketing Manager of Cirrus Logic, Inc., a diversified semiconductor company.
From June 1988 to March 1991, Mr. Talreja was Vice President, Marketing of Able
Communications, a private telecommunications company. From January 1984 to May
1988, Mr. Talreja was Marketing Manager of Siemens Semiconductor, a
semiconductor company. From January 1979 to April 1988, Mr. Talreja was Product
Marketing Manager of Inmos Corporation, an ASIC design company.
Ms. Tsui joined the Company in November 1982 as its Accounting Manager. Ms.
Tsui was promoted to Director of Finance in February 1990 and became Acting
Chief Financial Officer and Secretary in December 1996.
11
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent
(10%) of a registered class of the Company's equity securities, to file certain
reports regarding ownership of, and transactions in, the Company's securities
with the Securities and Exchange Commission and with the National Association of
Securities Dealers. Such officers, directors, and 10% shareholders are also
required to furnish the Company with copies of all Section 16(a) forms that they
file.
Based solely on its review of copies of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 16a-3(e) and Forms 5 and amendments
thereto furnished to the Company with respect to the Last Fiscal Year, and any
written representations referred to in Item 405(b)(2)(i) of Regulation S-K
stating that no Forms 5 were required, the Company believes that, during the
Last Fiscal Year, all Section 16(a) filing requirements applicable to the
Company's officers, directors and 10% shareholders were complied with.
12
<PAGE>
MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of the Record Date by (i) each person
who is known by the Company to own beneficially more than 5% of the Company's
Common Stock, (ii) each of the Company's directors, (iii) the Company's Chief
Executive Officer and each of the three other most highly compensated
individuals who served as executive officers of the Company at fiscal year end
(the "Named Officers") and (iv) all individuals who served as directors or
executive officers at fiscal year end as a group:
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)(2)
---------------------
DIRECTORS, OFFICERS AND 5% SHAREHOLDERS NUMBER PERCENT
- ----------------------------------------------------------------- ----------- ---------
<S> <C> <C>
FMR Corp.(3) ..................................................... 623,300 5.4%
82 Devonshire Street
Boston, MA 02109
Thinh Q. Tran(4) ................................................. 725,491 6.3%
Julien Nguyen .................................................... 332,200 2.9%
Silvio Perich(5) ................................................. 113,833 1.0%
Jacques Martinella(6) ............................................ 25,591 *
Prem Talreja(7) .................................................. 10,066 *
William J. Almon(8) .............................................. 5,625 *
William Wang(9) .................................................. 2,500 *
All Directors and Executive Officers at fiscal year end as a
group (9 persons) (10) .......................................... 1,399,877 12.2%
<FN>
- -----------------
* Less than 1%.
(1) The number and percentage of shares beneficially owned is determined under
rules of the Securities and Exchange Commission, and the information is not
necessarily indicative of beneficial ownership for any other purpose. Under
such rules, beneficial ownership includes any shares as to which the
individual has sole or shared voting power or investment power and also any
shares which the individual has the right to acquire within sixty (60) days
of April 9, 1997 through the exercise of any stock option or other right.
(2) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and the information
contained in the footnotes to this table. Unless otherwise noted, the
address for all persons shall be the principal executive office of the
Company.
(3) Based solely upon filings made by such shareholder with the Securities and
Exchange Commission.
(4) Includes 218,000 shares issuable upon exercise of outstanding options which
were exercisable at April 9, 1997 or within sixty (60) days thereafter.
(5) Includes 111,833 shares issuable upon the exercise of outstanding options
which were exercisable at April 9, 1997 or within sixty (60) days
thereafter.
(6) Includes 25,591 shares issuable upon the exercise of outstanding options
which were exercisable at April 9, 1997 or within sixty (60) days
thereafter.
(7) Includes 9,333 shares issuable upon the exercise of outstanding options
which were exercisable at April 9, 1997 or within sixty (60) days
thereafter.
(8) Includes 5,625 shares issuable upon the exercise of outstanding options
which were exercisable at April 9, 1997 or within sixty (60) days
thereafter.
(9) Includes 2,500 shares issuable upon the exercise of outstanding options
which were exercisable at April 9, 1997 or within sixty (60) days
thereafter.
(10) Includes 397,607 shares issuable upon the exercise of outstanding options
held by nine (9) officers and directors which were exercisable at April 9,
1997 or within sixty (60) days thereafter.
</FN>
</TABLE>
13
<PAGE>
EXECUTIVE COMPENSATION
The following table shows, as to each of the Named Officers, information
concerning compensation paid for services to the Company in all capacities
during the three fiscal years ended January 31, 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS SECURITIES
------------------------------------ ---------------------------
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER OPTIONS (#) COMPENSATION
- --------------------------- -------- -------------- ------------- ------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Thinh Q. Tran .............. 1997 $186,923 -- -- -- --
Chairman of the Board, 1996 $179,654 -- -- 120,000 --
President and Chief 1995 $157,192 -- -- 400,000 --
Executive Officer
Silvio Perich .............. 1997 $103,769 $57,621(1) -- -- --
Senior Vice President, 1996 $100,000 $69,854(2) -- 50,000 --
Worldwide Sales 1995 $ 86,615 $18,357(3) -- 20,000 --
Jacques Martinella ......... 1997 $127,261 $10,000(4) -- -- --
Vice President, 1996 $111,840 -- -- 13,882 --
Engineering 1995 $ 60,631(5) -- -- 32,500 --
Prem Talreja ............... 1997 $106,846(6) -- -- 40,000 --
Vice President, 1996 -- -- -- -- --
Marketing 1995 -- -- -- -- --
<FN>
- ----------------
(1) Represents total amount of commission paid to Mr. Perich for the fiscal
year ended January 31, 1997.
(2) Represents total amount of commission paid to Mr. Perich for the fiscal
year ended January 31, 1996.
(3) Represents total amount of commission paid to Mr. Perich for the fiscal
year ended January 31, 1995.
(4) Represents a performance bonus paid to Mr. Martinella for the fiscal year
ended January 31, 1997.
(5) Mr. Martinella joined the Company in May 1994. This amount represents the
total amount of salary paid to Mr. Martinella for the fiscal year ended
January 31, 1995.
(6) Mr. Talreja joined the Company in March 1996. This amount represents the
total amount of salary paid to Mr. Talreja for the fiscal year ended
January 31, 1997.
</FN>
</TABLE>
14
<PAGE>
The following table shows, as to each of the Named Officers, option grants
during the Last Fiscal Year and the potential realizable value of options,
assuming 5% and 10% appreciation, at the end of their term:
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ----------------------
NAME GRANTED FISCAL YEAR(1) PRICE DATE 5%(2) 10%(2)
- ----------------------- -------------- ---------------- ------------ -------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Thinh Q. Tran .......... -- -- $ -- -- $ -- $ --
Silvio Perich .......... -- -- -- -- -- --
Jacques Martinella .... -- -- -- -- --
Prem Talreja ........... 40,000 (3) 13% 8.75 3/27/2006 220,133 557,810
<FN>
- ----------------------
(1) The Company granted options representing 307,500 shares to employees in the
Last Fiscal Year under the Company's 1994 Stock Plan.
(2) The 5% and 10% assumed annual rates of appreciation are mandated by the
rules of the of the Securities and Exchange Commission and do not represent
the Company's estimate or projection of future Common Stock price.
(3) These options were granted under the Company's 1994 Stock Plan and have
exercise prices equal to the fair market value on the date of grant. The
options become exercisable cumulatively over a period of five (5) years at
the rate of twenty percent (20%) of the shares one (1) year after the
vesting commencement date specified in the grants and one-sixtieth ( 1/60 )
of the shares each month thereafter for the next four (4) years. The
options expire ten (10) years from the date of grant. The 1994 Stock Plan
is currently administered by the Board of Directors, except for grants to
executive officers, which are administered by the Compensation Committee.
The Board of Directors and the Compensation Committee have broad discretion
and authority to amend outstanding options and to reprice options, whether
through an exchange of options or an amendment thereto. Grants under the
Stock Plan are made at the discretion of the Board of Directors;
accordingly, future grants under the Stock Plan are not yet determinable.
</FN>
</TABLE>
The following table shows, as to each of the Named Officers, information
concerning options exercised during the Last Fiscal Year and the value of
options held at fiscal year end:
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED OPTIONS AT FISCAL YEAR END FISCAL YEAR END(1)
ON VALUE ----------------------------- -----------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------- ------------ ------------ ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Thinh Q. Tran ...... 200,000 $1,249,200 143,333 336,667 $766,782 $1,810,818
Silvio Perich ...... -- -- 110,117 59,883 648,229 346,421
Jacques Martinella -- -- 21,257 25,125 712,708 131,811
Prem Talreja ....... -- -- 0 40,000 0 55,000
<FN>
- ----------------------
(1) Calculated by determining the difference between the closing price of the securities underlying the
options at January 31, 1997 ($10.13) as reported on the Nasdaq National Market and the exercise
price of the options.
</FN>
</TABLE>
15
<PAGE>
REPRICING OF OPTIONS
On April 22, 1997, the Board of Directors of the Company approved the
repricing of all outstanding options to purchase the Common Stock of the Company
to an exercise price of $2.31, the closing price of the Common Stock of the
Company as reported on the Nasdaq National Market on such date.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors establishes the general
compensation policies of the Company as well as the compensation plans and
specific compensation levels for executive officers. It also administers the
Company's employee stock benefit plan for executive officers. The Compensation
Committee is currently composed of independent, non-employee directors who have
no interlocking relationships as defined by the Securities and Exchange
Commission.
The Compensation Committee believes that the compensation of the executive
officers, including that of the Chief Executive Officer (collectively, the
"Executive Officers") should be influenced by the Company's performance. The
Committee establishes the salaries of all of the Executive Officers by
considering (i) the Company's financial performance for the past year, (ii) the
achievement of certain objectives related to the particular Executive Officer's
area of responsibility, (iii) the salaries of executive officers in similar
positions of comparably-sized companies and (iv) the relationship between
revenue and executive officer compensation. The Committee believes that the
Company's executive officer salaries in the last fiscal year were comparable in
the industry for similarly-sized business.
In addition to salary, the Committee, from time to time, grants options to
Executive Officers. The Committee thus views stock option grants as an important
component of its long-term, performance- based compensation philosophy. Since
the value of an option bears a direct relationship to the Company's stock price,
the Committee believes that options motivate Executive Officers to manage the
Company in a manner which will also benefit shareholders. As such, options are
granted at the current market price. One of the principal factors considered in
granting stock options to an Executive Officer is the Executive Officer's
ability to influence the Company's long-term growth and profitability.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
William J. Almon
William Wang
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of William J. Almon and William Wang,
each of whom is an independent, non-employee director. No Executive Officer of
the Company serves as a member of the Board of Directors or Compensation
Committee of any entity which has one or more Executive Officers serving as a
member of the Company's Board of Directors or Compensation Committee.
16
<PAGE>
COMPANY STOCK PRICE PERFORMANCE
The following graph shows a comparison of cumulative total shareholder
return, calculated on a dividend reinvested basis, for the five-year period
beginning January 31, 1992 and ending January 31, 1997 for the Company, the CRSP
Index for the Nasdaq Stock Market (U.S. Companies) (the "Nasdaq Index") and the
CRSP Index for Computer Manufacturers' Stocks (the "Nasdaq Computer
Manufacturers' Index"). The graph assumes that $100 was invested in the
Company's Common Stock on January 31, 1992 and in the Nasdaq Index and the
Nasdaq Computer Manufacturers' Index on January 31, 1992. Note that historic
stock price performance is not necessarily indicative of future stock price
performance.
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
Cumulative Total Return
----------------------------------------------------------
01/31/92 01/31/93 01/29/94 01/31/95 01/31/96 01/31/97
-------- -------- -------- -------- -------- --------
Sigma Designs, Inc. 100 92.9 203.6 94.6 109.8 144.6
Nasdaq Stock Market 100 113.1 130.0 124.1 175.3 229.9
Nasdaq Computer
Manufacturers Stocks 100 123.4 116.7 119.4 193.1 281.1
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 01/31/92.
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy to vote the shares they represent as the
Board of Directors may recommend.
It is important that your stock be represented at the meeting, regardless of
the number of shares which you hold. You are, therefore, urged to execute and
return the accompanying proxy in the envelope which has been enclosed, at your
earliest convenience.
FOR THE BOARD OF DIRECTORS
Thinh Q. Tran
Chairman of the Board of Directors,
President and Chief Executive Officer
Dated: May 9, 1997
17
<PAGE>
APPENDIX A
PROXY SIGMA DESIGNS, INC. PROXY
PROXY FOR 1997 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of SIGMA DESIGNS, INC., a California corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and
Proxy Statement, each dated May 9, 1997, and hereby appoints Thinh Q. Tran and
Kit Tsui, and each of them, proxies and attorney-in-fact, with full power to
each of substitution and resubstitution, on behalf and in the name of the
undersigned, to represent the undersigned at the 1997 Annual Meeting of
Shareholders of SIGMA DESIGNS, INC. to be held on Friday, June 6, 1997, at 2:00
p.m., local time, at the principal executive offices of the Company at 46501
Landing Parkway, Fremont, California 94538, and at any postponement(s) or
adjournment(s) thereof, and to vote all shares of Common Stock which the
undersigned would be entitled to vote, if then and there personally present, on
the matters set forth on the reverse side.
Both of such attorneys or substitutes shall be present and shall act at said
meeting of any postponement(s) or adjournment(s) thereof (or if only one shall
be present and acting, then that one) and shall have and may exercise all of the
powers of said attorneys-in-fact hereunder.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE AMENDMENT TO THE
1994 STOCK PLAN, FOR THE AMENDMENT TO THE 1994 DIRECTOR OPTION PLAN, FOR THE
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS
FOR THE COMPANY FOR THE FISCAL YEAR ENDING JANUARY 31, 1998, AND AS SAID PROXIES
DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
(CONTINUED AND TOBE SIGNED ON REVERSE SIDE)
<PAGE>
Please mark
[X] your votes
as this
1. Elections of Directors WITHHOLD
(INSTRUCTION: IF YOU WISH TO FOR FOR ALL
WITHHOLD AUTHORITY TO VOTE FOR
ANY INDIVIDUAL NOMINEE, STRIKE [ ] [ ]
A LINE THROUGH THAT NOMINEE'S
NAME IN THE LIST BELOW:)
Thinh Q. Tran; Julien Nguyen; William J. Almon;
William Wang
- --------------------------------------------------
I PLAN TO ATTEND THE MEETING [ ]
FOR AGAINST ABSTAIN
2. Proposal to approve an amendment to the [ ] [ ] [ ]
Company's 1994 Stock Plan to increase the
number of shares available for grant thereunder
by 1,000,000 shares to a total of 3,400,000
shares:
3. Proposal to approve an amendment to the [ ] [ ] [ ]
Company's 1994 Director Option Plan to provide
for an increase in the automatic option grant
to outside directors by 10,000 shares to a
total of 20,000 shares:
4. Proposal to ratify the appointment of Ernst & [ ] [ ] [ ]
Young LLP as independent auditors for the
Company for the fiscal year ending January 31,
1998:
In their discretion, the proxies are authorized
to vote upon such other matter or matters which
may properly come before the meeting or any
postponement(s) or adjournment(s) thereof.
Signature(s)__________________________________________ Dated____________,1997
This proxy should be marked, dated, signed by the shareholder(s) exactly as his
or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If a corporation,
please sign full corporate name by authorized officer. If a partnership, please
sign in partnership name by authorized person. If shares are held by joint
tenants or as community property, both should sign.
