As filed with the Securities and Exchange Commission on December 10, 1998
Registration No. 333-33147
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
POST-EFFECTIVE
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------------------
Sigma Designs, Inc.
(Exact name of Registrant as specified in its charter)
---------------------------
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)
---------------------------
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)
---------------------------
Copies to:
DAVID J. SEGRE, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
(650) 493-9300
---------------------------
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. [_]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
=======================================================================================================================
Title of Each Class Amount Proposed Maximum Proposed Maximum Amount of
of Securities to to be Offering Price Aggregate Offering Registration
be Registered Registered (1) Per Share (2) Price (2) Fee
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock no par value............ 1,100,000 shares $2.63 $2,893,000 $804.25
=======================================================================================================================
<FN>
(1) Includes shares of Common Stock which may be offered pursuant to this
Registration Statement consisting of 1,100,000 shares issuable upon
conversion of 45,000 shares of Series A Convertible Preferred Stock of
the Company and issuable upon exercise of warrants issued in connection
with the issuance of the Series A Preferred Stock. In addition to the
shares set forth in the table, pursuant to Rule 416 under the
Securities Act of 1933, as amended, this Registration Statement also
covers an indeterminate number of additional shares of Common Stock as
may become issuable upon conversion of or in respect of the Company's
Series A Preferred Stock and Warrants, as such number may be adjusted
as a result of stock splits, stock dividends and antidilution
provisions (including floating rate conversion prices).
(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 Stock Market on December 4,
1998, in accordance with Rule 457(c) under the Securities Act of 1933.
A registration fee of $1,460 was paid by the Company in connection with
the initial filing of Registration Statement No. 333-33147 on August 7,
1997.
</FN>
</TABLE>
---------------------------
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>
PROSPECTUS
1,100,000 SHARES
SIGMA DESIGNS, INC.
COMMON STOCK
This Prospectus may be used only in connection with the resale, from
time to time, of up to 1,100,000 shares of Common Stock of Sigma Designs, Inc.
("Sigma" or the "Company"), by the Selling Shareholders, as listed in the table
on page 22 of this Prospectus. All of the shares covered by this Prospectus are
to be sold by the Selling Shareholders. The Selling Shareholders will receive
the shares upon conversion of our Series A Preferred Stock and exercise of
warrants. This Post-Effective Amendment No. 1 to the Form S-3 Registration
Statement is filed to add KA Investments LDC as a Selling Shareholder. KA
Investments LDC purchased shares of Series A Preferred Stock and warrants
exercisable for shares of our Common Stock from Banque Edouard Constant SA who
originally purchased Series A Preferred Stock and warrants directly from us in a
transaction not subject to registration with the Securities and Exchange
Commission. We will not receive any of the proceeds from the sale of the shares.
We will, however, pay the expenses incurred in registering the shares, including
legal and accounting fees.
The shares offered by this Prospectus may be offered and sold, from
time to time, by the Selling Shareholders, or others who receive the shares
pursuant to a valid transfer. Such offers and sales can take place in
transactions (including block transactions) on the Nasdaq Stock Market (or any
other exchange on which our Common Stock may then be listed), in
privately-negotiated transactions, broker-dealer transactions, exchange
transactions, short sales, or other methods. Sales may be made at market prices
or negotiated prices. The Selling Shareholders will pay for any commission
expenses and brokerage fees.
Our Common Stock is traded on the Nasdaq Stock Market under the symbol
"SIGM." On December 4, 1998, the last sale price for our Common Stock as
reported on the Nasdaq Stock Market was $2.63 per share.
---------------------------
SEE "RISK FACTORS" ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OFFERED BY THIS
PROSPECTUS.
---------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Date of this Prospectus is December 10, 1998
<PAGE>
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Accordingly, we file
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). These 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
these materials 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. Our Common Stock is quoted on the Nasdaq Stock 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 Public may obtain information on the
operation of the Public Reference Room by calling the Securities Exchange
Commission at 1-800-SEC-0330. 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. We maintain a World Wide Web Site at
http://www.sigmadesigns.com.
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 in this Prospectus 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.
<PAGE>
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, 1998; (ii) the
Company's Quarterly Report on Form 10-Q for the quarters ending April 30, 1998
and July 31, 1998; (iii) the Company's Proxy Statement relating to the Company's
Annual Meeting of Shareholders held on June 12, 1998; and (iv) 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, Director of Investor Relations, at the Company's principal
executive offices at 46501 Landing Parkway, Fremont, California 94538, or by
telephone at (510) 770-0100.
RISK FACTORS
You should carefully consider the risks described below before making
an investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations.
If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely effected. In
such case, the trading price of our Common Stock could decline, and you may lose
all or part of your investment.
This Prospectus also contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
Prospectus.
<PAGE>
History of Operating Losses; Recent Significant Losses; Liquidity
We incurred significant losses in fiscal 1995, 1996, 1998 and during
1999 and had substantial negative cash flow in fiscal 1995, 1996, 1997, 1998 and
during 1999. Since our introduction of the REALmagic Moving Picture Experts
Group ("MPEG") product line in November 1993, we have made significant
investments in marketing and technological innovation for our REALmagic
products. As a result of our investments, we experienced significant losses
through fiscal 1996. Fiscal 1995, 1996 and 1998 also included significant losses
associated with products other than those related to our REALmagic technology.
Since our inception through July 31, 1998, our total accumulated deficit is
$39,205,000. We cannot assure you that we will continue to sell our new
REALmagic products in substantial quantities or generate significant revenues
from those sales. We cannot assure you that we will return to profitable
operations in any future fiscal quarter or fiscal year. If profitable operations
are achieved, we cannot assure you that they will be sustained.
We have an Amended and Restated Business Loan Agreement with Silicon
Valley Bank, dated October 26, 1998. Under the Agreement we gave two secured
Promissory Notes in total principal amounts of $12 million and $6 million to
Silicon Valley Bank. Under this Agreement and the Notes, we are subject to
certain covenants relating to profitability and financial ratios. Since July,
1997, we have, on occasion, obtained waivers releasing us from our obligation to
meet these covenants. We have a waiver for the quarter ended October 31, 1998.
We expect to need another waiver for the quarter ending January 31, 1999. We
cannot assure you that Silicon Valley Bank will grant that waiver. If we do not
meet these covenants, and if we do not obtain another waiver, the loans may be
in default. If we are in default, then the lender could accelerate payments on
the Notes and we could suffer serious harm to our business, financial condition
and prospects.
Marketing Risks; Volatility of OEM Customer Sales; Volatility of Resale
Distribution
Our ability to increase sales, achieve profitability and maintain
REALmagic as a personal computer ("PC") industry multimedia standard depends
substantially on our ability to achieve a sustained high level of sales to new
Original Equipment Manufacture ("OEM") customers. We have not executed volume
purchase agreements with any of our customers. Our customers are not under any
obligation to purchase any minimum quantity of our products. We have not
achieved bundling agreements with many OEM customers to ensure the success of
our REALmagic product line. Also, even if we achieve new design wins, we cannot
assure you that PC manufacturers will purchase our 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 our experience in the PC industry, we expect that our
actual sales to OEM customers will experience significant fluctuations. Also,
estimates of future sales to any particular customer or groups of customers are
inherently uncertain.
Our ability to achieve sustained profitability also depends on a
substantial increase in the sales of REALmagic products through domestic and
international distributors for resale through corporate markets. Sales to such
distributors are typically subject to contractual rights of inventory
<PAGE>
rotation or price protection. The failure of distributors to achieve sustained
sell-through of REALmagic products could result in product returns or collection
problems. This could contribute to fluctuations in our results of operations. We
cannot assure you that we will be successful in maintaining a significant market
for our REALmagic products.
Technological Change; Uncertainty of Achievement of Technological Leadership
The market for multimedia PC products is characterized by the
following: 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, our success depends, among other things, on our ability to
achieve and maintain technological leadership and to remain competitive in terms
of price and product performance.
To have technological leadership, we must continue to make
technological advancements and research and development investments in the area
of MPEG video and audio decoding. These advancements include the following:
o compatibility with emerging standards and multiple platforms;
o improvements to the REALmagic architecture; and
o enhancements to the REALmagic application programming interface.
We cannot assure you that we will be able to make these advancements to
our REALmagic technology. If we do make these advances, we cannot assure you
that we will be able to achieve and maintain technological leadership. Any
material failure by us or OEMs and software developers to develop or incorporate
any required improvement could adversely affect the continued acceptance of our
technology and the introduction and sale of future products based on our
technology. We cannot assure you that products or technologies developed by
others will not render obsolete our technology, and the products based on our
technology.
To be competitive, we must anticipate the needs of the market and
successfully develop and introduce innovative new products in a timely fashion.
We cannot assure you that we will be able to successfully complete the design of
our 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 and
contribute to fluctuations in operating results from quarter to quarter. Our
introduction of new products also requires that we carefully manage our
inventory to avoid inventory obsolescence. In addition, new products, as opposed
to more mature products, typically have higher initial component costs. This
higher cost could result in downward pressures on our gross margins.
Competition
The market for multimedia PC products is highly competitive, and is
driven by faster processors provided by Intel Corporation and other companies.
Intel processors have, in recent
<PAGE>
years, included increased graphics functionality. Other companies with more
experience and financial resources may develop a competitive product that could
inhibit future growth of our 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 competitors include:
o SGS Thompson Microelectronics;
o C-Cube Microsystems;
o IBM Corporation;
o Zoran Corporation; and
o LSI Logic.
In addition, Intel processors are becoming more powerful, so that video
decoding could eventually be done in software. Intel processors have, in recent
years, included increased graphics functionality. Most of our competitors have
substantial experience and expertise in audio, video and multimedia technology
and in producing and selling consumer products through retail distribution.
These companies also have substantially greater engineering, marketing and
financial resources than we have. Our competitors could form cooperative
relationships that could present formidable competition to us. We cannot assure
you that our 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; Source of Net Sales; Market Demand for
Multimedia Products
Our business strategy is, and has been, to focus on REALmagic products
by investing heavily in PC-based MPEG technology. In the fiscal year ended
January 31, 1998 and the six months ended July 31, 1998, sales of multimedia
products accounted for virtually all of our net sales. A decline in market
demand for multimedia products will materially adversely affect our operating
results. Our present reliance on REALmagic products is further affected by the
fact that multimedia product sales are concentrated in the PC industry. A
decline in demand for PCs could have a material adverse effect on our operating
results and financial condition.
Variability of Operating Results; Seasonal Variations in Demand; DVD Technology
Our operating results have fluctuated in the past and may continue to
fluctuate in the future. This fluctuation is due to a number of factors,
including the following and others:
o our new product introductions and our competitors;
o market acceptance of our products by OEMs, software developers and end
users;
o the success of our promotional programs;
o gains or losses of our significant customers;
o reductions in selling prices;
<PAGE>
o inventory obsolescence;
o an interrupted or inadequate supply of semiconductor chips;
o our ability to protect our intellectual property; and
o loss of our key personnel.
In addition, sales to OEM customers are subject to significant
variability from quarter to quarter. This variability depends on OEMs' timing
and release of products that incorporate our REALmagic technology, experience
with sales of these products and inventory levels.
The market for consumer electronics products is characterized by
significant seasonal swings in demand. Demand typically peaks in the fourth
calendar quarter of each year. We expect to derive a substantial portion of our
revenues from the sales of REALmagic products in the future. The demand for our
products will depend in part on the success of digital video technology. In
light of this, our revenues may vary with the availability of and demand for DVD
titles. This 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 our operating results. Based on our experience, we believe
that a substantial portion of our 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 our operating results to be difficult to
predict. Currently, we place noncancellable orders to purchase semiconductor
products from our foundries with a long lead time. Consequently, if, as a result
of inaccurate forecasts or cancelled purchase orders, our anticipated sales and
shipments in any quarter do not occur when expected, our inventory levels could
be disproportionately high. This could require significant working capital, and
negatively affect our operating results.
Manufacturing Risks; Reliance on Independent Suppliers; Forecasting Risks;
Production Delay Risks
Our REALmagic products and components are presently manufactured by
outside suppliers or foundries. We do not have long-term contracts with these
suppliers. We conduct business with our suppliers on a written purchase order
basis. Our reliance on independent suppliers subjects us to several risks. These
risks include:
o the absence of adequate capacity;
o the unavailability of, or interruptions in access to, certain process
technologies; and
o reduced control over delivery schedules, manufacturing yields and
costs.
We obtain some of our components from a single source. Delays or interruptions
have not occurred to date, but any delay or interruption in the supply of any of
the components required for the production of our REALmagic multimedia card
currently obtained from a single source could have a material adverse impact on
our sales of REALmagic products, and on our business.
<PAGE>
We must provide our suppliers with sufficient lead time to meet our
forecasted manufacturing objectives. Any failure to properly forecast such
quantities could materially adversely affect our ability to produce REALmagic
products in sufficient quantities. We cannot assure you that our forecasts
regarding new product demand will be accurate, particularly because we sell our
REALmagic products on a purchase order basis. Manufacturing the REALmagic
chipsets is a complex process, and we may experience short-term difficulties in
obtaining timely deliveries. This could affect our ability to meet customer
demand for our products. Any such delay in delivering products in the future
could materially and adversely affect our operating results. Also, should any of
our major suppliers become unable or unwilling to continue to manufacture our
key components in required volumes, we will have to identify and qualify
acceptable additional suppliers. This qualification process could take up to
three months or longer and additional sources of supply may not be in a position
to satisfy our requirements on a timely basis.
In the past, we have experienced production delays and other
difficulties, and we could experience similar problems in the future. In
addition, product defects may occur and they may escape identification at the
factory. This could result in unanticipated costs, cancellations, deferrals of
purchase orders, or costly recall of products from customer sites.
Dependence on Key Personnel
Our future success depends in large part on the continued service of
our key technical, marketing, sales and management personnel. Given the
complexity of REALmagic technology, we are dependent on our ability to retain
and motivate highly skilled engineers involved in the ongoing hardware and
software development of REALmagic products. These engineers are required to
refine the existing hardware system and application programming interface and to
introduce enhancements in future applications. The multimedia PC industry is
characterized by high level employee mobility and aggressive recruiting of
skilled personnel. Despite incentives we provide to them, our current employees
may not continue to work for us, and if additional personnel were required for
our operations, we may not able to obtain the services of additional personnel
necessary for our growth. We do not have "keyperson" life insurance policies on
any of our employees.
Limited Intellectual Property Protection; Patents and Pending Patent
Applications; Litigious Sector
Our ability to compete may be affected by our ability to protect our
proprietary information. We currently hold ten patents covering the technology
underlying the REALmagic products. We have filed certain patent applications and
are in the process of preparing others. We cannot assure that any additional
patents for which we have applied will be issued or that any issued patents will
provide meaningful protection of our product innovations. Like other emerging
multimedia companies, we rely primarily on trade secrets and technological
know-how in the conduct of our business. We also rely, in part, on copyright law
to protect our proprietary rights with respect to REALmagic technology. We use
measures such as confidentiality agreements to protect our intellectual
property. These methods of protecting our intellectual property may not be
sufficient.
<PAGE>
The electronics industry is characterized by frequent litigation
regarding patent and intellectual property rights. Any such litigation could
result in significant expense to us and divert the efforts of our technical and
management personnel. In the event of an adverse result in any such litigation,
we 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, and we may not be successful in such development or in obtaining
such licenses on acceptable terms, if at all. In addition, patent disputes in
the electronics industry have often been settled through cross-licensing
arrangements. Because we do not yet have a large portfolio of issued patents, we
may not be able to settle an alleged patent infringement claim through a
cross-licensing arrangement.
Risks of International Operations; Substantial Percentage of Net Sales Derived
From the Asia Pacific Region
During the fiscal years ended January 31, 1998, 1997 and 1996, sales to
international customers accounted for approximately 64%, 72% and 63% of our net
sales, respectively. We anticipate that sales to international customers,
including sales of REALmagic products, will continue to account for a
substantial percentage of our net sales. Also, some of the foundries that
manufacture our products and components are located in Asia. Overseas sales and
purchases to date have been denominated in U.S. dollars.
Due to the concentration of international sales and the manufacturing
capacity in Asia, we are 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 our products in international markets, or make it
difficult for the Company to obtain price reductions from its foundries. We do
not currently engage in any hedging activities to reduce our exposure to
exchange rate risks. If and when we engage in transactions in foreign
currencies, our results of operations could be adversely affected by exchange
rate fluctuations.
We derive a substantial portion of our revenues from sales to the Asia
Pacific region. This region of the world is subject to increased levels of
economic instability, and this instability could have a material adverse effect
on our results of operations.
Volatility of Stock Price
The market of our Common Stock has been subject to significant
volatility. This volatility is expected to continue. The following factors,
among others, may have a significant impact on the market price of our Common
Stock:
o our announcement of the introduction of new products;
o our competitors' announcements of the introduction of new products;
o market conditions in the technology, entertainment and emerging growth
company sectors; and
o short sales by shareholders and others.
<PAGE>
The stock market has experienced, and is currently experiencing,
volatility that particularly affects the market prices of equity securities of
many high technology and development stage companies, such as those in the
electronics industry. This volatility is often unrelated or disproportionate to
the operating performance of such companies. These fluctuations, as well as
general economic and market conditions, could adversely affect the price of our
Common Stock.
Potential for Dilution from Conversion of Series B Preferred Stock
Series B Preferred Stock. As of December 7, 1998, 2,250 shares of our
Series B Convertible Preferred Stock were issued and outstanding. The shares of
Series B Preferred Stock are convertible at the option of the holders into that
number of shares of Common Stock as is generally determined by the following
formula:
o Multiply the stated value ($1,000) by the number of outstanding shares
of Series B Preferred Stock (under certain circumstances, this value
may be increased by a premium based on the number of days the Series B
Preferred Stock is held), and divide the product by the then current
Conversion Price (set forth below).
o The Conversion Price is based on the average of the lowest six trading
prices of our Common Stock in the twenty trading days ending one day
prior to the date of conversion of the Series B Preferred Stock. Thus,
if the Series B Preferred Stock was converted on December 7, 1998, the
Conversion Price would have been $2.06.
Based on this formula, if the remaining outstanding Series B Preferred
Stock was converted on December 7, 1998, it would have been convertible into
approximately 1,092,233 shares of Common Stock. This number can prove to be
significantly greater in the event of a decrease in the trading price of our
Common Stock. Purchasers of our Common Stock will experience substantial
dilution of their investment upon conversion of the Series B Preferred Stock.
However, in the event the price of our Common Stock falls below $3.26, subject
to applicable laws restricting our repurchase of stock, we have the option to
elect to pay cash (at a premium to the then current market price of our Common
Stock) to the holders of Series B Preferred Stock in lieu of converting the
shares of Series B Preferred Stock. In the event we elect to pay cash,
purchasers of our Common Stock will suffer less dilution. Our election to pay
cash, however, will come at the expense of diverting our available cash funds
from other potential uses. The shares of Series B Preferred Stock are not
registered and may be sold only if registered under the Securities Act or sold
in accordance with an applicable exemption from registration, such as Rule 144.
As of December 7, 1998, warrants to purchase 50,000 shares of Common
Stock issued to the purchasers of the Series B Preferred Stock and exercisable
for a period of three years following May 1, 1998 at a price of $5.16 (as may be
adjusted from time to time under certain antidilution provisions) were
outstanding.
<PAGE>
As of December 7, 1998, 5,854,398 shares of Common Stock were reserved
for issuance upon exercise of our outstanding warrants and options (excluding
the warrants issued to the purchasers of the Series B Preferred Stock) and an
additional 4,300,000 shares of Common Stock were reserved for issuance upon
conversion of the preferred stock and exercise of the warrants issued to the
purchasers of the Series B Preferred Stock. At October 31, 1998, there were
13,514,735 shares of Common Stock outstanding. Of these outstanding shares,
13,492,952 were freely tradable without restriction under the Securities Act
unless held by affiliates who are subject to certain limitations under Rule 144
of the Securities Act of 1933, as amended.
Impact of the Year 2000 Issue
Year 2000 Compliance. We are aware of the issues associated with the
programming code in existing computer systems as the year 2000 approaches. The
"year 2000 problem" is pervasive and complex as virtually every computer
operation will be affected in some way by the rollover of the two-digit year
value to 00. The issue is whether computer systems will properly recognize date
sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail.
We have tested our products and believe our products are year 2000
compliant. Our management has also conducted a review of our exposure to the
year 2000 problem, including working with computer systems and software vendors.
We currently believe that our internal systems are year 2000 compliant. We do
not expect to further incur any significant operating expenses or invest in
additional computer systems to resolve issues relating to the year 2000 problem,
with respect to both our information technology and product and service
functions.
However, significant uncertainty remains concerning the effects of the
year 2000 problem, including uncertainty regarding assurances made by vendors.
In addition, we have not investigated year 2000 compliance of other entities who
are not our vendors or who are vendors or purchasers of our product. For
example, we do not have control over the compliance of our distributors,
partners, banks, stock markets or systems in which our products are used.
We cannot assume that third parties will be year 2000 compliant, and if
they are not, we cannot assume that we will not be subject to actions,
liabilities or damages associated with these failures. We will develop
appropriate contingency plans in the event that a significant exposure arises
relative to any such third parties.
<PAGE>
THE COMPANY
Overview
The following sections regarding the Company contain 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, as discussed in this Registration
Statement.
We design, manufacture (using subcontractors) and market multimedia
products for use with personal computers. The emergence of multimedia technology
in the personal computer (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 Moving
Picture Experts Group (MPEG) technology, Sigma Designs has become a leader in
this emerging market.
Prior to MPEG's introduction, video on personal computers suffered from
serious drawbacks. Motion pictures appeared jerky, and video was confined to
small window sizes. MPEG, a defined International Standards Organization (ISO)
standard for video compression, eliminated many of 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 EM8300, EM8220 and EM8800 PC-based DVD and SVCD solutions are
extensions of the Company's MPEG expertise and provide a highly-integrated
solution for the PC-DVD and PC-SVCD markets.
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 developed strategic partnerships to develop and market
network streaming video products with companies such as Hughes Network Systems,
IBM, Microsoft Corporation, Oracle Corporation, Silicon Graphics, Inc.,
Starlight Networks, Sun Microsystems, OptiVision and FVC.com.
<PAGE>
Support from Software Developers
Support for Sigma's REALmagic MPEG standard has grown to over 1,200
software developers. To further expand the list of developers, Sigma has worked
directly with Microsoft on Microsoft's new streaming standard for MPEG-2 called
DirectShow. Sigma Designs is the first and currently the only company shipping
drivers with DirectShow support for streaming MPEG-2 video, making it the only
recommended decoder for use with Microsoft's NetShow Theater video server.
Using the DirectShow standard, software developers can create streaming
video applications with virtually any video server-without any C programming at
all. This enables universities and corporations to get live video and video on
demand applications online very rapidly, which shortens the sales process.
Support from OEMs
In the United States, Dell Computer Corporation, Compaq Computer
Corporation, IBM, Hughes Network Systems and OptiVision have purchased REALmagic
cards for installation inside their systems for streaming video. Additionally,
Philips, Sony, Panasonic Canada, Matsushita, Toshiba, VideoLogic and several
other companies market DVD kits that include REALmagic Hollywood Plus playback
cards, and several vendors base their DVD systems on REALmagic DVD playback
cards.
Acceptance by the Corporate Market
REALmagic is the most well-known and most recognized brand name for
MPEG video on PCs. Sigma Designs has developed this brand name through marketing
campaigns and by building a reputation for delivering and supporting inexpensive
MPEG decoders with robust, powerful and flexible software drivers. This has made
Sigma Designs' REALmagic the de facto standard for corporate market projects
such as corporate-wide rollouts at Merrill Lynch, Smith Barney and Wal-Mart.
REALmagic Business Strategy
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:
<PAGE>
Win More OEM Partnerships and Further Penetrate the Corporate Market
To establish REALmagic for 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 Value
Added Resellers (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 chipsets to add-on card manufacturers that will, in turn, market to
owners of 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 increase
the sale of REALmagic chipsets while continuing to develop newer versions and
generations of REALmagic products, including chipsets for both desktop and
notebook PCs. The Company seeks to continue to offer consumers better-featured
and lower-priced products over time.
REALmagic Products
The Company currently offers a complete family of REALmagic products
including:
o REALmagic Hollywood Plus-In April 1997, the Company announced its entry
into the DVD market. The REALmagic Hollywood Plus MPEG-2 playback card
turns a PC into a full-featured DVD player that exploits many of the
digital video and digital surround sound capabilities of the DVD format
and upcoming MPEG-2 interactive titles. The REALmagic Hollywood Plus
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 NetStream 2-In October 1997, the Company announced its entry
into the MPEG-2 networked video market. Products in the NetStream
family include specialized hardware and software developed specifically
for delivering video to corporate desktops and can be used for both
video on demand and broadcast video playback. NetStream 2 is an MPEG-2
playback card offering full plug and play installation and
compatibility with a broad range of third-party applications, including
video servers for video on demand, MPEG encoders for stored or
real-time playback, satellite delivery systems, streaming video
playback systems and scores of customizable interactive training
titles.
o REALmagic EM8300-In March 1998, the Company announced the introduction
of the EM8300 REALmagic DVD/MPEG-2/MPEG-1 decoder Integrated Circuit
("IC"). Integrating virtually all functions of a DVD decoder on one
chip, the EM8300 is designed to provide a highly integrated, cost
effective vehicle for high-quality DVD. The EM8300 feature set draws on
Sigma's industry-leading experience in the DVD/MPEG-2 market with
<PAGE>
earlier designs such as the REALmagic Ventura and REALmagic Hollywood
decoder cards. The result is a blend of performance and affordability
that can be key to gaining market share in the rapidly growing DVD
market.
o REALmagic EM8220 DVD/MPEG-2 VGA Add-On Card-In June 1998, the Company
announced the introduction of a daughter card to add to Intel
i740-based 2D/3D Video Graphics Array ("VGA") graphics cards to quickly
and effectively deliver high-performance, video-ready multimedia
systems.
o REALmagic DVD/MPEG-2 Notebook Module-Designed to connect directly to
the VGA controller through the ZV-bus and to the system bus through the
module's Peripheral Component Interconnect ("PCI") interface, the
notebook module gives notebook users all of the power and impact of DVD
performance with their go-anywhere systems.
o REALmagic EM8800-In October 1998, the Company announced the REALmagic
EM8800 decoder IC, the first single-chip PC solution for China's new
Super Video Compact Disk ("SVCD") standard. Integrating virtually all
SVCD decoding functions on one chip, the EM8800 can turn a PC into a
full-featured home theater video player that fully exploits the
improved video quality supported by the SVCD standard.
Marketing and Sales
Sigma Designs currently distributes its products through sales to
national and regional distributors, value-added resellers 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 Sony, Philips, Panasonic Canada, IBM
Canada, Matsushita, Toshiba, Kapok Computers, Sidus/TigerDirect, Inc., Royal
Computer, ASE Technologies, LungHwa Electronics Co., Ltd., Formosa Industrial
Computing, Labway Corporation and others. The Company's international
distributors are strategically located in many countries around the world.
The Company generally acquires and maintains products for distribution
through corporate markets 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, which
purchase orders are typically cancellable 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.
Sales to distributors 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
<PAGE>
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.
Research and Development
As of November 30, 1998 the Company had a staff of 31 research and
development personnel. The research and development personnel conduct 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 maintaining
compatibility with emerging standards and multiple platforms, making
improvements to the REALmagic architecture, and developing enhancements to the
REALmagic Application Programming Interface (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.
During fiscal 1998, fiscal 1997 and fiscal 1996, the Company's research
and development expenses were $4,948,000, $4,688,000 and $4,499,000,
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;
companies such as C-Cube Microsystems have a high profile in the industry.
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 with 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
<PAGE>
significant competitive advantage for the Company. However, there can be no
assurance that the REALmagic API will be established as an industry standard or
that the Company's lead time in product introduction will be sustained.
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 fifteen pending patent applications for its REALmagic technology.
Ten 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 all of its manufacturing needs, including chipset manufacture and
board-level assembly. All of the chips used by the Company to develop 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.
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. However, 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 November 30, 1998, the Company had 71 full-time employees,
including 31 in research and development, 15 in marketing, sales and support, 10
in operations, and 15 in finance and administration.
<PAGE>
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.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of shares
hereunder by the Selling Shareholders.
SELLING SHAREHOLDERS
On June 25, 1997, the Company entered into a Subscription Agreement
with Banque Edouard Constant SA and RIC Entity Limited, pursuant to which those
two entities purchased certain shares of Series A Preferred Stock that are
convertible into Common Stock of the Company (the "Preferred Stock") in an
aggregate amount of $4,500,000, and, concurrent with the purchase of the
Preferred Stock, such entities also received warrants to purchase additional
Common Stock at an exercise price in excess of the conversion price of the
Preferred Stock. The original Registration Statement No. 333-33147 was filed by
the Company pursuant to the exercise of certain registration rights granted
under the Subscription Agreement. In addition, the Company granted 10,000 shares
of Common Stock to Gene Jung on behalf of Trinity Capital Advisors, Inc. in
consideration for his efforts in assisting with the sale of the Preferred Stock.
On March 11, 1998, the Company, Banque Edouard Constant SA ("BEC"), and
KA Investments LDC entered into an Assignment and Assumption Agreement under
which KA Investments LDC purchased from BEC 15,000 shares of Series A Preferred
Stock convertible into shares of the Company's Common Stock and a Warrant
exercisable for 21,428 shares of the Company's Common Stock (the "Warrant"). The
Series A Preferred Stock and Warrant now held by KA Investments LDC is subject
to the terms of the June 25, 1997 Subscription Agreement, a Certificate of
Determination of Preferences filed in connection with the initial issuance of
the Preferred Stock, and a Registration Rights Agreement.
In accordance with the Assignment and Assumption Agreement, KA
Investments LDC obtained certain registration rights relating to the shares of
Series A Preferred Stock and the Warrant under 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 December 7, 1998 by the
Selling Shareholders as follows: (i) the name of each Selling Shareholder; (ii)
the number of the Company's outstanding shares of Common Stock beneficially
owned by such Selling Shareholders (including shares obtainable under options
<PAGE>
exercisable within sixty (60) days of such date) prior to the offering hereby;
(iii) the number of shares of Common Stock being offered hereby; and (iv) the
number of and percentage of the Company's outstanding shares of Common Stock to
be beneficially owned by each Selling Shareholder after completion of the sale
of Common Stock. Except as indicated in the footnotes to this table, the persons
named in the table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them, subject to community
property laws where applicable. The Selling Shareholders have 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>
Number of Shares of Common Stock
---------------------------------------------------------------------
Beneficially
Owned
Beneficially After Offering(1)
Owned Prior to ----------------------
Name and Address Offering(1) Being Offered hereby Number Percent
- ---------------- ----------- -------------------- ------ -------
<S> <C> <C> <C> <C>
Banque Edouard Constant(3) 35,714(2) 35,714 0(3) 0(3)
c/o Kernco Trust SA
2, rue Jargonnaut
P.O. Box 6432 CH
1211 Geneva 6
Switzerland
Gene Jung 3,000 3,000 0(3) 0(3)
Trinity Capital Advisors, Inc.
369 Pine Street, Suite 310
San Francisco, CA
94114
KA Investments LDC 402,254(4) 240,181 162,073(3) 1.2%(3)
c/o Tarmachan Capital Management
1712 Hopkins Crossroads
Minnetonka, Minnesota 55305
RIC Equity Limited 7,143(5) 7,143 0(3) 0(3)
c/o Rana Investment Company
P.O. Box 60148
Riydadh 11545
<PAGE>
Saudi Arabia
<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 shares of Series A
Preferred Stock or the exercise of the warrants.
(2) Represents shares underlying a warrant exercisable for 35,714 shares of
Common Stock.
(3) Assumes sale of all shares of Common Stock offered hereby.
(4) Includes the number of shares of Common Stock (i) issued upon conversion of
shares of Series A Preferred Stock and (ii) issuable upon exercise of the
Warrant to purchase 21,428 shares of Common Stock. 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.
<PAGE>
(5) Represents shares underlying a warrant exercisable for 7,143 shares of
Common Stock.
</FN>
</TABLE>
<PAGE>
PLAN OF DISTRIBUTION
The Selling Shareholders may, from time to time, sell all or a portion
of the shares on the Nasdaq Stock 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 Shareholders 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
Shareholders may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions or discounts from the Selling Shareholders (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 Shareholders 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
such 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
Shareholders may also sell the shares in accordance with Rule 144 under the
Securities Act, rather than pursuant to this Prospectus.
The Selling Shareholders and any broker-dealers or agents that
participate with the Selling Shareholders 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.
<PAGE>
From time to time the Selling Shareholders 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
Shareholders engage in such transactions, the Conversion Price may be affected.
From time to time the Selling Shareholders may pledge their shares pursuant to
the margin provisions of their customer agreements with their brokers. Upon a
default by a 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
Shareholders. The Company has agreed to indemnify the Selling Shareholders
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, 1998
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.
<PAGE>
TABLE OF CONTENTS
Page
Available Information .................................................... 2
Incorporation of Certain Documents by Reference .......................... 3
Risk Factors ............................................................. 3
The Company .............................................................. 12
Use of Proceeds .......................................................... 18
Selling Shareholders...................................................... 18
Plan of Distribution ..................................................... 22
Legal Matters ............................................................ 23
Experts .................................................................. 23
You should rely on the information contained in this Prospectus. We
have not authorized anyone to provide you with information different from that
contained in this Prospectus. We are offering to sell and seeking offers to buy,
shares of Common Stock only in jurisdictions where offers and sales are
permitted. The information contained in this Prospectus is accurate only as of
the date of this Prospectus, regardless of the time of delivery of this
Prospectus or of any sale of the Common Stock.
In this Prospectus, the "Company," "Sigma," "we," "us," and "our" refer to
Sigma Designs, Inc.
<PAGE>
1,100,000 Shares
SIGMA DESIGNS, INC.
Common Stock
------------
PROSPECTUS
------------
December 10, 1998
<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 Stock Market Listing
Fee.
Securities and Exchange Commission Registration Fee ................... $ 1,460
Nasdaq Stock Market Listing Fee ....................................... 17,500
Legal Fees and Expenses ............................................... 60,000
Accounting Fees and Expenses .......................................... 10,000
Blue Sky Fees and Expenses ............................................ 2,500
Transfer Agent and Registrar Fees ..................................... 5,000
Miscellaneous ......................................................... 1,500
Total ........................................................ $ 92,960
<PAGE>
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 o 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 and the initial purchasers of the Series A Preferred
Stock and warrants.
4.3 Assignment and Assumption Agreement by and among the Company,
BEC and KA Investments LDC.
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).
<PAGE>
** Previously filed.
- ---------------------------
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 ability 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.
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 December 1998.
SIGMA DESIGNS, INC.
By: /s/ Thinh Q. Tran
----------------------
Thinh Q. Tran
Chairman of the Board,
President and Chief
Executive Officer
<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>
Thinh Q. Tran* Chairman of the Board, President and Chief December 10, 1998
- -------------------------------------- Executive Officer (Principal Executive Officer)
Thinh Q. Tran
Kit Tsui* Director of Finance, Chief Financial Officer, December 10, 1998
- -------------------------------------- Secretary (Chief Financial and Accounting Officer)
Kit Tsui
William J. Almon* Director December 10, 1998
- --------------------------------------
William J. Almon
William Wang* Director December 10, 1998
- --------------------------------------
William Wang
*By: /s/ Thinh Q. Tran December 10, 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 and the initial purchasers of the Series A Preferred
Stock and warrants.
4.3 Assignment and Assumption Agreement by and among the Company,
BEC and KA Investments LDC.
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).
** Previously filed.
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
-4-
<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.
-5-
<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]
-6-
<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
-7-
WARRANT
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED
OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION WHICH IS EXEMPT FROM, OR
NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE
BENEFICIARY OF CERTAIN OBLIGATIONS OF SIGMA DESIGNS, INC. (THE "COMPANY") SET
FORTH IN A PRIVATE SECURITIES SUBSCRIPTION AGREEMENT BETWEEN THE COMPANY AND
BANQUE EDOUARD CONSTANT DATED JUNE 25, 1997 AND IN THE ASSIGNMENT AND ASSUMPTION
AGREEMENT BETWEEN THE COMPANY, BANQUE EDOUARD CONSTANT AND KA INVESTMENTS LDC. A
COPY OF THE AFORESAID SUBSCRIPTION AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY BE
OBTAINED FROM THE COMPANY'S EXECUTIVE OFFICES.
March 11, 1998
Warrant to Purchase up to 21,428 Shares
of Common Stock of Sigma Designs, Inc.
Sigma Designs, Inc., a California corporation (the "Company"), hereby
acknowledges that KA Investments LDC (the "Buyer") or any other Warrant Holder
(hereinafter defined) is entitled, on the terms and conditions set forth below,
to purchase from the Company beginning the day after the six month anniversary
date of the closing of the purchase of this warrant (the "Warrant") and ending
three years after the six month anniversary date of the closing forty-two ((42)
months after the original issuance of this Warrant) up to 21,428 fully paid and
nonassessable shares of common stock, no par value, of the Company (the "Common
Stock"), as the same may be adjusted pursuant to Section 5 herein, at the
Purchase Price (hereinafter defined), as the same may be adjusted pursuant to
Section 5 herein. The resale of the shares of Common Stock or other securities
issuable upon exercise or exchange of this Warrant is subject to the provisions
of the Registration Rights Agreement by and between the Company and the Investor
dated as of June 25, 1997 (the "Registration Rights Agreement").
1. Definitions.
(a) The term "Warrant Holder" shall mean the Buyer or any
assignee of all or any portion of this Warrant.
<PAGE>
(b) The term "Warrant Shares" shall mean the shares of Common
Stock or other securities issuable upon exercise of this Warrant.
(c) The term "Purchase Price" shall be an amount equal to 130%
of the average closing bid price of Common Stock of the Company for five (5)
trading days ending April 30,1998, provided that such price shall not exceed
$9.425.
(d) The term "Agreement" shall mean the Private Securities
Subscription Agreement, dated as of June 25, 1997, between the Company and the
Buyer.
(e) Other capitalized terms used herein which are defined in
the Agreement shall have the same meanings herein as therein.
2. Exercise or Exchange of Warrant.
(a) This Warrant may be exercised by the Warrant Holder, in
whole or in part, at any time during the life of this Warrant as described
herein, and from time to time by surrender of this Warrant, together with the
Exercise Form (as defined herein) at the end hereof duly executed by Warrant
Holder, together with the full Purchase Price (as defined in Section 1) for each
share of Common Stock as to which this Warrant is exercised to the Company at
the address of the Company set forth in Section 13 hereof. In the event that the
Warrant is not exercised in full, the number of Warrant Shares shall be reduced
by the number of such Warrant Shares for which this Warrant is exercised, and
the Company, at its expense, shall forthwith issue and deliver to or upon the
order of the Warrant Holder a new Warrant of like tenor in the name of the
Warrant Holder or as the Warrant Holder may request, reflecting such adjusted
Warrant Shares. Warrants may be exchanged for shares of Common Stock, the value
of the Warrants so exchanged shall equal the Closing Price (as hereinafter
defined) minus the Purchase Price for each share subject to the Warrant so
exchanged. The "Closing Price" shall mean (i) the closing bid price of such
Common Stock as quoted on the Principal Market (as herein defined) on the Date
of Exercise (as defined below) or (ii) if the Common Stock is not listed or
admitted to trading on any national securities exchange or quoted on the Nasdaq
National Market or Small-Cap Market, the closing bid price on the
over-the-counter market as furnished by any New York Stock Exchange member firm
which makes a market in the Common Stock reasonably selected from time to time
by the Company for that purpose, or (iii) if the Common Stock is not listed or
admitted to trading on any national securities exchange or quoted on the Nasdaq
National Market or Small-Cap Market or traded over-the-counter and the average
price cannot be determined as contemplated above, the fair market value of the
Common Stock as reasonably determined in good faith by the Company's Board of
Directors.
(b) The "Date of Exercise" of the Warrant shall be the date
that the advance copy of the form of exercise attached hereto as Exhibit A (the
"Exercise Form"), is sent by facsimile to the Company, provided that the
original Warrant and Exercise Form are received by the Company within reasonable
time thereafter. If the Warrant Holder has not sent advance notice by facsimile,
the Date of Exercise shall be the date the original Exercise Form is received by
the Company.
-2-
<PAGE>
3. Delivery of Stock Certificates.
(a) Subject to the terms and conditions of this Warrant, as
soon as practicable after the exercise of this Warrant in full or in part, and
in any event within five (5) business days thereafter, the Company at its
expense (including, without limitation, the payment by it of any applicable
issue taxes) will cause to be issued in the name of and delivered to the Warrant
Holder, or as the Warrant Holder may lawfully direct, a certificate or
certificates for the number of fully paid and non-assessable shares of Common
Stock to which the Warrant Holder shall be entitled on such exercise, together
with any other stock or other securities or property (including cash, where
applicable) to which the Warrant Holder is entitled upon such exercise in
accordance with the provisions hereof.
(b) This Warrant may not be exercised as to fractional shares
of Common Stock. In the event that the exercise of this Warrant, in full or in
part, would result in the issuance of any fractional share of Common Stock, then
in such event the Warrant Holder shall be entitled to cash equal to the fair
market value of such fractional share. For purposes of this Warrant, "fair
market value" shall equal the closing bid price of the Common Stock on the
Nasdaq National Market or Small-Cap Market, the American Stock Exchange or the
New York Stock Exchange, whichever is the principal trading exchange or market
for the Common Stock (the "Principal Market") on the date of determination or,
if the Common Stock is not listed or admitted to trading on any national
securities exchange or quoted on the Nasdaq National Market or Small-Cap Market,
the closing bid price on the over-the-counter market as furnished by any New
York Stock Exchange member firm which makes a market in the Common Stock
reasonably selected from time to time by the Company for that purpose, or, if
the Common Stock is not listed or admitted to trading on any national securities
exchange or quoted on the Nasdaq National Market or Small-Cap Market or traded
over-the-counter and the average price cannot be determined as contemplated
above, the fair market value of the Common Stock shall be as reasonably
determined in good faith by the Company's Board of Directors.
4. Covenants of the Company.
(a) The Company shall use its reasonable best efforts to
insure that a registration statement under the Securities Act covering the
resale or other disposition thereof of the Warrant Shares by the Warrant Holder
is effective to the extent provided by the Registration Rights Agreement.
(b) All Warrant Shares that may be issued upon the exercise of
the rights represented by this Warrant will, upon issuance, be validly issued,
fully paid and nonassessable and free from all taxes, liens, and charges with
respect to the issue thereof.
(c) The Company shall take all necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, including, without limitation the notification of the Nasdaq
National Market, for the legal and valid issuance of this Warrant and the
Warrant Shares to the Warrant Holder.
-3-
<PAGE>
(d) From the date hereof through the last date on which this
Warrant is exercisable, the Company shall take all steps reasonably necessary
and within its control to insure that the Common Stock remains listed or quoted
on the Principal Market.
(e) The Company shall at all times reserve and keep available,
solely for issuance and delivery as Warrant Shares hereunder, such shares of
Common Stock as shall from time to time be issuable as Warrant Shares.
(f) The Warrant Shares, when issued in accordance with the
terms hereof, will be duly authorized and, when paid for or issued in accordance
with the terms hereof, shall be validly issued, fully paid and non-assessable.
The Company has authorized and reserved for issuance to the Warrant Holder the
requisite number of shares of Common Stock to be issued pursuant to this
Warrant.
(g) With a view to making available to the Warrant Holder the
benefits of any rule or regulation of the Securities and Exchange Commission
(the "SEC"), that may at any time permit the Warrant Holder to sell securities
of the Company to the public without registration, including without limitation
Rule 144, the Company agrees to use its reasonable best efforts to (i) make and
keep public information available, as those terms are understood and defined in
such rule or regulation, at all times; and (ii) file with the SEC in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act.
(h) This Warrant will be binding upon any entity succeeding to
the Company by merger, consolidation or acquisition of all or substantially all
of the Company's assets.
5. Adjustment of Purchase Price and Number of Shares. The number of and
kind of securities purchasable upon exercise of this Warrant and the Purchase
Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances. If the
Company shall at any time after the date hereof but prior to the expiration of
this Warrant subdivide its outstanding securities as to which purchase rights
under this Warrant exist, by split-up, or otherwise, or combine its outstanding
securities as to which purchase rights under this Warrant exist, the number of
Warrant Shares as to which this Warrant is exercisable as of the date of such
subdivision, split-up, or combination shall forthwith be proportionately
increased in the case of a subdivision, or proportionately decreased in the case
of a combination. Appropriate adjustments shall also be made to the Purchase
Price, so that after such adjustments the aggregate Purchase Price payable
hereunder for the increased number of shares of Common Stock shall be the same
as the aggregate Purchase Price in effect immediately prior to such adjustments.
(b) Stock Dividend. If at any time after the date hereof the
Company declares a dividend or other distribution on Common Stock payable in
Common Stock or other securities or rights convertible into or exchangeable for
Common Stock ("Common Stock Equivalents"), without payment of any consideration
by holders of Common Stock for the additional shares of Common Stock or the
-4-
<PAGE>
Common Stock Equivalents (including the additional shares of Common Stock
issuable upon exercise or conversion thereof), then the number of shares of
Common Stock for which this Warrant may be exercised shall be increased as of
the record date (or the date of such dividend distribution if no record date is
set) for determining which holders of Common Stock shall be entitled to receive
such dividends, in proportion to the increase in the number of outstanding
shares (and shares of Common Stock issuable upon conversion of all such Common
Stock Equivalents) of Common Stock as a result of such dividend, and the
Purchase Price shall be adjusted so that the aggregate amount payable for the
purchase of all the Warrant Shares issuable hereunder immediately after the
record date (or on the date of such distribution, if applicable) for such
dividend shall equal the aggregate amount so payable before the record date (or
before the date of such distribution, if applicable).
(c) Other Distributions. If at any time after the date hereof
the Company distributes to holders of its Common Stock, other than as part of a
dissolution or liquidation or the winding up of its affairs, any shares of its
capital stock, any evidence of indebtedness or any of its assets (other than
cash, Common Stock or Common Stock Equivalents), then, in any such case, the
Warrant Holder shall be entitled to receive, upon exercise of this Warrant, with
respect to each share of Common Stock issuable upon such exercise, (i) the
amount of evidences of indebtedness or other securities or assets (excluding
cash and the Company's own Common Stock or Common Stock Equivalents) which such
Warrant Holder would have been entitled to receive as a result of the happening
of such event with respect to each such share of Common Stock subject to this
Warrant had this Warrant been exercised immediately prior to the record date or
other date determining the shareholders entitled to participate in such
distribution (the "Determination Date") or (ii) in lieu thereof, if the Board of
Directors of the Company should so determine at the time of such distribution, a
lower Purchase Price reduced by the value of such distribution applicable to one
share of Common Stock (such value to be determined in good faith by the
Company's Board of Directors).
(d) Merger, Consolidation, etc. If at any time after the date
hereof there shall be a merger or consolidation of the Company with or into, or
a transfer of all or substantially all of the assets of the Company to, another
entity (a "Consolidation Event"), then the Warrant Holder shall be entitled to
receive upon such transfer, merger or consolidation becoming effective, and upon
payment of the aggregate Purchase Price then in effect, the number of shares or
other securities or property of or cash or other consideration from the Company
or of the successor corporation resulting from such merger or consolidation, to
which such Warrant Holder would have been entitled to receive as a result of the
happening of such event with respect to each such share of Common Stock subject
to this Warrant had this Warrant been exercised immediately prior to such
transfer, merger or consolidation becoming effective or to the applicable record
date thereof, as the case may be. The Company shall not effect any Consolidation
Event unless the resulting successor or acquiring entity (if not the Company)
assumes by written instrument the obligation to deliver to the Warrant Holder
such shares of stock and/or securities as the Warrant Holder is entitled to
receive had this Warrant been exercised in accordance with the foregoing;
provided, however, that if as of the third business day prior to the
consummation of the Consolidation Event the closing bid price of the Common
Stock shall be equal to at least 200% of the Purchase Price, then the Warrant
shall be automatically exchanged on the date of consummation of the
Consolidation Event, as provided in Section 2 hereof.
-5-
<PAGE>
(e) Reclassification, Etc. If at any time after the date
hereof there shall be a reclassification of any securities as to which purchase
rights under this Warrant exist, into the same or a different number of
securities of any other class or classes, then the Warrant Holder shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified herein and upon payment of the Purchase Price then in effect,
the number of shares or other securities or property or cash or other
consideration resulting from such reorganization or reclassification, which
would have been received by the Warrant Holder for the shares of stock subject
to this Warrant had this Warrant at such time been exercised.
(f) Purchase Price Adjustment. In the event that the Company
issues or sells any Common Stock or securities which are convertible into or
exchangeable for its Common Stock or any convertible securities, or any warrants
or other rights to subscribe for or to purchase or any options for the purchase
of its Common Stock or any such convertible securities (other than issuance of
Preferred Stock or of shares of Common Stock upon conversion thereof, shares or
options issued or which may be issued to employees, directors or consultants
pursuant to the Company's stock option or stock purchase plans listed in the
Public Documents or shares issued upon exercise of options, warrants or rights
outstanding on the date of the Agreement and listed in the Public Documents) at
an effective purchase price per share which is less than the Purchase Price then
in effect and less than the fair market value (as hereinabove defined) of the
Common Stock on the trading day next preceding such issue or sale, then in each
such case, the Purchase Price in effect immediately prior to such issue or sale
shall be reduced effective concurrently with such issue or sale to an amount
determined by multiplying the Purchase Price then in effect by a fraction, (x)
the numerator of which shall be the sum of (1) the number of shares of Common
Stock outstanding immediately prior to such issue or sale, including, without
duplication, those deemed to have been issued under any provision of the
Preferred Stock and the Warrants plus (2) the number of shares of Common Stock
which the aggregate consideration received by the Company for such additional
shares would purchase at such fair market value then in effect and (y) the
denominator of which shall be the number of shares of Common Stock of the
Company outstand ing immediately after such issue or sale including, without
duplication, those deemed to have been issued under any provision of the
Preferred Stock and Warrants; provided, however, there shall be no reduction of
the Purchase Price for such issuances or sales at any time from June 25, 1997
through the term of this Warrant in an aggregate (i.e., not per transaction)
amount of up to $4,500,000 provided that such issuance or sale is completed at
an effective purchase price per share of at least 85% of the fair market value
of the Common Stock on the trading day next preceding such issue or sale. For
purposes of the foregoing fraction, Common Stock outstanding shall include,
without limitation, any equity offer ings then outstanding, whether or not they
are exercisable or convertible when such fraction is to be determined.
The number of shares which may be purchased hereunder shall be
increased proportionately to any reduction in Purchase Price pursuant to this
paragraph 5(f), so that after such adjustments the aggregate Purchase Price
payable hereunder for the increased number of shares of Common Stock shall be
the same as the aggregate Purchase Price in effect immediately prior to such
adjustments.
-6-
<PAGE>
Notwithstanding anything else contained in this Warrant to the
contrary, there shall be no adjustment of the Purchase Price or the number of
shares of Common Stock issuable pursuant to the exercise of this Warrant in the
event that during the term of this Warrant, the Company issues shares of Common
Stock, or securities convertible into Common Stock to the Buyer.
(g) Adjustments: Additional Shares, Securities or Assets. In
the event that at any time, as a result of an adjustment made pursuant to this
Section 5, the Warrant Holder shall, upon exercise of this Warrant, become
entitled to receive shares and/or other securities or assets (other than Common
Stock) then, wherever appropriate, all references herein to shares of Common
Stock shall be deemed to refer to and include such shares and/or other
securities or assets; and thereafter the number of such shares and/or other
securities or assets shall be subject to adjustment from time to time in a
manner and upon terms as nearly equivalent as practicable to the provisions of
this Section 5.
6. No Impairment. The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Warrant Holder against
impairment. Without limiting the generality of the foregoing, the Company (a)
will not increase the par value of any Warrant Shares above the amount payable
therefor on such exercise, and (b) will take all such action as may be
reasonably necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares on the exercise of
this Warrant.
7. Notice of Adjustments; Notices. Whenever the Purchase Price or
number of Warrant Shares purchasable hereunder shall be adjusted pursuant to
Section 5 hereof, the Company shall promptly execute and deliver to the Warrant
Holder a certificate setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated and the Purchase Price and number of shares
purchasable hereunder after giving effect to such adjustment, and shall cause a
copy of such certificate to be mailed (by first class mail, postage prepaid) to
the Warrant Holder.
8. Rights As Stockholder. Prior to exercise of this Warrant, the
Warrant Holder shall not be entitled to any rights as a stockholder of the
Company with respect to the Warrant Shares, including (without limitation) the
right to vote such shares, receive dividends or other distributions thereon or
be notified of stockholder meetings. However, in the event of any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Company shall mail to
each Warrant Holder, at least 10 days prior to the date specified therein, a
notice specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character of
such dividend, distribution or right.
-7-
<PAGE>
9. Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Warrant and, in the case of any such loss, theft or destruction of the Warrant,
upon delivery of an indemnity agreement or security reasonably satis factory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
10. Consent to Jurisdiction. Each of the Company and the Warrant Holder
(i) hereby irrevocably submits to personal jurisdiction in any state or federal
court located in the State of California for the purposes of any suit, action or
proceeding arising out of or relating to this Warrant.
11. Entire Agreement; Amendments. This Warrant and the Agreement
contain the entire understanding of the parties with respect to the matters
covered herein and therein. No provision of this Warrant may be waived or
amended other than by a written instrument signed by the party against whom
enforcement of any such amendment or waiver is sought.
12. Restricted Securities.
(a) Registration or Exemption Required. This Warrant has been
issued in a transaction exempt from the registration requirements of the Act in
reliance upon the provisions of Section 4(2) promulgated by the SEC under the
Securities Act. This Warrant and the Warrant Shares issuable upon exercise of
this Warrant may not be resold except pursuant to an effective registration
statement or an exemption to the registration requirements of the Securities Act
and applicable state laws.
(b) Legend. The Warrant and any Warrant Shares issued upon
exercise thereof (until a registration statement has been declared effective by
the SEC with respect to the Warrant Shares, at which time, such legend shall be
removed, and the Warrant Shares shall be freely tradeable), shall bear the
following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN
ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY
NOR ANY INTER EST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED, HYPO THECATED OR OTHERWISE DISPOSED OF,
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A
TRANSACTION WHICH IS EXEMPT FROM, OR NOT SUBJECT
-8-
<PAGE>
TO, SUCH REGISTRATION. THE HOLDER OF THIS
CERTIFICATE IS THE BENEFICIARY OF CERTAIN
OBLIGATIONS OF SIGMA DESIGNS, INC. SET FORTH IN A
PRIVATE SECURITIES SUBSCRIPTION AGREEMENT BETWEEN
THE COMPANY AND BANQUE EDOUARD CONSTANT DATED JUNE
25, 1997. A COPY OF THE AFORESAID SUBSCRIPTION
AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY BE
OBTAINED FROM THE COMPANY'S EXECUTIVE OFFICES."
The certificates representing the Warrants, the shares of Preferred Stock and
underlying Common Stock shall also bear any other legends required by applicable
Federal or state securities laws, which legends shall be removed when not
required in accordance with this Paragraph 2(iii).
(c) Assignment. Assuming the conditions of (a) above regarding
registration or exemption have been satisfied, the Warrant Holder may sell,
transfer, assign, pledge or otherwise dispose of this Warrant, in whole or in
part. The Warrant Holder shall deliver a written notice to the Company,
substantially in the form of the Assignment attached hereto as Exhibit B,
indicating the person or persons to whom the Warrant shall be assigned and the
respective number of warrants to be assigned to each assignee. The Company shall
effect the assignment within ten (10) days, and shall deliver to the assignee(s)
designated by the Warrant Holder a Warrant or Warrants of like tenor and terms
for the appropriate number of shares.
13. Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery or delivery by facsimile at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
to the Company: Sigma Designs, Inc.
46501 Landing Parkway
Fremont, California 94538
Attn: Ms. Carol Kaplan
Fax: (510) 770-2640
-9-
<PAGE>
to the Warrant Holder: KA Investments LDC
c/o Robinson Silverman
Attn: Alexandre Speaker, Esq.
1290 Avenue of the Americas
New York, NY 10104
ph: (212) 541-2000
fx: (212) 541-4630
with a copy to:
Either party hereto may from time to time change its address or
facsimile number for notices under this Section 13 by giving at least 10 days
prior written notice of such changed address or facsimile number to the other
party hereto.
14. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of California. The headings in this Warrant
are for purposes of reference only, and shall not limit or otherwise affect any
of the terms hereof. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provision.
-10-
<PAGE>
SIGMA DESIGNS, INC.
By: ___________________________________________
Thinh Q. Tran
Chairman of the Board and
Chief Executive Officer
[CORPORATE SEAL]
Attest:
By: ___________________________________________
Kit Tsui
Secretary
-11-
<PAGE>
EXHIBIT A
EXERCISE FORM
SIGMA DESIGNS, INC.
The undersigned hereby irrevocably exercises the right to purchase
__________________ shares of Common Stock of SIGMA DESIGNS, INC., a California
corporation, evidenced by the attached Warrant, and herewith makes payment of
the Purchase Price with respect to such shares in full in the form of [cash or
check in the amount of $___], [______ Warrant Shares which represent the amount
of Warrant Shares as provided in the attached Warrant to be canceled in
connection with such exercise], all in accordance with the conditions and
provisions of said Warrant.
The undersigned requests that stock certificates for such Warrant
Shares be issued, and a Warrant representing any unexercised portion hereof be
issued, pursuant to this Warrant in the name of the registered Holder and
delivered to the undersigned at the address set forth below.
Dated: ________________________________
Signature of Registered Holder
Name of Registered Holder (Print)
Address
<PAGE>
EXHIBIT B
ASSIGNMENT
(To be executed by the registered Warrant Holder desiring
to transfer the Warrant)
FOR VALUED RECEIVED, the undersigned Warrant Holder of the attached
Warrant hereby sells, assigns and transfers unto the persons below named the
right to purchase ______________ shares of the Common Stock of SIGMA DESIGNS,
INC. evidenced by the attached Warrant and does hereby irrevocably constitute
and appoint ______________________ attorney to transfer the said Warrant on the
books of the Company, with full power of substitution in the premises.
Dated: ________________________________
Signature
Fill in for new Registration of Warrant:
Name
Address
Please print name and address of assignee
(including zip code number)
NOTICE
The signature to the foregoing Exercise Form or Assignment must
correspond to the name as written upon the face of the attached Warrant in every
particular, without alteration or enlargement or any change whatsoever.
December 10, 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 Post-Effective Amendment No. 1 to the Registration
Statement on Form S-3 to be filed by you with the Securities and Exchange
Commission on December 10, 1998 (the "Registration Statement"), in connection
with the registration under the Securities Act of 1933, as amended, of 1,100,000
shares of your Common Stock, no par value (the "Shares"), all of which are
authorized and will be issued to the selling shareholders identified in the
Registration Statement (the "Selling Shareholders"). The Shares are to be
offered by the Selling Shareholders for sale to the public as described in the
Registration Statement. As your counsel in connection with this transaction, we
have examined the proceedings taken and proposed to be taken in connection with
the sale of the Shares.
It is our opinion that, upon completion of the proceedings being taken
or contemplated to be taken prior to the registration of the Shares, including
such proceedings to be carried out in accordance with the securities laws of the
various states, where required, the Shares, when sold in the manner referred to
in the Registration Statement, will be legally and validly issued, fully paid
and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendment thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ Wilson Sonsini Goodrich & Rosati
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective
Amendment No. 1 to Registration Statement 333-33147 of Sigma Designs, Inc. on
Form S-3 of our report dated February 26, 1998, appearing in the Annual Report
on Form 10-K of Sigma Designs, Inc. for the year ended January 31, 1998 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
December 8, 1998
