As filed with the Securities and Exchange Commission on March 15, 1998
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:
DAVID A. SEGRE, 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>
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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(2) Price(2) Fee
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<S> <C> <C> <C> <C>
Common Stock, no par value........... 900,000 shares $3.08 $2,770,312.50 $817.24
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<FN>
(1) Pursuant to Rule 416 under the Securities Act of 1933, as amended, this
Registration Statement also covers such indeterminate additional shares of
Common Stock as may become issuable as a result of decreases in the
conversion price of the Company's Series A Convertible Preferred Stock and
any future antidilution adjustments in accordance with the terms of the
Series A Convertible Preferred Stock, the underlying shares of Common Stock
of which are included for registration, as well as any future antidilution
adjustments with respect to the warrant to purchase Common Stock.
(2) 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 March 12, 1998,
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>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED MARCH 15, 1998
PROSPECTUS
900,000 SHARES
SIGMA DESIGNS, INC.
COMMON STOCK
This Prospectus may be used only in connection with the resale, from
time to time, of up to 900,000 shares (the "Shares") of Common Stock, no par
value per share (the "Common Stock"), of Sigma Designs, Inc. ("Sigma" or the
"Company"), by the selling shareholder identified below (the "Selling
Shareholder"). All of the Shares covered hereby are to be sold by the Selling
Shareholder who purchased shares of Series A Convertible Preferred Stock
convertible into shares of Common Stock and a warrant to purchase shares of
Common Stock from a purchaser who originally purchased shares of Series A
Convertible Preferred Stock and a warrant to purchase Common Stock in a private
placement transaction. See "Selling Shareholder." The Company will not receive
any of the proceeds from the sale of the Shares by the Selling Shareholder. The
expenses incurred in registering the Shares, including legal and accounting
fees, will be paid by the Company.
All or a portion of the Shares offered hereby may, without limitation
and from time to time, be sold by the Selling Shareholder on the Nasdaq National
Market, in privately negotiated transactions, or otherwise pursuant to block
trades, broker-dealer transactions, exchange transactions, short sales, or other
methods. Sales may be made at market prices or negotiated prices. See "Plan of
Distribution."
The Company's Common Stock is traded on the Nasdaq National Market
under the symbol "SIGM." On March 12, 1998, the last sale price for the Common
Stock as reported on the Nasdaq National Market was $3-1/8 per share.
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SEE "RISK FACTORS" ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS , 1998
<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 Quarterly Report on Form 10-Q for the quarter ended July 31,
1997; (iv) The Company's Quarterly Report on Form 10-Q for the quarter ended
October 31, 1997; (v) the Company's Proxy Statement relating to the Company's
Annual Meeting of Shareholders to be held on June 6, 1997, and (vi) 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. Through the end of the third quarter of fiscal year
1998, the Company's total accumulated deficit is $38,141,000. 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.
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, Chromatic 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 five 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.
The Company derives a substantial portion of its revenues from sales to
the Asia Pacific region, a region of the world subject to increased levels of
economic instability. There can be no assurance that such instability will not
have a material adverse effect on the Company's results of operations.
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.
Potential for Dilution.
Series B Preferred Stock. As of March 9, 1998, 5,000 shares of the
Company's Series B Convertible Preferred Stock (the "Series B Preferred Stock")
were issued and outstanding. Each share of the Series B Preferred Stock is
convertible into such number of shares of Common Stock as is determined by
dividing the stated value ($1,000) of the share of Series B Preferred Stock
(under certain circumstances, such value may be increased by a premium based on
the number of days the Series B Preferred Stock is held) by the then current
Conversion Price (which is deteremined by reference to the then current market
price). If converted on March 9, 1998, the Series B Preferred Stock would have
been convertible into approximately 1,666,667 shares of Common Stock, but this
number of shares could prove to be significantly greater in the event of a
decrease in the trading price of the Common Stock. Purchasers of Common Stock
could therefore experience substantial dilution of their investment upon
conversion of the Series B Preferred Stock. The shares of Series B Stock are not
registered and may be sold only if registered under the Securities Act or sold
in acordance with an applicable exemption from registration, such as Rule 144.
The shares of Common Stock into which the Series B Preferred Stock may be
converted have been registered pursuant to a Registration Statement.
As of March 9, 1998, "Warrants" to purchase 50,000 shares of Common
Stock issued to the purchasers of the Series B Preferred Stock and exercisable
beginning on May 1, 1998 for a period of three years at a price based on a
premium to the market price as of April 30, 1998 (as may be adjusted from time
to time under certain antidilution provisions) were outstanding. The shares of
Common Stock issuable upon exercise of these warrants have been registered
pursuant to a Registration Statement.
As of March 9, 1998, 5,754,398 shares of Common Stock were reserved for
issuance upon exercise of the Company's outstanding warrants and options
(excluding the Warrants) and an additional 3,400,000 shares of Common Stock were
reserved for issuance upon conversion of the preferred stock and exercise of the
Warrants. At March 9, 1998, there were 11,736,415 shares of Common Stock
outstanding. Of these outstanding shares, 11,714,632 were freely tradeable
without restriction under the Securities Act unless held by affiliates.
Series A Preferred Stock. As of March 9, 1998, 23,800 shares of the
Company's Series A Convertible Preferred Stock (the "Series A Preferred Stock")
were issued and outstanding. Each share of the Series A Preferred Stock is
convertible into such number of shares of Common Stock as is determined by
dividing the stated value ($100) of the share of Series A Preferred Stock by the
then current Conversion Price (which is determined by reference to a formula
that includes a discount, adjusted for certain events, on the lowest trading
price of the common stock of the Company over a five day period ending on the
day prior to conversion as further described in the Certificate of Determination
of Preferences of Series A Preferred Stock). If converted on March 9, 1998, the
Series A Preferred Stock would have been convertible into approximately 790,698
shares of Common Stock, but this number of shares could prove to be
significantly greater in the event of a decrease in the trading price of the
Common Stock. Purchasers of Common Stock could also experience substantial
dilution of their investment upon conversion of the Series A Preferred Stock.
The shares of Series A Stock are currently not registered and may be sold only
if registered under the Securities Act or sold in acordance with an applicable
exemption from registration, such as Rule 144. A portion of the shares of Common
Stock into which the Series A Preferred Stock may be converted has been
previously registered and an additional portion is being registered for resale
by the Selling Shareholder pursuant to this Registration Statement.
As of March 9, 1998, a warrant to purchase 57,142 shares of Common
Stock issued to a purchaser of the Series A Preferred Stock and exercisable
beginning on April 30, 1998 for a period of three years at a price based on a
premium to the market price as of April 30, 1998 (as may be adjusted from time
to time under certain antidilution provisions) was outstanding. A portion of the
shares of Common Stock issuable upon exercise of this warrant has been
previously registered and an additional portion is being registered for resale
by the Selling Shareholder pursuant to this Registration Statement.
-7-
<PAGE>
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.
-8-
<PAGE>
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.
-10-
<PAGE>
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 Kapok Computers, TigerDirect, Inc., Royal Computer,
ASE Technologies, 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.
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 January 31, 1998, the Company had a staff of 35 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 certain software and
hardware features in current and future versions of REALmagic. The Company
currently has eleven pending patent applications for its REALmagic technology.
Five 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 January 31, 1998, the Company had 71 full-time employees,
including 35 in research and development, 12 in marketing, sales, and support,
11 in operations, and 13 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.
Certain Accounting Changes
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). SFAS
128 replaced the previously reported primary and fully diluted earnings per
share with basic and diluted earnings per share. Basic earnings per share
excludes dilution and is computed by dividing net income available to common
shareholders by the weighted average of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock.
<TABLE>
The following table presents selected financial data which includes earnings per
share amounts calculated in accordance with SFAS 128 (the table includes all
periods for which earnings per share amounts were previously presented in the
Form 10-K and Forms 10-Q which are incorporated by reference in this document):
<CAPTION>
(Dollars in 000's) Fiscal year ended January 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net Revenues $41,214 $26,374 $43,700 $34,989 $27,058
Net Income (Loss) Available to
Common Shareholders $1,529 ($14,708) ($8,773) ($29,546) ($7,166)
Net Income (Loss) Per Share
- Basic $0.16 ($1.88) ($1.20) ($5.15) ($1.37)
- Diluted $0.14 ($1.88) ($1.20) ($5.15) ($1.37)
Shares Used in Computation
- Basic 9,843 7,822 7,307 5,733 5,234
- Diluted 11,259 7,822 7,307 5,733 5,234
</TABLE>
<TABLE>
<CAPTION>
Quarter ended,
October 31, July 31, April 30, January 31, October 31, July 31, April
1997 1997 1997 1997 1996 1996 30, 1996
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenues $10,022 $8,593 $8,507 $9,674 $12,727 $10,078 $8,735
Net Income (Loss) Available to
Common Shareholders ($64) ($4,406) ($598) $222 $1,062 $349 ($104)
Net Income (Loss) Per Share
- Basic ($0.01) ($0.40) ($0.06) $0.02 $0.11 $0.04 ($0.01)
- Diluted ($0.01) ($0.40) ($0.06) $0.02 $0.09 $0.03 ($0.01)
Shares Used in Computation
- Basic 10,970 10,916 10,852 10,318 9,931 9,773 9,267
- Diluted 10,970 10,916 10,852 11,615 11,441 11,377 9,267
</TABLE>
-13-
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Shares
hereunder by the Selling Shareholders.
SELLING SHAREHOLDER
On March 11, 1998, the Company, Banque Edouard Constant SA ("BEC"), and
KA Investments LDC (the "Selling Shareholder") entered into an Assignment and
Assumption Agreement (the "Assignment Agreement") pursuant to which, subject to
certain conditions, the Selling Shareholder purchased from BEC 15,000 shares of
Series A Convertible Preferred Stock (the "Preferred Stock") of the Company
convertible into shares of Common Stock of the Company and a warrant exercisable
for 21,428 shares of Common Stock of the Company exercisable beginning on or
after April 30, 1998 (the "Warrant"). The Company and BEC had previously entered
into a Series A Preferred Stock Private Securities Subscription Agreement dated
as of June 25, 1997 (the "Purchase Agreement"), pursuant to which BEC purchased
a warrant exercisable for 57,142 shares of Common Stock of the Company beginning
April 30, 1998 and 40,000 shares of Series A Convertible Preferred Stock. The
Preferred Stock is now convertible into Common Stock of the Company subject to
the restrictions described in the Purchase Agreement and the Certificate of
Determination of Preferences of Series A Preferred Stock. BEC had also
previously entered into a Registration Rights Agreement with the Company (the
"Registration Rights Agreement").
Pursuant to the Assignment Agreement, the Selling Shareholder obtained
certain registration rights under the Registration Rights Agreement relating to
the Preferred Stock and the Warrant. This Registration Statement has been filed
by the Company pursuant to the Assignment Agreement. Under the Assignment
Agreement, the Selling Shareholder is restricted from, among other things,
exercising its right to convert the Preferred Stock or offering, selling, short
selling, or otherwise encumbering or disposing of any shares of Common Stock
which would be received upon conversion of the Preferred Stock without consent
of the Company within 90 days following the closing of the Assignment Agreement
and is restricted from exercising the Warrant before April 30, 1998. The
Preferred Stock and the Warrant are also subject to the provisions of the
Purchase Agreement and the Registration Rights Agreement.
<TABLE>
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of March 13, 1998 by the
Selling Shareholder and the number of shares of Common Stock covered by this
Prospectus. The Selling Shareholder has not held any position or office or had a
material relationship with the Company or any of its affiliates within the past
three years.
<CAPTION>
Shares of Common
Number of Stock Beneficially
Shares of Common Shares of Owned
Stock Beneficially Common After Offering(1)
Owned Prior to Stock ----------------------
Name and Address Offering(1) Being Offered Number Percent
- ------------------------------------- ----------------------------- -------------- ----------------------
<S> <C> <C> <C> <C>
KA Investments LDC 900,000(2)(3) 900,000(2)(3) 0(4) 0(4)
c/o Tamarchan Capital Management
1712 Hopkins Crossroads
Minnetonka, Minnesota 55305
<FN>
- ---------------------------
(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 sixty
(60) days of the Offering through the conversion of the Preferred Stock or
the exercise of the warrant.
(2) Includes the number of shares of Common Stock issuable upon (i) conversion
of the Preferred Stock (the price of which will fluctuate from time to time
based on changes in the market price of the Common Stock and provisions in
the formula for determining the conversion price) and (ii) exercise of the
Warrant exercisable on or after April 30, 1998 to purchase 21,428 shares of
Common Stock. The Preferred Stock is not convertible for ninety (90) days
following the closing of the Assignment Agreement and the Warrant is not
exercisable until April 30, 1998. Also includes an indeterminate number of
shares of Common Stock that may become issuable to prevent dilution
resulting from stock splits, stock dividends and conversion price or
exercise price adjustments, which are included pursuant to Rule 416 under
the Securities Act of 1933, as amended.
(3) In order to provide for (i) fluctuations in the market price of the Common
Stock and (ii) provisions in the formula for determining the conversion
price of the Preferred Stock provided for in the terms thereof, the
aggregate number of shares of Common Stock registered hereby exceeds the
aggregate number of such shares issuable upon conversion of the Preferred
Stock at the conversion price in effect on the date hereof.
(4) Assumes sale of all shares of Common Stock offered hereby.
</FN>
</TABLE>
-14-
<PAGE>
PLAN OF DISTRIBUTION
The Selling Shareholder may, from time to time, sell all or a portion
of the Shares on the Nasdaq National Market in privately negotiated transactions
or otherwise, at fixed prices that may be changed, at market prices prevailing
at the time of sale, at prices related to such market prices or at negotiated
prices. The Shares may be sold by the Selling Shareholder by one or more of the
following methods, without limitation: (a) block trades in which the broker or
dealer so engaged will attempt to sell the Shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction, (b)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this Prospectus, (c) an exchange distribution in
accordance with the rules of such exchange, (d) ordinary brokerage transactions
and transactions in which the broker solicits purchasers, (e) privately
negotiated transactions, (f) short sales and (g) a combination of any such
methods of sale. In effecting sales, brokers and dealers engaged by the Selling
Shareholder may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions or discounts from the Selling Shareholder (or,
if any such broker-dealer acts as agent for the purchaser of such shares, from
such purchaser) in amounts to be negotiated which are not expected to exceed
those customary in the types of transactions involved. Broker-dealers may agree
with the Selling Shareholder to sell a specified number of such Shares at a
stipulated price per share, and, to the extent such broker-dealer is unable to
do so acting as agent for a Selling Shareholder, to purchase as principal any
unsold Shares at the price required to fulfill the broker-dealer commitment to
the Selling Shareholder. Broker-dealers who acquire Shares as principal may
thereafter resell such Shares from time to time in transactions (which may
involve block transactions and sales to and through other broker-dealers,
including transactions of the nature described above) in the over-the-counter
market or otherwise at prices and on terms then prevailing at the time of sale,
at prices then related to the then-current market price or in negotiated
transactions and, in connection with such resales, may pay to or receive from
the purchasers of such Shares commissions as described above. The Selling
Shareholder may also sell the Shares in accordance with Rule 144 under the
Securities Act, rather than pursuant to this Prospectus.
The Selling Shareholder and any broker-dealers or agents that
participate with the Selling Shareholder in sales of the Shares may be deemed to
be "underwriters" withing the meaning of the Securities Act in connection with
such sales. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the Shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.
From time to time the Selling Shareholder may engage in short sales,
short sales against the box, puts and calls and other transactions in securities
of the Company or derivatives thereof, and may sell and deliver the Shares in
connection therewith or in settlement of securities loans. If the Selling
Shareholder engages in such transaction, the Conversion Price may be affected.
From time to time the Selling Shareholder may pledge their Shares pursuant to
the margin provisions of its customer agreements with its brokers. Upon a
default by the Selling Shareholder, the broker may offer and sell the pledged
Shares from time to time.
The Company is required to pay all fees and expenses incident to the
registration of the Shares, including one half of any fees and disbursements
(which half is not to exceed an aggregate of $5,000) of counsel to the Selling
Shareholder. The Company has agreed to indemnify the Selling Shareholder against
certain losses, claims, damages and 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 have 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............................................................... 8
Use of Proceeds...........................................................14
Selling Shareholder ......................................................14
Plan of Distribution..................................................... 15
Legal Matters............................................................ 15
Experts.................................................................. 15
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.
900,000 Shares
SIGMA DESIGNS, INC.
Common Stock
------------
PROSPECTUS
------------
March __, 1998
-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..... $ 817
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.......................................... $97,317
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 the
Company and the initial purchasers of the Series A
Preferred Stock and warrants.
4.2* Form of Registration Rights Agreement by and between
the Company the initial purchasers of the Series A
Preferred Stock and warrants.
4.3 Assignment and Assumption Agreement by and among the
Company, BEC and the Selling Shareholder.
4.4 Form of Stock Purchase Warrant.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, counsel for the Registrant.
23.1 Independent Auditors' Consent.
23.2 Consent of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, counsel for the Registrant
(included in Exhibit 5.1).
24.1 Power of Attorney.
* Incorporated by reference to Registration Statement No. 333-33147 (filed
August 7, 1997).
- ---------------------------
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 10th day of March 1998.
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 March 15, 1998
- -------------------------------------- Executive Officer (Principal Executive Officer)
Thinh Q. Tran
/s/ Kit Tsui Director of Finance, Chief Financial Officer, March 15, 1998
- -------------------------------------- Secretary (Chief Financial and Accounting Officer)
Kit Tsui
/s/ William J. Almon Director March 15, 1998
- --------------------------------------
William J. Almon
/s/ William Wang Director March 15, 1998
- --------------------------------------
William Wang
*By: /s/ Thinh Q. Tran March 15, 1998
- --------------------------------------
Attorney-in-Fact
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER
- --------------
4.1* Form of Subscription Agreement by and between the Company
and the initial purchasers of the Series A Preferred
Stock and warrants.
4.2* Form of Registration Rights Agreement by and between the
Company the initial purchasers of the Series A Preferred
Stock and warrants.
4.3 Assignment and Assumption Agreement by and among the
Company, BEC and the Selling Shareholder.
4.4 Form of Stock Purchase Warrant.
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.)
* Incorporated by reference to Registration Statement No. 333-33147 (filed
August 7, 1997).
II-5
Exhibit 4.3
Assignment and Assumption
Agreement by and between the
Company, BEC and the Selling Shareholder
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement"), dated as of
March 11, 1998, among Banque Edouard Constant, a Swiss corporation ("Assignor"),
KA Investments LDC, a Cayman Islands corporation ("Assignee"), and Sigma
Designs, Inc., a California corporation (the "Company").
WHEREAS, the Company and Assignor entered into a certain Subscription
Agreement (the "Subscription Agreement"; capitalized terms used and not
otherwise defined herein shall have the respective meanings set forth in the
Subscription Agreement), dated as of June 25, 1997;
WHEREAS, in connection with the transactions contemplated by the
Subscription Agreement, the Company delivered to Assignor 40,000 shares of
Series A Preferred Stock (the "Shares") and a common stock purchase warrant
pursuant to which the Assignor is currently entitled to acquire 57,142 shares of
Common Stock of the Company at an exercise price of $9.425, as set forth
thereunder (the "Warrant") (the shares of Common Stock underlying the Warrant
are referred to as the "Warrant Shares");
WHEREAS, the Assignor wishes to hereby sell, transfer, convey and
assign to the Assignee its right, title and interest in 15,000 Shares (the "Sold
Shares") and 21,428 Warrant Shares (the "Sold Warrants," together with the Sold
Shares, the "Securities") and to retain its right, title and interest in the
remaining 8,000 Shares and the remaining 35,714 Warrant Shares;
WHEREAS, in connection with the transactions contemplated by the
Subscription Agreement, the Company granted the Assignor certain registration
rights regarding the Common Stock underlying the Shares (the "Underlying
Shares") and the Warrant Shares pursuant to the Registration Rights Agreement,
dated as of June 25, 1997 between the Company and the Assignor (the
"Registration Rights Agreement");
WHEREAS, pursuant to the Registration Rights Agreement, on August 7,
1997, the Company filed a registration statement on Form S-3 with the Securities
and Exchange Commission (the "SEC") covering the resale of the Underlying Shares
and Warrant Shares (the "Registration Statement") and, in connection with the
closing of the transactions contemplated hereunder, the Company will file a new
registration statement (the "New Registration Statement") in order to register
an additional 900,000 shares of Common Stock pursuant to the terms of the
Registration Rights Agreement (the "Additional Registrable Securities") and to
include the Assignee as a selling shareholder thereunder with respect to its
Underlying Shares and Warrant Shares (the "Assignee's Underlying Share"); and
WHEREAS, the Company has agreed to permit the sale, transfer,
conveyance and assignment of the Securities, subject to the terms and conditions
set forth below.
-1-
<PAGE>
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants herein set forth and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Assignment of the Securities. Subject to the terms and conditions
set forth in this Agreement and the Escrow Agreement among the Company, Assignor
and Assignee, dated the date hereof (the "Escrow Agreement"), the Assignor
hereby sells, transfers, conveys and assigns to Assignee the Securities, the
Assignee accepts such sale, transfer, conveyance and assignment in reliance upon
the Assignor's representations and warranties set forth in Schedule A and the
Company's representations and warranties set forth in Schedule B and the Company
agrees to permit such sale, transfer, conveyance and assignment of the
Securities in reliance upon the Assignee's representations and warranties set
forth in Schedule C.
2. Purchase Price. The purchase price for the Securities shall be
$1,500,000 (the "Purchase Price").
3. Filing of the New Registration Statement. The Company acknowledges
and confirms that within five (5) business days of its receipt of a
fully-executed copy of this Agreement (the "Filing Date"), it will file the New
Registration Statement to include the Additional Registrable Securities and name
the Assignee as a selling shareholder thereunder with respect to the Assignee's
Underlying Shares, provided, however, that not less than three (3) business days
prior to the Filing Date, the Company shall (i) furnish to the Assignee and its
counsel, copies of all such documents proposed to be filed in connection with
the New Registration Statement, which documents (other than those incorporated
or deemed to be incorporated by reference) will be subject to the review of the
Assignee and its counsel, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the opinion of respective counsel to the Assignee, to conduct a
reasonable investigation within the meaning of the Securities Act. The Company
shall not file the New Registration Statement if the Assignee is reviewing the
New Registration Statement and shall reasonably object on a timely basis.
Notwithstanding anything to the contrary contained herein, in the event that
either (i) the Company and the Assignee are unable to agree on the language to
be used in the New Registration Statement, or (ii) the New Registration
Statement has not been filed with the SEC by the Filing Date, the Assignee shall
have the right to terminate this Agreement at any time after the Filing Date
(the "Assignee's Termination Right").
4. Closing of the Sale of the Securities.
(a) The closing for the sale of the Securities (the "Closing")
shall, subject to the terms of the Escrow Agreement, take place two (2) business
days following the date on which the Escrow Agent has received a copy of the New
Registration Statement, together with proof reasonably satisfactory to the
Assignee that such New Registration Statement has been filed with the SEC.
-2-
<PAGE>
(b) At the Closing, the Escrow Agent, in accordance with and
subject to the terms and conditions of the Escrow Agreement, shall deliver (i)
to the Assignee, (x) a copy of the New Registration Statement which has been
filed with the SEC, (y) now stock certificate(s) registered in the name of the
Assignee reflecting the ownership of 15,000 shares of Series A Preferred Stock
by the Assignee, and (z) a new common stock purchase warrant registered in the
name of the Assignee (the "Assignee Warrant") in the form of the Warrant, to
acquire 21,428 shares of Common Stock, which Assignee Warrant shall contain the
same terms as the Warrant, except that the exercise price of the Assignee
Warrant shall be 130% of the average closing bid price of the Common Stock for
the five days trading days immediately preceding May 1, 1998, provided, that
such exercise price shall not exceed $9.425, (ii) to the Assignor, (x) the
Purchase Price, and (y) a new common stock purchase warrant registered in the
name of the Assignor (the "Assignor Warrant"), in the form of the Warrant, to
acquire 35,714 shares of Common Stock, which Assignor Warrant shall contain the
same terms as the Assignee Warrant, (iii) to the Company, the old warrant,
representing the Warrant, previously delivered to the Assignor in connection
with the Subscription Agreement, and (iv) to the party entitled thereto, all
other documents, instruments and writings, if any, required to have been
delivered at or prior to such Closing by any party hereto pursuant to this
Agreement or the Escrow Agreement.
5. Certain Agreements of the Company.
(a) The Company acknowledges and confirms that (i) the
Assignee is an intended beneficiary hereof and shall be entitled to enforce all
of the rights and benefits of a Purchaser under the Purchase Agreement as if it
were a party thereto, and (ii) the Assignee's Underlying Shares shall be deemed
to be "Registrable Securities" (as defined in the Registration Rights
Agreement), and that the Assignee shall have the same registration rights with
respect to the Assignee's Underlying Shares as all other owners of "Registrable
Securities" have under the Registration Rights Agreement as if it were a party
thereto.
(b) The Company acknowledges and confirms that if the New
Registration Statement is not declared effective by the SEC on or prior to the
60th day following the date of the Closing (the "Effectiveness Date") the
Company shall pay to the Assignee $15,000 on the Effectiveness Date as
liquidated damages and not as a penalty. Thereafter, the Company shall pay to
the Assignee, as liquidated damages and not as a penalty, $45,000 on each
monthly anniversary following the Effectiveness Date in which the New
Registration Statement has not been declared effective by the SEC. The
Effectiveness Date will be extended, as applicable, by the number of days, in
excess of two (2), during which the proposed registration statement was reviewed
by the Assignee and its counsel pursuant to Section 3 hereof.
(c) At the Closing, the Company shall pay one half (1/2) of
the legal fees and expenses of the Assignee incident to the preparation and
negotiation of documents relating to the transactions contemplated by this
Agreement, up to a maximum of $5,000.
-3-
<PAGE>
(d) At the Closing, the Company agrees to pay to the Assignor
accrued and unpaid dividends up to and including the date of the Closing and a
special payment of 1.5% of the aggregate Original Issue Price of the Sold
Shares.
(e) The Assignee and the Company agree that the Assignee's
right to receive dividends on the Sold Shares shall begin on the day immediately
following the Closing.
6. Certain Agreements of the Assignee.
(a) The Assignee agrees that it will not exercise its right to
convert the Sold Shares into shares of Common Stock prior to 90 days following
the date of the Closing.
(b) The Assignee agrees further that until the day the
Assignee validly exercises its right to convert the Sold Shares into shares of
Common Stock (the "Lock-up Period"), it will not, without the express prior
written consent of the Company, offer, sell, make any short sale of, loan,
encumber, grant any option for the purchase of, or otherwise, dispose of (the
"Resale Restrictions"), any securities of the Company beneficially owned or
otherwise held by the Assignee as of the date hereof or hereafter acquired by
the Assignee (collectively, the "Restricted Securities"). The foregoing Resale
Restrictions are expressly agreed to preclude the holder of the Restricted
Securities from engaging in any hedging or other transaction which may lead to
or result in a sale of Restricted Securities during the Lock-up Period, even if
such Restricted Securities would be sold by someone other than the Assignee.
Such prohibited hedging or other transactions would include, without limitation,
any short sale (whether or not against the box), any pledge or any purchase,
sale or grant of any right (including, without limitation, any put or call
option) with respect to any of the Restricted Securities. The Resale
Restrictions shall not apply to the conversion of the Sold Shares into Common
Stock as contemplated by this Agreement but shall apply to the Common Stock
issued upon such conversion. The Assignee agrees and consents to the entry of
stop transfer instructions with the transfer agent for the Company's Common
Stock against any transfer of shares of Common Stock by the undersigned in
contravention of the Resale Restrictions.
(c) The Assignee 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 the Common Stock with the intention of causing a reduction in the
Conversion Price.
7. Miscellaneous.
(a) Authority. Each of the Company, the Assignor and the
Assignee hereby represent and warrant to the other that each has the requisite
power and authority to enter into and to consummate the transactions
contemplated by this Agreement, that the execution and delivery of this
Agreement and the transactions contemplated by this Agreement have been duly
authorized by all necessary action, that this Agreement has been validly
executed and delivered, and that this Agreement constitutes its valid, legal and
binding obligation, enforceable against it in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
-4-
<PAGE>
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(b) Further Assurances. The parties hereto agree to execute
such other documents and instruments as may be reasonably required to effectuate
the sale, transfer, conveyance and assignment contemplated by this Agreement.
(c) Amendment and Modification. This Agreement may be amended,
modified and supplemented only in a written agreement executed by each of the
parties hereto.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the respective successors and permitted assigns
of the parties hereto. Assignment of the rights and obligations hereunder shall
be governed by the terms thereof set forth in the Registration Rights Agreement.
The assignment by a party of this Agreement or any rights hereunder shall not
affect the obligations of such party under this Agreement.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York without
regard to conflicts of law principals thereof.
(f) Counterpart Signatures; Facsimile. This Agreement may be
executed in counterparts, which will, when taken together, be deemed for all
purposes to be one and the same Agreement. For all purposes, a signature
delivered by facsimile shall have the same force and effect as the original of
such signature.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Assumption Agreement to be duly executed as of the day and year first above
written.
SIGMA DESIGNS, INC.
By:_________________________
Name:_________________
Title:________________
BANQUE EDOUARD CONSTANT
By:_________________________
Name:_________________
Title:________________
KA INVESTMENTS LDC
By:_________________________
Name:_________________
Title:________________
-6-
<PAGE>
Schedule A
Representations and Warranties of Assignor
1. The Shares and the Warrant were acquired by the Assignor in a
transaction exempt from the registration requirements of the Securities Act.
2. The Assignor holds of record and owns beneficially the Securities.
3. The Assignor is not a party to any option, warrant, purchase right,
or other contract or commitment (other than this Agreement) that requires the
Assignor to sell, transfer, or otherwise dispose of any of the Securities or the
Underlying Shares.
4. The Assignor has all right, power and authority to transfer the
Securities to the Assignee in accordance with the terms of this Agreement.
5. Upon the Closing, such Securities will be transferred to the
Assignee free and clear of all liens, claims and encumbrances.
6. No consent, approval or other authorization is required for the
Assignor to assign the Securities to the Assignee pursuant to the terms of this
Agreement.
7. Immediately prior to the date of this Agreement, the Assignor was
listed as a selling shareholder in the Registration Statement with respect to
the Underlying Shares.
<PAGE>
Schedule B
Representations and Warranties of the Company
1. The Shares and the Warrant were acquired by the Assignor in a
transaction exempt from the registration requirements of the Securities Act.
2. The Registration Statement remains effective with respect to the
resale of the Warrant Shares and shares of Common Stock underlying the
Assignor's Shares.
<PAGE>
Schedule C
Representations and Warranties of Assignee
1. The Assignee represents that it is an "accredited investor" as such
term is defined in Rule 501(a) promulgated under the Securities Act.
2. The Assignee either alone or with its representatives has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the investment contemplated by this
Agreement.
3. The Assignee is able to bear the economic risk of the investment
contemplated by this Agreement and, at the present time, is able to afford a
complete loss of such investment.
4. The Assignee has no present intention to sell the Securities to or
through any person or entity.
5. The Assignee is acquiring the Securities for its own account and
does not intend to be a "distributor" of the Securities.
<PAGE>
ESCROW AGREEMENT
ESCROW AGREEMENT (this "Agreement"), dated as of March 11, 1998, among
Sigma Designs, Inc. (the "Company"), Banque Edouard Constant (the "Assignor"),
KA Investments LDC (the "Assignee") and Robinson Silverman Pearce Aronsohn &
Berman LLP ("RSPA&B") as escrow agent (the "Escrow Agent").
Recitals
A. Simultaneously with the execution of this Agreement, the Company,
the Assignor and the Assignee have entered into an Assignment and Assumption
Agreement, dated as of the date hereof (the "Assignment Agreement"; capitalized
terms used herein without definition shall have the meanings assigned to such
terms in the Assignment Agreement), pursuant to which the Assignor is assigning
the Securities to the Assignee.
B. The Escrow Agent is willing to act as escrow agent pursuant to the
terms of this Agreement with respect to the delivery of the Purchase Price to be
paid for the Securities and the delivery of one or more stock certificates
representing the Sold Shares and the Sold Warrant (collectively, the
"Consideration").
C. Upon the closing of the transaction contemplated by the Assignment
Agreement (the "Closing"), and the occurrence of an event described in Section 2
below, the Escrow Agent shall cause the distribution of the Consideration in
accordance with the terms of this Agreement.
NOW, THEREFORE, IT IS AGREED:
1. Deposit of Consideration.
(a) Concurrently with the execution hereof (i) the Assignee
shall deposit the Purchase Price with the Escrow Agent, (ii) the Assignor shall
deliver to the Escrow Agent (x) the stock certificate(s), representing the
15,000 Shares, previously delivered to the Assignor in connection with the
Subscription Agreement (the "June Stock Certificates"), and (y) the common stock
purchase warrant, representing the Warrant, previously delivered to the Assignor
in connection with the Subscription Agreement (the "June Warrant" and together
with the June Stock Certificate, the "June Securities"), and (iii) the Company
shall deliver to the Escrow Agent (w) stock certificate(s) registered in the
name of the Assignee reflecting the ownership of 15,000 Shares by the Assignee
(the "Assignee March Stock Certificate"), (x) a common stock purchase warrant
registered in the name of the Assignee, in the form of the Warrant, to acquire
21,428 shares of Common Stock, which, except as otherwise set forth in the
Assignment Agreement, shall contain the same terms as the Warrant (the "Assignee
March Warrant" and together with the Assignee March Stock Certificate, the
"Assignee March Securities") and (y) a common stock purchase warrant registered
in the name of the Assignor, in the form of the Warrant, to acquire 35,714,
shares of Common Stock, which, except as otherwise set forth in the Assignment
Agreement, shall contain the same terms as the Warrant (the "Assignor March
Securities").
-1-
<PAGE>
(b) The Assignor shall also deliver to the Escrow Agent wiring
instructions for transfer of the Purchase Price by the Escrow Agent into an
account specified by the Assignor for such purpose. In addition, the Company,
the Assignee and the Assignor shall deposit with the Escrow Agent all other
certificates and documents required under the Assignment Agreement to be
delivered by them at the Closing (such certificates and other documents being
hereinafter referred to as the "Ancillary Closing Documents").
(i) The Purchase Price shall be delivered by the
Assignee to the Escrow Agent by wire transfer to the following account:
Citibank, N.A.
153 East 53rd Street
New York, NY 10043
ABA No.: 021-000-089
For the Account of
Robinson Silverman Pearce Aronsohn
& Berman LLP
Attorney Trust Account
Account No.: 37-204-162
Reference: 11161-7
(ii) The Assignor March Securities, the Assignee
March Securities, the June Securities and the Ancillary Closing Documents, if
any, shall be delivered to the Escrow Agent at its address for notice indicated
in Section 5(a).
(c) Until termination of this Agreement, any additional
Consideration to be paid or delivered pursuant to the Assignment Agreement shall
be deposited with the Escrow Agent.
(d) The Assignee and the Assignor understand that all monetary
Consideration delivered to the Escrow Agent pursuant to this Agreement shall be
held in escrow in the Escrow Agent's interest bearing business account until it
is released in accordance with this Agreement.
(e) At the Closing:
(i) the Purchase Price shall be reduced by all
wire transfer fees incurred thereupon; and
(ii) the Company shall pay to the Escrow Agent
one half (1/2) of the Assignee's legal fees, up to a maximum of $5,000, pursuant
to Section 5(c) of the Assignment Agreement.
-2-
<PAGE>
2. Terms of Escrow.
(a) The Escrow Agent shall continue to follow the provisions
of this Agreement until the earlier to occur of (i) the date of the Escrow
Agent's receipt of the New Registration Statement as filed with the SEC, or (ii)
the earlier to occur of (x) the exercise by the Assignee of the Assignee's
Termination Right, or (y) the date on which the Escrow Agent receives a written
notice, executed by the Company, the Assignor and the Assignee, stating that the
Assignment Agreement has been terminated in accordance with its terms and
instructing the Escrow Agent with respect to the Purchase Price, the Assignee
March Securities, the Assignor March Securities, the June Securities and the
Ancillary Closing Documents, if any.
(b) If the Escrow Agent receives the items referenced in
clause (i) of Section 2(a) prior to its receipt of the notice referenced in
clause (ii) of Section 2(a), then, promptly thereafter, the Escrow Agent shall
deliver (i) to the Assignee the (x) Assignee March Securities, and (y) any
interest earned on account of the Purchase Price that shall have accrued from
the date hereof through the date of the Closing, (ii) to the Assignor, (x) the
Purchase Price (net of amounts described under Section l(e)(i)), and (y) the
Assignor March Securities, (iii) to the Company, the June Securities, and (iv)
to the appropriate party, the Ancillary Closing Documents.
(c) If the Escrow Agent receives the notice referenced in
clause (ii) of Section 2(a) prior to its receipt of the items referenced in
clause (i) of Section 2(a), then the Escrow Agent shall promptly upon receipt of
such notice return (i) the Purchase Price (together with any interest earned
thereon through such date) to the Assignee, (ii) the June Securities to the
Assignor, (iii) the Assignor March Securities and the Assignee March Securities
to the Company, and (iv) any Ancillary Closing Documents to the party that
delivered the same.
(d) If the Escrow Agent, prior to delivering or causing to be
delivered the Consideration in accordance herewith, receives notice of
objection, dispute, or other assertion in accordance with any of the provisions
of this Agreement, the Escrow Agent shall continue to hold the Consideration
until such time as the Escrow Agent shall receive (i) written instructions
jointly executed by the Assignor, the Assignee and the Company, directing
distribution of such Consideration, or (ii) a certified copy of a judgment,
order or decree of a court of competent jurisdiction, final beyond the right of
appeal, directing the Escrow Agent to distribute said Consideration to any party
hereto or as such judgment, order or decree shall otherwise specify (including
any such order directing the Escrow Agent to deposit the Consideration into the
court rendering such order, pending determination of any dispute between any of
the parties). In addition, the Escrow Agent shall have the right to deposit any
of the Consideration with a court of competent jurisdiction pursuant to Section
1006 of the New York Civil Practice Law and Rules without liability to any party
if said dispute is not resolved within 30 days of receipt of any such notice of
objection, dispute or otherwise.
-3-
<PAGE>
3. Duties and Obligations of the Escrow Agent.
(a) The parties hereto agree that the duties and obligations
of the Escrow Agent are only such as are herein specifically provided and no
other. The Escrow Agent's duties are as a depositary only, and the Escrow Agent
shall incur no liability whatsoever, except as a direct result of its willful
misconduct.
(b) The Escrow Agent may consult with counsel of its choice,
and shall not be liable for any action taken, suffered or omitted by it in
accordance with the advice of such counsel.
(c) The Escrow Agent shall not be bound in any way by the
terms of any other agreement to which the Company, the Assignee and the Assignor
are parties, whether or not it has knowledge thereof, and the Escrow Agent shall
not in any way be required to determine whether or not any other agreement has
been complied with by the Company, the Assignee and the Assignor, or any other
party thereto. The Escrow Agent shall not be bound by any modification,
amendment, termination, cancellation, rescission or supersession of this
Agreement unless the same shall be in writing and signed by each of the Company,
the Assignee and the Assignor, and agreed to in writing by the Escrow Agent.
(d) In the event that the Escrow Agent shall be uncertain as
to its duties or rights hereunder or shall receive instructions, claims or
demands which, in its opinion, are in conflict with any of the provisions of
this Agreement, it shall be entitled to refrain from taking any action, other
than to keep safely all Consideration then held in escrow, until it shall
jointly be directed otherwise in writing by the Assignee and the Assignor or by
a final judgment of a court of competent jurisdiction.
(e) The Escrow Agent shall be fully protected in relying upon
any written notice, demand, certificate or document which it, in good faith,
believes to be genuine. The Escrow Agent shall not be responsible for the
sufficiency or accuracy of the form, execution, validity or genuineness of
documents or securities now or hereafter deposited hereunder, or of any
endorsement thereon, or for any lack of endorsement thereon, or for any
description therein; nor shall the Escrow Agent be responsible or liable in any
respect on account of the identity, authority or rights of the persons executing
or delivering or purporting to execute or deliver any such document, security or
endorsement.
(f) The Escrow Agent shall not be required to institute legal
proceedings of any kind and shall not be required to defend any legal
proceedings which may be instituted against it or in respect of the
Consideration.
(g) If the Escrow Agent at any time, in its sole discretion,
deems it necessary or advisable to relinquish custody of the Consideration then
held by it, it may do so by delivering the same to any other escrow agent
mutually agreeable to the Assignee and the Assignor and, if no such escrow agent
shall be selected within three days of the Escrow Agent's notification to the
Assignee and the Assignor of its desire to so relinquish custody of the
Consideration then held by it, then the Escrow Agent may do so by delivering
such Consideration (a) to any bank or trust company in the
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<PAGE>
Borough of Manhattan, City and State of New York, which is willing to act as
escrow agent thereunder in place and instead of the Escrow Agent, or (b) to the
clerk or other proper officer of a court of competent jurisdiction as may be
permitted by law within the State, County and City of New York. The fee of any
such bank or trust company or court officer shall be borne by the Assignor. Upon
such delivery, the Escrow Agent shall be discharged from any and all
responsibility or liability with respect to the Consideration and the Assignor
shall promptly pay to the Escrow Agent all monies which may be owed it for its
services hereunder, including, but not limited to, reimbursement of its
out-of-pocket expenses pursuant to paragraph (i) below.
(h) This Agreement shall not create any fiduciary duty on the
Escrow Agent's part to the Company, the Assignee or the Assignor, nor disqualify
the Escrow Agent from representing either party hereto in any dispute with the
other, including any dispute with respect to the Consideration. The Company and
the Assignor understand that RSPA&B has acted and will continue to act as
counsel to Assignor.
(i) The reasonable out-of-pocket expenses paid or incurred by
the Escrow Agent in the administration of its duties hereunder, including, but
not limited to, all counsel and advisors' and agents' fees and all taxes or
other governmental charges, if any, shall be paid by the Assignor.
4. Indemnification. The Company, the Assignee and the Assignor, jointly
and severally, hereby indemnify and hold the Escrow Agent harmless from and
against any and all losses, damages, taxes, liabilities and expenses that may be
incurred, directly or indirectly, by the Escrow Agent, arising out of or in
connection with its acceptance of appointment as the Escrow Agent hereunder
and/or the performance of its duties pursuant to this Agreement, including, but
not limited to, all legal costs and expenses of the Escrow Agent incurred
defending itself against any claim or liability in connection with its
performance hereunder and the costs of recovery of amounts pursuant to this
Section 4.
5. Miscellaneous.
(a) All notices, requests, demands and other communications
hereunder shall be made in accordance with the notice provisions of the
Assignment Agreement at the addresses set forth therein. Notices to the Escrow
Agent shall be sent to the following address:
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
Facsimile No.: (212) 541-4630
Attention: Eric L. Cohen, Esq. and
Alexandre T. Speaker, Esq.
(b) This Agreement shall be construed and enforced in
accordance with the law of the State of New York applicable to contracts entered
into and performed entirely within New York.
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<PAGE>
(c) This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be signed the day and year first above written.
SIGMA DESIGNS, INC.
By:______________________________________
Name:_____________________________________
Title:_____________________________________
BANQUE EDOUARD CONSTANT
By:______________________________________
Name:_____________________________________
Title:_____________________________________
KA INVESTMENTS LDC
By:______________________________________
Name:_____________________________________
Title:_____________________________________
ROBINSON SILVERMAN PEARCE
ARONSOHN & BERMAN LLP
By:______________________________________
A Member of the Firm
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EXHIBIT 5.1
March 15, 1998
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 March 15, 1998 (the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of 900,000 shares of your Common Stock, no
par value (the "Shares"), all of which are authorized and will be issued to the
selling shareholder identified in the Registration Statement (the "Selling
Shareholder"). The Shares are to be offered by the Selling Shareholder 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
March 11, 1998
