As filed with the Securities and Exchange Commission on August 7, 1997
Registration No. 333-
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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)
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CALIFORNIA 7372 94-2848099
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification Number)
organization) Code Number)
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)
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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
(650) 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.
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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<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
===================================================================================================================================
Title of Each Class Amount Proposed Maximum Proposed Maximum Amount of
of Securities to to be Offering Price Aggregate Offering Registration
be Registered Registered Per Share(1) Price(1) Fee
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<S> <C> <C> <C> <C>
Common Stock no par value............ 1,100,000 shares $4.38 $4,818,000 $1,460
===================================================================================================================================
<FN>
(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 August 1, 1997,
in accordance with Rule 457(c) under the Securities Act of 1933.
</FN>
</TABLE>
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
SUBJECT TO COMPLETION DATED , 1997
PROSPECTUS
1,100,000 SHARES
SIGMA DESIGNS, INC.
COMMON STOCK
This Prospectus may be used only in connection with the resale, from
time to time, of up to 1,100,000 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 a private
placement. 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 August 6, 1997, the last sale price for the Common
Stock as reported on the Nasdaq National Market was $4-7/8 per share.
---------------------------
SEE "RISK FACTORS" ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OFFERED HEREBY.
---------------------------
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 , 1997
<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. The Commission maintains a World Wide Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of the site is
http://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 for the fiscal year ended January 31, 1997, (ii) the
Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 1997;
(iii) the Company's Proxy Statement relating to the Company's Annual Meeting of
Shareholders to be held on June 6, 1997, (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 Carol Kaplan 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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<PAGE>
RISK FACTORS
In the interest of providing the Company's shareholders and potential
investors with certain Company information, including management's assessment of
the Company's future potential, certain statements set forth herein or
incorporated by reference herein relate to management's future plans and
objectives or to the Company's future economic performance. Such statements are
"forward-looking statements" within the meaning of Section 27A(I) of the
Securities Act of 1933, as amended, and in Section 21E(I) of the Securities Act
of 1934, as amended. Although any forward-looking statements contained herein or
incorporated by reference herein or otherwise expressed by or on behalf of the
Company are, to the knowledge and in the judgment of the officers and directors
of the Company, expected to prove true and to come to pass, the Company is not
able to predict such events with absolute certainty. Accordingly, shareholders
and potential investors are hereby cautioned that certain events or
circumstances could cause actual results to differ materially from those
projected or predicted. In addition, forward-looking statements are based on the
Company's knowledge and judgment as of the date hereof, and the Company does not
intend to update any forward-looking statements to reflect events occurring or
circumstances existing hereafter. In particular, the Company believes the
following facts could affect forward-looking statements made herein or
incorporated by reference herein or in future written or oral releases and by
hindsight, prove such statements to be overly optimistic and unachievable.
History of Operating Losses. The Company incurred significant losses in
fiscal 1993, 1994, 1995, and 1996 and had substantial negative operating cash
flow in fiscal 1992, 1993, 1994, 1995, and 1996. Since the introduction of the
Company's REALmagic Moving Picture Experts Group ("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 experienced
significant losses through fiscal 1996. 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 is $33,114,000. There can be no assurance that the Company will continue
to sell its new REALmagic products in substantial quantities or generate
significant revenues from such sales. Although the Company was profitable in
fiscal 1997, there can be no assurance that the Company will continue to achieve
profitable operations in any future fiscal quarter or fiscal year or that
profitable operations, if achieved, will be sustainable.
Marketing Risks. The Company's ability to increase its sales, achieve
profitability, and maintain REALmagic as a PC industry multimedia standard
depends substantially on the Company's ability to achieve a sustained high level
of sales to new OEM customers. 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.
The Company has not achieved bundling agreements with numerous OEM customers to
ensure success of the REALmagic product line. Moreover, even if the Company
achieves new design wins, there can be no assurance that personal computer
("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 1997,
Ingram Micro, Inc. was the only domestic 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.
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<PAGE>
Dependence on Development of Software Titles by Third Parties. The
Company depends on third-party content developers to create, produce, and market
software titles that will operate in 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 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.
Currently, more than 500 interactive MPEG off-the-shelf business
applications are available in the MPEG format. 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. Future sales of
REALmagic products will likely depend on a decision by retailers to carry
compatible software titles on the shelf.
The Company announced in October 1995 its strategic direction of
selling chipsets to add-on card and computer manufacturers. The REALmagic Pro
chipset announced in October 1995 became available in January 1996. This chipset
enables 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 enables OEM customers to build type II ZVport-compatible PC
cards for MPEG-1 video and audio playback, bringing MPEG technology to notebook
computers for the first time. In July 1996, the Company entered the graphics
market with announcement of its 2D VGA chip. In December 1996, the Company
announced a 2D/3D graphics chip. Any production delay or failure to bring any of
the chipsets to market could adversely affect the Company's market position by
limiting chipset acceptance by computer manufacturers.
Technological Change. The market for multimedia PC products is
characterized by rapidly changing technology and user preferences, evolving
formats for compression 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, on the Company's ability to achieve and maintain technological
leadership and to remain competitive in terms of price and product performance.
To have technological leadership, the Company must continue to make
technological advancements in the area of MPEG video and audio decoding. 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 its
REALmagic technology or that, if such advances are made, the Company will be
able to achieve and maintain technological leadership. 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.
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<PAGE>
To be 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, driven by faster processors provided by Intel Corporation and other
companies. The possibility that other companies with more experience and
financial resources may develop a competitive product may inhibit future growth
of REALmagic technology. Increased competition may be generated from several
major computer product manufacturers that have developed products and
technologies that could compete directly with REALmagic products on the PC
platform. These include SGS-Thomson Microelectronics, C-Cube Microsystems, IBM
Microelectronics, Chromatics Research, Inc., Zoran Corporation and Mediamatics,
Inc. Also, several OEMs and microprocessor companies possess proprietary video
compression technology that may compete with MPEG-based products. These include
IBM, Intel Corporation, Mediamatics Corporation and ESS Technology, Inc.. Most
of these companies have substantial experience and expertise in audio, video,
and multimedia technology and in producing and selling consumer products through
retail distribution, as well as 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 REALmagic technology will achieve
commercial success or that it will compete effectively against other interactive
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 REALmagic products by investing heavily in PC-based MPEG
technology. In the fiscal year ended January 31, 1997, sales of multimedia
products accounted for virtually all of net sales. A decline in 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
that 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
fluctuated 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 OEMs' timing and
release of products incorporating 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. Since 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 in part on the emergence of digital
video technology, the Company's revenues may vary with the availability of and
demand for DVD 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
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<PAGE>
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
completed 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 noncancellable 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
affecting operating results.
Manufacturing Risks. 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. The Company obtains
certain of its components from a single source. 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 REALmagic multimedia card
currently obtained from a single source could have a material adverse impact on
sales of REALmagic products by the Company and, thus, on the Company's business.
The Company must provide its suppliers with sufficient lead time 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.
Manufacturing 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 delivering 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 purchase 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 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 REALmagic products
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.
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,
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<PAGE>
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 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 that 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.
International Operations. During the fiscal years ended January 31,
1997, 1996 and 1995, sales to international customers accounted for
approximately 72%, 63%, and 36% 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 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 that 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 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 of the Company's Common Stock has
been subject to significant volatility, which is expected to continue. 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
Overview
The following business section contains forward-looking statements that
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."
Sigma designs, manufactures (using subcontractors), and markets
multimedia products for use with personal computers. The emergence of multimedia
technology in the PC market has dramatically changed the way in which users
interact with computers. Multimedia integrates different elements, such as sound
and video, to enhance the computing experience and deliver a heightened sense of
realism. Through its REALmagic product line incorporating 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.
With MPEG technology, producers can create (and users can enjoy) an
interactive, television-like experience on a desktop PC. The result is a
significant new visual impact, thereby opening possibilities for a wide range of
entertainment, education, training, and business presentation applications. In
April 1997, the Company announced its entry into the Digital Video Disk ("DVD")
market. A key element of the DVD specification is the use of MPEG-2 for digital
video compression, a technology in which Sigma has established expertise.
Sigma's REALmagic Hollywood PC-based DVD solution is an extension of the
Company's MPEG expertise and provides a highly-integrated solution for the
PC-DVD market.
The REALmagic MPEG Standard
Since its first shipment in November 1993, REALmagic technology has
received 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 Hewlett-Packard Company, Hughes Network Systems, IBM,
Microsoft Corporation, Oracle Corporation, Novell, Inc., Silicon Graphics, Inc.,
Starlight Networks and Sun Microsystems, Inc. On the operating system side,
REALmagic is 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.
Support from Software Developers
Support for Sigma's REALmagic MPEG standard has grown rapidly in the
software development community. Three 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, Inc. and Interplay Productions. This developer support has led
to the introduction of more than 500 off-the-shelf business applications in the
REALmagic format.
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The REALmagic DOS MPEG Applications Programming Interface (API) has
become an industry standard for MPEG-1 software development, further evidence of
support from the software development community. With its robust functionality,
the REALmagic API is currently the preferred technology available for creating
fully interactive MPEG software titles.
Support from OEMs
In the United States, Dell Computer Corporation, Smith Barney, Inc.,
Infotel, Royal Computer and Zenon Technology, Inc., have purchased REALmagic
Maxima boards for installation inside their multimedia PCs. Additionally, many
VARs have taken 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 well received
product, the Company's OEM customers include NEC Corporation, Panasonic
Industrial Co. and Virt in Japan and Hyundai and Haitai in Korea.
Acceptance by the Retail Channel
In addition to international distributors, national U.S. distributors
such as Ingram Micro, Inc. and Tech Data Corporation are carrying REALmagic
products.
REALmagic Business Strategies
Sigma's corporate objective is to continue to be a leading provider of
MPEG multimedia products that enable full-screen, full-motion, TV-like quality
video on the standard desktop and the notebook PC. To accomplish this goal the
Company intends to promote widespread acceptance of REALmagic technology. The
key parts of this strategy include:
Encourage Continued Development of Software Utilizing 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.
Win More OEM Partnerships and Further Penetrate the Retail Channel
To establish REALmagic MPEG-2 as a standard, the Company will continue
to seek design wins with major PC manufacturers worldwide, in which the OEMs
will factory-install REALmagic boards or chipsets inside their multimedia PCs.
On the retail side, the Company's systems integration sales team will continue
to work with its network of national distributors and special VARs to distribute
its high-end REALmagic playback card. In Europe and Asia Pacific, the Company
will continue to expand its relationship with distributors as well as OEMs and
VARs. In addition, the Company will seek to sell to add-on card manufacturers
who will, in turn, market to owners of 486 and Pentium PCs.
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 REALmagic products, including chipsets for both
desktop and notebook PCs. The general direction is to continue to offer
consumers with better-featured and lower-priced products over time.
-9-
<PAGE>
REALmagic Products
The Company offers a complete family of REALmagic products including:
o REALmagic DVD--In April 1997, the Company announced its entry
into the DVD market. The Realmagic Hollywood DVD MPEG-2
playback card turns a PC into a full-featured DVD player that
fully exploits all of the digital video and digital surround
sound capabilities of the DVD format and upcoming MPEG-2
interactive titles. The REALmagic Hollywood DVD/MPEG-2
playback card displays flicker-free video at full-screen
resolution, making video watching on a PC a new experience.
Movies can be simultaneously displayed on the PC monitor and
on a large-screen TV.
o REALmagic Maxima--An MPEG playback card designed to eliminate
compatibility issues with graphics cards by using 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 interactive MPEG titles available today
and all future titles that are OM-1 compatible.
o 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:
o Very high quality MPEG playback through 16 million
color MPEG video; horizontal and vertical bilinear
interpolation; digital brightness, contrast, and
saturation adjustment
o The use of Sigma's REAL Overlay chip, enabling mixing
MPEG video and PC graphics at resolutions up to 1600
x 1200 with an 85 Hz non-interlaced refresh rate
o 100% Windows 95 and MPC3 compliance
o 100% OM-1 and REALmagic compatibility
o Direct interface for NTSC/PAL decoder to support TV
tuner input
o REALmagic Explorer---In November 1995, the Company announced
the introduction of the REALmagic Explorer chipset. This
chipset puts MPEG-1 digital video playback in ZV port PC cards
for the new generation of notebook computers. The main
features of this chipset include:
o MPEG-1 video playback with 16 million colors
o MPEG-1 audio layers I and II
o 100% REALmagic and OM-1 standard compatibility
o MPC3 standard compliance
o Windows 95 Plug and Play
-10-
<PAGE>
o REALmagic 64/GX video and graphics accelerator chip--In July
1996, the Company announced the introduction of this chip for
the commercial and home desktop PC market. The REALmagic 64/GX
includes an optimized 64-bit graphics accelerator engine,
unique motion-video acceleration hardware, and a highly tuned
memory interface. This chip has the following distinctive
features:
o The 64-bit architecture supporting REALmagic 64/GX
yields 20% faster GUI acceleration than competitive
products.
o The video engine includes a YUV to RGB color-space
converter to accelerate decompression and a hardware
scaler to provide smooth horizontal and vertical
scaling.
o DRAM support of 1 MB to 4 MB enables the accelerator
to be integrated with machines at a variety of
price/performance levels.
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 Panasonic, NEC, Royal Computer, Smart Modular
Technologies, Inc., Kingmax Technology, Inc., Lung Hwa Electronics Co., Ltd. and
Zenon Computer Systems. The Company's international distributors are
strategically located in many countries around the world. Although the Company
was profitable throughout all four quarters of fiscal 1997, there can be no
assurance that the Company will maintain profitability in fiscal 1998 or
thereafter.
The Company generally acquires and maintains products for distribution
through retail channels based on forecasts rather than firm purchase orders.
Additionally, the Company generally acquires products for sale to its OEM
customers only after receiving purchase orders from such customers, whose
purchase orders are typically cancelable without substantial penalty from such
OEM customers. The Company currently places noncancellable 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 cancelled
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 and resulting in severe pressure on the
Company's financial condition.
Research and Development
As of July 1, 1997, the Company had a staff of 43 research and
development personnel, which conducts all the Company's product development. The
Company is focusing its development efforts primarily on MPEG multimedia
products, including new and improved versions of REALmagic MPEG chipsets and
cost reduction processes.
To achieve and maintain technological leadership, 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 the REALmagic API. There can be no assurance
that the Company will be able to make any such advancements in the REALmagic
MPEG technology or, if they are made, that the Company will be able to market
such advancements to maintain profitability and its technological leadership.
-11-
<PAGE>
During fiscal 1997, fiscal 1996, and fiscal 1995, the Company's
research and development expenses were $4,688,000, $4,499,000, and $4,349,000,
respectively. The Company plans to continue to devote substantial resources to
research and development of future generations of MPEG and other multimedia
products.
Competition
The market for MPEG multimedia products is highly competitive. Although
the Company does not believe that any products sold by a third party are in
direct competition with the REALmagic decoding card in terms of price and
performance, the possibility that other companies with more marketing and
financial resources may develop a competitive product may inhibit the wide
acceptance of REALmagic technology. 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 MPEG multimedia hardware 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 its REALmagic products. Moreover, the Company believes that the
acceptance of the 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 architecture of
the REALmagic Producer (the Company's video encoding product), 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. There can be
no assurance that more patents will be issued or that such patents, 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, along with 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 decoding 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 and reduced control over delivery
schedules, manufacturing yields, and costs. Any delay or interruption in 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.
-12-
<PAGE>
Backlog
Since 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 1, 1997, the Company had 81 full-time employees, including
43 in research and development, 15 in marketing, sales, and support, 9 in
operations, and 14 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.
-13-
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Shares
hereunder by the Selling Shareholders.
SELLING SHAREHOLDERS
<TABLE>
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of August 6, 1997 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.
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to Owned
Offering(1)(2) Number of After Offering(1)(2)
----------------------------- Shares ----------------------
Name and Address Number Percent Being Offered Number Percent
- ------------------------------------- ----------------------------- -------------- ----------------------
<S> <C> <C> <C> <C> <C>
Banque Edouard Constant(3)........... 968,888 8.7 968,888 0 0
c/o Kernco Trust SA
2, rue Jargonnaut
P.O. Box 6432 CH
1211 Geneva 6
Switzerland
RIC Equity Limited(4)................ 121,112 1.1 121,112 0 0
c/o Rana Investment Company
P.O. Box 60148
Riyadh 11545
Saudi Arabia
Gene Jung............................ 10,000 * 10,000 0 0
Trinity Capital Advisors, Inc.
369 Pine Street, Suite 310
San Francisco, CA 94114
<FN>
- ---------------------------
* 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 and also
any shares which the individual has the potential right to acquire within
two (2) years of the Offering through the exercise of the Preferred Stock
or Warrants. See "Plan of Distribution."
(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) Includes shares underlying a warrant exercisable after December 25, 1997
for 57,142 shares of Common Stock.
(4) Includes shares underlying a warrant exercisable after December 25, 1997
for 7,143 shares of Common Stock.
</FN>
</TABLE>
-14-
<PAGE>
PLAN OF DISTRIBUTION
On June 25, 1997, the Company entered into a Subscription Agreement
with two of the Selling Shareholders (the "Subscription Agreement"), pursuant to
which those two Selling Shareholders purchased certain shares of Series A
Preferred Stock that are convertible into Common Stock of the Company (the
"Preferred Stock") in an aggregate amount of $4,500,000. The Preferred Stock can
be converted by the Selling Shareholders into shares of the Company's Common
Stock 120 days after its issuance at a rate described in the Subscription
Agreement, and concurrent with the purchase of the Preferred Stock, the Selling
Shareholders received warrants to purchase additional Common Stock at an
exercise price in excess of the conversion price of the Preferred Stock. This
Registration Statement has been filed by the Company pursuant to the exercise of
certain registration rights granted under the Subscription Agreement. In
addition, the Company granted 10,000 shares of Common Stock to Gene Jung on
behalf of Trinity Capital Advisors, Inc. in consideration for his efforts in
assisting with the sale of the Preferred Stock.
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 under writing
discounts, concessions or commissions from the Selling Shareholders and/or
purchasers of 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 Company has advised the
Selling Shareholders that Regulation M promulgated under the Securities Exchange
Act of 1934 may apply to its sales in the market, has provided the Selling
Shareholders with a copy of this regulation and has informed them of the need
for delivery of copies of this Prospectus. The Subscription 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 incorporated in this prospectus by reference from the
Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1997
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference, and has been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
-15-
<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, sales representative, or any other person has been
authorized to give any information or to make any representations in connection
with this offering other than those contained in this Prospectus, and, if given
or made, such information or representations must not be relied upon as having
been authorized by the Company or any of the Underwriters. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any
securities other than the shares of Common Stock to which it relates or an offer
to, or a solicitation of, any person in any jurisdiction where such an offer or
solicitation would be unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circum stances, create an implication that
there has been no change in the affairs of the Company or that information
contained herein is correct as of any date subsequent to the date hereof.
1,100,000 Shares
SIGMA DESIGNS, INC.
Common Stock
------------
PROSPECTUS
------------
______ __, 1997
-16-
<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.
Securities and Exchange Commission Registration Fee..... $ 1,460
Nasdaq National Market Listing Fee...................... 17,500
Legal Fees and Expenses................................. 60,000
Accounting Fees and Expenses............................ 10,000
Blue Sky Fees and Expenses.............................. 2,500
Transfer Agent and Registrar Fees....................... 5,000
Miscellaneous........................................... 1,500
Total.......................................... 92,960
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 liabilities (including reimbursement for expenses
incurred) arising under the Securities Act. Article IV of the Registrant's
Second Restated 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
4.1 Form of Subscription Agreement by and between Sigma
and the Buyers.
4.2 Form of Registration Rights Agreement by and between
Sigma and the Investors.
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.
- ---------------------------
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-2
<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,
a 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-3
<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 6th day of August 1997.
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 (with full power to act
alone), his true and lawful attorney-in-fact and agent, 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 attorney-in-fact and agent 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 attorney-in-fact and agent or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
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:
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Thinh Q. Tran Chairman of the Board, President and Chief August 6, 1997
- -------------------------------------- Executive Officer (Principal Executive Officer)
Thinh Q. Tran
/s/ Kit Tsui Director of Finance, Chief Financial Officer, August 6, 1997
- -------------------------------------- Secretary (Chief Financial and Accounting Officer)
Kit Tsui
/s/ William J. Almon Director August 6, 1997
- --------------------------------------
William J. Almon
/s/ William Wang Director August 6, 1997
- --------------------------------------
William Wang
*By: /s/ August 6, 1997
- --------------------------------------
Attorney-in-Fact
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER
- --------------
4.1 Form of Subscription Agreement by and between Sigma and
the Buyers.
4.2 Form of Registration Rights Agreement by and between
Sigma and the Investors.
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-4.)
II-5
Exhibit 4.1
FORM OF SUBSCRIPTION AGREEMENT
THIS PRIVATE SECURITIES SUBSCRIPTION AGREEMENT (the "Agreement") has
been executed by the undersigned in connection with the sale in a private
placement pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act"), of certain shares of series A convertible preferred
stock (the "Preferred Stock"), convertible into shares of common stock (the
"Common Stock"), and of certain warrants (the "Warrants," and each individually,
a "Warrant") convertible into shares of Common Stock (the "Warrant Shares" and,
together with the Common Stock issuable upon conversion of the Preferred Stock,
the "Shares") of Sigma Designs, Inc. ("Sigma Designs"), 46501 Landing Parkway,
Fremont, CA 94538, a corporation organized under the laws of California to the
persons and entities listed on the Schedule of Buyers attached as Exhibit A
hereto (the "Buyers" and, individually, each a "Buyer"). Sigma Designs and
Buyers (collectively, the "parties") each hereby represents, warrants and agrees
as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(i) Sigma Designs and Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission ("SEC") under the Securities Act; and
(ii) Each Buyer hereby subscribes for the number of shares of
Preferred Stock, convertible into Common Stock in accordance with the terms set
forth in the Certificate of Determination attached as Exhibit B to this
Agreement, specified opposite each Buyer's name in Column B on the Schedule of
Buyers at a cash purchase price of $100.00 per share payable in United States
Dollars at the Closing, as defined in Paragraph 5 hereof.
(iii) Each Buyer shall pay the purchase price by delivering
same day funds in United States Dollars to an escrow agent or as otherwise
agreed between the parties, to be delivered to the order of Sigma Designs upon
delivery of the Preferred Stock.
(iv) Each Buyer shall each receive from Sigma Designs at the
Closing, for no additional consideration, a Warrant to purchase the number of
shares of Common Stock set forth opposite its name in Column C on the Schedule
of Buyers. The Warrant shall be exercisable under the terms set forth in the
Form of Warrant attached as Exhibit C to this Agreement.
2. BUYER'S REPRESENTATIONS AND AGREEMENTS. Each Buyer represents,
warrants and agrees as follows:
(i) Each Buyer understands that the Preferred Stock and the
Warrant have not been registered under the Securities Act, or any other
applicable securities law, and, accordingly, none of the Preferred Stock nor the
Warrant may be offered, sold, transferred, pledged, hypothecated or otherwise
disposed of unless registered pursuant to, or in a transaction exempt from
registration under, the Securities Act and any other applicable securities law;
(ii) Each Buyer is an "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3), or (7) of Regulation D (an "Accredited Investor")
that is acquiring the Preferred Stock and the Warrant either for its own account
or as a fiduciary or agent for one or more institutional accounts, each of which
is an Accredited Investor. Each Buyer has such knowledge and experience in
financial and business matters that they are capable of evaluating the merits
and risks of an investment in the Preferred Stock and the Warrant. Buyer has had
a
-1-
<PAGE>
reasonable opportunity to ask questions of and receive answers from Sigma
Designs concerning Sigma Designs and the offering of the Preferred Stock and the
Warrant. Buyer is not subscribing for the Preferred Stock and the Warrant as a
result of or pursuant to any advertisement, article, notice, or other
communication published in any newspaper, magazine, or similar media or
broadcast over television or radio. Buyer is aware that it (or such
institutional account) may be required to bear the economic risk of an
investment in the Preferred Stock and the Warrant for an indefinite period, and
it (or such institutional account ) is able to bear such risk for an indefinite
period;
(iii) Buyer is acquiring the Preferred Stock and the Warrant
for its own account or for one or more institutional accounts as described in
Paragraph 2(ii) hereof, in each case for investment purposes and not with a view
to, or for offer or sale in connection with, any distribution thereof (subject
to any requirement of law that the disposition of their property or the property
of such institutional account or accounts remain within their control). Buyer
agrees on its own behalf and on behalf of any such institutional account for
which it is acquiring the Preferred Stock and the Warrant to offer, sell or
otherwise transfer any Preferred Stock, Warrant or Shares only to Accredited
Investors (subject to any requirement of law that the disposition of their
property or the property of such institutional account or accounts remain within
its control) in conformity with the Securities Act and any other applicable
securities law and with the restrictions on transfer set forth on the
certificate(s) evidencing the Preferred Stock, the Warrant and Shares; provided,
however, that by making the representations herein, each Buyer does not agree to
hold the Preferred Stock, Warrant or Shares for any minimum or other specific
term and reserves the right to dispose of the Preferred Stock, Warrant or Shares
at any time in accordance with or pursuant to an effective registration
statement or an exemption under the Securities Act.
(iv) Each Buyer acknowledges that Sigma Designs or any
transfer agent of Sigma Designs shall register the transfer or exchange of any
of the Preferred Stock or Shares only upon receipt of the certificate(s)
evidencing such Preferred Stock or Shares with the transfer notice set forth
thereon appropriately completed and upon receipt in writing from the transferee
or the recipient of such Shares in such transfer or exchange (as the case may
be) of a certificate setting forth the representations in Paragraph 2 hereof;
(v) Each Buyer acknowledges that Sigma Designs and others will
rely upon the truth and accuracy of the foregoing acknowledgments,
representations and agreements and further agrees that if, prior to the closing,
any of such acknowledgments, representations and agreements made by Buyer are no
longer accurate, Buyer will promptly notify Sigma Designs;
(vi) Each Buyer has received all information from Sigma
Designs, including but not limited to Sigma Designs' latest Form 10-K, all Forms
10-Q and 8-K filed thereafter, and the Proxy Statement for its latest fiscal
year (collectively, the "Public Documents") and the Private Placement Memorandum
dated June 25, 1997 (the "Private Placement Memorandum") prepared by Sigma
Designs and Buyer acknowledges this information is sufficient to make an
informed business decision;
(vii) This Agreement and the matters contemplated herein have
been duly authorized, and this Agreement has been validly executed, and
delivered on behalf of Buyer and is a valid and binding agreement enforceable in
accordance with its terms, subject to general principles of equity and to
bankruptcy or other laws affecting the enforcement of creditors' rights
generally;
(viii) Buyer has no existing short position with respect to
the common stock of Sigma Designs and agrees not to enter into any short sales
or other hedging transactions with respect to the common stock of Sigma Designs
at any time after the execution of this Agreement by Buyer and prior to the date
on which Buyer files a notice of conversion with Sigma Designs;
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(ix) Each Buyer agrees not to effectuate or cause a third
party to effectuate a sale of, offer for sale, or solicit a purchase or offer to
purchase Sigma Designs' Common Stock with the intention of causing a reduction
in the Conversion Price (as defined in the Certificate of Designation);
(x) Each Buyer agrees not to use its ability to convert
Preferred Stock or exercise the Warrant such that such conversion or exercise
would result in Buyer beneficially owning more than 4.9999% of the outstanding
shares of the Common Stock. Sigma Designs may rely upon Buyer's notice of
conversion or exercise that such conversion or exercise will not cause Buyer to
exceed such 4.9999% limit and Sigma shall in no way be responsible for a
properly executed conversion or exercise causing Buyer to exceed the 4.9999%
limit; and
(xi) Each Buyer further agrees that, at all times after the
execution of this Agreement by Buyer and prior to the date on which the
Preferred Stock becomes convertible, they will each keep their purchase of the
Preferred Stock, Warrant or the Shares confidential, except as required by law
and except as necessary in the ordinary course of business of either Buyer.
3. SIGMA DESIGNS' REPRESENTATIONS AND AGREEMENTS. Sigma Designs
represents, warrants and agrees as follows:
(i) Sigma Designs and its subsidiaries are corporations duly
organized and validly existing in good standing under the laws of the
jurisdiction in which they are incorporated, and have the requisite corporate
power to own their properties and to carry on their business as now being
conducted. Each of Sigma Designs and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on Sigma Designs and its
subsidiaries taken as a whole (a "Material Adverse Effect").
(ii) As set forth in the Second Restated Articles of
Incorporation of Sigma Designs, as amended (the "Articles of Incorporation"),
the authorized capital stock of Sigma Designs consists of 22,000,000 shares of
Common Stock, of which 11,147,116 shares were issued and outstanding at June 9,
1997, and 2,000,000 shares of Preferred Stock, none of which were issued and
outstanding prior to the date hereof. All of such outstanding shares have been
validly issued and are fully paid and nonassessable. No shares of Common Stock
or Preferred Stock are subject to preemptive rights or any other similar rights
or any liens or encumbrances suffered or permitted by Sigma Designs. There are
no securities or instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of the Preferred Stock, the Warrants or the
Shares. Sigma Designs has furnished or made available to the Buyers true and
correct copies of Sigma Designs's Articles of Incorporation and By-laws and as
in effect on the date hereof, and the terms of all outstanding securities
convertible into or exercisable for Common Stock and the material rights of the
holders thereof in respect thereto.
(iii) Neither Sigma Designs, nor any of its affiliates, nor
any person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would require registration of the Preferred Stock, the
Warrants, or the Shares under the Securities Act or cause this offering of
Preferred Stock or the Shares to be integrated with prior offerings by Sigma
Designs for purposes of the Securities Act or any applicable stockholder
approval provisions.
(iv) Neither Sigma Designs nor any of its subsidiaries is
involved in any labor dispute nor, to the knowledge of Sigma Designs or any of
its subsidiaries, is any such dispute threatened. None of Sigma Designs' or its
subsidiaries' employees is a member of a union and Sigma Designs and its
subsidiaries believe that their relations with their employees are good.
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(v) Except as disclosed in the public documents, Sigma Designs
and its subsidiaries have sufficient trademarks, trade names, patent rights,
copyrights, licenses, approvals and governmental authorizations to conduct their
businesses as described in the Public Documents; the expiration of any
trademarks, trade names, patent rights, copyrights, licenses, approvals or
governmental authorizations would not have a Material Adverse Effect; and Sigma
Designs has no knowledge of any material infringement by it or its subsidiaries
of trademark, trade name rights, patent rights, copyrights, licenses, trade
secret or other similar rights of others, and there is no claim being made
against Sigma Designs or its subsidiaries regarding trademark, trade name,
patent, copyright, license, trade secret or other infringement which would
reasonably be expected to have a Material Adverse Effect.
(vi) Sigma Designs and its subsidiaries are (i) in compliance,
in all material respects, with any and all applicable foreign, federal, state
and local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws"), (ii) have received all material permits,
licenses or other approvals required of them under applicable Environmental Laws
to conduct their respective businesses and (iii) are in compliance, in all
material respects, with all terms and conditions of any such permit, license or
approval.
(vii) Any real property and facilities held under lease by
Sigma Designs and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
materially interfere with the use made of such property and buildings by Sigma
Designs and its subsidiaries.
(viii) Each of Sigma Designs and its subsidiaries maintains
insurance of the types and in the amounts generally deemed adequate for its
business all of which insurance is in full force and effect.
(ix) Sigma Designs and its subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses with such exceptions that would not have a Material Adverse Effect,
and neither Sigma Designs nor any such subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit, with such exceptions that would not have a Material
Adverse Effect.
(x) Sigma Designs and each of its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specified authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(xi) Neither Sigma Designs nor any of its subsidiaries is
subject to any charter, corporate or other legal restriction, or any judgment,
decree, order, rule or regulation which in the judgment of Sigma Designs's
executive officers has a Material Adverse Effect. Neither Sigma Designs nor any
of its subsidiaries is a party to any contract or agreement which in the
judgment of Sigma Designs's executive officers has a Material Adverse Effect.
(xii) Sigma Designs has filed all material Federal, State,
local and foreign income tax returns which have been required to be filed and
have paid all material taxes indicated by said returns and all assessments
received by them or any of them to the extent that such taxes have become due
and are not being contested in good faith. All tax liabilities have been
adequately provided for in the financial statements of Sigma Designs.
(xiii) Sigma Designs has not conducted any general
solicitation or general advertising (as defined in Regulation D) with respect to
any of its securities;
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<PAGE>
(xiv) The Preferred Stock and Shares when issued and delivered
will be duly and validly authorized and issued, fully-paid and nonassessable,
free and clear of any taxes, liens, encumbrances, charges, or adverse claims of
any nature whatsoever, and will not subject the holders thereof to personal
liability by reason of being such holders;
(xv) This Agreement, the Registration Rights Agreement, the
Warrants, and any related agreements, have been duly authorized, validly
executed and delivered on behalf of Sigma Designs and are valid and binding
agreements in accordance with their respective terms, subject to general
principles of equity and to bankruptcy or other laws affecting the enforcement
of creditors' rights generally;
(xvi) The execution and delivery of this Agreement, the
Registration Rights Agreement, the Warrants and any related agreement and the
consummation of the issuance of the Preferred Stock and the Warrants and the
transactions contemplated by such agreements do not and will not conflict with
or result in a breach by Sigma Designs of any of the terms or provisions of, or
constitute a default under, the Articles of Incorporation or bylaws of Sigma
Designs, or to the knowledge of the executive officers of Sigma Designs, any
indenture, mortgage, deed of trust, or any statute, rule or regulation
applicable to Sigma Designs or its subsidiaries or other material agreement or
instrument to which Sigma Designs is a party or by which it or any of its
properties or assets are bound, or any existing applicable decree, judgment or
order of any court, federal or state regulatory body, administrative agency or
other governmental body having jurisdiction over Sigma Designs or any of its
properties or assets, or to the knowledge of the Sigma Designs any statute, rule
or regulation applicable to Sigma Designs or its subsidiaries, except for such
conflict, breach or default as would not result in a Material Adverse Effect;
(xvii) No authorization, approval or consent of or filing with
any federal, state or local governmental body of the United States is legally
required for the issuance and sale of the Shares as contemplated by this
Agreement or any related agreements;
(xviii) Neither the Public Documents nor the Private Placement
Memorandum, as of their respective dates, contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstance under which they are made,
not misleading. Since January 31, 1997, there has been no material adverse
development in the business, properties, operations, financial condition or
results of operations of Sigma Designs, except as disclosed in the documents
referred to in Paragraph 2(vii) hereof.
(xix) Sigma Designs will issue one or more certificates
representing the Preferred Stock in the name of each Buyer in such denominations
to be specified by each Buyer prior to closing. The Preferred Stock and Warrants
will bear the restrictive legend specified in Paragraph 4 of this Agreement.
Sigma Designs further warrants that no instructions other than these
instructions and stop transfer instructions to give effect to Paragraph 2(i)
hereof will be given at any time to the transfer agent and also warrants that
the Preferred Stock, Warrants and Shares shall otherwise be transferable on the
books and records of Sigma Designs as and to the extent provided in this
Agreement, subject to compliance with Federal and State securities laws. As soon
as commercially practicable after the date hereof, Sigma Designs agrees to
furnish new instructions to the transfer agent instructing them to issue the
Common Stock without a restrictive legend, but only if and when a registration
statement registering the resale of such Common Stock has been declared
effective by the SEC. Nothing in this Paragraph shall affect in any way each
Buyer's obligations and agreement to comply with all applicable securities laws
upon resale of the Shares. Sigma Designs shall promptly notify the Transfer
Agent of the effectiveness or suspension of a registration statement registering
the Shares for resale.
(xx) There is no action, suit, notice of violation, proceeding
or investigation pending or, to the best knowledge of Sigma Designs, threatened
against or affecting Sigma Designs or any of its subsidiaries of any of their
respective properties before or by any court, governmental or administrative
agency or regulatory authority
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<PAGE>
which relates to the validity of enforceability of any documents related to the
transaction contemplated hereby, the Preferred Stock, the Warrant, or the Shares
which may reasonably likely result in a Material Adverse Effect.
(xxi) Sigma Designs is, and at the Closing Date will be,
eligible to register securities for resale with the SEC under Form S-3.
(xxii) Neither Sigma Designs nor any of its subsidiaries is in
default under or in violation of (i) any indenture, loan, credit agreement, or
any other agreement or instrument by which it is bound, (ii) any order of any
court, arbitrator or governmental body or (iii) any statute, rule or regulation
of any governmental authority, except in the case of both (i) and (ii) as does
not have a Material Adverse Effect.
4. LEGENDS.
Each certificate evidencing the Preferred Stock, the Warrants and the
Shares shall bear a legend substantially to the effect of Paragraphs 2(i) and
2(ii) above and this Section 4. Such legend shall be in substantially the
following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT" OR THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE
SECURITIES LAWS AND HAVE BEEN ISSUED IN RELI ANCE UPON AN
EXEMPTION FROM THE REGISTRATION REQUIRE MENTS OF THE
SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICI PATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANS FERRED, PLEDGED, ENCUMBERED,
HYPOTHECATED OR OTHER WISE DISPOSED OF, EXCEPT PURSUANT TO AN
EFFECTIVE REGIS TRATION STATEMENT UNDER THE ACT OR PURSUANT TO
A TRANS ACTION WHICH, IN AN OPINION OF COUNSEL REASONABLY
SATIS FACTORY TO SIGMA DESIGNS, IS EXEMPT FROM, OR NOT SUBJECT
TO, SUCH REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE
BENEFICIARY OF CERTAIN OBLIGATIONS OF SIGMA DESIGNS SET FORTH
IN A PRIVATE SECURITIES SUBSCRIPTION AGREEMENT BETWEEN SIGMA
DESIGNS, INC. AND [BUYER] DATED JUNE 25, 1997. A COPY OF THE
AFORESAID SUBSCRIPTION AGREEMENT EVIDENC ING SUCH OBLIGATIONS
MAY BE OBTAINED FROM SIGMA DESIGNS' EXECUTIVE OFFICES."
Upon conversion of the Preferred Stock and the exercise of the
Warrants, Sigma Designs shall issue a Common Stock certificate without such
legend to the holder of such shares if and to the extent that (a) the SEC has
declared a registration statement effective under which such Common Stock is
sold or (b) such holder has provided Sigma Designs with an opinion of counsel
reasonably acceptable to Sigma Designs to the effect that a public sale or a
transfer of such security may be made without registration under the Securities
Act, or (c) such holder has provided Sigma Designs with reasonable assurances
that such security can be sold free of any volume limitations pursuant to Rule
144 under the Securities Act (or a successor thereto).
The certificates representing the Warrants, the shares of
Preferred Stock and underlying Common Stock shall also bear any other legends
required by applicable Federal or state securities laws, which legends shall be
removed when not required in accordance with this Section 4.
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<PAGE>
5. COVENANTS.
(i) Each party shall use its reasonable best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in this
Agreement.
(ii) Sigma Designs agrees to file a Form D with respect to the
Preferred Stock, the Warrants and the Shares as required under Regulation D.
Sigma Designs shall, on or before the Closing Date, take such action as Sigma
Designs shall reasonably determine is necessary to qualify the Preferred Stock,
the Warrants, and the Shares for, or obtain exemption for the Preferred Stock,
the Warrants, and the Shares, for sale to the Buyers at the Closing pursuant to
this Agreement under applicable securities or "Blue Sky" laws of the states of
the United States.
(iii) Until the earlier of (i) the date as of which the Buyers
may sell all of the Shares without restriction pursuant to Rule 144(k)
promulgated under the Securities Act (or successor thereto), or (ii) the date on
which (A) the Investors shall have sold all the Shares and (B) none of the
Preferred Stock or Warrants is outstanding (the "Registration Period"), Sigma
Designs shall file all reports required to be filed with the SEC pursuant to the
Exchange Act of 1934, as amended (the "Exchange Act"), and Sigma Designs shall
not terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would otherwise permit such termination.
(iv) Sigma Designs will use the proceeds from the sale of the
Preferred Stock for substantially the same purposes and in substantially the
same amounts as indicated in the Private Placement Memorandum.
(v) Sigma Designs shall take all action necessary to at all
times have authorized, and reserved for the purpose of issuance, no less than
200% of the number of shares of Common Stock needed to provide for the issuance
of the Shares.
(vi) Sigma Designs shall promptly secure the listing of the
Shares upon each national securities exchange or automated quotation system, if
any, upon which shares of Common Stock are then listed (subject to official
notice of issuance) and shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all Shares from time to time issuable
upon conversion of the Preferred Stock and exercise of the Warrants. Sigma
Designs shall maintain the Common Stock's authorization for quotation in the
over-the counter market. Sigma Designs shall promptly provide to each Buyer
copies of any notices it receives regarding the continued eligibility of the
Common Stock for trading in the over-the-counter market.
(vii) Unless Sigma Designs otherwise consents in writing, each
Buyer shall take such action as may be required so that all of the Preferred
Stock owned by such Buyer is voted in accordance with the recommendation of the
Board of Directors of Sigma Designs on all matters to be voted on by holders of
Sigma Designs' outstanding Preferred Stock (including any matters requiring a
class vote of the outstanding Preferred Stock) in not less than the same
proportion as the votes cast by holders of Sigma Designs' outstanding Common
Stock with respect to such matters. Each Buyer, as a holder of shares of Sigma
Designs' Preferred Stock shall be present, in person or by proxy, at all
meetings of shareholders of Sigma Designs, so that all shares of Sigma Designs'
outstanding Preferred Stock beneficially owned by the Buyer may be counted for
the purposes of determining the presence of a quorum at such meetings.
6. TRANSFER AGENT INSTRUCTIONS. Pursuant to Paragraph 2(iii) and
Section 4 of this Agreement, Sigma Designs shall issue irrevocable instructions
to its transfer agent to issue certificates, registered in the name of each
Buyer, for the Shares in such amounts as specified from time to time by the
Buyers to Sigma Designs upon conversion of the Preferred Stock or exercise of
the Warrants (the "Irrevocable Transfer Agent Instructions"). Prior to
registration of the Shares under the Securities Act, all such certificates shall
bear the
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restrictive legend specified in Section 4 of this Agreement. Sigma Designs
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Paragraph, and stop transfer instructions to
give effect to Section 4 hereof (in this case of the Shares, prior to
registration of such shares under the Securities Act) will be given by Sigma
Designs to its transfer agent and that the Preferred Stock, the Warrants, and
the Shares shall otherwise be freely transferable on the books and records of
Sigma Designs as and to the extent provided in this Agreement, the Registration
Rights Agreement, the Warrants and applicable laws, including securities laws.
Nothing in this Paragraph shall affect in any way the Buyers' obligations and
agreement to comply with all applicable securities laws upon resale of the
Preferred Stock, the Warrants, or the Shares. If either (a) a Buyer provides
Sigma Designs with an opinion of counsel, reasonably satisfactory in form and
substance to Sigma Designs, that registration of a resale by such Buyer of any
of the Preferred Stock, the Warrant, or Shares is not required under the
Securities Act or (b) its Shares are registered under the Securities Act, Sigma
Designs shall permit the transfer, and, in the case of the Shares, promptly
instruct its transfer agent to issue one or more certificates in such name and
in such denominations as specified by such Buyer. Sigma Designs acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
the Buyer by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, Sigma Designs acknowledges that the remedy at law for a
breach of its obligations under this Paragraph will be inadequate and agrees, in
the event of a breach or threatened breach by Sigma Designs of the provisions of
this Paragraph that the Buyer requesting, in accordance with this Agreement,
Sigma Designs to take such action shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer.
7. CLOSING. Share certificates shall be delivered to Buyers and the
funds therefor shall be delivered to Sigma Designs on June 25, 1997 (the
"Closing") or at such time to be mutually agreed.
8. CONDITIONS TO CLOSING OF BUYERS. The Buyers' obligations to purchase
the Preferred Stock and the Warrants at the Closing are, at the option of each
Buyer, subject to the fulfillment on or prior to the Closing Date of each of the
following conditions:
(i) Delivery of certificate(s) representing the Preferred
Stock as described in Paragraph 1(ii) hereto and a Warrant as described in
Paragraph 1(iv) hereto,
(ii) Delivery of an opinion of counsel to Sigma Designs in
substantially the form attached hereto as Exhibit D; and
(iii) Sigma Designs and Buyers shall have entered into a
Registration Rights Agreement substantially in the form of Exhibit E hereto.
9. CONDITIONS TO CLOSING OF SIGMA DESIGNS. The obligation of Sigma
Designs to sell and issue the Preferred Stock and the Warrants at the Closing
is, at the option of Sigma Designs, subject to the fulfillment of the following
conditions:
(i) Delivery into escrow or otherwise as agreed between Buyers
and Sigma Designs by Buyers of the amount set forth in Paragraph 1 hereof.
(ii) Sigma Designs and Buyers shall have entered into a
Registration Rights Agreement substantially in the form of Exhibit E hereto.
(iii) The Certificate of Determination shall have been filed
with the Secretary of State of the State of California.
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10. EXPENSES. Sigma Designs and the Buyers shall each bear their own
expenses and legal fees with respect to this Agreement and the transactions
contemplated hereby; except that, assuming a successful completion of the
offering, Sigma Designs will pay at the Closing the reasonable legal fees of the
Buyers (up to a maximum total of $10,000 for Buyers to be divided among the
Buyers on a pro rata basis derived from the proportion of Preferred Stock each
Buyer holds upon the Closing) and reasonable expenses upon receipt of a bill
therefor, incurred by counsel to the Buyers.
11. GOVERNING LAW; INTERPRETATION. This Agreement shall be governed by
and construed in accordance with the laws of the State of California without
giving effect to the provisions governing the conflict of laws. The parties
jointly consent to personal jurisdiction in any state or federal court located
in the state of California, waive any objection as to jurisdiction or venue, and
agree not to assert any defense based on lack of jurisdiction or venue.
Facsimile signatures of this agreement shall be binding on all parties hereto.
12. CONVERSION. Sigma Designs shall use its reasonable best efforts to
issue and deliver to each Buyer a certificate or certificates for the number of
Common Stock to which such Buyer shall be entitled within five (5) business days
after such Buyer has fulfilled all conditions required for conversion as set
forth in this Agreement (the "Deadline"). Sigma Designs understands that a delay
in the issuance of the Common Stock beyond the Deadline could result in economic
loss to such Buyer. As compensation to such Buyer for such loss, and not as a
penalty, Sigma Designs agrees to pay liquidated damages to such Buyer for late
issuance of Common Stock upon conversion in the amount of one percent (1%) of
the requested conversion amount, per day, beginning on the sixth (6th) business
day from the date of receipt by Sigma Designs of a duly executed notice of
conversion, provided that the original Preferred Stock to be converted have been
delivered to Sigma Designs within such time period, all in accordance with this
Agreement, the Preferred Stock and the requirements of Sigma Designs' transfer
agent. Said liquidated damages shall accrue each day through the date the Common
Stock are issued to such Buyer upon conversion, and shall be paid by wire
transfer to an account designated by such Buyer upon the earlier to occur of (i)
issuance of the Shares to such Buyer, or (ii) each monthly anniversary of the
receipt by Sigma Designs of such Buyer's notice of conversion. Nothing herein
shall waive Sigma Designs' obligations to deliver Common Stock upon conversion
of the Preferred Stock.
Sigma Designs agrees that, in addition to any other remedies
which may be available to a Buyer requesting conversion of its Preferred Stock,
in the event Sigma Designs fails for any reason to effect delivery to such Buyer
of certificates representing Common Stock within five (5) business days
following receipt by Sigma Designs of a notice of conversion, such Buyer may, at
its sole election, revoke the notice of conversion by delivering a notice of
such effect to Sigma Designs, whereupon Sigma Designs and such Buyer shall each
be restored to their respective positions immediately prior to delivery of such
notice of conversion.
13. NOTICE. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed effectively given upon
delivery to the party to be notified in person or upon delivery by courier
service or upon delivery after deposit with the United States mail, by
registered or certified mail, postage prepaid, or upon receipt by the party of a
facsimile copy, addressed (a) if to a Buyer, at such Buyer's address set forth
in Exhibit A, or at such other address as such Purchaser shall have furnished to
Sigma Designs in writing, or (b) if to any other holder of any Shares, at such
address as such holder shall have furnished Sigma Designs in writing, or, until
any such holder so furnishes an address to Sigma Designs, then to and at the
address of the last holder of such Shares who has so furnished an address to
Sigma Designs, or (c) if to Sigma Designs, one copy should be sent to at 46501
Landing Parkway, Fremont, CA 94538, and addressed to the attention of the
Corporate Secretary, or at such other address as Sigma Designs shall have
furnished to the Purchasers.
14. ARBITRATION; REMEDIES. Any dispute that arises between the parties
to this Agreement shall first be submitted for resolution to arbitration under
the rules of the American Arbitration Association of Santa Clara County,
California. In the event of a breach or a threatened breach by any party to this
Agreement of its
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obligations under this Agreement, any party injured or to be injured by such
breach will be entitled to specific performance of its rights under this
Agreement or to injunctive relief, in addition to being entitled to exercise all
rights provided in this Agreement and granted by law. The parties agree that the
provisions of this Agreement shall be specifically enforceable, it being agreed
by the parties that the remedy at law, including monetary damages, for breach of
any such provision will be inadequate compensation for any loss and that any
defense or objection in any action for specific performance or injunctive relief
that a remedy at law would be adequate is waived.
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Buyers, each
of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
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<TABLE>
Exhibit A
Schedule of Buyers
<CAPTION>
A B C
-------------------------- -------------------- ------------------------
Number
of Shares
Aggregate of Preferred Number of
Name of Purchaser Purchase Price Stock Warrant Shares
- ----------------------------------------------- -------------------------- -------------------- ------------------------
<S> <C> <C> <C> <C>
1. Banque Edouard Constant $4,000,000.00 40,000 57,142
2. RIC Equity Limited 500,000.00 5,000 7,143
</TABLE>
Address of Purchasers
---------------------
1. Banque Edouard Constant
Registered Address: 11 Cours de Rive, CH 1211 Geneva, 3,
Switzerland
Attention: Maria Luisa Agustoni
Mailing Address: KERNCO Trust SA
2, rue Jargonnant
P.O. Box 6432 CH, 1211 Geneva 6,
Switzerland
Attention: Sunder Advani
2. RIC Equity Limited
Registered Address: E&Y Corporate Services (Cayman Islands) Ltd.
P.O. Box 1034, One Capital Place,
George Town, Grand Cayman, Cayman Islands,
British West Indies
Mailing Address: c/o Rana Investment Company
P.O. Box 60148, Riyadh 11545
Saudi Arabia
Attention: Najmul Hasnain
<PAGE>
Exhibit B
Certificate of Determination
CERTIFICATE OF DETERMINATION OF
PREFERENCES OF SERIES A PREFERRED STOCK OF
SIGMA DESIGNS, INC.
The undersigned, Thinh Q. Tran and Kit Tsui, hereby certify that:
1. They are the duly elected President and Secretary, respectively, of
Sigma Designs, Inc., a California corporation (the "Corporation").
2. The Corporation hereby designates Fifty Thousand (50,000) shares of
Series A Preferred Stock.
3. None of the shares of the Series A Preferred Stock have been issued.
4. Pursuant to authority given by the Corporation's Second Restated
Articles of Incorporation, the Board of Directors of the Corporation has duly
adopted the following recitals and resolutions:
WHEREAS, the Second Restated Articles of Incorporation of the
Corporation provide for a class of shares known as Preferred Shares, issuable
from time to time in one or more series; and
WHEREAS, the Board of Directors of the Corporation is authorized within
the limitations and restrictions stated in the Second Restated Articles of
Incorporation to determine or alter the rights, preferences, privileges, and
restrictions granted to or imposed on any wholly unissued series of Preferred
Shares, to fix the number of shares constituting any such series, and to
determine the designation thereof, or any of them; and
WHEREAS, the Corporation has not issued any shares of Preferred Stock
and the Board of Directors of this Corporation desires to determine the rights,
preferences, privileges, and restrictions relating to this initial series of
Preferred Stock, and the number of shares constituting said Series and the
designation of said series;
NOW, THEREFORE, BE IT
RESOLVED: That the President and the Secretary of this Corporation are
each authorized to execute, verify and file a certificate of
determination of preferences with respect to the Series A Preferred
Stock in accordance with the laws of the State of California.
RESOLVED FURTHER: That the Board of Directors hereby determines the
rights, preferences, privileges and restrictions relating to said
initial Series of Preferred Stock shall be as set forth below:
"A. Fifty thousand of the authorized shares of Preferred Stock of
the Corporation, none of which have been issued or are outstanding, are
hereby designated "Series A Convertible Preferred Stock" (the "Series A
Preferred Stock").
<PAGE>
B. The rights, preferences, privileges, restrictions and other
matters relating to the Series A Preferred Stock are as follows:
1. Dividend Rights. The holders of Series A Preferred Stock
shall be entitled to receive quarterly in arrears, but only out of
funds that are legally available therefor, dividends in cash or common
stock of the Corporation, at the option of the Corporation, at the rate
of three percent (3%) of the "Original Issue Price" of the Series A
Preferred Stock per annum, accruing daily on the basis of a 360-day
year commencing with the issuance of such Series A Preferred Stock, on
each outstanding share of Series A Preferred Stock. The Original Issue
Price of the Series A Preferred Stock (as adjusted for any combination,
consolidation, shares distributions or shares dividends with respect to
such shares) shall be equal to $100.00 per share.
2. Voting Rights. Except as otherwise provided by law, the
holders of Series A Preferred Stock shall have no voting rights and
their consent shall not be required (except to the extent required by
law) for taking any corporate action.
3. Liquidation, Dissolution or Winding Up. In the event of
any liquidation, dissolution or winding up of the Corporation, either
voluntary or involuntary, the holders of the Series A Preferred Stock
shall be entitled to receive, prior and in preference to any
distribution of the assets or surplus funds of the Corporation to the
holders of the Common Stock by reason of their ownership thereof, an
amount equal to the Original Issue Price, plus an amount equal to
accrued and unpaid dividends on such Series A Preferred Stock to the
date of such payment (the "Liquidation Preference"). If, upon
occurrence of such event the assets and funds thus distributed among
the holders of the Series A Preferred Stock shall be insufficient to
permit the holders of the Series A Preferred Stock the full Liquidation
Preference, then the entire assets and funds of the Corporation legally
available for distribution shall be distributed among the holders of
the Series A Preferred Stock in proportion to the number of shares of
Series A Preferred Stock held by each such holder. After payment has
been made to the holders of the Series A Preferred Stock of the
Liquidation Preference, the holders of the Common Stock shall be
entitled to receive the remaining assets of the Corporation.
4. Consolidation, Merger, Exchange, Etc.. In case the
Corporation shall enter into any consolidation, merger, combination,
statutory share exchange or other transaction in which the Common Stock
is exchanged for or changed into other shares or securities, money
and/or any other property, then in any such case the Series A Preferred
Stock shall at the same time be either, at the option of the
Corporation, (a) similarly exchanged or changed into preferred shares
of the surviving entity providing the holders of such preferred stock
with (to the extent possible) the same relative rights and preferences
as the Series A Preferred Stock or (b) converted into the shares of
stock and other securities, money and/or any other property receivable
upon or deemed to be held by holders of Common Stock immediately
following such consolidation, merger, combination, statutory share
exchange or other transaction, and the holders of the Series A
Preferred Stock shall be entitled upon such event to receive such
amount of securities, money and/or any other property as the shares of
the Common Stock of the Corporation into which such shares of Series A
Preferred Stock could have been converted immediately prior to such
consolidation, merger, combination, statutory share exchange or other
transaction would have been entitled
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<PAGE>
5. Conversion.
(a) At the option of the holder of the Series A
Preferred Stock, up to twenty-five percent (25%) of the Series A
Preferred Stock held by such holder may be converted, on or after 120
days from the closing of the purchase thereof, into fully paid and
nonassessable shares of the Corporation's Common Stock or, if the
Conversion Price (as defined below) is below $10.00 and the Corporation
so chooses, the Cash Equivalent (as defined below) at the Conversion
Price. The number of shares of Common Stock each share of Series A
Preferred Stock shall be convertible into shall be calculated by
dividing the Original Issue Price of the Series A Preferred Stock to be
converted by the conversion price, which shall be calculated at ten
percent (10%) less than (the "Discount") the low reported trading price
of the Corporation's Common Stock, as reported by Bloomberg, L.P., over
the five-day trading period ending on the day prior to conversion (the
"Conversion Price"); provided, however, that the Conversion Price shall
not exceed $10.00 in any case. Thereafter, an additional twenty-five
percent (25%) of the Series A Preferred Stock held by such holder shall
be convertible on or after the first day of each calendar month
thereafter on a cumulative basis. In the event the Corporation chooses
to issue cash in lieu of Common Stock upon conversion of the Series A
Preferred Stock, such cash amount (the "Cash Equivalent") shall be
calculated by multiplying (i) the quotient obtained by dividing (a) the
dollar amount of the Series A Preferred Stock that the holder of Series
A Preferred Stock has elected to convert by (b) the product of .9 and
the lowest intra day trading price of the Common Stock on the day of
conversion; and (ii) the closing bid price of the Common Stock on the
day of conversion. Such cash payment shall be delivered within five (5)
days of conversion. The holder of Series A Preferred Stock shall
indicate upon its notice of conversion its preferred method of
conversion, and the Company shall provide the holder of Series A
Preferred Stock with notice of its choice of the means of conversion,
Common Stock or the Cash Equivalent, within twenty four (24) hours
after receipt of the notice of conversion. Failure by the Company to
provide such notice will entitle the holder of Series A Preferred Stock
to its choice of the method of conversion. Should the Company elect to
remit the Cash Equivalent rather than Common Stock, such cash payment
shall be delivered within five (5) days of conversion, or the holder of
Series A Preferred Stock may elect to revoke his conversion or receive
a conversion in stock. In the event the Conversion Price equals or
exceeds $10.00, the Corporation shall effect a conversion only in
stock.
(b) Any Series A Preferred Stock that is outstanding
on the second anniversary of the initial issuance of the Series A
Preferred Stock will be automatically converted into shares of the
Corporation's Common Stock as provided above.
(c) Reservation of Stock Issuable Upon Conversion.
The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the shares of the Series A
Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all
outstanding shares of Series A Preferred Stock except to the extent
such conversion is limited by Section 5(d). To the extent that at any
time there are fewer shares of Common Stock available than are required
to effect such conversion, the Common Stock will be allocated on a pro
rata basis among holders of Series A Preferred Stock derived from the
proportion of Series A Preferred Stock each holder of Series A
Preferred Stock holds upon the closing of the transaction. If at any
time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding
shares of Series A Preferred Stock, the Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to
-3-
<PAGE>
increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose except as
limited by Section 5(d).
(d) Notwithstanding Section 5(a), 5(b) and 5(c), the
Series A Preferred Stock issued herewith shall not be entitled to
conversion into Common Stock that would cause the Corporation to issue
greater than 2,220,000 shares of Common Stock. Any such conversion
requests with respect to such Series A Preferred Stock that would, in
the aggregate with all other Series A Preferred Stock previously
converted, cause the Company to issue more than 2,220,000 shares of
Common Stock shall be converted by the Corporation into cash at a rate
of one hundred and ten percent (110%) of the Original Issue Price of
such unconverted Series A Preferred Stock. Such cash payment shall be
delivered within five (5) days of conversion.
(e) Mechanisms for Effecting Conversions. The holder
shall effect conversions by surrendering the certificate or
certificates representing the shares of Series A Preferred Stock to be
converted to the Corporation, together with the form of conversion
notice attached hereto as Exhibit A (the "Conversion Notice"),
provided, however, that the holder shall not convert more than an
aggregate of 25% of the shares of Series A Preferred Stock originally
issued to it in any one month period. Each Conversion Notice shall
specify the number of shares of Series A Preferred Stock to be
converted, the preferred means of conversion of the holder of Series A
Preferred Stock, and the date on which such conversion is to be
effected, which date may not be prior to the date the holder delivers
such Conversion Notice by facsimile (the "Conversion Date"). If no
Conversion Date is specified in a Conversion Notice, the Conversion
Date shall be the date that the Conversion Notice is deemed delivered
pursuant to Section 10. If the holder is converting less than all
shares of Series A Preferred Stock represented by the certificate or
certificates tendered by the holder with the Conversion Notice, or if a
conversion hereunder cannot be effected in full for any reason, the
Corporation shall convert up to the number of shares of Series A
Preferred Stock which can be so converted and shall promptly deliver to
such holder a certificate for such number of shares as have not been
converted.
6. Fractional Shares. In lieu of any fractional shares to
which the holder of the Series A Preferred Stock would otherwise be
entitled, the Corporation shall pay cash equal to such fraction
multiplied by the closing price of one share of the Corporation's
Common Stock on the trading day prior to conversion, if such price is
available. If such price is not available, this Corporation shall pay
cash for fractional shares equal to such fraction multiplied by the
fair market value of one share of Series A Preferred Stock as
determined by the Board of Directors of this Corporation. Whether or
not fractional shares are issuable upon such conversion shall be
determined on the basis of the total number of shares of Series A
Preferred Stock of each holder at the time converting into Common Stock
and the number of shares of Common Stock issuable upon such aggregate
conversion.
7. Minimal Adjustments. No adjustment in the Original Issue
Price need be made if such adjustment would result in a change in the
Conversion Price of less than $0.01. Any adjustment of less than $0.01
which is not made shall be carried forward and shall be made at the
time of and together with any subsequent adjustment which, on a
cumulative basis, amounts to an adjustment of $0.01 or more in the
Conversion Price.
-4-
<PAGE>
8. Adjustment of Conversion for Dividend and Distributions.
(a) In the event the Corporation shall at any time
after issuance of the Series A Preferred Stock declare or pay any
dividend or other distribution on Common Stock, payable in Common Stock
or other securities or rights convertible into, or exchangeable for,
Common Stock, or effect a subdivision or combination or consolidation
of the outstanding Common Stock (by reclassification or otherwise) into
a greater or lesser number of Common Stock, then in each such case the
number of Common Stock issuable upon the conversion of the Series A
Preferred Stock shall be adjusted (the "Adjustment") by multiplying the
number of Common Stock to which the holder was entitled before such
event by a multiplier X/Y determined as follows:
X = The number of Common Stock
outstanding immediately after such
event.
Y = The number of Common Stock that were
outstanding immediately prior to
such event.
(b) In the event the Corporation shall at any time
after issuance of the Series A Preferred Stock, distribute to holders
of its Common Stock, other than as part of a dissolution or liquidation
or the winding up of its affairs, any shares of its capital stock, any
evidence of indebtedness, or other securities or any of its assets
(other than Common Stock or securities convertible into or exchangeable
for Common Stock), then, in any such case, the Preferred Stock holder
shall be entitled to receive, upon conversion of the Series A Preferred
Stock, with respect to each share of Common Stock issuable upon such
conversion, the amount of cash or evidence of indebtedness or other
securities or assets which such Series A Preferred Stock holder would
have been entitled to receive with respect to each such share of Common
Stock as a result of the happening of such event had the Series A
Preferred Stock holder converted to Common Stock immediately prior to
the record date or other date determining the shareholders entitled to
participate in such distribution (the "Determination Date") or, in lieu
thereof, if the Board of Directors of the Corporation should so
determine at the time of such distribution, a reduced Conversion Price
determined by multiplying the Conversion Price on the Determination
Date by a fraction, the numerator of which is the result of such
Conversion Price reduced by the value of such distribution applicable
to one share of Common Shares (such value to be determined in good
faith by the Corporation's Board of Directors) and the denominator of
which is such Conversion Price.
(c) In the event an Adjustment is made by the
Corporation, the Corporation shall notify each holder of Series A
Preferred Stock as soon as is commercially practicable and, if deemed
necessary, shall explain briefly to each holder the Adjustment
procedure and the reason for the Adjustment.
9. Vote to Change the Terms of Series A Preferred Shares.
The approval of the Board of Directors and the affirmative vote at a
meeting duly called by the Board of Directors for such purpose (or the
written consent without a meeting) of the holders of not less than
two-thirds (2/3) of the then outstanding Series A Preferred Stock shall
be required to either (i) amend, alter, change or repeal any of the
powers, designations, preferences and rights of the Series A Preferred
Stock or (ii) for a period of one year after the date this certificate
is filed with the California Secretary of State, authorize or issue a
class of equity securities or convertible debt ranking senior in
liquidation preference, dividends, or distribution of assets to the
Series A Preferred Stock.
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<PAGE>
10. Notices. All notices and other communications required
or permitted hereunder shall be in writing and shall be deemed
effectively given upon delivery to the party to be notified in person
or upon delivery by courier service or upon delivery after deposit with
the United States mail, by registered or certified mail, postage
prepaid, or upon receipt by the party of a facsimile copy, addressed
(a) if to a holder of Series A Preferred Stock, at such address of such
holder of Series A Preferred Stock set forth in Exhibit A, or at such
other address as such holder of Series A Preferred Stock shall have
furnished to Sigma Designs, Inc. in writing, or (b) if to any other
holder of any Shares, at such address as such holder shall have
furnished Sigma Designs, Inc. in writing, or, until any such holder so
furnishes an address to Sigma Designs, Inc. then to and at the address
of the last holder of such Shares who has so furnished an address to
Sigma Designs, Inc. or (c) if to Sigma Designs, Inc. one copy should be
sent to Sigma Designs, Inc., 46501 Landing Parkway, Fremont, California
94538 and addressed to the attention of the Corporate Secretary, or at
such other address as Sigma Designs, Inc. shall have furnished to the
holders of Series A Preferred Stock."
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<PAGE>
Exhibit A
SIGMA DESIGNS, INC.
CONVERSION NOTICE
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby irrevocably elects to convert the number of shares of
Series A Convertible Preferred Stock indicated below, into shares of Common
Stock, no par value (the "Common Stock"), of Sigma Designs, Inc. (the
"Corporation") according to the conditions hereof, or, if applicable, its
preference for the Cash Equivalent, as of the date written below. If shares are
to be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by the
Corporation in accordance therewith. No fee will be charged to the Holder for
any conversion, except for such transfer taxes, if any.
Conversion calculations:
---------------------------------------------------
Date to Effect Conversion
Holder to indicate one Conversion Preference:
|_| Shares
|_| Cash Equivalent
---------------------------------------------------
Number of Shares of Preferred Stock to be Converted
---------------------------------------------------
Applicable Conversion Price
---------------------------------------------------
Signature
---------------------------------------------------
Name:
---------------------------------------------------
Address:
The Company undertakes within twenty-four (24) hours of its receipt, whether by
facsimile or other means provided for in Section 10 of the Certificate of
Determination, of this conversion notice (and, in any case prior to the time it
effects the conversion requested hereby), to notify the converting holder of its
choice, where applicable, of the means of conversion.
<PAGE>
Exhibit C
FORM OF WARRANT
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED
OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION WHICH IS EXEMPT FROM, OR
NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE
BENEFICIARY OF CERTAIN OBLIGATIONS OF SIGMA DESIGNS, INC. (THE "COMPANY") SET
FORTH IN A PRIVATE SECURITIES SUBSCRIPTION AGREEMENT BETWEEN THE COMPANY AND
[BUYER] DATED [DATE]. A COPY OF THE AFORESAID SUBSCRIPTION AGREEMENT EVIDENCING
SUCH OBLIGATIONS MAY BE OBTAINED FROM THE COMPANY'S EXECUTIVE OFFICES.
[Date]
Warrant to Purchase up to ________ Shares
of Common Stock of Sigma Designs, Inc.
Sigma Designs, Inc., a California corporation (the "Company"), hereby
acknowledges that ___________ ___________ (the "Buyer") or any other Warrant
Holder (hereinafter defined) is entitled, on the terms and conditions set forth
below, to purchase from the Company beginning the day after the six month
anniversary date of the closing of the purchase of this warrant (the "Warrant")
and ending three years after the six month anniversary date of the closing
forty-two ((42) months after the original issuance of this Warrant) up to
__________ fully paid and nonassessable shares of common stock, no par value, of
the Company (the "Common Stock"), as the same may be adjusted pursuant to
Section 5 herein, at the Purchase Price (hereinafter defined), as the same may
be adjusted pursuant to Section 5 herein. The resale of the shares of Common
Stock or other securities issuable upon exercise or exchange of this Warrant is
subject to the provisions of the Registration Rights Agreement by and between
the Company and the Investor dated as of June _____, 1997 (the "Registration
Rights Agreement").
16. Definitions.
a. The term "Warrant Holder" shall mean the Buyer or any assignee of
all or any portion of this Warrant.
b. The term "Warrant Shares" shall mean the shares of Common Stock or
other securities issuable upon exercise of this Warrant.
c. The term "Purchase Price" shall be an amount equal to 130% of the
Market Price for the Common Stock on the earlier of (i) the date
the registration statement, registering the Warrant Shares, is
declared effective by the Securities and Exchange Commission, or
(ii) if a registration statement has not been declared effective,
the 120th day after the Closing as may be adjusted pursuant to
Section 5 herein.
<PAGE>
d. The term "Agreement" shall mean the Private Securities Subscription
Agreement, dated as of June __, 1997, between the Company and the
Buyer.
e. Other capitalized terms used herein which are defined in the
Agreement shall have the same meanings herein as therein.
17. Exercise or Exchange of Warrant.
a. This Warrant may be exercised by the Warrant Holder, in whole or
in part, at any time during the life of this Warrant as described
herein, and from time to time by surrender of this Warrant,
together with the form of subscription at the end hereof duly
executed by Warrant Holder, together with the full Purchase Price
(as defined in Section 1) for each share of Common Stock as to
which this Warrant is exercised to the Company at the address of
the Company set forth in Section 13 hereof. In the event that the
Warrant is not exercised in full, the number of Warrant Shares
shall be reduced by the number of such Warrant Shares for which
this Warrant is exercised, and the Company, at its expense, shall
forthwith issue and deliver to or upon the order of the Warrant
Holder a new Warrant of like tenor in the name of the Warrant
Holder or as the Warrant Holder may request, reflecting such
adjusted Warrant Shares. Warrants may be exchanged for shares of
Common Stock, the value of the Warrants so exchanged shall equal
the Closing Price (as hereinafter defined) minus the Purchase
Price for each share subject to the Warrant so exchanged. The
"Closing Price" shall mean (i) the closing bid price of such
Common Stock as quoted on the Principal Market (as herein defined)
on the Date of Exercise (as defined below) or (ii) if the Common
Stock is not listed or admitted to trading on any national
securities exchange or quoted on the Nasdaq National Market or
Small-Cap Market, the closing bid price on the over-the-counter
market as furnished by any New York Stock Exchange member firm
which makes a market in the Common Stock reasonably selected from
time to time by the Company for that purpose, or (iii) if the
Common Stock is not listed or admitted to trading on any national
securities exchange or quoted on the Nasdaq National Market or
Small-Cap Market or traded over-the-counter and the average price
cannot be determined as contemplated above, the fair market value
of the Common Stock as reasonably determined in good faith by the
Company's Board of Directors.
b. The "Date of Exercise" of the Warrant shall be the date that the
advance copy of the form of exercise attached hereto as Exhibit A
(the "Exercise Form"), is sent by facsimile to the Company,
provided that the original Warrant and Exercise Form are received
by the Company within reasonable time thereafter. If the Warrant
Holder has not sent advance notice by facsimile, the Date of
Exercise shall be the date the original Exercise Form is received
by the Company.
18. Delivery of Stock Certificates.
a. Subject to the terms and conditions of this Warrant, as soon as
practicable after the exercise of this Warrant in full or in part,
and in any event within five (5) business days thereafter, the
Company at its expense (including, without limitation, the payment
by it of any applicable issue taxes) will cause to be issued in
the name of and delivered to the Warrant Holder, or as the Warrant
Holder may lawfully direct, a certificate or certificates for the
number of fully paid and non-assessable shares of Common Stock to
which the Warrant Holder shall be entitled on such exercise,
together with any other stock or other securities or property
(including cash, where applicable) to which the Warrant Holder is
entitled upon such exercise in accordance with the provisions
hereof.
b. This Warrant may not be exercised as to fractional shares of
Common Stock. In the event that the exercise of this Warrant, in
full or in part, would result in the issuance of any fractional
share of
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<PAGE>
Common Stock, then in such event the Warrant Holder shall be
entitled to cash equal to the fair market value of such fractional
share. For purposes of this Warrant, "fair market value" shall
equal the closing bid price of the Common Stock on the Nasdaq
National Market or Small-Cap Market, the American Stock Exchange
or the New York Stock Exchange, whichever is the principal trading
exchange or market for the Common Stock (the "Principal Market")
on the date of determination or, if the Common Stock is not listed
or admitted to trading on any national securities exchange or
quoted on the Nasdaq National Market or Small-Cap Market, the
closing bid price on the over-the- counter market as furnished by
any New York Stock Exchange member firm which makes a market in
the Common Stock reasonably selected from time to time by the
Company for that purpose, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange or quoted
on the Nasdaq National Market or Small-Cap Market or traded
over-the-counter and the average price cannot be determined as
contemplated above, the fair market value of the Common Stock
shall be as reasonably determined in good faith by the Company's
Board of Directors.
19. Covenants of the Company.
a. The Company shall use its reasonable best efforts to insure that a
registration statement under the Securities Act covering the
resale or other disposition thereof of the Warrant Shares by the
Warrant Holder is effective to the extent provided by the
Registration Rights Agreement.
b. All Warrant Shares that may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly
issued, fully paid and nonassessable and free from all taxes,
liens, and charges with respect to the issue thereof.
c. The Company shall take all necessary action and proceedings as may
be required and permitted by applicable law, rule and regulation,
including, without limitation the notification of the Nasdaq
National Market, for the legal and valid issuance of this Warrant
and the Warrant Shares to the Warrant Holder.
d. From the date hereof through the last date on which this Warrant
is exercisable, the Company shall take all steps reasonably
necessary and within its control to insure that the Common Stock
remains listed or quoted on the Principal Market.
e. The Company shall at all times reserve and keep available, solely
for issuance and delivery as Warrant Shares hereunder, such shares
of Common Stock as shall from time to time be issuable as Warrant
Shares.
f. The Warrant Shares, when issued in accordance with the terms
hereof, will be duly authorized and, when paid for or issued in
accordance with the terms hereof, shall be validly issued, fully
paid and non-assessable. The Company has authorized and reserved
for issuance to the Warrant Holder the requisite number of shares
of Common Stock to be issued pursuant to this Warrant.
g. With a view to making available to the Warrant Holder the benefits
of any rule or regulation of the Securities and Exchange
Commission (the "SEC"), that may at any time permit the Warrant
Holder to sell securities of the Company to the public without
registration, including without limitation Rule 144, the Company
agrees to use its reasonable best efforts to (i) make and keep
public information available, as those terms are understood and
defined in such rule or regulation, at all times; and (ii) file
with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange
Act.
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<PAGE>
h. This Warrant will be binding upon any entity succeeding to the
Company by merger, consolidation or acquisition of all or
substantially all of the Company's assets.
20. Adjustment of Purchase Price and Number of Shares. The number of and
kind of securities purchasable upon exercise of this Warrant and the
Purchase Price shall be subject to adjustment from time to time as
follows:
a. Subdivisions, Combinations and Other Issuances. If the Company
shall at any time after the date hereof but prior to the
expiration of this Warrant subdivide its outstanding securities as
to which purchase rights under this Warrant exist, by split-up, or
otherwise, or combine its outstanding securities as to which
purchase rights under this Warrant exist, the number of Warrant
Shares as to which this Warrant is exercisable as of the date of
such subdivision, split-up, or combination shall forthwith be
proportionately increased in the case of a subdivision, or
proportionately decreased in the case of a combination.
Appropriate adjustments shall also be made to the Purchase Price,
so that after such adjustments the aggregate Purchase Price
payable hereunder for the increased number of shares of Common
Stock shall be the same as the aggregate Purchase Price in effect
immediately prior to such adjustments.
b. Stock Dividend. If at any time after the date hereof the Company
declares a dividend or other distribution on Common Stock payable
in Common Stock or other securities or rights convertible into or
exchangeable for Common Stock ("Common Stock Equivalents"),
without payment of any consideration by holders of Common Stock
for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock
issuable upon exercise or conversion thereof), then the number of
shares of Common Stock for which this Warrant may be exercised
shall be increased as of the record date (or the date of such
dividend distribution if no record date is set) for determining
which holders of Common Stock shall be entitled to receive such
dividends, in proportion to the increase in the number of
outstanding shares (and shares of Common Stock issuable upon
conversion of all such Common Stock Equivalents) of Common Stock
as a result of such dividend, and the Purchase Price shall be
adjusted so that the aggregate amount payable for the purchase of
all the Warrant Shares issuable hereunder immediately after the
record date (or on the date of such distribution, if applicable)
for such dividend shall equal the aggregate amount so payable
before the record date (or before the date of such distribution,
if applicable).
c. Other Distributions. If at any time after the date hereof the
Company distributes to holders of its Common Stock, other than as
part of a dissolution or liquidation or the winding up of its
affairs, any shares of its capital stock, any evidence of
indebtedness or any of its assets (other than cash, Common Stock
or Common Stock Equivalents), then, in any such case, the Warrant
Holder shall be entitled to receive, upon exercise of this
Warrant, with respect to each share of Common Stock issuable upon
such exercise, (i) the amount of evidences of indebtedness or
other securities or assets (excluding cash and the Company's own
Common Stock or Common Stock Equivalents) which such Warrant
Holder would have been entitled to receive as a result of the
happening of such event with respect to each such share of Common
Stock subject to this Warrant had this Warrant been exercised
immediately prior to the record date or other date determining the
shareholders entitled to participate in such distribution (the
"Determination Date") or (ii) in lieu thereof, if the Board of
Directors of the Company should so determine at the time of such
distribution, a lower Purchase Price reduced by the value of such
distribution applicable to one share of Common Stock (such value
to be determined in good faith by the Company's Board of
Directors)
d. Merger, Consolidation, etc. If at any time after the date hereof
there shall be a merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of
the Company to, another entity (a "Consolidation Event"), then the
Warrant Holder shall be entitled to
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<PAGE>
receive upon such transfer, merger or consolidation becoming
effective, and upon payment of the aggregate Purchase Price then
in effect, the number of shares or other securities or property of
or cash or other consideration from the Company or of the
successor corporation resulting from such merger or consolidation,
to which such Warrant Holder would have been entitled to receive
as a result of the happening of such event with respect to each
such share of Common Stock subject to this Warrant had this
Warrant been exercised immediately prior to such transfer, merger
or consolidation becoming effective or to the applicable record
date thereof, as the case may be. The Company shall not effect any
Consolidation Event unless the resulting successor or acquiring
entity (if not the Company) assumes by written instrument the
obligation to deliver to the Warrant Holder such shares of stock
and/or securities as the Warrant Holder is entitled to receive had
this Warrant been exercised in accordance with the foregoing;
provided, however, that if as of the third business day prior to
the consummation of the Consolidation Event the closing bid price
of the Common Stock shall be equal to at least 200% of the
Purchase Price, then the Warrant shall be automatically exchanged
on the date of consummation of the Consolidation Event, as
provided in Section 2 hereof.
e. Reclassification, Etc. If at any time after the date hereof there
shall be a reclassification of any securities as to which purchase
rights under this Warrant exist, into the same or a different
number of securities of any other class or classes, then the
Warrant Holder shall thereafter be entitled to receive upon
exercise of this Warrant, during the period specified herein and
upon payment of the Purchase Price then in effect, the number of
shares or other securities or property or cash or other
consideration resulting from such reorganization or
reclassification, which would have been received by the Warrant
Holder for the shares of stock subject to this Warrant had this
Warrant at such time been exercised.
f. Purchase Price Adjustment. In the event that the Company issues or
sells any Common Stock or securities which are convertible into or
exchangeable for its Common Stock or any convertible securities,
or any warrants or other rights to subscribe for or to purchase or
any options for the purchase of its Common Stock or any such
convertible securities (other than issuance of Preferred Stock or
of shares of Common Stock upon conversion thereof, shares or
options issued or which may be issued to employees, directors or
consultants pursuant to the Company's stock option or stock
purchase plans listed in the Public Documents or shares issued
upon exercise of options, warrants or rights outstanding on the
date of the Agreement and listed in the Public Documents) at an
effective purchase price per share which is less than the Purchase
Price then in effect and less than the fair market value (as
hereinabove defined) of the Common Stock on the trading day next
preceding such issue or sale, then in each such case, the Purchase
Price in effect immediately prior to such issue or sale shall be
reduced effective concurrently with such issue or sale to an
amount determined by multiplying the Purchase Price then in effect
by a fraction, (x) the numerator of which shall be the sum of (1)
the number of shares of Common Stock outstanding immediately prior
to such issue or sale, including, without duplication, those
deemed to have been issued under any provision of the Preferred
Stock and the Warrants plus (2) the number of shares of Common
Stock which the aggregate consideration received by the Company
for such additional shares would purchase at such fair market
value then in effect and (y) the denominator of which shall be the
number of shares of Common Stock of the Company outstanding
immediately after such issue or sale including, without
duplication, those deemed to have been issued under any provision
of the Preferred Stock and Warrants; provided, however, there
shall be no reduction of the Purchase Price for such issuances or
sales at any time from ___________, 1997 through the term of this
Warrant in an aggregate (i.e., not per transaction) amount of up
to $7,000,000 provided that such issuance or sale is completed at
an effective purchase price per share of at least 85% of the fair
market value of the Common Stock on the trading day next preceding
such issue or sale. For purposes of the foregoing fraction, Common
Stock outstanding shall include, without limitation, any equity
offerings
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<PAGE>
then outstanding, whether or not they are exercisable or
convertible when such fraction is to be determined.
The number of shares which may be purchased hereunder shall be
increased proportionately to any reduction in Purchase Price pursuant to this
paragraph 5(f), so that after such adjustments the aggregate Purchase Price
payable hereunder for the increased number of shares of Common Stock shall be
the same as the aggregate Purchase Price in effect immediately prior to such
adjustments.
Notwithstanding anything else contained in this Warrant to the
contrary, there shall be no adjustment of the Purchase Price or the number of
shares of Common Stock issuable pursuant to the exercise of this Warrant in the
event that during the term of this Warrant, the Company issues shares of Common
Stock, or securities convertible into Common Stock to the Buyer.
g. Adjustments: Additional Shares, Securities or Assets. In the event
that at any time, as a result of an adjustment made pursuant to
this Section 5, the Warrant Holder shall, upon exercise of this
Warrant, become entitled to receive shares and/or other securities
or assets (other than Common Stock) then, wherever appropriate,
all references herein to shares of Common Stock shall be deemed to
refer to and include such shares and/or other securities or
assets; and thereafter the number of such shares and/or other
securities or assets shall be subject to adjustment from time to
time in a manner and upon terms as nearly equivalent as
practicable to the provisions of this Section 5.
21. No Impairment. The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times
in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order
to protect the rights of the Warrant Holder against impairment. Without
limiting the generality of the foregoing, the Company (a) will not
increase the par value of any Warrant Shares above the amount payable
therefor on such exercise, and (b) will take all such action as may be
reasonably necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable Warrant Shares
on the exercise of this Warrant.
22. Notice of Adjustments; Notices. Whenever the Purchase Price or number
of Warrant Shares purchasable hereunder shall be adjusted pursuant to
Section 5 hereof, the Company shall promptly execute and deliver to the
Warrant Holder a certificate setting forth, in reasonable detail, the
event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated and the Purchase Price
and number of shares purchasable hereunder after giving effect to such
adjustment, and shall cause a copy of such certificate to be mailed (by
first class mail, postage prepaid) to the Warrant Holder.
23. Rights As Stockholder. Prior to exercise of this Warrant, the Warrant
Holder shall not be entitled to any rights as a stockholder of the
Company with respect to the Warrant Shares, including (without
limitation) the right to vote such shares, receive dividends or other
distributions thereon or be notified of stockholder meetings. However,
in the event of any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash
dividend) or other distribution, any right to subscribe for, purchase
or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Company
shall mail to each Warrant Holder, at least 10 days prior to the date
specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or
right.
-6-
<PAGE>
24. Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of the Warrant and, in the case of any such loss, theft or
destruction of the Warrant, upon delivery of an indemnity agreement or
security reasonably satisfactory in form and amount to the Company or,
in the case of any such mutilation, on surrender and cancellation of
such Warrant, the Company at its expense will execute and deliver, in
lieu thereof, a new Warrant of like tenor.
25. Consent to Jurisdiction. Each of the Company and the Warrant Holder (i)
hereby irrevocably submits to personal jurisdiction in any state or
federal court located in the State of California for the purposes of
any suit, action or proceeding arising out of or relating to this
Warrant.
26. Entire Agreement; Amendments. This Warrant and the Agreement contain
the entire understanding of the parties with respect to the matters
covered herein and therein. No provision of this Warrant may be waived
or amended other than by a written instrument signed by the party
against whom enforcement of any such amendment or waiver is sought.
27. Restricted Securities.
a. Registration or Exemption Required. This Warrant has been issued
in a transaction exempt from the registration requirements of the
Act in reliance upon the provisions of Section 4(2) promulgated by
the SEC under the Securities Act. This Warrant and the Warrant
Shares issuable upon exercise of this Warrant may not be resold
except pursuant to an effective registration statement or an
exemption to the registration requirements of the Securities Act
and applicable state laws.
b. Legend. The Warrant and any Warrant Shares issued upon exercise
thereof (until a registration statement has been declared
effective by the SEC with respect to the Warrant Shares, at which
time, such legend shall be removed, and the Warrant Shares shall
be freely tradeable), shall bear the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND
HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED, HYPO THECATED OR OTHERWISE
DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION
WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE
HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY OF CERTAIN
OBLIGATIONS OF SIGMA DESIGNS, INC. SET FORTH IN A PRIVATE
SECURITIES SUBSCRIPTION AGREEMENT BETWEEN THE COMPANY AND [BUYER]
DATED [DATE]. A COPY OF THE AFORESAID SUBSCRIPTION AGREEMENT
EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM THE COMPANY'S
EXECUTIVE OFFICES."
The certificates representing the Warrants, the shares of Preferred Stock and
underlying Common Stock shall also bear any other legends required by applicable
Federal or state securities laws, which legends shall be removed when not
required in accordance with this Paragraph 2(iii).
-7-
<PAGE>
c. Assignment. Assuming the conditions of (a) above regarding
registration or exemption have been satisfied, the Warrant Holder
may sell, transfer, assign, pledge or otherwise dispose of this
Warrant, in whole or in part. The Warrant Holder shall deliver a
written notice to the Company, substantially in the form of the
Assignment attached hereto as Exhibit B, indicating the person or
persons to whom the Warrant shall be assigned and the respective
number of warrants to be assigned to each assignee. The Company
shall effect the assignment within ten (10) days, and shall
deliver to the assignee(s) designated by the Warrant Holder a
Warrant or Warrants of like tenor and terms for the appropriate
number of shares.
28. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be effective (a) upon
hand delivery or delivery by facsimile at the address or number
designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or
(b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
to the Company: Sigma Designs, Inc.
46501 Landing Parkway
Fremont, California 94538
Attn: Ms. Carol Kaplan
Fax: (510) 770-2640
to the Warrant Holder:
Attn:
Fax:
with a copy to:
Attn:
Fax:
Either party hereto may from time to time change its address or
facsimile number for notices under this Section 13 by giving at least 10 days
prior written notice of such changed address or facsimile number to the other
party hereto.
29. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or
termination is sought. This Warrant shall be construed and enforced in
accordance with and governed by the laws of the State of California.
The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
-8-
<PAGE>
SIGMA DESIGNS, INC.
By: _________________________________
Thinh Q. Tran
Chairman of the Board and
Chief Executive Officer
[CORPORATE SEAL]
Attest:
By: _________________________________
Kit Tsui
Secretary
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<PAGE>
EXHIBIT A
EXERCISE FORM
SIGMA DESIGNS, INC.
The undersigned hereby irrevocably exercises the right to purchase
__________________ shares of Common Stock of SIGMA DESIGNS, INC., a California
corporation, evidenced by the attached Warrant, and herewith makes payment of
the Purchase Price with respect to such shares in full in the form of [cash or
check in the amount of $___], [______ Warrant Shares which represent the amount
of Warrant Shares as provided in the attached Warrant to be canceled in
connection with such exercise], all in accordance with the conditions and
provisions of said Warrant.
The undersigned requests that stock certificates for such Warrant
Shares be issued, and a Warrant representing any unexercised portion hereof be
issued, pursuant to this Warrant in the name of the registered Holder and
delivered to the undersigned at the address set forth below.
Dated:___________________________________
_________________________________________
Signature of Registered Holder
_________________________________________
Name of Registered Holder (Print)
_________________________________________
Address
<PAGE>
EXHIBIT B
ASSIGNMENT
(To be executed by the registered Warrant Holder
desiring to transfer the Warrant)
FOR VALUED RECEIVED, the undersigned Warrant Holder of the attached
Warrant hereby sells, assigns and transfers unto the persons below named the
right to purchase ______________ shares of the Common Stock of SIGMA DESIGNS,
INC. evidenced by the attached Warrant and does hereby irrevocably constitute
and appoint ______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated:______________________________________
____________________________________________
Signature
Fill in for new Registration of Warrant:
____________________________________________
Name
____________________________________________
Address
____________________________________________
Please print name and address of assignee
(including zip code number)
NOTICE
The signature to the foregoing Exercise Form or Assignment must
correspond to the name as written upon the face of the attached Warrant in every
particular, without alteration or enlargement or any change whatsoever.
<PAGE>
Exhibit D
Form of Opinion of Wilson Sonsini Goodrich & Rosati, P.C.
June __, 1997
To the Purchasers Listed in Exhibit A
to the Sigma Designs, Inc.
Series A Preferred Stock Subscription
Agreement Dated as of June __, 1997
Ladies and Gentlemen:
Reference is made to that certain Private Securities Subscription
Agreement, dated as of June __, 1997 (the "Subscription Agreement") by and among
Sigma Designs, Inc., a California corporation (the "Company"), and the
purchasers listed in Exhibit A to the Subscription Agreement (the "Investors"),
which provides for the issuance by the Company to the Investors of up to
__________ shares of Series A Preferred Stock of the Company, without par value
(the "Series A Preferred Stock"). This opinion is rendered to you pursuant to
Section 6(ii) of the Subscription Agreement, and all terms used herein have the
meanings defined for them in the Subscription Agreement unless otherwise defined
herein.
We have acted as counsel for the Company in connection with the
negotiation of the Subscription Agreement and the issuance of the Series A
Preferred Stock. As such counsel, we have made such legal and factual
examinations and inquiries as we have deemed advisable or necessary for the
purpose of rendering this opinion. In addition, we have examined originals or
copies of documents, corporate records and other writings which we consider
relevant for the purposes of this opinion. In such examination we have assumed
the genuineness of all signatures on original documents, the conformity to
original documents of all copies submitted to us and the due execution and
delivery of all documents where due execution and delivery are a prerequisite to
the effectiveness thereof.
As used in this opinion, the expression "to our knowledge," "known to
us" or similar language with reference to matters of fact means that, after an
examination of documents made available to us by the Company, and after
inquiries of officers of the Company, but without any further independent
factual investigation, we find no reason to believe that the opinions expressed
herein are factually incorrect. Further, the expression "to our knowledge",
"known to us" or similar language with reference to matters of fact refers to
the current actual knowledge of the attorneys of this firm who have worked on
matters for the Company solely in connection with the Subscription Agreement and
the transactions contemplated thereby. Except to the extent expressly set forth
herein or as we otherwise believe to be necessary to our opinion, we have not
undertaken any independent investigation to determine the existence or absence
of any fact, and no inference as to our knowledge of the existence or absence of
any fact should be drawn from our representation of the Company or the rendering
of the opinion set forth below.
For purposes of this opinion, we are assuming that you have all
requisite power and authority, and have taken any and all necessary corporate or
partnership action, to execute and deliver the Subscription Agreement, and we
are assuming that the representations and warranties made by the Investors in
the Subscription Agreement and pursuant thereto are true and correct. We are
also assuming that the Investors have purchased the Series A Preferred Stock for
value, in good faith and without notice of any adverse claims within the meaning
of the California Uniform Commercial Code.
<PAGE>
June __, 1997
Page 2
The opinions hereinafter expressed are subject to the following
qualifications:
(a) We express no opinion as to the effect of applicable bankruptcy and
other similar laws affecting the rights of creditors generally;
(b) We express no opinion as to the effect of rules of law governing
specific performance, liquidated damages, injunctive relief or other equitable
remedies;
(c) We express no opinion as to compliance with applicable anti-fraud
provisions of federal or state securities laws;
(d) We express no opinion as to the enforceability of the voting
provisions of Section 5(vii) of the Subscription Agreement; and
(e) We are members of the Bar of the State of California and we are not
expressing any opinion as to any matter relating to the laws of any jurisdiction
other than the laws of the United States of America and the laws of the State of
California.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Series A Preferred Stock issued under the Subscription Agreement
are validly issued, fully-paid and nonassessable, free and clear of any liens,
encumbrances, and preemptive rights or similar rights contained in the Company's
Second Restated Articles of Incorporation or Bylaws;
2. The Subscription Agreement has been duly authorized, and validly
executed and delivered by the Company and constitutes a valid and binding
agreement in accordance with its terms;
3. The execution and delivery of the Subscription Agreement and the
consummation of the issuance of the Series A Preferred Stock do not violate any
provision of the Second Restated Articles of Incorporation or Bylaws of the
Company, or, to our knowledge, any material indenture, mortgage, deed of trust
or other material agreement or instrument listed as an Exhibit in the Company's
most recent Form 10-K filed under the Securities Exchange Act of 1934, as
amended, or, to our knowledge, any existing applicable decree, judgment or order
of any court, federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any of its properties
or assets;
4. No authorization, approval or consent of or filing with any federal,
state or local governmental body of the United States is legally required for
the issuance and sale of the Series A Preferred Stock as contemplated by the
Subscription Agreement.
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<PAGE>
June __, 1997
Page 3
This opinion is furnished to the Investors solely for their benefit in
connection with the purchase of the Shares, and may not be relied upon by any
other person without our prior written consent.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
-3-
Exhibit 4.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June
25, 1997 is made and entered into between SIGMA DESIGNS, INC., a California
corporation (the "Company"), and RIC Equity Limited and Banque Edouard Constant
(the "Investors").
WHEREAS, the Company and the Investors have entered into that certain
Private Securities Subscription Agreement, dated as of the date hereof (the
"Subscription Agreement"), pursuant to which the Company will issue to the
Investors shares of its Series A Preferred Stock (the "Preferred Stock")
convertible as described in the Subscription Agreement to Common Stock of the
Company, no par value (the "Common Stock");
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investors' agreement to enter into the Subscription Agreement, the Company
has issued to each Investor a warrant (the "Warrant") dated June 25, 1997,
exercisable from time to time within three (3) years from the six (6) month
anniversary of the date of the closing of the purchase of the Warrants for the
purchase of an aggregate of 64,285 shares of Common Stock at a price specified
in such Warrant;
WHEREAS, pursuant to the terms of, and in partial consideration for,
the Investors' agreement to enter into the Subscription Agreement, the Company
has agreed to provide the Investors with certain registration rights with
respect to the Conversion Shares (as defined below);
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein and in the Subscription
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. Capitalized terms defined in the Subscription
Agreement or the Warrant shall have the same meanings herein as are ascribed to
them therein. In addition, the following terms shall have the meanings ascribed
below:
"Act" means the Securities Act of 1933, as amended.
"Material Event" means the happening of any event during the period
that the registration statement described in Section 2 hereof is required to be
effective as a result of which, in the reasonable judgment of the Company, such
registration statement or the related prospectus contains or may contain any
untrue statement of a material fact or omits or may omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
"Registrable Securities" means all of the Common Stock and any other
securities issued or issuable upon conversion of the Preferred Stock or upon
exercise of the Warrants as provided therein (together, the "Conversion
Shares"); provided, however, that any such conversion shares which have been
resold to the public under the Act shall cease to be Registrable Securities upon
such resale.
"Registration Statement" See Section 2.1(a).
<PAGE>
"Rule 144" means Rule 144 promulgated under the Act.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1. FORM S-3 REGISTRATION STATEMENT.
(a) Filing of Form S-3 Registration Statement. Subject to the
terms and conditions of this Agreement, the Company shall file with the
Securities and Exchange Commission (the "SEC") no later than forty-five (45)
days following the date of this Agreement a registration statement on Form S-3
under the Act (the "Registration Statement") for the registration of the resale
by the Investors of Common Stock to be issued upon conversion of the Preferred
Stock and upon exercise of the Warrant (or, if such form is unavailable for such
registration, on such other form as is available for such registration, which
Registration Statement shall state that, in accordance with Rule 416 promulgated
under the Act, such Registration Statement also covers such indeterminate number
of additional shares of Common Stock).
(b) Effectiveness of Registration Statements. The Company will
use its reasonable best efforts to have the Registration Statement declared
effective by the SEC by no later than one hundred twenty (120) days following
the date of this Agreement and to have the Registration Statement remain in
effect until the termination of this Agreement as provided in Section 5.1.
(c) Penalties for Failure to Obtain or Maintain Effectiveness
of Registration Statement. In the event the Company fails to obtain the
effectiveness of a Registration Statement within the time period set forth in
Section 2.1(b), the discount used to determine the Conversion Price (as defined
in the Certificate of Determination of Preferences of Series A Preferred Stock
of Sigma Designs, Inc.) of the Preferred Stock shall be adjusted one percent
(1%) higher for the first month after such one hundred twenty (120) day period
(or any portion thereof) the Registration Statement is not effective and for
each month thereafter (or any portion thereof) that the Registration Statement
is not effective, the discount shall be increased two percent (2%). In addition,
in the event the Company fails to maintain the effectiveness of a Registration
Statement (or the use of the underlying prospectus) throughout the period set
forth in Section 2.1(b), other than temporary suspensions due to a Material
Event not exceeding sixty (60) days in any one twelve (12) month period, the
Company shall pay to the Investors on a pro rata basis at the end of any
calendar month in which such a suspension has occurred, in cash liquidated
damages in an amount equal to $250 per day. Such liquidated damages amount shall
not be payable with respect to deferrals of filing of a Registration Statement
or suspensions of the effectiveness of a Registration Statement (or use of the
underlying prospectus) in accordance with Section 2.1(d), although any such
deferrals or suspensions shall be counted towards the sixty (60) days allowed by
the preceding sentence.
(d) Material Event. The Investors agree that, upon receipt of
any notice from the Company of the happening of a Material Event, the Investors
will forthwith discontinue disposition of the Registrable Securities pursuant to
any Registration Statement described in Section 2 until the Investors' receipt
of copies of supplemented or amended prospectuses prepared by the Company (which
the Company will use its commercially reasonable efforts to prepare and file
promptly), and, if so directed by the Company, the Investors will deliver to the
Company all copies in their possession, other than permanent file copies then in
the Investors' possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice. In no event shall the
Company delay causing to be effective a supplement or post-effective amendment
to any Registration Statement pursuant to Section 2 or the related prospectus,
for more than sixty (60) days during any twelve (12) month period.
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<PAGE>
ARTICLE III
REGISTRATION PROCEDURES
SECTION 3.1. FILINGS; INFORMATION. Whenever the Company is required to
effect or cause the registration of Registrable Securities pursuant to Section
2.1, the Company will use reasonable best efforts to effect the registration of
such Registrable Securities in accordance with the intended method of
disposition thereof as quickly as practicable, and in connection with any such
request:
(a) The Company will as expeditiously as possible but in no
event later than the time period prescribed by Section 2.1(a), prepare and file
with the SEC a registration statement on Form S-3 (if use of such form is then
available to the Company pursuant to the rules of the SEC and, if not, on such
other form promulgated by the SEC for which the Company then qualifies and which
counsel for the Company shall deem appropriate and which form shall be available
for the sale of the Registrable Securities to be registered thereunder in
accordance with the provisions of this Agreement and in accordance with the
intended method of disposition of such Registrable Securities), and use
reasonable best efforts to cause such filed Registration Statement to become and
remain effective (pursuant to Rule 415 under the Act or otherwise), and the
Company will as expeditiously as possible prepare and file with the SEC such
amendments and supplements to such Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective for the time periods prescribed by Section 2.1(b) and comply
with the provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during such period in accordance with the
intended methods of disposition by the Investors set forth in such Registration
Statement. Such Registration Statement shall cover the resale of the Registrable
Securities only. No other securities shall be registered under such Registration
Statement.
(b) The Company will, prior to filing a Registration Statement
or prospectus or any amendment or supplement thereto (excluding amendments
deemed to result from the filing of documents incorporated by reference
therein), furnish to the Investors and one firm of counsel representing the
Investors, copies of such Registration Statement as proposed to be filed,
together with exhibits thereto, which documents will be subject to review and
approval by such parties, and thereafter furnish to the Investors and their
counsel for their review and comment such number of copies of such Registration
Statement, each amendment and supplement thereto (in each case including all
exhibits thereto), the prospectus included in such Registration Statement
(including each preliminary prospectus) and such other documents or information
as the Investors or counsel may reasonably request in order to facilitate the
disposition of the Registrable Securities.
(c) After the filing of the Registration Statement, the
Company will promptly notify the Investors of any stop order issued or
threatened by the SEC in connection therewith and take all reasonable actions
required to prevent the entry of such stop order or to remove it if entered.
(d) The Company will use reasonable best efforts to (i)
register or qualify such Registrable Securities under such other securities or
blue sky laws of such jurisdictions in the United States as the Investors may
reasonably (in light of its intended plan of distribution) request, and (ii)
cause such Registrable Securities to be registered with or approved by such
other governmental agencies or authorities in the United States as may be
necessary by virtue of the business and operations of the Company and do any and
all other acts and things that may be reasonably necessary or advisable to
enable the Investors to consummate the disposition of the Registrable
Securities; provided that the Company will not be required to (A) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this paragraph (d), (B) subject itself to taxation
in any such jurisdiction or (C) consent or subject itself to general service of
process in any such jurisdiction.
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(e) The Company will promptly notify the Investors upon the
occurrence of any of the following events in respect of a Registration Statement
or related prospectus in respect of an offering of Registrable Securities: (i)
the declaration of the effectiveness of a Registration Statement; (ii) receipt
of any request for additional information by the SEC or any other federal or
state governmental authority during the period of effectiveness of the
Registration Statement for amendments or supplements to the Registration
Statement or related prospectus; (iii) the issuance by the SEC or any other
federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose; (iv) receipt of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (v) the happening of any event
which makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or which requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
the Registration Statement and the related prospectus will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances in which they were made; and (vi) the
Company's reasonable determination that a post-effective amendment to the
Registration Statement would be appropriate; and the Company will promptly make
available to the Investors any such supplement or amendment to the related
prospectus.
(f) The Company will enter into customary agreements and take
such other actions as are reasonably required in order to expedite or facilitate
the disposition of such Registrable Securities (the Investors may, at their
option, require that any or all of the representations, warranties and covenants
of the Company also be made to and for the benefit of the Investors). The
Investors understand that no sales of Shares may be underwritten and the Company
is under no obligation to enter into an underwriting agreement.
(g) The Company will otherwise comply with all applicable
rules and regulations of the SEC, including, without limitation, compliance with
applicable reporting requirements under the Exchange Act of 1934, as amended
(the "Exchange Act"), and will make available to its security holders, as soon
as reasonably practicable, an earning statement covering a period of twelve (12)
months, beginning within three (3) months after the effective date of the
Registration Statement, which earning statement shall satisfy the provisions of
Section 11(a) of the Act.
(h) The Company will use commercially reasonable efforts to
secure designation of all such Registrable Securities covered by such
Registration Statement as a Nasdaq "national market system security" within the
meaning of Rule 11Aa2-1 of the SEC.
(i) The Company will appoint a transfer agent and registrar
for all such Registrable Securities covered by such Registration Statement not
later than the effective date of such Registration Statement.
The Company may require the Investors to promptly furnish
in writing to the Company such information regarding the distribution of the
Registrable Securities as the Company may from time to time reasonably request
and such other information as may be legally required in connection with such
registration including, without limitation, all such information as may be
requested by the SEC or the National Association of Securities Dealers, Inc.
(the "NASD"). The Investors agree to provide such information as shall be
reasonably requested in connection with such registration within ten (10)
business days after receiving such written request and the Company shall not be
responsible for any delays in obtaining or maintaining the effectiveness of the
Registration Statement caused by the Investors' failure to timely provide such
information. The Investors agree that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3.1(e)
hereof, the Investors will forthwith discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until the Investors' receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3.1(e) hereof, and, if so directed by
the Company,
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the Investors will deliver to the Company all copies, other than permanent file
copies then in the Investors' possession, of the most recent prospectus covering
such Registrable Securities at the time of receipt of such notice. In the event
the Company shall give such notice, the Company shall extend the period during
which such Registration Statement shall be maintained effective (including the
period referred to in Section 3.1(a) hereof) by the number of days during the
period from and including the date of the giving of notice pursuant to Section
3.1(e) hereof to the date when the Company shall make available to the Investors
a prospectus supplemented or amended to conform with the requirements of Section
3.1(e) hereof.
SECTION 3.2. REGISTRATION EXPENSES. In connection with each
Registration Statement, the Company shall pay the following registration
expenses incurred in connection with the registration thereunder (the
"Registration Expenses"): (i) all registration and filing fees, (ii) fees and
expenses of compliance with securities or blue sky laws, (iii) printing
expenses, (iv) the Company's internal expenses (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), (v) the fees and expenses incurred in connection with the
listing of the Registrable Securities, (vi) subject to the limitations set forth
in the Subscription Agreement, reasonable fees and disbursements of counsel for
the Company and the Investors and customary fees and expenses for independent
certified public accountants retained by the Company (including the expenses of
any comfort letters or costs associated with the delivery by independent
certified public accountants of a comfort letter or comfort letters requested
pursuant to Section 3.1(h) hereof), and (vii) the fees and expenses of any
special experts retained by the Company in connection with such registration.
The Company shall have no obligation to pay any underwriting fees, discounts or
commissions attributable to the sale of Registrable Securities, or the cost of
any special audit required by the Investors, such costs to be borne by the
Investors.
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
SECTION 4.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless each Investor, its partners, Affiliates, officers,
directors, employees and duly authorized agents, and each Person or entity, if
any, who controls such Investor within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, together with the partners, Affiliates,
officers, directors, employees and duly authorized agents of such controlling
Person or entity (collectively, the "Controlling Persons"), from and against any
loss, claim, damage, liability, reasonable attorneys' fees, costs or expenses
and costs and expenses of investigating and defending any such claim
(collectively, "Damages"), joint or several, and any action in respect thereof
to which each Investor, its partners, Affiliates, officers, directors, employees
and duly authorized agents, and any such Controlling Person may become subject
under the Act or otherwise, insofar as such Damages (or proceedings in respect
thereof) arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
prospectus, supplement or amendment relating to the Registrable Securities or
any preliminary prospectus, or arises out of, or are based upon, any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
the same are based upon information furnished in writing to the Company by each
Investor expressly for use therein, and shall reimburse each Investor, its
partners, Affiliates, officers, directors, employees and duly authorized agents,
and each such Controlling Person for any legal and other expenses reasonably
incurred by such Investor, its partners, Affiliates, officers, directors,
employees and duly authorized agents, or any such Controlling Person in
investigating or defending or preparing to defend against any such Damages or
proceedings; provided, however, that the Company shall not be liable to such
Investor to the extent that (i) such Investor failed to send or deliver a copy
of the final prospectus with or prior to the delivery of written confirmation of
the sale by such Investor to the Person asserting the claim from which such
Damages arise, and (ii) the final prospectus would have corrected such untrue
statement or alleged untrue statement or such omission or alleged omission upon
which the claim is asserted and from which the Damages arise.
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SECTION 4.2. INDEMNIFICATION BY THE INVESTORS. Each Investor agrees to
indemnify and hold harmless the Company, its partners, Affiliates, officers,
directors, employees and duly authorized agents and each Person or entity, if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, together with the partners, Affiliates,
officers, directors, employees and duly authorized agents of such controlling
Person, to the same extent as the foregoing indemnity from the Company to the
Investor, but only with reference to information related to the Investor or its
plan of distribution, furnished in writing by the Investor or on the Investor's
behalf expressly for use in any Registration Statement or prospectus relating to
the Registrable Securities, or any amendment or supplement thereto, or any
preliminary prospectus. In case any action or proceeding shall be brought
against the Company or its partners, Affiliates, officers, directors, employees
or duly authorized agents or any such controlling Person or its partners,
Affiliates, officers, directors, employees or duly authorized agents, in respect
of which indemnity may be sought against the Investor, the Investor shall have
the rights and duties given to the Company, and the Company or its partners,
Affiliates, officers, directors, employees or duly authorized agents, or such
controlling Person, or its partners, Affiliates, officers, directors, employees
or duly authorized agents, shall have the comparable rights and duties given to
the Investor by Section 4.1. The Company shall be entitled to receive
indemnities on customary terms from Underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, to the same extent as provided above, with respect to information
so furnished in writing by such persons specifically for inclusion in any
prospectus or Registration Statement.
SECTION 4.3. CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after
receipt by any person or entity in respect of which indemnity may be sought
pursuant to Section 4.1 or 4.2 (an "Indemnified Party") of notice of any claim
or the commencement of any action, the Indemnified Party shall, if a claim in
respect thereof is to be made against the person or entity from whom such
indemnity may be sought (an "Indemnifying Party"), promptly notify the
Indemnifying Party in writing of the claim or the commencement of such action.
In the event an Indemnified Party shall fail to give such notice as provided in
this Section 4.3 and the Indemnifying Party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, the indemnification
provided for in Section 4.1 or 4.2 shall be reduced to the extent of any actual
prejudice resulting from such failure to so notify the Indemnifying Party;
provided, that the failure to notify the Indemnifying Party shall not relieve
the Indemnifying Party from any liability which it may have to an Indemnified
Party other than that liability arising under Section 4.1 or 4.2. If any such
claim or action shall be brought against an Indemnified Party, and it shall
notify the Indemnifying Party thereof, the Indemnifying Party shall be entitled
to participate therein, and, to the extent that it wishes, jointly with any
other similarly notified Indemnifying Party, to assume the defense thereof.
After notice from the Indemnifying Party to the Indemnified Party of its
election to assume the defense of such claim or action, the Indemnifying Party
shall not be liable to the Indemnified Party for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation; provided that the
Indemnified Party shall have the right to employ separate counsel to represent
the Indemnified Party and its controlling persons who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
by the Indemnified Party against the Indemnifying Party, but the fees and
expenses of such counsel shall be for the account of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) in the reasonable judgment of
the Company and such Indemnified Party, representation of both parties by the
same counsel would be inappropriate due to actual or potential conflicts of
interest between them, it being understood, however, that the Indemnifying Party
shall not, in connection with any one such claim or action or separate but
substantially similar or related claims or actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all Indemnified Parties, or for fees
and expenses that are not reasonable. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
claim or pending or threatened proceeding in respect of which the Indemnified
Party is or could have been a party and indemnity could have been sought
hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such
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Indemnified Party from all liability arising out of such claim or proceeding.
Whether or not the defense of any claim or action is assumed by the Indemnifying
Party, such Indemnifying Party will not be subject to any liability for any
settlement made without its consent.
SECTION 4.4. CONTRIBUTION. If the indemnification provided for in this
Article IV is unavailable to the Indemnified Parties in respect of any Damages
referred to herein, then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Damages as between the Company on the one
hand and the Investors on the other, in such proportion as is appropriate to
reflect the relative fault of the Company and of the Investors in connection
with such statements or omissions, as well as other equitable considerations.
The relative fault of the Company on the one hand and of the Investors on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and each Investor agrees that it would not be just and
equitable if contribution pursuant to this Section 4.4 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of the
Damages referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 4.4, contribution by any seller of Registrable Securities shall be
limited to the gross amount of proceeds received by such seller from the sale of
such Registrable Securities. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. TERM. The registration rights provided to the holders of
Registrable Securities hereunder shall terminate on the earlier of (i) the
second anniversary of the date of this Agreement, or (ii) as to any Buyer, the
date as of which such Buyer may sell all of the Registrable Securities that it
holds in reliance upon Rule 144 promulgated under the Securities Act (or
successor thereto), provided, however, that the provisions of Article IV hereof
shall survive any termination of this Agreement.
SECTION 5.2. RULE 144. The Company covenants that it will file all
reports required to be filed by it under the Act and the Exchange Act in a
timely manner and that it will take such further action as holders of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable the Investors to sell Registrable Securities without
registration under the Act within the limitation of the exemptions provided by
(a) Rule 144, as such Rule may be amended from time to time, or (b) any similar
rule or regulation hereafter adopted by the SEC. If at any time the Company is
not required to file such reports, it will, upon the request of any holder of
Registrable Securities, make publicly available other information so long as
necessary to permit sales pursuant to Rule 144. Upon the request of the
Investors, the Company will deliver to the Investors a written statement as to
whether it has complied with such requirements.
SECTION 5.3. AMENDMENT AND MODIFICATION. Any provision of this
Agreement may be waived, provided that such waiver is set forth in a writing
executed by the party against whom the enforcement of such waiver is sought. The
provisions of this Agreement, including the provisions of this sentence, may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not
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be given, unless the Company has obtained the written consent of the holders of
a majority of the then outstanding Registrable Securities. Notwithstanding the
foregoing, the waiver of any provision hereof with respect to a matter that
relates exclusively to the rights of holders of Registrable Securities whose
securities are being sold pursuant to a Registration Statement and does not
directly or indirectly affect the rights of other holders of Registrable
Securities may be given by holders of at least a majority of the Registrable
Securities being sold by such holders; provided that the provisions of this
sentence may not be amended, modified or supplemented except in accordance with
the provisions of the immediately preceding sentence. No course of dealing
between or among any Person having any interest in this Agreement will be deemed
effective to modify, amend or discharge any part of this Agreement or any rights
or obligations of any person under or by reason of this Agreement.
SECTION 5.4. SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT. This Agreement
and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. The Investors
may assign their rights under this Agreement to any subsequent holder of
Preferred Stock, Warrants or Conversion Shares, provided that the Company shall
have the right to require any holder of Registrable Securities to execute a
counterpart of this Agreement as a condition to such holder's claim to any
rights hereunder. This Agreement, together with the Subscription Agreement and
the Warrants sets forth the entire agreement and understanding between the
parties as to the subject matter hereof and merges and supersedes all prior
discussions, agreements and understandings of any and every nature among them.
SECTION 5.5. SEPARABILITY. In the event that any provision of this
Agreement or the application of any provision hereof is declared to be illegal,
invalid or otherwise unenforceable by a court of competent jurisdiction, the
remainder of this Agreement shall not be affected except to the extent necessary
to delete such illegal, invalid or unenforceable provision unless that provision
held invalid shall substantially impair the benefits of the remaining portions
of this Agreement.
SECTION 5.6. NOTICES. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given hereunder or
which are given with respect to this Agreement shall be in writing and shall be
personally served or deposited in the mail, registered or certified, return
receipt requested, postage prepaid, or delivered by reputable air courier
service with charges prepaid, or transmitted by hand delivery, telegram, telex
or facsimile, addressed as set forth below, or to such other address as such
party shall have specified most recently by written notice: (i) if to the
Company, to: Sigma Designs, Inc., 46501 Landing Parkway, Fremont, CA 94538;
Attention: Mr. Thinh Q. Tran, Facsimile No.: (510) 770-2691, with copies (which
shall not constitute notice) to: Wilson Sonsini Goodrich & Rosati, 650 Page Mill
Road, Palo Alto, CA 94304 Attention: Tor Braham, Esq., Facsimile No.: (415)
493-6811; and (ii) if to the Investors, to either (a) RIC Equity Limited, c/o
Rana Investment Company, P.O. Box 60148, Riyadh 11545, Saudi Arabia, Phone No.:
(9661) 462-6262, Fax: (9661) 462-8817 or (b) Banque Edouard Constant, c/o KERNCO
Trust SA, 2, rue Jargonnant P.O. Box 6432 CH 1211 Geneva 6, Switzerland,
Attention: Sunder Advoni Phone No.: (011)(412) 270-77038, Fax: (011) (412)
270-77040. Notice shall be deemed given on the date of service or transmission
if personally served or transmitted by telegram, telex or facsimile. Notice
otherwise sent as provided herein shall be deemed given on the third business
day following the date mailed or on the second business day following delivery
of such notice by a reputable air courier service.
SECTION 5.7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING
EFFECT TO PROVISIONS GOVERNING CONFLICTS OF LAWS THEREOF.
SECTION 5.8. HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not constitute a part of this Agreement,
nor shall they affect their meaning, construction or effect.
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SECTION 5.9. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original instrument and all
of which together shall constitute one and the same instrument.
SECTION 5.10. FURTHER ASSURANCES. Each party shall cooperate and take
such action as may be reasonably requested by another party in order to carry
out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
SECTION 5.11. ARBITRATION; REMEDIES. Any dispute that arises between
the parties to this Agreement shall first be submitted for resolution to
arbitration under the rules of the American Arbitration Association of Santa
Clara County, California. In the event of a breach or a threatened breach by any
party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach will be entitled to specific performance
of its rights under this Agreement or to injunctive relief, in addition to being
entitled to exercise all rights provided in this Agreement and granted by law.
The parties agree that the provisions of this Agreement shall be specifically
enforceable, it being agreed by the parties that the remedy at law, including
monetary damages, for breach of any such provision will be inadequate
compensation for any loss and that any defense or objection in any action for
specific performance or injunctive relief that a remedy at law would be adequate
is waived.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.
SIGMA DESIGNS, INC.
By:
----------------------------------------
Thinh Q. Tran
Chairman and Chief Executive Officer
INVESTOR
By:
----------------------------------------
Name:
Title:
INVESTOR
By:
----------------------------------------
Name:
Title:
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EXHIBIT 5.1
August 6, 1997
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 August 7, 1997 (the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of 1,100,000 shares of your Common Stock, no
par value (the "Shares"), all of which are authorized and will be 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
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Sigma Designs, Inc. on Form S-3 of our report dated February 28,
1997, appearing in the Annual Report on Form 10-K of Sigma Designs, Inc. for the
year ended January 31, 1997 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
August 4, 1997
