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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON September 11, 1996
REGISTRATION NO. 333-883
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SIGMA DESIGNS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
CALIFORNIA 7372 95-2848099
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
46501 LANDING PARKWAY
FREMONT, CALIFORNIA 94538
(510) 770-0100
(Address, including zip code and telephone number, including area code, of
Registrant's principal executive offices)
THINH Q. TRAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SIGMA DESIGNS, INC.
46501 LANDING PARKWAY
FREMONT, CALIFORNIA 94538
(510) 770-0100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
TOR R. BRAHAM, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
(415) 493-9300
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
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If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If the only securities being delivered pursuant to this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT
TITLE OF EACH CLASS OF AMOUNT TO OFFERING AGGREGATE OF
SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER SHARE(1) OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, no par value 1,123,760 $8.125 $9,130,550 3,149
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(1) Estimated solely for the purpose of computing the amount of the
registration fee, based on the average of the high and low prices for the
Common Stock as reported on the Nasdaq National Market on September 9,
1996, in accordance with Rule 457(c) under the Securities Act of 1933.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
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SUBJECT TO COMPLETION DATED , 1996
PROSPECTUS
1,123,760 SHARES
SIGMA DESIGNS, INC.
COMMON STOCK
This Prospectus may be used only in connection with the resale, from
time to time, of up to 1,123,760 shares (the "Shares") of Common Stock, no par
value per share (the "Common Stock"), of Sigma Designs, Inc. ("Sigma" or the
"Company"), for the account of the selling shareholders identified below (the
"Selling Shareholders"). All of the Shares covered hereby are to be sold by the
Selling Shareholders, who originally received the Shares pursuant to an
acquisition. The Company will not receive any of the proceeds from the sale of
the Shares by the Selling Shareholders. The expenses incurred in registering the
Shares, including legal and accounting fees, will be paid by the Company.
The Shares offered hereby may be offered and sold, from time to time, by
the Selling Shareholders in one or more transactions (which may involve block
transactions) on the Nasdaq National Market (or any exchange on which the Common
Stock may then be listed), in the over-the-counter market, in negotiated
transactions or otherwise. Sales will be effected at such prices and for such
consideration as may be obtainable from time to time. Commission expenses and
brokerage fees, if any, will be paid by the Selling Shareholders. See "Plan of
Distribution."
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "SIGM." On September 9, 1996, the last sale price for the Common
Stock as reported on the Nasdaq National Market was $8.125 per share.
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SEE "RISK FACTORS" ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy and information statements and other
information may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the
Commission: New York Regional Office, Seven World Trade Center, New York,
New York 10048, and Chicago Regional Office, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material can be obtained from
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 upon payment of the prescribed fees. The Common
Stock of the Company is quoted on the Nasdaq National Market. Reports,
proxy and information statements and other information concerning the
Company may be inspected at the National Association of Securities
Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006. Information
is also available at website www.sec.gov.
This Prospectus constitutes a part of a Registration Statement on
Form S-3 (herein, together with all amendments and exhibits, referred to
as the "Registration Statement") filed by the Company with the Commission
under the Securities Act of 1933, as amended (the "Securities Act").
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further
information with respect to the Company and the shares covered by this
prospectus, reference is made to the Registration Statement. Statements
contained herein concerning the provisions of any document are not
necessarily complete, and each such statement is qualified in its
entirety by reference to the copy of such document filed with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
hereby incorporated by reference in this Prospectus: (i) the Company's
Annual Report on Form 10-K and 10-K/A for the fiscal year ended January
31, 1996, (ii) the Company's Quarterly Reports on Form 10-Q for the
periods ended on April 30, 1996, and July 31, 1996, (iii) the Company's
Proxy Statement relating to the Company's Annual Meeting of Shareholders
held on June 7, 1996, (iv) the Company's Current Report on Form 8-K filed
with the Commission on May 6, 1996, and (v) the description of the
Company's Common Stock contained in its Registration Statement on Form 8-
A filed with the Commission on November 3, 1986, as amended on September
22, 1989.
All reports and other documents subsequently filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Prospectus and prior to the termination of this offering
shall be deemed to be incorporated by reference herein and to be a part
hereof from the date of filing of such reports and documents. Any
statement incorporated herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also
is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part
of the Registration Statement or this Prospectus.
The Company hereby undertakes to provide without charge to each
person, including any beneficial owner, to whom a copy of this Prospectus
has been delivered, upon written or oral request of such person, a copy
of any or all of the foregoing documents incorporated herein by reference
(other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into such documents). Requests
for such documents should be submitted in writing to Q. Binh Trinh at the
Company's principal executive offices at 46501 Landing Parkway, Fremont,
California, 94538, or by telephone at (510) 770-0100.
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RISK FACTORS
The following discussion contains forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in such forward-looking statements as a result of certain
factors, including those set forth in the following risk factors and elsewhere
in this prospectus.
HISTORY OF OPERATING LOSSES
The Company has incurred significant losses in the last four years and has
had substantial negative cash flow in the last five years. Since the
introduction of the Company's REALmagic MPEG product line in November 1993, the
Company has invested heavily in marketing and technological innovation for its
REALmagic products. As a result, the Company has continued to experience
significant losses. Fiscal 1994, 1995 and 1996 also included significant losses
associated with products other than those related to the REALmagic technology.
Since inception, the Company's total accumulated deficit as of July 31, 1996 is
$34,398,000. There can be no assurance that the Company will continue to sell
its new REALmagic and graphics products in substantial quantities or
generate significant revenues from such sales. There can be no assurance that
the Company will achieve profitable operations in the future or that profitable
operations, if achieved, will be sustainable. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
MARKETING RISKS
The Company's ability to increase its sales, achieve profitability and
maintain REALmagic as a PC industry multimedia standard depends substantially
upon the Company's ability to achieve a sustained high level of sales to new OEM
customers. To date, the Company has commenced initial shipments of its new
REALmagic products (REALmagic Ultra, REALmagic EM8000 MPEG chip, REALmagic
Explorer chip, REALmagic 64/GX graphics chip) to certain OEM customers including
Smart Modular Technologies, Cannon Computer Systems, NEC, Convergent Systems in
the U.S. and Lung Hwa in Taiwan. The Company has not executed volume purchase
agreements with any of the Company's customers and these customers are not under
any obligation to purchase any minimum quantity of the Company's products.
Although the Company is continually engaged in marketing efforts directed to
sales of REALmagic products to additional U.S. and international OEMs, the
Company has not yet achieved design wins with a sufficient number of OEM
customers to ensure success of the REALmagic product line. Moreover, even if the
Company continues to achieve new design wins, there can be no assurance that PC
manufacturers will purchase the Company's products in substantial volumes. Sales
to any particular OEM customer are subject to significant variability from
quarter to quarter and to severe price pressures by competitors. Based on its
experience in the personal computer industry, the Company expects that its
actual sales to OEM customers will experience significant fluctuations and
estimates of future sales with respect to any particular customer or groups of
customers are inherently uncertain.
The Company's ability to achieve sustained profitability also depends on a
substantial increase in sales of REALmagic products through domestic and
international distributors for resale through retail channels. In fiscal 1996,
Ingram Micro, Inc. was the only customer to which sales comprised over 10% of
consolidated revenue. Sales to such distributors are typically subject to
contractual rights of inventory rotation or price protection. Regardless of
particular contractual rights, however, the failure of Ingram Micro, Inc. or
other distributors to achieve sustained sell-through of REALmagic products could
result in product returns or collection problems, contributing to fluctuations
in the Company's results of operations. There can be no assurance that the
Company will be successful in maintaining a significant market for its REALmagic
products.
DEPENDENCE ON DEVELOPMENT OF SOFTWARE TITLES BY THIRD PARTIES
The Company depends on third-party software developers to create, produce
and market the software titles that will operate on the REALmagic format. No
software developer is contractually obligated to produce a REALmagic-compatible
title. There can be no assurance that third-party software developers will
continue to produce a substantial number of software titles, or that they will
produce enough software titles to develop and sustain a significant market in
REALmagic products. Moreover, there can be no assurance that any individual
software titles will be of high quality or that they will achieve market
acceptance. There can also be no assurance that current popular software titles
will be introduced in the REALmagic format. Because the Company has no control
over the content of the titles produced by software developers, the software
titles developed may represent only a limited number of software categories and
are likely to be of varying quality.
To date, over sixty interactive software titles and over 1,0000 business
software applications are available in the REALmagic format. The Company expects
that many more interactive and business software applications will be available
through the second half of 1996, although there can be no assurance that any
such titles will not be delayed or cancelled. None of these titles are currently
carried by retailers on an unbundled basis and these titles must be obtained
through a Company catalog which is not widely circulated. The Company has
licensed the REALmagic API to over 1,200 software developers for development of
REALmagic-compatible programs. However, the number of software titles to be
developed by such software companies cannot be predicted. There can be no
assurance that any software developer who develops a REALmagic-compatible title
will actively promote the product or develop follow-on titles. Moreover, there
can be no assurance that any published title will have the quality or price
characteristics required to be commercially successful or that titles compatible
with the REALmagic format will be allotted retail shelf space. While the Company
is currently distributing titles itself by catalog, future sales of REALmagic
products will likely depend upon retailers carrying compatible software titles
on the shelf.
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To further establish the Company's technology as a standard, the Company
announced in October 1995, its strategic direction of selling chipsets to
add-on card and computer manufacturers. The REALmagic Pro chipset became
available in January 1996. This chipset will enable other companies to
manufacture 100% OM-1 and REALmagic compatible MPEG playback cards capable of
playing the growing number of MPEG software titles on the market. In addition,
the Company announced the REALmagic Explorer chipset in November 1995, which
will allow OEM customers to build type II ZV-port compatible PCMCIA cards for
MPEG-1 video and audio playback, bringing MPEG technology to notebook computers
for the first time. The Company also introduced the REALmagic EM8000 chipset in
June 1996 which will allow OEM customers to build low-cost MPEG playback cards
for sale to home PC users who can benefit from the growing number of
entertainment, training and education materials available on video CD. To expand
its multimedia product lines, the Company announced the availability of its
REALmagic 64/GX accelerator chip in July 1996; this chip has the state-of-the-
art graphics engine and enhanced-motion-video playback features which will allow
OEM customers to build a competitive graphics controller card. Any delay or
failure to bring any of the chipsets to market could adversely affect the
Company's market position by limiting the production of REALmagic compatible
playback cards capable of playing MPEG software titles. Moreover, there can be
no assurance that any of the Company's chipsets will be broadly accepted by
computer manufacturers.
TECHNOLOGICAL CHANGE
The market for multimedia PC products is characterized by rapidly changing
technology and user preferences, evolving formats for graphics,
compression/decompression of video and audio data and frequent new product
introductions. Even though REALmagic products and related software titles have
gained initial market acceptance, the Company's success will depend, among other
things, upon the ability of the Company, to achieve and maintain technological
leadership and to remain competitive in terms of price and product performance.
To maintain technological competitiveness, the Company must continue to
make technological advancements in the area of MPEG video and PC graphics.
These advancements include compatibility with emerging standards and multiple
platforms, improvements to the REALmagic architecture, enhancements to the
REALmagic API and the achievement of these enhancements. There can be no
assurance that the Company will be able to make any such advancements to the
REALmagic technology or, if they are made, that the Company will be able to
achieve and maintain technological competitiveness. Any material failure of the
Company or OEMs and software developers to develop or incorporate any required
improvement could adversely affect the continued acceptance of the Company's
technology and the introduction and sale of future products based on the
Company's technology. There can be no assurance that products or technologies
developed by others will not render obsolete the Company's technology and the
products based on the Company's technology.
Further, to remain competitive, the Company must anticipate the needs of
the market and successfully develop and introduce innovative new products in a
timely fashion. No assurance can be given that the Company will be able to
successfully complete the design of its new products, have these products
manufactured at acceptable manufacturing yields or obtain significant purchase
orders for these products. The introduction of new products may adversely affect
sales of existing products, contributing to fluctuations in operating results
from quarter to quarter. The introduction of new products also requires the
Company to carefully manage its inventory to avoid inventory obsolescence. In
addition, new products typically have higher initial component costs than more
mature products, possibly resulting in downward pressures on the Company's gross
margins.
COMPETITION
The market for multimedia PC products is highly competitive. While the
Company does not believe that any product sold by a third party is directly
competitive with the REALmagic MPEG products, in the area of PC graphics the
Company has many strong competitors who have more experience and financial
resources than the Company. Increased price competition could have an adverse
effect on the Company's financial performance. Current and potential competition
is and may be generated from several major computer product manufacturers who
have developed products and technologies that compete directly with the
Company's MPEG and graphics product lines. These include S3, Cirrus Logic, ATI,
Trident Microsystems, Alliance, Windbond and SGS Thompson. Also, several OEMs
and microprocessors companies possess proprietary graphics and MPEG technology
that may compete with the Company's REALmagic product lines. These include IBM,
Intel, Mediamatics, MicroUnity Systems, ESS Technology and Chromatic Research.
Most of these companies have substantial experience and expertise in multimedia
technology, in producing and selling consumer products through retail
distribution, and also have substantially greater engineering, marketing and
financial resources than the Company. Competitors of the Company may form
cooperative relationships, which could present formidable competition to the
Company. There can be no assurance that the Company's MPEG and graphics
technologies will achieve commercial success or that they will compete
effectively against other multimedia products, services and technologies that
currently exist, are under development or may be announced by competitors.
RELIANCE ON A SINGLE LINE OF PRODUCTS
The Company's business strategy has been to focus on MPEG and graphics
products by investing heavily in the PC-based MPEG and graphics technologies. In
the fiscal year ended January 31, 1996, sales of multimedia products accounted
for primarily all of net sales. A decline in the market demand for multimedia
products would adversely affect the Company's operating results. The Company's
present reliance on REALmagic products is exacerbated by the fact multimedia
product sales are concentrated in the personal computer industry. A decline in
demand for PCs could have a material adverse effect on the Company's operating
results and financial condition.
VARIABILITY OF OPERATING RESULTS
The Company's operating results have in the past and may continue to
fluctuate in the future due to a number of factors, including but not limited to
new product introductions by the Company and its competitors; market acceptance
of the Company's products by OEMs, software developers and end users; the
success of the Company's promotional programs; gains or losses of significant
customers; reductions in selling prices; inventory obsolescence; an interrupted
or inadequate supply of semiconductor chips; the Company's ability to protect
its intellectual property; and loss of key personnel. In addition, sales to OEM
customers are subject to significant variability from quarter to quarter,
depending on the OEMs' timing and release of products incorporating the
REALmagic technology, experience with sell-through of such products and
inventory levels.
The market for consumer electronics products is characterized by
significant seasonal swings in demand, which typically peak in the fourth
calendar quarter of each year. Because the Company expects to derive a
substantial portion of its revenues from the sales of REALmagic products in the
future, and the demand for such products will depend on the introduction of
compact disks containing software titles compatible with the Company's format,
the Company's revenues may also vary with the production of and demand for
popular software titles. Such demand may increase or decrease as a result of
a number of factors that cannot be predicted, such as consumer preferences and
product announcements by competitors. Announcements of directly competing
products will likely have a negative effect on operating results. Based on the
Company's experience, the Company believes that a substantial portion of its
shipments will occur in the third month of a quarter, with significant shipments
competed in the latter part of the third month. This shipment pattern may cause
the Company's operating results to be difficult to predict. The Company
currently places noncancelable orders to purchase semiconductor products from
its foundries on a long lead time basis. Consequently, if, as a result of
inaccurate forecasts or canceled purchase orders, anticipated sales and
shipments in any quarter do not occur when expected, inventory levels could be
disproportionately high, requiring significant working capital, negatively
impacting operating results.
MANUFACTURING RISKS
The Company's products consist of several VLSI chips, each of which
is presently manufactured by an outside supplier or foundry. These suppliers
include Toshiba, C-Cube Microsystems, Analog Devices, Quality Semiconductor
Australia and TSMC each of which is a sole source supplier to the Company of
their respective chip. The Company does not have long-term contracts with such
suppliers and conducts business with its suppliers on a written purchase order
basis. The Company's reliance on independent suppliers involves several risks,
including the absence of adequate capacity, the unavailability of, or
interruptions in access to, certain process technologies and reduced control
over delivery schedules, manufacturing yields and costs. Although delays or
interruptions have not occurred to date, any delay or interruption in the supply
of any of the components required for the production of the Company's products
that are currently obtained from a single source could have a material adverse
impact on the sales of the Company's products and thus on the Company's results
of operations.
The Company must provide its suppliers with sufficient lead time in order
to meet forecasted manufacturing objectives. Any failure to properly forecast
such quantities could materially adversely affect the Company's ability to
produce REALmagic products in sufficient quantities. No assurance can be given
that the Company's forecasts regarding new product demand will be accurate,
particularly since the Company sells REALmagic products on a purchase order
basis. The manufacturing of the REALmagic chipsets is a complex process, and the
Company may experience short-term difficulties in obtaining timely deliveries,
which could affect the Company's ability to meet customer demand for its
products. Any such delay in delivery products in the future could materially and
adversely affect the Company's operating results. In addition, should any of the
Company's major suppliers be unable or unwilling to continue to manufacture the
Company's key components in required volumes, the Company would have to identify
and qualify acceptable additional suppliers. This qualification process could
take up to three months or longer. No assurances can be given that any
additional sources of supply could be in a position to satisfy the Company's
requirements on a timely basis.
In the past, the Company has experienced production delays and other
difficulties and the Company could experience similar problems in the future. In
addition, there can be no assurance that a product defect will not escape
identification at the factory, possibly resulting in unanticipated costs,
cancellations or deferrals of purchaser orders or costly recall of products from
customer sites.
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends in large part on the continued service
of its key technical, marketing, sales and management personnel. Given the
complexity of the REALmagic technology, the Company is dependent on its ability
to retain and motivate highly skilled engineers involved in the ongoing hardware
and software development of the REALmagic product, who will be required to
refine the existing hardware system and API and to introduce enhancements in
future applications. The multimedia PC industry is characterized by a high level
of employee mobility and aggressive recruiting of skilled personnel. There can
be no assurance that the Company's current employees will continue to work for
the Company or that the Company will be able to obtain the services of
additional personnel necessary for the Company's growth. The Company does not
have "key person" life insurance policies on any of its employees.
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LIMITED INTELLECTUAL PROPERTY PROTECTION
The Company's ability to compete may be affected by its ability to protect
its proprietary information. The Company currently holds four patents covering
the technology underlying the REALmagic products and the Company has filed
certain patent applications and is in the process of preparing others. There can
be no assurance that any additional patents for which the Company has applied
will be issued or that any issued patents will provide meaningful protection of
its product innovations. The Company, like other emerging multimedia companies,
relies primarily on trade secrets and technological know-how in the conduct of
its business. In addition, the Company is relying in part on copyright law to
protect its proprietary rights with respect to the REALmagic technology.
The electronics industry is characterized by frequent litigation regarding
patent and intellectual property rights. Any such litigation could result in
significant expense to the Company and divert the efforts of the Company's
technical and management personnel, whether or not the outcome of such
litigation is favorable to the Company. Moreover, in the event of an adverse
result in any such litigation, the Company could be required to expend
significant resources to develop noninfringing technology or to obtain licenses
to the technology which is the subject of the litigation. There can be no
assurance that the Company would be successful in such development or that any
such licenses would be available on acceptable terms, if at all. In addition,
patent disputes in the electronics industry have often been settled through
cross-licensing arrangements. Because the Company does not yet have a large
portfolio of issued patents, the Company may not be able to settle an alleged
patent infringement claim through a cross-licensing arrangement.
CHANGE IN BUSINESS PLAN
The Company has dramatically altered its business plan with the acquisition
of EMI and with the acquisition of Active Design, and the elimination
of all product lines other than the REALmagic line. The Company has begun to
devote its resources to the successful introduction of the REALmagic technology
and related multimedia products. As a result of the change in business strategy,
the Company expects to experience a period of significant alteration in number
and organization of employees. This change has placed, and will continue to
place, a substantial strain on the Company's management, operational, financial
and accounting resources. The Company must be evaluated in light of the costs,
delays and other difficulties frequently encountered in a recently established
and rapidly changing business enterprise.
INTERNATIONAL OPERATIONS
During the fiscal years ended January 31, 1996, 1995 and 1994, sales to
international customers accounted for approximately 63%, 36% and 33% of the
Company's net sales, respectively. The Company anticipates that sales to
international customers, including sales of REALmagic products, will continue to
account for a substantial percentage of net sales. In addition, some of the
foundries that manufacture the Company's products and components are located in
Asia. Overseas sales and purchases to date have been denominated in U.S.
dollars. Due to the concentration of international sales and the manufacturing
capacity in Asia, the Company is subject to the risks of conducting business
internationally. These risks include unexpected changes in regulatory
requirements and fluctuations in the U.S. dollar which could increase the sales
price in local currencies of the Company's products in international markets or
make it difficult for the Company to obtain price reductions from its foundries.
The Company does not currently engage in any hedging activities to mitigate
exchange rate risks. To the extent that the Company is successful in increasing
its sales to foreign customers, or to the extent that the Company increases its
transactions in foreign currencies, the Company's results of operations could be
adversely affected by exchange rate fluctuations.
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock has been and is expected to
continue to be subject to significant fluctuations. Factors such as
announcements of the introduction of new products by the Company or its
competitors and market conditions in the technology, entertainment and emerging
growth company sectors may have a significant impact on the market price of the
Company's Common Stock. Further, the stock market has experienced volatility
that has particularly affected the market prices of equity securities of many
high technology and development stage companies such as those in the electronics
industry. Such volatility has often been unrelated or disproportionate to the
operating performance of such companies. These fluctuations, as well as general
economic and market conditions, may adversely affect the price of the Common
Stock.
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THE COMPANY
The following section contains forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under "Risk Factors" and elsewhere in
this Prospectus.
Sigma Designs, Inc. ("Sigma" or the "Company") designs, manufactures (using
subcontractors), and markets multimedia products for use with personal
computers. The emergence of multimedia technology in the personal computer
("PC") market has dramatically changed the way users interact with computers.
Multimedia integrates different elements, such as graphics, sound and video, to
enhance the computing experience and deliver a heightened sense of realism.
Through its REALmagic product line incorporating Moving Pictures Experts Group
("MPEG") technology, Sigma Designs has become a leader in this emerging market.
Prior to MPEG's introduction, video on personal computers suffered from
serious drawbacks. Motion pictures appeared jerky and video was confined to
small window sizes. MPEG, a defined International Standards Organization (ISO)
standard for compression, eliminated those problems and revolutionized
multimedia on the PC platform. For the first time, MPEG users could play back
full-screen, full-motion video combined with stereo audio, even from a standard
CD-ROM. A single CD-ROM using the MPEG compression technique can store up to 74
minutes of full-motion video and audio.
Because of MPEG technology, producers can create (and users can enjoy) an
interactive, television-like experience on a desktop PC. The result was a
significant new visual impact thereby opening possibilities for a wide range of
entertainment, education, training and business presentation applications.
THE REALMAGIC MPEG STANDARD
Since its first shipment in November 1993, REALmagic technology has
received widespread support from PC industry leaders, software developers and
OEM and retail customers.
PARTNERSHIP WITH PC INDUSTRY LEADERS. Sigma has received endorsement for
its REALmagic technology from companies such as Microsoft, IBM, Hewlett Packard,
Oracle, Novell and Starlight Networks. On the operating system side, REALmagic
is being supported by Microsoft Windows 95 and IBM O/S 2. Additionally, both
Novell and Starlight Networks have products that are compatible with REALmagic
in a network environment.
WIDESPREAD SUPPORT FROM SOFTWARE DEVELOPERS. Support for Sigma's REALmagic
MPEG standard has grown rapidly in the software development community. Two years
ago, the Company listed fifty authorized REALmagic software developers; by the
end of fiscal 1996, Sigma's roster of developers rose to more than 1,200,
including Activision, Tsunami Media, Mindscape, Time Warner, and Interplay. This
widespread developer support has led to the introduction of more than 60
interactive software titles in the REALmagic format and many more currently
under development.
The REALmagic DOS MPEG API has also become the industry standard for MPEG
software development, further evidence of widespread support from the software
development community. With its robust functionality, the REALmagic API is
currently the preferred technology available which allows the creation of fully
interactive MPEG software titles.
SUPPORT FROM OEMS. In the U.S., Zenith Data Systems, Zenon Technology, Inc.
and PREMIO Express, the direct marketing arm of Compu Trend Systems, Inc., Smart
Modular Technologies and Cannon Computer Systems have purchased the REALmagic
products to incorporate with their systems. Additionally many VARs have begun
taking shipments of REALmagic boards for systems targeted at vertical kiosk,
business training and presentation applications. In the Far East, where the
popularity of Karaoke and videoCD has made REALmagic a very well received
product, the Company's OEM customers include NEC in Japan and Hyundai in Korea
and Lung Hwa in Taiwan.
ACCEPTANCE BY RETAIL CHANNEL. In addition to international distributors,
national U.S. distributors such as Ingram Micro, Inc. and Tech Data are carrying
REALmagic products, further evidence of the channel's acceptance and interest in
MPEG technology.
REALMAGIC BUSINESS STRATEGIES
Sigma's corporate objective is to be the leading provider of the REALmagic
MPEG and graphics multimedia products that enable full-screen, full-motion, TV-
like quality video and graphics on the standard desktop and the notebook PC. To
accomplish this goal, the Company intends to promote the widespread acceptance
of the REALmagic technology. The key parts of this strategy includes:
ENCOURAGE CONTINUED DEVELOPMENT OF SOFTWARE UTILIZING THE REALMAGIC
TECHNOLOGY. The Company continues to encourage widespread software title
development by providing free technical support and licensing its
comprehensive API free of charge to all developers who wish to publish
REALmagic-compatible software titles. In addition, the Company has been
shipping REALmagic Producer, the industry's first low-cost MPEG authoring
system. It enables compression of MPEG video and audio in order to create
high-quality multimedia presentations and titles. The Company expects that
the availability of REALmagic Producer will lead to the development of more
REALmagic MPEG titles, and therefore increase the demand for REALmagic
playback card.
WIN MORE OEM PARTNERSHIPS AND FURTHER PENETRATE RETAIL CHANNEL. To
establish REALmagic as a true standard, the Company will continue to seek
design wins with major board and PC manufacturers worldwide in which the
OEMs will either manufacture the MPEG or graphics cards and distribute them
through their own channels of distribution or later when a single chip
solution for the mother board becomes available, these OEMs will install it
on the CPUs of their MPCs. On the retail side, the Company plans to expand
its network of national distributors and special VARs to distribute its
high-end REALmagic MPEG playback card and the REALmagic Producer, its low-
cost encoding card.
INTRODUCE NEW GENERATIONS OF REALMAGIC, OFFER REALMAGIC PRODUCTS AT
COMPETITIVE PRICES AND CONTINUALLY REDUCE PRODUCT COSTS. A significant
aspect of the Company's product strategy is to include the sale of
REALmagic chipsets in its product line and continue developing newer
versions and generations of the REALmagic products including chipsets for
both desktop and notebook PCs. The general direction is to continue to
offer consumers with better-features and lower price products over time.
The intention is to stay at least one step ahead of competition.
-6-
<PAGE>
REALMAGIC PRODUCTS
The Company offers a complete family of REALamMagic products including:
. REALMAGIC MAXIMA. An MPEG playback card designed to eliminate the
compatibility issue with graphics cards by using the Analog Overlay
Technology. The Maxima accelerates MPEG video to a guaranteed 30
frames per second playback rate with high quality CD sound at
resolutions of up to 1280 x 1024, which is in compliance with the MPC3
industry standard for MPEG video playback. The REALmagic drivers
guarantee compatibility with all the interactive MPEG titles available
today and all future titles which are OM-1 compatible.
. REAlmagic ULTRA. A high-end MPEG playback card which has all the
features of the REALmagic MAXIMA plus additional features such as
horizontal and vertical imterpolation (filtering), 24-bit colors, and
on-the-fly adjustments for brightness, contrast and saturation to
provide superior video display quality at resolutions as high as
1600x1200; integrated Windows PCM stereo audio playback; and TV output
option.
. REALMAGIC PRO CHIPSET. In October 1995, the Company announced the
availability for sale of the REALmagic Pro Chipset. This chipset has
the following distinctive features:
+ Very high quality MPEG playback through 16 million color MPEG
video; horizontal and vertical bilinear interpolation; digital
brightness, contrast and saturation adjustment.
+ The use of Sigma's REAL Overlay chip enables the mixing of MPEG
video and PC graphics at resolutions up to 1600 x 1200 with an 85
Hz non-interlaced refresh rate.
+ 100% Windows 95 and MPC3 compliance.
+ 100% OM-1 and REALmagic compatibility.
+ Direct interface for NTSC/PAL decoder to support TV tuner
input.
The Company currently expects to commence volume shipment of this product
in the second quarter of fiscal 1997.
. REALMAGIC EXPLORER. In November 1995, the Company announced the
introduction of the REALmagic Explorer chipset. This chipset will put
MPEG-1 digital video playback in ZV port PCMCIA cards for the new
generation of notebook computers. The main features of this chipset
are:
+ MPEG-1 video playback with 16 million colors.
+ MPEG-1 audio layers I and II.
+ 100% REALmagic and OM-1 standard compatible.
+ MPC3 standard compliant.
+ Windows 95 Plug and Play.
The Company currently expects to start volume shipment of this product in
the second half of fiscal 1997.
. REALmagic EM8000 MPEG CHIP. In June 1996, the Company announced the
availability of the REALmagic EM8000 MPEG chip. This chip is designed
for add-on card manufacturer to produce a low-cost MPEG playback card
with the following features:
+ MPEG-1 playback at 30 fps with 16 million colors.
+ 16-bit stereo quality MPEG audio,
+ Horizontal and vertical interpolation video quality display.
+ Low-cost ISA bus implementation.
The Company expects to commence volume shipment of this product in the
fourth quarter of fiscal 1997.
REALmagic 64/GX GRAPHICS CHIP. In July 1996, the Company introduced the
REALmagic 64/GX graphics chip which is designated for add-on card
manufacturers to produce a low-cost graphics card with the following
features:
+ State-of-the-art graphics engine and 64-bit architecture.
+ Horizontal and vertical scaling with linear X-Y interpolation.
+ Capable of delivering 30 fps full-motion digital video through
software MPEG .
+ Includes CD Station MPEG playback at no extra cost.
The Company currently expects to commence volume shipment of this product
in the fourth quarter of fiscal 1997.
. REALMAGIC PRODUCER. A 32-bit PCI low cost card with audio/video
capture and MPEG encoding capabilities. This product comes bundled
with a frame-accurate software VTR controller; real-time video
Previewer; Adobe and Caligari trueSpace software which are necessary
to make high-quality multimedia presentations and titles. REALmagic
Producer features include:
+ Fully compliant with MPEG-1 standard.
+ Compatible with any AVI-compatible video editing software.
+ Compatible with REALmagic decoding products.
+ Files are converted to fully compressed MPEG-1 at three times
actual time.
+ Accepts both S-VHS and Composite video inputs.
MARKETING AND SALES
Sigma Designs currently distributes its products through sales to national
and regional distributors, VARs and OEMs in the U.S. and throughout the world.
The Company's U.S. distributors include Ingram Micro, Inc. and Tech Data, and
its OEMs include Zenith Data Systems, Smart Modular Technologies, Zenon
Technology and PREMIO Express. The Company's international OEMs include NEC in
Japan and Hyundai in Korea and Lung Hwa in Taiwan and its international
distributors are strategically located in many countries around the world.
However, there can be no assurance that the Company will achieve significant
sales so as to realize profitability in the near term, if at all.
The Company generally acquires and maintains products for distribution
through retail channels based on forecasts rather than firm purchase orders.
Additionally, the Company generally only acquires products for sales to its OEM
customers after receiving purchase orders from such customers, which purchase
orders are typically cancelable without substantial penalty from such OEM
customers. The Company currently places noncancelable orders to purchase
semiconductor products from its suppliers on a twelve to sixteen-week lead time
basis. Consequently, if, as a result of inaccurate forecasts or canceled
purchase orders, anticipated sales and shipments in any quarter do not occur
when expected, expenses and inventory levels could be disproportionately high,
requiring significant working capital resulting in severe pressure on the
Company's financial condition.
RESEARCH AND DEVELOPMENT
As of July 31, 1996, the Company had a staff of 37 research and development
personnel, which conducts all the Company's product development. The Company is
focusing its development efforts primarily on MPEG and graphics multimedia
products for PCs, including new and improved versions of REALmagic MPEG and
graphics chipsets, new software titles and cost reduction processes.
To maintain its competitiveness, the Company must continue to make
technological advancements in the areas of MPEG video and audio compression and
decompression. These advancements include compatibility with emerging standards
and multiple platforms, improvements to the REALmagic architecture and
enhancements to REALmagic API. There can be no assurance that the Company will
be able to make any of such advancement to the REALmagic MPEG technology or, if
they are made, that the Company will be able to market such advancements to
achieve profitability and maintain its technological leadership.
During fiscal 1996, fiscal 1995 and fiscal 1994, the Company's research
and development expenses were approximately $4.5 million, $4.3 million and $12.0
million (including $8.1 million of acquired research and development relating to
the acquisition of EMI) respectively. The Company plans to continue to devote
substantial resources to the research and development of the future generation
of PC graphics, MPEG video and other multi-media.
COMPETITION
The market for graphics and MPEG multimedia products is highly competitive.
While the Company does not believe that any products sold by a third party is in
direct competition with the REALmagic encoding and decoding card and MPEG
chipsets in terms of price and performance, but in the area of PC graphics, the
Company has many strong competitors who have more experience and financial
resources than the Company. The Company believes that many computer product
manufacturers are developing MPEG products that will compete directly with
REALmagic products in the near future.
The Company believes that the principal competitive factors in the market
for graphics and MPEG multimedia products include time to market for new product
introductions, product performance, compatibility to industry standards, price
and marketing and distribution resources. The Company believes that it competes
most favorably with respect to time to market, product performance and price of
REALmagic products. Moreover, the Company believes that the acceptance of
REALmagic API as an industry standard for software development could provide a
significant competitive advantage for the Company. However, there can be no
assurance that the Company's lead time in product introduction will be
sustained.
Sales to distributors and sometimes even to OEMs are typically subject to
contractual rights of inventory rotation and price protection. Regardless of
particular contractual rights, the failure of one or more distributors or OEMs
to achieve sustained sell-through of REALmagic products could result in product
returns or collection problems, contributing to significant fluctuations in the
Company's operating results.
LICENSES, PATENTS AND TRADEMARKS
The Company is seeking patent protection for the basic low-cost
architecture of the REALmagic products, as well as certain software and
hardware features in current and future versions of REALmagic. The Company
currently has eight pending patent applications for its REALmagic technology.
Four patents have been issued to the Company and there can be no assurance that
more patents will be issued, or, even if issued, will provide adequate
protection for the Company's competitive position. The Company also attempts to
protect its trade secrets and other proprietary information through agreements
with customers, suppliers and employees and other security measures. Although
the Company intends to protect its rights vigorously, there can be no assurance
that these measures will be successful.
MANUFACTURING
To reduce overhead expenses, capital and staffing requirements, the Company
currently uses third party contract manufacturers to fulfill its manufacturing
needs. All of the chips used by the Company to make its graphics, encoding and
decoding MPEG products are manufactured by outside suppliers and foundries. Each
of these suppliers is a sole source of supply to the Company of the respective
chips produced by such supplier.
The Company's reliance on independent suppliers involves several risks,
including the absence of adequate capacity, reduced control over delivery
schedules, manufacturing yields and costs. Any delay or interruption on the
supply of any of the components required for the production of REALmagic
products could have a material adverse impact on the sales of the Company's
products and thus on the Company's operating results.
BACKLOG
Because the Company's customers typically expect quick deliveries, the
Company seeks to ship products within a few weeks of receipt of a purchase
order. The customer may reschedule delivery of products or cancel the purchase
order entirely without significant penalty. Historically, the Company's backlog
has not been reflective of future sales. The Company also expects that in the
near term, its backlog will continue to be not indicative of future sales.
EMPLOYEES
As of July 31, 1996, the Company had 76 full-time employees, including 37
in research and development, 22 in marketing, sales and support, 6 in operations
and 11 in finance and administration. The Company's future success will depend,
in part, on its ability to continue to attract, retain and motivate highly
qualified technical, marketing, engineering and management personnel, who are in
great demand. The Company's employees are not represented by any collective
bargaining unit, and the Company has never experienced a work stoppage. The
Company believes that its employee relations are satisfactory.
-7-
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Shares
hereunder by the Selling Shareholders.
SELLING SHAREHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of August 22, 1996 by
each Selling Shareholder. Except as indicated in the footnotes to this
table, 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.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED
OFFERING (1)(2) NUMBER AFTER OFFERING(1)(2)
-------------------- OF SHARES ---------------------
NAME AND ADDRESS NUMBER PERCENT BEING OFFERED NUMBER PERCENT
- ---------------- ------- ------- ------------- ------ -------
<S> <C> <C> <C> <C> <C>
Dan Chen(3)............................... 154,000 1.51% 154,000 0 0
P.O. Box 2871
13282 Glen Brae Drive
Saratoga, CA 95070
Tsan Chiu Chen............................ 118,800 1.17% 118,800 0 0
402 Chin Nien First Road
Kaohsiung, Taiwan
Daniel M. Hou............................. 118,800 1.17% 118,800 0 0
212 25th Street
Santa Monica, CA 90402
Li Mam Kuo................................ 118,800 1.17% 118,800 0 0
2nd Fl. #7 Alley 28 Lane 39
Chulin Road
Yungho City, Taipei County
Taiwan
Direct International Limited.............. 110,000 1.08% 110,000 0 0
9th Fl., #75, Sec. 3
Ming-Sheng East Road
Taipei, Taiwan
C.J. Huang................................ 92,400 * 92,400 0 0
#4 Alley 1 Lane 132
Charn Chin Road
Nei-Hu District
104 Taipei City, Taiwan
Kenneth Tai................................ 88,000 * 88,000 0 0
28080 Story Hill Lane
Los Altos Hill, CA 94022
Cecilie To................................ 71,500 * 71,500 0 0
24 Arnold Drive
Princeton, NJ 08540
Kuo-Wei Chang............................. 67,100 * 67,100 0 0
7F, 135, Pateh Road Section 4
Taipei, Taiwan
John O'Neil............................... 29,700 * 29,700 0 0
124 Heather Drive
Princeton, NJ 08540
C.T. Wu................................... 29,700 * 29,700 0 0
29 Airpark Road
Princeton, NJ 08540
I-Ching Chen.............................. 22,000 * 22,000 0 0
197 Spreading Oak Drive
Scotts Valley, CA 95066
Lin May Wu Chi............................ 22,000 * 22,000 0 0
Floor 3, No. 1, Alley 12
Lane 128, Sec 1
Chung-Sun Road, Yun-Ro
Taipei, Taiwan
Jianfeng Huang............................ 13,200 * 13,200 0 0
7489 Standard Place
Cupertino, CA 95014
Liancai Liu............................... 13,200 * 13,200 0 0
1047 Belvedere Lane
San Jose, CA 95129
Rong Zhang Hu............................. 13,200 * 13,200 0 0
1195 Sabal Drive
San Jose, CA 95132
Kei Fat Ng................................ 13,200 * 13,200 0 0
34789 Dorado Common
Fremont, CA 94555
Ching Tai Chiu............................ 4,400 * 4,400 0 0
1442 Cedarmeadow Court, #D
San Jose, CA 95131
Yan Li.................................... 6,600 * 6,600 0 0
116 Surrey Court
Milpitas, CA 95035
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED
OFFERING (1)(2) NUMBER AFTER OFFERING(1)(2)
-------------------- OF SHARES ---------------------
NAME AND ADDRESS NUMBER PERCENT BEING OFFERED NUMBER PERCENT
- ---------------- ------- ------- ------------- ------ -------
<S> <C> <C> <C> <C> <C>
Fumei F. Pan.............................. 6,600 * 6,600 0 0
3190 Impala Drive, #2
San Jose, CA 95117
Jingli Hu................................. 3,959 * 3,959 0 0
1195 Sabal Drive
San Jose, CA 95132
Henrietta T.Y. Lee........................ 2,200 * 2,200 0 0
1781 Cedarwood Court
San Bruno, CA 94066
H.C. Hung................................. 2,200 * 2,200 0 0
3F, 5, Lane 1, Alley 99
Tun Hwa Road North
Taipei, Taiwan
Nai Ling Chen............................. 2,200 * 2,200 0 0
204 St. Philip Court
Fremont, CA 94539
</TABLE>
- ---------------
* Represents 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.
(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.
(3) Dan Chen is the Senior Vice President for Technology of the Company.
-9-
<PAGE>
PLAN OF DISTRIBUTION
On April 23, 1996 the Company entered into an Agreement and Plan of
Reorganization ("Reorganization Plan") with Active Design Corporation
("Active Design") pursuant to which the shareholders of Active Design
("Selling Shareholders") entered into a Registration Rights Agreement
(together with the Reorganization Plan, the "Acquisition Agreements")
with the Company. Under the terms of the Acquisition Agreements, the
Selling Shareholders received Common Stock of the Company. This
Registration Statement has been filed by the Company pursuant to the
exercise of certain registration rights granted under the Acquisition
Agreements.
The Shares may be sold from time to time by the Selling Shareholders
or by pledgees, donees, transferees or other successors in interest.
Such sales may be made in any one or more transactions (which may involve
block transactions) on the Nasdaq National Market, or any exchange on
which the Common Stock may then be listed, in the over-the-counter market
or otherwise in negotiated transactions or a combination of such methods
of sale, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The
Selling Shareholders may effect such transactions by selling shares to or
through broker-dealers, and such broker-dealers may sell the Shares as
agent or may purchase such Shares as principal and resell them for their
own account pursuant to this Prospectus. Such broker-dealers may receive
compensation in the form of underwriting discounts, concessions or
commissions from the Selling Shareholders and/or purchasers the Shares,
for whom they may act as agent (which compensation may be in excess of
customary commissions). In connection with such sales, the Selling
Shareholders and any participating brokers or dealers may be deemed to be
"underwriters" as defined in the Securities Act. The Acquisition
Agreements provide that the Company will indemnify the Selling
Shareholders against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters relating to validity of the shares of Common
Stock offered hereby will be passed upon for the Company by Wilson
Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California.
EXPERTS
The consolidated financial statements and the related financial
statement schedule of Sigma Designs, Inc., all of which are incorporated
in this prospectus by reference from the Company's Report on Form 10-K/A
(No. 1) for the fiscal year ended January 31, 1996, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report,
which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
-10-
<PAGE>
================================================================================
TABLE OF CONTENTS
Page
----
Available Information............................ 2
Incorporation of Certain Documents by Reference.. 2
Risk Factors..................................... 3
The Company...................................... 6
Use of Proceeds.................................. 8
Selling Shareholders............................. 8
Plan of Distribution............................. 10
Legal Matters.................................... 10
Experts.......................................... 10
---------------
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information and representations must not
be relied upon as having been authorized by the Company or the Selling
Shareholders. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy the Shares by anyone in any jurisdiction in
which such offer or solicitation is not authorized, or in which the person
making the offer or solicitation is not qualified to do so, or to any person to
whom it is unlawful to make such offer or solicitation. Under no circumstances
shall the delivery of this Prospectus or any sale made pursuant to this
Prospectus, create any implication that the information contained in this
Prospectus is correct as of any time subsequent to the date of this Prospectus.
---------------
================================================================================
================================================================================
1,123,760 Shares
SIGMA DESIGNS, INC.
Common Stock
______________________
PROSPECTUS
_____________________
_________ __, 1996
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable in connection with the
sale of Common Stock being registered. All amounts are estimates except
the Securities and Exchange Commission registration fee and the Nasdaq
National Market Listing Fee.
<TABLE>
<S> <C>
Securities and Exchange Commission
Registration Fee.................... $ 3,149
Nasdaq National Market Listing Fee.... 17,500
Legal Fees and Expenses............... 30,000
Accounting Fees and Expenses.......... 22,500
Blue Sky Fees and Expenses............ 2,500
Transfer Agent and Registrar Fees..... 5,000
Miscellaneous......................... 5,656
-------
Total.......................... $86,305
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 317 of the California Corporations Code authorizes a court
to award or a corporation's Board of Directors to grant, indemnity to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for labilities (including
reimbursement for expenses incurred) arising under the Securities Act.
Article IV of the Registrant's Articles of Incorporation and Article VI
of the Registrant's Bylaws provide for indemnification of its directors,
officers, employees and other agents to the maximum extent permitted by
the California Corporations Code. In addition, the Registrant has
entered into Indemnification Agreements with its officers and directors.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons
controlling the Registrant pursuant to the foregoing provisions, the
Registrant has been informed that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
2.1* Agreement and Plan of Reorganization by and among Sigma
Designs, Inc., Sigma Acquisition Corp. and Active Design
Corporation dated as of April 23, 1996.
4.1 Registration Rights Agreement, by and between Sigma and
the Selling Shareholders.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, counsel for the Registrant.
23.1 Independent Auditors' Consent.
23.2 Consent of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, counsel for the Registrant
(included in Exhibit 5.1).
24.1 Power of Attorney.
---------------
*Incorporated by reference to Exhibit 10.11 of the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 1996.
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set
forth therein is included in the consolidated financial statements or
notes thereto.
II-1
<PAGE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification by the Registrant for liabilities arising
under the Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered hereunder, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, or post-effective amendment to this Registration Statement to
include any material information with respect to the plan of distribution
not previously disclosed in the Registration Statement or any material
change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act, the information
omitted from the form of Prospectus filed as part of this Registration
Statement in reliance upon 430A and contained in a form of Prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fremont, State of
California, on the 11th day of September 1996.
SIGMA DESIGNS, INC.
By: /s/ Thinh Q. Tran
------------------------------
Thinh Q. Tran
Chairman of the Board,
President and Chief Executive
Officer
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature appears
below constitutes and appoints Thinh Q. Tran and Q. Binh Trinh, and each of them
(with full power to each of them to act alone), his true and lawful
attorneys-in-fact and agent, each with full power of substitution, for him and
on his behalf to sign, execute and file this Registration Statement and any or
all amendments (including, without limitation, post-effective amendments and any
amendment or amendments or abbreviated registration statement increasing the
amount of securities for which registration is being sought) to this
Registration Statement, with all exhibits and any and all documents required to
be filed with respect thereto, with the Securities and Exchange Commission or
any regulatory authority, granting unto such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as he or she might or
could do if personally present, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
*/s/ Thinh Q. Tran Chairman of the Board, President and Chief September 11, 1996
---------------------- Executive Officer (Principal Executive Officer)
Thinh Q. Tran
* /s/ Julien Nguyen Co-Chairman of the Board and Chief Technical September 11, 1996
---------------------- Officer
Julien Nguyen
*/s/ Q. Binh Trinh Vice President, Finance, Chief Financial Officer, September 11, 1996
---------------------- Secretary and Director (Chief Financial and
Q. Binh Trinh Accounting Officer)
*/s/ William J. Almon Director September 11, 1996
----------------------
William J. Almon
*/s/ William Wang Director September 11, 1996
----------------------
William Wang
*By: /s/ Q. Binh Trinh
- ----------------------
Attorney-in-Fact
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER
--------------
2.1* Agreement and Plan of Reorganization, by and among Sigma
Designs, Inc., Sigma Acquisition Corp., and Active Design
Corporation, dated as of April 23, 1996.
4.1 Registration Rights Agreement, by and between Sigma and
the Selling Shareholders.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, counsel for the Registrant.
23.1 Independent Auditors' Consent.
23.2 Consent of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, counsel for the Registrant
(included in Exhibit 5.1).
24.1 Power of Attorney. (See page II-3.)
----------
*Incorporated by reference to Exhibit 10.11 of the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 1996.
<PAGE>
EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered into
as of April 30, 1996 by and among Sigma Designs, Inc., a California corporation
("Parent") and certain former shareholders of Active Design Corporation, a
California corporation (the "Company"), listed on the signature pages hereto
(the "Shareholders").
A. Pursuant to the terms of the Agreement and Plan of Reorganization dated
as of April 23, 1996 (the "Reorganization Agreement"), by and among Parent, the
Company, and Sigma Acquisition Corp., a California corporation and wholly owned
subsidiary of Parent ("Sub"), Sub is being merged with and into the Company (the
"Merger"), with the Company being the surviving corporation.
B. In connection with the Merger, the Shareholders received in the aggregate
1,123,760 shares (the "Shares") of common stock of Parent, without par value
("Parent Common Stock").
C. The Reorganization Agreement provides for the execution and delivery of
this Agreement at the closing of the transactions contemplated thereby which
grants the Shareholders certain rights to have their Shares registered under the
Securities Act of 1933, as amended.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and conditions herein and in the Reorganization Agreement, the parties
hereto agree as follows:
SECTION 1
REGISTRATION RIGHTS
1.1 CERTAIN DEFINITIONS. As used in this Agreement:
-------------------
(a) The term "beneficially owned" refers to the meaning of such terms as
provided in Rule 13d-3 promulgated under the Exchange Act. References to
ownership of Voting Stock hereunder mean beneficial ownership.
(b) The term "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations of the SEC
thereunder, all as the same shall be in effect from time to time.
(c) The term "person" shall mean any person, individual, corporation,
partnership, trust or other nongovernmental entity or any governmental agency,
court, authority or other body (whether foreign, federal, state, local or
otherwise).
<PAGE>
(d) The term "Holder" means the Shareholders and any transferee of
Registrable Securities pursuant to Section 1.8 of this Agreement, provided that
any such person shall cease to be a Holder at such time as the registration
rights to which such person is entitled hereunder terminate pursuant to Section
1.9.
(e) The terms "Option Shares" shall refer to those shares issued to those
shares allocated to beneficiaries of the Active Design Stock Option plan to be
assumed by Sigma Designs upon completion of the acquisition.
(f) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(g) The term "Registrable Securities" means (i) the Shares and (ii) any
shares of Parent's Common Stock (or Common Stock issued by Parent upon the
exercise, conversion or exchange of any other securities) issued by Parent with
respect to such Shares upon any stock split, stock dividend, recapitalization,
or similar event.
(h) The term "Securities Act" means the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time.
(i) The term "SEC" means the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
1.2 REQUESTED S-3 REGISTRATION.
--------------------------
(a) If Parent shall receive a written request no sooner than July 23, 1996
from the Holders who in the aggregate hold not less than 70% of the outstanding
Registrable Securities (the "Initiating Holders"), then Parent shall use its
reasonable best efforts to cause a registration statement on Form S-3 under the
Securities Act relating to the resale of such shares of Registrable Securities
specified in such request to be declared effective within thirty (30) days, so
as to permit the sale thereof in the public market. In connection therewith the
Company shall use its best efforts to prepare and file within thirty (30) days
the Form S-3 registration statement with the SEC to effect such registration.
Upon receipt of the written request from the Initiating Holders, Parent will
promptly give to the other Holders written notice thereof and include in such
registration all Registrable Securities specified in a written request or
requests made by such other Holders within five (5) days of Parent's notice.
Each Holder request made pursuant to this Section 1.2(a) shall (i) specify the
number of shares of Registrable Securi ties intended to be offered and sold by
each participating Holder (provided, however, that each partici pating Holder
shall not be required to sell any or all of such shares of Registrable
Securities pursuant to the ensuing registration), and (ii) contain the
undertaking of each participating Holder to provide all such information and
materials and take all
-2-
<PAGE>
such action as may be required in order to permit Parent to comply with all
applicable requirements of the SEC and to obtain any desired acceleration of the
effective date of such registration statement.
(b) The Registrable Securities being offered pursuant to the registration
statement shall not be sold by means of an underwriting. It is intended that
the participating Holders shall have thirty (30) days from the effective date of
the registration statement to sell the Registrable Securities under the
registration statement, subject to the application of Parent's insider trading
policies set forth on Exhibit A hereto (the "Insider Trading Policy"), which
policy shall apply to all insiders.
(c) Within ten (10) days of the announcement to the public of Parent's
results of operations for its fiscal quarter ending October 31, 1996, Parent
shall use its reasonable best efforts to file a post-effective amendment to the
S-3 Registration Statement. Parent shall use its reasonable best efforts to
cause the post-effective amendment to be declared effective as soon as
reasonably practicable after its filing. It is intended that the participating
Holders shall have thirty (30) days from the effective date of the post-
effective amendment to sell their Registrable Securities, subject to the
application of Parent's Insider Trading Policy, which policy shall apply to all
insiders. Notwithstanding the foregoing Parent shall not be required to file
such post-effective amendment or have it declared effective, if the holders of
over 80% of the Registrable Securities issued at the closing of the Merger agree
in writing with Parent to waive their rights under this paragraph.
Parent's obligations under this Section 1.2 shall be deferred in the event
that Parent shall furnish to the participating Holders a certificate signed by
the Chief Financial Officer of Parent stating that, in the good faith judgment
of the Board of Directors, it would be detrimental to Parent or its stockholders
for the registration statement to be filed or declared effective in the near
future, provided that Parent's obligation to file such a registration statement
may be deferred for a period not to exceed ninety (90) days from the receipt of
the request to file such registration by the Initiating Holders.
(d) In the event that (i) the Parent shall fail to provide a minimum of
ten (10) trading days within the effective periods contemplated by Sections
1.2(a), (b) and (c), due to limitations imposed by Parent's Insider Trading
Policy; and (ii) the Principal Shareholder is not able to sell all shares of
Registrable Securities proposed by the Principal Shareholder to be sold during
any of such periods as a result of such Holder following Parent's Insider
Trading Policy, then Parent shall, at the Principal Share holder's request,
cause to be filed with the SEC an additional registration statement on Form S-3
under the Securities Act relating to the resale of such shares of Registrable
Securities at a time to be reasonably agreed to by the Parent and such Holder.
1.3 S-8 REGISTRATION
----------------
(a) Parent agrees to undertake reasonable best efforts to cause a
registration statement on Form S-8 under the Securities Act relating to the
resale of the vested Option Shares to be declared effective within ten (10) days
after the Effective Time of the Merger, as defined in the Reorganization
Agreement, so as to permit the sale thereof in the public market. In connection
therewith the
-3-
<PAGE>
Company shall use its best efforts to prepare and file within ten (10) days
after the Effective Time, as defined in the Reorganization Agreement, the
Form S-8 registration statement with the SEC to effect such registration.
(b) The vested Option Shares being offered pursuant to the registration
statement shall not be sold by means of an underwriting. It is intended that
the holders of the vested Option Shares shall have thirty (30) days from the
effective date of the registration statement to sell the securities under the
registration statement, subject to the application of Parent's insider trading
policies set forth on Exhibit A hereto (the "Insider Trading Policy"), which
policy shall apply to all insiders.
(c) Within ten (10) days of the announcement to the public of Parent's
results of operations for its fiscal quarter ending October 31, 1996, Parent
shall use its reasonable best efforts to file a post-effective amendment to the
S-8 Registration Statement. Parent shall use its reasonable best efforts to
cause the post-effective amendment to be declared effective as soon as
reasonably practicable after its filing. It is intended that the holders of the
vested Option Shares shall have thirty (30) days from the effective date of the
post-effective amendment to sell the securities, subject to the application of
Parent's Insider Trading Policy, which policy shall apply to all insiders.
Parent's obligations under this Section 1.3 shall be deferred in the event
that Parent shall furnish to the holders of vested Option Shares a certificate
signed by the Chief Financial Officer of Parent stating that, in the good faith
judgment of the Board of Directors, it would be detrimental to Parent or its
stock holders for the registration statement to be filed or declared effective
in the near future, provided that Parent's obligation to file such a
registration statement may be deferred for a period not to exceed ninety (90)
days.
(d) In the event that (i) the Parent shall fail to provide a minimum of
ten (10) trading days within the effective periods contemplated by Sections
1.3(a), (b) and (c), due to limitations imposed by Parent's Insider Trading
Policy; and (ii) the Principal Shareholder is not able to sell all shares of
Regis trable Securities proposed by the Principal Shareholder to be sold during
any of such periods as a result of such holder following Parent's Insider
Trading Policy, then Parent shall, at the Principal Shareholder's request, cause
to be filed with the SEC an additional registration statement on Form S-8 under
the Securities Act relating to the resale of such shares of Registrable
Securities at a time to be reasonably agreed to by the Parent and such holder.
1.4 COMPANY REGISTRATION.
--------------------
(a) If, at any time or from time to time, Parent shall determine to
register any of its securities, other than (i) for a security holder or holders
exercising their respective demand registration rights, (ii) a registration
relating solely to employee benefit plans on Form S-1 or S-8 or similar forms
which may be promulgated in the future, or (iii) a registration on Form S-4 or
similar form which may be promulgated in the future relating to a SEC Rule 145
transaction, Parent will promptly give to the Holders written notice thereof and
include in such registration (and any related
-4-
<PAGE>
qualification under Blue Sky laws or other compliance), and in any underwriting
involved therein, all Registrable Securities specified in a written request or
requests, made within ten (10) business days after receipt of such written
notice from Parent by the Holders.
(b) If the registration of which Parent gives notice is for a registered
public offering involving an underwriting, Parent shall so advise the Holders as
a part of the written notice given pursu ant to Section 1.3(a). In such event
the right of each Holder to registration pursuant to this Section 1.3 shall be
conditioned upon such Holder's agreeing to participate in such underwriting and
in the inclusion of such Holder's Registrable Securities in the underwriting to
the extent provided herein. All Holders proposing to distribute their
securities through such underwriting shall (together with Parent and any other
holders distributing securities in the offering) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting by Parent. Notwithstanding any other provision of this
Section 1.3, if the underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the underwriter may
exclude the Registrable Securities or other securities requested to be
registered. Parent shall so advise the Holders and the other holders
distributing their securities through such underwriting, and the number of
Registrable Securities and other securities that may be included in the
registration and underwriting shall be allocated among all holders thereof in
proportion, as nearly as practicable, to the respective amounts of securities
entitled to inclusion in such registration held by such holders at the time of
filing the registration statement. If the Holders or any other holder
disapproves of the terms of any such underwriting, such holder may elect to
withdraw therefrom by written notice to Parent and the underwriter. Any
securities excluded or with drawn from such underwriting shall be withdrawn from
such registration.
1.5 OBLIGATIONS OF PARENT. Except as provided in Section 1.2, whenever
---------------------
Parent is required by the provisions of this Agreement to use its best efforts
to effect the registration of any Registrable Securities under the Securities
Act, Parent shall:
(i) Prepare and file with the SEC such amendments and supplements to the
registration statement and the prospectus used in connection therewith as may be
necessary to make and to keep such registration statement effective and current
and to comply with the provi sions of the Securities Act with respect to the
sale or other disposition of all securities proposed to be registered in such
registration statement, including such amendments and supplements as may be
reasonably necessary to reflect the intended method of disposition from time to
time of the parti cipating Holders, until the earlier of (i) the sale of the
shares of Registrable Securities so registered or (ii) the dates specified in
Section 1.2 for expiration of the effectiveness of the registration state ment,
provided that the Parent shall only be obligated to take such actions to support
sale trans actions within the "window" periods contemplated in Section 1.2(a),
(b) and (c) above.
(ii) Furnish to the participating Holders or the underwriters such
number of copies of any prospectus (including any preliminary prospectus and any
amended or
-5-
<PAGE>
supplemented prospectus), in conformity with the requirements of the Securities
Act, as the participating Holders may reasonably request in order to effect the
offering and sale of the shares of Registrable Securi ties to be offered and
sold, but only while Parent shall be required under the provisions hereof to
cause the registration statement to remain current.
(iii) Use its best efforts to register or qualify the shares of
Registrable Securities covered by such registration statement under the
securities or Blue Sky laws of such states as the participating Holders shall
reasonably request, maintain any such registration or qualification current
until the earlier of (i) the sale of the shares of Registrable Securities so
registered or (ii) the dates specified in Section 1.2 for the expiration of the
effectiveness of the registration statement; provided, however, that Parent
shall not be required to take any action that would subject it to the general
jurisdiction of the courts of any jurisdiction in which it is not so subject or
to qualify as a foreign corporation in any jurisdiction where Parent is not so
qualified.
(iv) Take all such other action either necessary or desirable to permit
the shares of Registrable Securities held by Holders (or their permitted
assignees) to be registered and disposed of in accordance with the method of
disposition described herein, including, if required by the broker effecting the
sale of the Registrable Securities held by the Holders, delivery of an agreement
containing representations, warranties and indemnities of the type that are
customary in the distribution of like securities.
(v) Notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such seller, prepared and
furnish to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the state ments therein not
misleading or incomplete in the light of the circumstances then existing.
(vi) Otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC.
1.6 EXPENSES.
--------
(a) All expenses, other than discounts and commissions, incurred in
connection with any registration pursuant to Section 1.2 and Section 1.3 shall
be borne by Parent. The costs and
-6-
<PAGE>
expenses of any such registration shall include, without limitation, the fees
and expenses of Parent's counsel and its accountants, and all other costs and
expenses of Parent incident to the preparation, printing and filing under the
Securities Act of the registration statement and all amendments and supplements
thereto and the cost of furnishing copies of each preliminary prospectus, each
final prospectus and each amendment or supplement thereto to underwriters,
dealers and other purchasers of the securities so registered, the costs and
expenses incurred in connection with the qualification of such securities so
registered under the "blue sky" laws of various jurisdictions, the fees and
expenses of Parent's transfer agent and all other costs and expenses of
complying with the provisions of this Section 1 with respect to such
registration (collectively, "Registration Expenses").
(b) The participating Holders (and other holders including any securities
in such registration) shall pay all expenses of any counsel for the
participating Holders and all underwriting discounts and selling commissions
with respect to the Registrable Securities sold by them pursuant to such
registration statement.
1.7 INDEMNIFICATION.
---------------
(a) In the case of any offering registered pursuant to this Section 1,
Parent hereby indemnifies and agrees to hold harmless each participating Holder,
and each person, if any, who controls such participating Holder or any such
underwriter within the meaning of Section 15 of the Securities Act against any
losses, claims, damages or liabilities, joint or several, to which any such
persons may be subject, under the Securities Act or otherwise, and to reimburse
any of such persons for any legal or other expenses reasonably incurred by them
in connection with investigating any claims or defending against any actions,
insofar as such losses, claims, damages or liabilities arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the registration statement under which such shares of Registrable
Securities were registered under the Securities Act pursuant to this Section 1,
any prospectus contained therein, if used during the period appropriate for such
prospectus, or any amendment or supplement thereto (if so used), or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, except insofar as such
losses, claims, damages or liabilities arise out of or are (i) based upon any
such untrue statement or omission or alleged untrue statement or omission made
in reliance upon information furnished to Parent in writing by such Holder or
any underwriter for such Holder specifically for use therein, or (ii) made in
any preliminary prospectus, and the prospectus contained in the registration
statement as declared effective or in the form filed by Parent with the SEC
pursuant to Rule 424 under the Securities Act shall have corrected such
statement or omission and a copy of such prospectus shall not have been sent or
otherwise delivered to such person at or prior to the confirmation of such sale
to such person.
(b) By requesting registration under this Section 1, each participating
Holder agrees, if Registrable Securities held by such Holder are included in the
securities as to which such registration is being effected, in the same manner
and to the same extent as set forth in the preceding
-7-
<PAGE>
paragraph, to indemnify and to hold harmless Parent and its directors and
officers and each person, if any, who controls Parent within the meaning of the
Securities Act against any losses, claims, damages or liabilities, joint or
several, to which any of such persons may be subject under the Securities Act or
otherwise, and to reim burse any of such persons for any legal or other expenses
incurred in connection with investigating or defending against any such losses,
claims, damages or liabilities, but only to the extent it arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission of a material fact in any registration statement under which
the shares of Registrable Securities were registered under the Securities Act
pursuant to this Section 1, any prospectus contained therein, or any amendment
or supplement thereto, which was based upon and made in conformity with
information furnished to Parent in writing by such Holder expressly for use
therein; provided, however that any such participating Holder's obligations
pursuant to this Section 1.6(b) shall be limited in all cases to the amount of
the net proceeds received by such participating holder from the sale of its
Registrable Securities pursuant to such registration.
(c) Each party entitled to indemnification under this Section 1.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, and the Indemnified Party may participate in
such defense at its own expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1 unless such failure
resulted in a detriment to the Indemnifying Party. No Indemnifying Party, (i)
in the defense of any such claim or litigation, shall, except with the consent
of each Indemnified Party, which consent shall not be unreasonably withheld,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation, or (ii) shall be liable for amounts paid in any settlement
if such settle ment is effected without the consent of the Indemnifying Party,
which consent shall not be unreasonably withheld.
(d) If the indemnification provided for in this Section 1.6 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemni fied Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to infor mation, and
opportunity to correct or prevent such statement or omission.
-8-
<PAGE>
1.8 INFORMATION BY HOLDER. Each participating Holder or Holders of
---------------------
Registrable Securities included in any registration shall furnish to Parent such
information regarding such Holder or Holders in the distribution proposed by
such Holder or Holders as Parent may request in writing and as shall be required
in connection with any registration, qualification or compliance referred to in
this Section 1.
1.9 TRANSFER OF REGISTRATION RIGHTS. Holders may assign any or all of
-------------------------------
their registration rights under this Section 1 to a transferee who, after such
transfer, holds at least 25% of the Registrable Securities outstanding on the
date hereof, provided that Parent shall be entitled to written notice of any
such transfer no later than ten (10) days after such transfer. No transferee,
assignee or other person purporting to exercise rights under this Section 1 who
is not a signatory to this Agreement shall be entitled to do so unless and until
such person agrees in a writing delivered to Parent to be bound by the terms of
this Agreement.
1.10 TERMINATION OF REGISTRATION RIGHTS. The registration rights granted
----------------------------------
pursuant to this Section 1 shall terminate as to any Holder at such time as the
Parent has delivered to such Holder a legal opinion, in form and substance
satisfactory to such Holder, and from counsel reasonably acceptable to such
Holder stating that all Registrable Securities beneficially owned by such Holder
can be sold within a given three-month period without compliance with the
registration requirements of the Securities Act pursuant to Rule 144.
Notwithstanding the foregoing, all registration rights granted in this Agreement
shall terminate two (2) years from the date of this Agreement.
SECTION 2
MISCELLANEOUS
2.1 NOTICES. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete trans mission)
to the parties at the addresses set forth on the signature page hereto (or at
such other address for a party as shall be specified by like notice).
2.2 INTERPRETATION. The words "include," "includes" and "including" when
--------------
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
2.3 COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counter parts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
-9-
<PAGE>
2.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
----------------------
inure to the benefit of the parties hereto and their respective successors and
assigns. This Agreement may not be assigned by a party without the prior
written consent of the other party. This Agreement is not intended and shall
not be construed to create any rights or remedies in any parties other than the
Holders and Parent and no person shall assert any rights as third party
beneficiary hereunder.
2.5 ENTIRE AGREEMENT. This Agreement contains the entire understanding and
----------------
agreement between the parties with regard to the subject matter hereof and
thereof and supersedes all prior agree ments and understandings among the
parties relating to the subject matter hereof.
2.6 SEVERABILITY. In the event that any provision of this Agreement or the
------------
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
2.7 OTHER REMEDIES. Except as otherwise provided herein, any and all
--------------
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
2.8 GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
2.9 FURTHER ASSURANCES. Each party agrees to cooperate fully with the
------------------
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
2.10 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
----------------------
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), with the
written consent of Parent and the holders of a majority of the then outstanding
Registrable Securities.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as
of the date first written above.
SIGMA DESIGNS, INC.
a California corporation
By: ____________________________
Name: ______________________
Title: _____________________
"SHAREHOLDERS"
By: ___________________________
Name
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
-11-
<PAGE>
EXHIBIT A
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INSIDER TRADING POLICY
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EXHIBIT 5.1
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
(415) 493-9300
SEPTEMBER 10, 1996
Sigma Designs, Inc.
46501 Landing Parkway
Fremont, CA 94538
RE: SIGMA DESIGNS, INC. REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed by you
with the Securities and Exchange Commission on September 11, 1996 (the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of 1,123,760 shares of your Common Stock, no
par value (the "Shares"), all of which are authorized and have been previously
issued to the selling shareholders identified in the Registration Statement (the
"Selling Shareholders"). The Shares are to be offered by the Selling
Shareholders for sale to the public as described in the Registration Statement.
As your counsel in connection with this transaction, we have examined the
proceedings taken and proposed to be taken in connection with the sale of the
Shares.
It is our opinion that, upon completion of the proceedings being taken or
contemplated to be taken prior to the registration of the Shares, including such
proceedings to be carried out in accordance with the securities laws of the
various states, where required, the Shares, when sold in the manner referred to
in the Registration Statement, will be legally and validly issued, fully paid
and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendment thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ WILSON SONSINI GOODRICH & ROSATI
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EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-883 of Sigma Designs, Inc. on Form S-3 of our report dated April 22, 1996
(May 2, 1996 as to Note 14) on the consolidated financial statements and the
related financial statement schedule of Sigma Designs, Inc. appearing in the
Annual Report on Form 10-K/A (No. 1) of Sigma Designs, Inc. for the fiscal year
ended January 31, 1996 and to the reference to us under the heading "Experts"
in the Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
San Jose, California
September 6, 1996
