As filed with the Securities and Exchange Commission on May 3, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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Sigma Designs, Inc.
(Exact name of Registrant as specified in its charter)
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CALIFORNIA 7372 94-2848099
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification Number)
organization) Code Number)
355 Fairview Way
Milpitas, California 95035
(408) 262-9003
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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Thinh Q. Tran
President and Chief Executive Officer
Sigma Designs, Inc.
355 Fairview Way
Milpitas, California 95035
(408) 262-9003
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
David J. Segre, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
(650) 493-9300
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Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, please check the following box. [X]
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. [ ]
If the only securities being delivered pursuant to this Form are
being offered pursuant to dividend or interest reinvestment plans,
please check the following box. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed
Maximum Proposed
Offering Maximum
Amount to be Price Aggregate Amount of
Title of Each Class of Registered Per Offering Registration
Securities to be Registered (Shares) Share(1) Price(1) Fee
- ---------------------------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C>
Common Stock, no par value 632,225 $6.44 $4,071,529 $1,132
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee based on the average of the high and low prices for
the Common Stock as reported on the Nasdaq Stock Market on April 28,
1999, in accordance with Rule 457(c) under the Securities Act of
1933, as amended. 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 our Series C Preferred Stock and
warrants issued in connection therewith, as such number may be
adjusted as a result of stock splits, stock dividends and
antidilution provisions.
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.
The information in this preliminary prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective.
This preliminary prospectus is not an offer to sell these securities and
it is not soliciting an offer to buy these securities in any jurisdiction
where the offer of sale is not permitted.
SUBJECT TO COMPLETION
PROSPECTUS
632,225 SHARES
SIGMA DESIGNS, INC.
COMMON STOCK
This Prospectus may be used only in connection with the resale,
from time to time, of up to 625,000 shares of Common Stock of Sigma
Designs, Inc., by the following selling shareholders: Preferred Hardware
Distributors, Inc., JFIC, Inc., Multiventure Technologies, Inc., and
Jason Chan. All of the shares covered by this Prospectus are to be sold
by the selling shareholders. Each selling shareholder will receive the
shares upon conversion of our Series C Preferred Stock, exercise of
warrants issued in connection with the sale of the Series C Preferred
Stock, and payment of dividends (however, we have the option to pay the
dividends in cash). The selling shareholders purchased the shares of
Series C Preferred Stock and warrants directly from us in a transaction
not subject to registration with the Securities and Exchange Commission,
and will receive stock dividends, if any, 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 April 14, 1999, the last sale price for our Common
Stock as reported on The Nasdaq Stock Market was $6.125 per share.
See "Risk Factors" on page 3 for a discussion of certain factors
that should be considered by prospective purchasers of the shares offered
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 May __, 1999
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission (SEC). You
may read and copy any documents we file at the SEC's public reference
room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the
SEC at 1-800-SEC-0330 for further information on the public reference
room. Our SEC filings are also available to the public from the SEC's
Website at "http://www.sec.gov."
The SEC allows us to "incorporate by reference" the information
we file with them, which means that we can disclose important information
to you by referring you to those documents. The information incorporated
by reference is considered to be part of this prospectus, and information
that we file later with the SEC will automatically update and supersede
this information. We incorporate by reference the documents listed below
and any future filings we will make with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities and Exchange Act of 1934:
o Annual Report on Form 10-K for the fiscal year ended January 31,
1999;
o Definitive Proxy Statement relating to our Annual Meeting of
Shareholders held on June 12, 1998;
o The description of our common stock contained in the
Registration Statement on Form 8-A filed with the Commission on
November 3, 1986, and amended on September 22, 1989.
You may request a copy of these filings, at no cost, by writing or
telephoning Carol Kaplan, our Director of Investor Relations, at the
following address:
Sigma Designs, Inc.
355 Fairview Way
Milpitas, California 95035
(408) 262-9003
This prospectus is part of a registration statement we filed with
the SEC. You should rely only on the information or representations
provided in this prospectus. We have authorized no one to provide you
with different information. We are not making an offer of these
securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus is accurate as of any date
other than the date on the front of the document.
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 affected. In such case, the trading price of our Common Stock
could decline, and you may lose all or part of your investment.
This Registration Statement on Form S-3 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.
We Have a History of Operating Losses and We Expect Future Losses
We incurred significant operating losses in fiscal 1995, 1996 and
1998 and had negative cash flow in fiscal 1995 and 1998. 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 January 31, 1999, our total
accumulated deficit is $41,452,000. 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.
Liquidity
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 which we may borrow as
needed. Under the Agreement and the Notes, we are subject to a certain
profitability covenant. Since July 1997, we have, on occasion, been in
violation of the profitability covenant and have obtained waivers
releasing us from our obligation to meet this covenant. We were granted
such a waiver for the quarter ended January 31, 1999. We may need
another waiver for the quarter ending April 30, 1999 or in future
periods. We cannot assure you that Silicon Valley Bank will grant these
waivers. If we do not meet this covenant, and if we do not obtain
waivers, 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 and Volatility of OEM Customer Sales and 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 Manufacturer ("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. In
addition, 28% of our net sales were derived from one customer in fiscal
1999; any reduction in those sales could seriously harm us. 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 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.
Our Market May Undergo Rapid Technological Change and Our Future Success
Will Depend on Our Ability to meet the Changing Needs of Our Industry
The market for multimedia PC products is characterized by the
following:
o rapidly changing technology and user preferences;
o evolving formats for compression of video and audio data; and
o 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.
Our Industry is Highly Competitive and We Cannot Assure You That We Will
Be Able to Effectively Compete
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 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. 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.
Our Net Sales Are Dependent on 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, 1999, sales of multimedia products accounted for
virtually all of our net sales. A decline in market demand for
multimedia products will seriously harm 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 seriously harm our operating results and
financial condition. In addition, one international customer accounted
for 28%, 39% and 22% of revenues in fiscal 1999, 1998 and 1997.
Our Operating Results Are Subject to Significant Fluctuations Due To Many
Factors and Any of These Factors Could Adversely Affect Our Stock Price
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 product introductions by 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;
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 harm our operating results.
We Rely Heavily on Certain Manufacturers and Suppliers
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.
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 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.
We Depend 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
employee mobility and aggressive recruiting of skilled personnel.
Despite incentives we provide, 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.
We Face Risks Related to Intellectual Property Rights
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 our 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.
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.
Our International Operations Are Subject to Certain Risks
During the fiscal years ended January 31, 1999, 1998 and 1997,
sales to international customers accounted for approximately 72%, 64% and
72% 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 seriously harm
our results of operations.
Our Stock Price May Be Volatile
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; and
o market conditions in the technology, entertainment and
emerging growth company sectors.
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 decrease the price of our Common Stock.
There Is A Potential for Dilution From Conversion of Our Series C
Preferred Stock
Series C Preferred Stock. As of April 14, 1999, 1,400 shares of
our Series C Convertible Preferred Stock were issued and outstanding.
The shares of Series C Preferred Stock are convertible at the option of
the holders into that number of shares of our Common Stock as determined
by the following formula:
o Multiply the stated value ($1,000) of the Series C Preferred Stock
by the number of outstanding shares of Series C Preferred Stock,
and divide the product by the then current Conversion Price (set
forth below).
o The Conversion Price is based on the average of the closing sale
trading market price of our Common Stock over the five trading-day
period ending one day prior to the date of conversion of the
Series C Preferred Stock; provided, however, that no share of
Series C Preferred Stock may be converted into shares of our Common
Stock if the Conversion Price is less than $4.00. Furthermore, the
maximum Conversion Price for the Series C Preferred Stock is fixed
at $7.00. Thus, if the Series C Preferred Stock was converted on
April 14, 1999, the Conversion Price would have been $5.43.
Based on this formula, if the remaining outstanding Series C
Preferred Stock had been converted on April 14, 1999, it would have been
convertible into approximately 257,827 shares of Common Stock.
Purchasers of our common stock will experience dilution of their
investment upon conversion of the Series C Preferred Stock. Because the
Conversion Price of the Series C Preferred Stock is capped at $7.00, the
minimum number of shares of Common Stock that the remaining outstanding
shares of Series C Preferred Stock may be converted into is 200,000
shares. And, because the Series C Preferred Stock cannot be converted at
a Conversion Price that is less than $4.00, the maximum number of Common
Stock that the remaining outstanding shares of Series C Preferred Stock
may be converted into is 350,000 shares.
In addition, the Series C Preferred Stock receives payment of
dividends upon conversion into shares of our Common Stock. Dividends at
the rate of eight percent (8%) of the stated value ($1,000) of the
Series C Preferred Stock accrue daily on the basis of a 360-day year
beginning January 22, 1999. At our option, we can pay the dividend by
issuing shares of our Common Stock or, if funds are legally available, by
cash. In the event we pay the dividends in cash, purchasers of our
Common Stock will suffer less dilution. Our election to pay cash,
however, will divert our available cash from other potential uses. The
shares of Series C 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 April 14, 1999, warrants to purchase 95,000 shares of Common
Stock issued to the purchasers of the Series C Preferred Stock and
exercisable for a period of two years following January 22, 1999 at a
price of $5.16 (as may be adjusted from time to time under certain
antidilution provisions) were outstanding.
Year 2000 Issues Could Affect Our Business
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 that are not our vendors or that 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.
<PAGE>
THE COMPANY
Overview
This Registration Statement on Form S-3 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, as discussed in this
Registration Statement under Risk Factors and elsewhere.
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, we announced our 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 Super Video Compact Disk ("SVCD") solutions are
extensions of our 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, OptiVision, Oracle Corporation,
Silicon Graphics, Inc., Starlight Networs, acquired by Picturetel, Sun
Microsystems, and FVC.com.
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 first 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 Original Equipment Manufacturer ("OEM") Customers
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, we intend to promote widespread acceptance of REALmagic
technology. The key parts of this strategy include:
Win More OEM Partnerships and Further Penetrate the Corporate Market
To establish REALmagic for MPEG-2 as a standard, we 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, our systems integration sales team
will continue to work with its network of national distributors and
special Value Added Resellers (VARs) to distribute our high-end REALmagic
playback card. In Europe and Asia Pacific, we intend to continue to
expand our relationship with distributors as well as OEMs and VARs. In
addition, we 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 our 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. We seek to continue to offer consumers better-featured
and lower-priced products over time.
REALmagic Products
We currently offer a complete family of REALmagic products
including:
o REALmagic Hollywood Plus-In April 1997, we announced our
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, we announced our
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, we 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 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, we
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, we 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. Our U.S. distributors include Ingram
Micro, Inc. and Tech Data, and our OEMs include Sony, Philips, Panasonic
Canada, IBM, Matsushita, Toshiba, Kapok Computers, Royal Computer, ASE
Technologies, LungHwa Electronics Co., Ltd., Formosa Industrial
Computing, Labway Corporation and others. Our international distributors
are strategically located in many countries around the world.
We generally acquire and maintain products for distribution through
corporate markets based on forecasts rather than firm purchase orders.
Additionally, we generally acquire products for sale to our OEM customers
only after receiving purchase orders from such customers, which purchase
orders are typically cancellable without substantial penalty from such
OEM customers. We currently places noncancellable orders to purchase
semiconductor products from our 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 our financial condition. One customer
accounted for 28% of our net sales in fiscal 1999.
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 OEMs to
achieve sustained sell-through of REALmagic products could result in
product returns or collection problems, contributing to significant
fluctuations in our operating results.
Research and Development
As of January 31, 1999, we had a staff of 36 research and
development personnel. The research and development personnel conduct
all of our product development. We are focusing our 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, we 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).
We cannot assure you that the we will be able to make any such
advancements in the REALmagic MPEG technology or, if they are made, that
we will be able to market such advancements to maintain profitability and
technological leadership.
During fiscal 1999, fiscal 1998 and fiscal 1997, our research and
development expenses were $5,678,000, $4,948,000 and $4,688,000,
respectively. We plan 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 we do 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. We believe that
many computer product manufacturers are developing MPEG products that
will compete directly with REALmagic products in the near future.
We believe 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. We believe
that we compete most favorably with respect to time to market, product
performance and price of our REALmagic products. Moreover, we believe
that the acceptance of the REALmagic API as an industry standard for
software development could provide a significant competitive advantage
for Sigma. 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
We are seeking patent protection for certain software and hardware
features in current and future versions of REALmagic. We currently have
fifteen pending patent applications for its REALmagic technology. Ten
patents have been issued to us. We cannot assure you that more patents
will be issued or that such patents, even if issued, will provide
adequate protection for the Company's competitive position. We also
attempt to protect our trade secrets and other proprietary information
through agreements with customers, suppliers and employees and other
security measures. Although we intend to protect our rights vigorously,
we cannot assure you that these measures will be successful.
Manufacturing
To reduce overhead expenses, along with capital and staffing
requirements, we currently use third-party contract manufacturers to
fulfill all of our manufacturing needs, including chipset manufacture and
board-level assembly. All of the chips used by us to develop our
decoding products are manufactured by outside suppliers and foundries.
Each of these suppliers is a sole source of supply to us of the
respective chips produced by such supplier.
Our 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 seriously harm our sales of the
Company's products and, thus, our operating results.
Backlog
Since our customers typically expect quick deliveries, we seek 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, our
backlog has not been reflective of future sales. We also expect that in
the near term, our backlog will continue to be not indicative of future
sales.
Employees
As of January 31, 1999, the Company had 78 full-time employees,
including 36 in research and development, 19 in marketing, sales and
support, 9 in operations, and 14 in finance and administration.
Our future success will depend, in part, on our ability to continue
to attract, retain and motivate highly qualified technical, marketing,
engineering and management personnel, who are in great demand. Our
employees are not represented by any collective bargaining unit, and we
have never experienced a work stoppage. We believe that our 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
The following table sets forth certain information with respect to
beneficial ownership of our Common Stock as of April 14, 1999 by the
selling shareholders as follows: (i) the name and address of each selling
shareholder; (ii) the number of our outstanding shares of Common Stock
beneficially owned by each selling shareholder (including shares
obtainable under options 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 our
outstanding shares of Common Stock to be beneficially owned by each such
selling shareholder after completion of the sale of Common Stock. Except
as indicated in the footnotes to this table, the persons and entities
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. Except as indicated in the
footnotes to this table, no selling shareholder has held any position or
office or had a material relationship with the Company or any of its
affiliates within the past three years.
<TABLE>
<CAPTION>
Number of Shares of Common Stock
----------------------------------------------
Beneficially Beneficially Owned
Owned Being After Offering(1)(6)
Prior to Offered -------------------
Name and Address Offering(1) Hereby Number Percent
- ------------------------------------- ------------ ----------- --------- ---------
<S> <C> <C> <C> <C>
Preferred Hardware Distributors, Inc. -- 128,225 (2) -- --
4775 River Green Parkway
Duluth, GA 30096
Attention: Walter Huang, President
JFIC Inc. ............................ -- 180,000 (3) -- --
111 N. Hudson Avenue
Industry, CA 91744
Attention: Howard Chan, President
Multiventure Technologies, Inc. ...... -- 288,000 (4) -- --
20370 Town Center Lane, Suite 150
Cupertino, CA 95014
Attention: James Mah, CEO
Jason Chan(7) ........................ 34,134 36,000 (5) 34,134 *
15961 Viewfield Road
Monte Sereno, CA 95030
</TABLE>
-----------------
* Less than one percent (1%).
(1) The number and percentage of shares beneficially owned is determined
under rules of the Securities and Exchange Commission, and the
information is not necessarily indicative of beneficial ownership for
any other purpose. Under such rules, beneficial ownership includes
any shares as to which the individual has sole or shared voting power
or investment power and also any shares which the individual has the
potential right to acquire within sixty (60) days of the Offering
through the conversion of the shares of Series C Preferred Stock or
the exercise of warrants.
(2) Includes 103,225 shares of Common Stock issued on February 9, 1999
upon conversion of 500 shares of Series C Preferred Stock, and 25,000
shares of Common Stock issuable upon exercise of a warrant.
(3) Includes the number of shares of Common Stock (i) issued upon
conversion of shares of Series C Preferred Stock, the conversion of
which may not occur if, over the five-day trading period ending on
the day prior to conversion, the average closing sale trading market
price of the Company's Common Stock is less than $4.00 per share;
(ii) issuable upon exercise of the warrant to purchase 25,000 shares
of Common Stock; and (iii) up to 30,000 shares of Common Stock
issuable on the date of conversion of Series C Preferred Stock in the
form of a dividend payable in Common Stock at the rate of 8% of the
original issue price of the Series C Preferred Stock, which interest
rate shall accrue daily on the basis of a 360-day year commencing
with the original date of issuance; however, if funds are legally
available therefor, the Company has the option to pay such accrued
dividends in cash rather than shares of Common Stock.
(4) Includes the number of shares of Common Stock (i) issued upon
conversion of shares of Series C Preferred Stock, the conversion of
which may not occur if, over the five-day trading period ending on
the day prior to conversion, the average closing sale trading market
price of the Company's Common Stock is less than $4.00 per share;
(ii) issuable upon exercise of a warrant to purchase 40,000 shares of
Common Stock; and (iii) up to 48,000 shares of Common Stock issuable
on the date of conversion of Series C Preferred Stock in the form of
a dividend payable in Common Stock at the rate of 8% of the original
issue price of the Series C Preferred Stock, which interest rate
shall accrue daily on the basis of a 360-day year commencing with the
original date of issuance; however, if funds are legally available
therefor, the Company has the option to pay such accrued dividends in
cash rather than shares of Common Stock.
(5) Includes the number of shares of Common Stock (i) issued upon
conversion of shares of Series C Preferred Stock, the conversion of
which may not occur if, over the five-day trading period ending on
the day prior to conversion, the average closing sale trading market
price of the Company's Common Stock is less than $4.00 per share;
(ii) issuable upon exercise of the Warrant to purchase 5,000 shares
of Common Stock; and (iii) up to 6,000 shares of Common Stock
issuable on the date of conversion of Series C Preferred Stock in the
form of a dividend payable in Common Stock at the rate of 8% of the
original issue price of the Series C Preferred Stock, which interest
rate shall accrue daily on the basis of a 360-day year commencing
with the original date of issuance; however, if funds are legally
available therefor, the Company has the option to pay such accrued
dividends in cash rather than shares of Common Stock.
(6) Assumes sale of all shares of Common Stock offered hereby.
(7) Jason Chan is an employee of the company and currently holds the
position of Director, Operations.
<PAGE>
PLAN OF DISTRIBUTION
The selling shareholders may, from time to time, sell all or a
portion of the shares as follows:
o on The Nasdaq Stock Market, in privately negotiated transactions or
otherwise;
o at fixed prices that may be changed;
o at market prices prevailing at the time of sale;
o at prices related to such market prices; or
o at negotiated prices.
The shares may be sold by the selling shareholders by one or more
of the following methods, or others:
o 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;
o purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this
Prospectus;
o on a stock exchange in accordance with the rules of such
exchange;
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
o privately negotiated transactions; and
o a combination of any such methods of sale.
In effecting sales, brokers and dealers engaged by any selling
shareholder may arrange for other brokers or dealers to participate.
Brokers or dealers may receive commissions or discounts from the selling
shareholder (or, if any such broker-dealer acts as agent for the
purchaser of such shares, from such purchaser) in amounts to be
negotiated which are not expected to exceed those customary in the types
of transactions involved. Broker-dealers may agree with a selling
shareholder to sell a specified number of such shares at a stipulated
price per share, and, to the extent such broker-dealer is unable to do so
acting as agent for the selling shareholder, to purchase as principal any
unsold shares at the price required to fulfill the broker-dealer
commitment to the selling shareholder. Broker-dealers who acquire shares
as principal may thereafter resell such shares from time to time in
transactions (which may involve block transactions and sales to and
through other broker-dealers, including transactions of the nature
described above) in the over-the-counter market or otherwise at prices
and on terms then prevailing at the time of sale, at prices then related
to the then-current market price or in negotiated transactions and, in
connection with such resales, may pay to or receive from the purchasers
of such shares commissions as described above. Each selling shareholder
may also sell the shares in accordance with Rule 144 under the Securities
Act, rather than pursuant to this Prospectus.
Each selling shareholder and any broker-dealers or agents that
participate with any such selling shareholders in sales of the shares may
be deemed to be "underwriters" within the meaning of the Securities Act
in connection with such sales. In such event, any commissions received by
such broker-dealers or agents and any profit on the resale of the shares
purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
From time to time a selling shareholder may pledge its shares
pursuant to the margin provisions of its customer agreements with its
brokers. Upon a default by a selling shareholder, the broker may offer
and sell the pledged shares from time to time.
We are required to pay all fees and expenses incident to the
registration of the shares. We have 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, 1999 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.
TABLE OF CONTENTS
Page
Available Information 2
Risk Factors 3
The Company 10
Use of Proceeds 16
Selling Shareholders 17
Plan of Distribution 19
Legal Matters 21
Experts 21
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.
632,225 Shares
SIGMA DESIGNS, INC.
Common Stock
PROSPECTUS
May __, 1999
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.. $1,132
Nasdaq National Market Listing Fee................... 17,500
Legal Fees and Expenses.............................. 60,000
Accounting Fees and Expenses......................... 10,000
Blue Sky Fees and Expenses........................... 2,500
Transfer Agent and Registrar Fees.................... 5,000
Miscellaneous........................................ 1,500
---------
Total............................................ $97,632
=========
Item 15. Indemnification of Directors and Officers
Section 317 of the California Corporations Code authorizes a court
to award or a corporation's Board of Directors to grant indemnity to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act.
Article IV of the Registrant's Second Restated Articles of Incorporation
and Article VI of the Registrant's Bylaws provide for indemnification of
its directors, officers, employees and other agents to the maximum extent
permitted by the California Corporations Code. In addition, the
Registrant has entered into Indemnification Agreements with its officers
and directors.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons
controlling the Registrant pursuant to the foregoing provisions, the
Registrant has been informed that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
Item 16. Exhibits and Financial Statement Schedules
(a) EXHIBITS
3.1 Certificate of Determination of Preferences of Series C
Preferred Stock
4.1 Form of Subscription Agreement by and between the Company and
the purchasers of the Series C Preferred Stock and warrants.
4.2 Form of Registration Rights Agreement by and between the
Company and the purchasers of the Series C Preferred Stock
and warrants.
4.3 Form of Stock Purchase Warrant.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
23.1 Independent Auditors' Consent.
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
24.1 Power of Attorney. (See page II-4).
-----------------
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.
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.
<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
Milpitas, State of California, on the 30th day of April 1999.
SIGMA DESIGNS, INC.
By: /s/ Thinh Q. Tran
----------------------------------
Thinh Q. Tran
Chairman of the Board,
President and Chief Executive Officer
Each of the undersigned hereby appoints Thinh Q. Tran and Kit Tsui,
and each of them (with full power to act alone), as attorneys and agents
for the undersigned, with full power of substitution, for and in the name
place and stead of the undersigned, to sign and file with the Securities
and Exchange Commission under the Securities Act of 1933 any and all
amendments and exhibits to this Registration Statement and any and all
applications, instruments and other documents to be filed with the
Securities and Exchange Commission pertaining to the registration of the
securities covered hereby, with full power and authority to do and
perform any and all acts and things whatsoever requisite and necessary or
desirable.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------ ---------------------------------- -----------------
<S> <C>
/s/ Thinh Q. Tran Chairman of the Board, President April 30, 1999
- ------------------------ and Chief Executive Officer
Thinh Q. Tran (Principal Executive Officer)
/s/ Kit Tsui Director of Finance, Chief April 30, 1999
- ------------------------ Financial Officer, Secretary
Kit Tsui (Principal Financial and Accounting
Officer)
Director April 30, 1999
- ------------------------
William J. Almon
/s/ William Wang Director April 30, 1999
- ------------------------
William Wang
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER
-------------
3.1 Certificate of Determination of Preferences of Series C
Preferred Stock
4.1 Form of Subscription Agreement by and between the Company and
the purchasers of the Series C Preferred Stock and warrants.
4.2 Form of Registration Rights Agreement by and between the
Company and the purchasers of the Series C Preferred Stock
and warrants.
4.3 Form of Stock Purchase Warrant.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
23.1 Independent Auditors' Consent.
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
24.1 Power of Attorney. (See page II-4).
Exhibit 3.1
CERTIFICATE OF DETERMINATION OF
PREFERENCES OF SERIES C PREFERRED STOCK OF
SIGMA DESIGNS, INC.
The undersigned, Thinh Q. Tran and Kit Tsui, hereby certify that:
1. They are the duly elected President and Secretary, respectively, of
Sigma Designs, Inc., a California corporation (the "Corporation").
2. The Corporation hereby designates Three Thousand (3,000) shares of
Series C Preferred Stock.
3. None of the shares of the Series C Preferred Stock have been
issued.
4. Pursuant to authority given by the Corporation's Second Restated
Articles of Incorporation, as amended, the Board of Directors of the
Corporation has duly adopted the following recitals and resolutions:
WHEREAS, the Second Restated Articles of Incorporation of the
Corporation, as amended, provide for a class of shares known as Preferred
Shares, issuable from time to time in one or more series; and
WHEREAS, the Board of Directors of the Corporation is authorized within
the limitations and restrictions stated in the Second Restated Articles
of Incorporation to determine or alter the rights, preferences,
privileges, and restrictions granted to or imposed on any wholly unissued
series of Preferred Shares, to fix the number of shares constituting any
such series, and to determine the designation thereof, or any of them;
and
WHEREAS, the Corporation has not issued any shares of Series C Preferred
Stock and the Board of Directors of this Corporation desires to determine
the rights, preferences, privileges, and restrictions relating to this
series of Preferred Stock, and the number of shares constituting said
Series C and the designation of said series;
NOW, THEREFORE, BE IT
RESOLVED: That the President and the Secretary of this Corporation are
each authorized to execute, verify and file a certificate of
determination of preferences with respect to the Series C Preferred Stock
in accordance with the laws of the State of California.
RESOLVED FURTHER: That the Board of Directors hereby determines the
rights, preferences, privileges and restrictions relating to said Series
of Preferred Stock shall be as set forth below:
"A. Three thousand of the authorized shares of Preferred Stock of the
Corporation, none of which have been issued or are outstanding, are
hereby designated "Series C Convertible Preferred Stock" (the "Series
C Preferred Stock").
B. The rights, preferences, privileges, restrictions and other matters
relating to the Series C Preferred Stock are as follows:
1. Dividend Rights. The holders of Series C Preferred
Stock shall be entitled to receive, but only out of funds that are
legally available therefor, in cash upon the occurrence of an event
described in Section 3 below, or quarterly in arrears, in cash or Common
Stock of the Corporation, at the option of the Corporation, upon the
conversion of the Preferred Stock described in Section 5 below (as to the
number of shares of Preferred Stock so converted), dividends at the rate
of eight percent (8%) of the "Original Issue Price" of the Series C
Preferred Stock per annum, accruing daily on the basis of a 360-day year
commencing with the issuance of such Series C Preferred Stock, on each
outstanding share of Series C Preferred Stock. The Original Issue Price
of the Series C Preferred Stock (as adjusted for any combination,
consolidation, shares distributions or shares dividends with respect to
such shares) shall be equal to $1,000.00 per share.
2. Voting Rights. Except as otherwise provided by law,
the holders of Series C Preferred Stock shall have no voting rights and
their consent shall not be required (except to the extent required by
law) for taking any corporate action.
3. Rank, Liquidation, Dissolution or Winding Up. The
Series C Preferred Stock shall rank (i) prior to the Corporation's common
stock, no par value per share, (ii) prior to any class or series of
capital stock of the Corporation hereafter created, unless such class or
series by its terms specifically ranks senior to or in parity with Series
C Preferred Stock, (iii) pari passu with the Series A Preferred Stock and
Series B Preferred Stock and any class or series of capital stock of the
Corporation hereafter created specifically ranking, by its terms, on
parity with the Series C Preferred Stock ("Pari Passu Securities"), and
(iv) junior to any class or series of capital stock of the Corporation
hereafter created specifically ranking, by its terms, senior to the
Series C Preferred Stock, and in each case as to distribution of assets
upon liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary. In the event of any liquidation, dissolution
or winding up of the Corporation, either voluntary or involuntary, the
holders of the Series C Preferred Stock shall be entitled to receive,
prior and in preference to any distribution of the assets or surplus
funds of the Corporation to the holders of the Common Stock and in pari
passu with the Pari Passu Securities by reason of their ownership
thereof, an amount equal to the Original Issue Price, plus an amount
equal to accrued and unpaid dividends on such Series C Preferred Stock to
the date of such payment (the "Liquidation Preference"). If, upon
occurrence of such event the assets and funds thus distributed among the
holders of the Series C Preferred Stock and the Pari Passu Securities
shall be insufficient to permit the holders of the Series C Preferred
Stock the full Liquidation Preference and the Pari Passu Securities the
liquidation preference payable thereon, then the entire assets and funds
of the Corporation legally available for distribution shall be
distributed among the holders of the Series C Preferred Stock and the
Pari Passu Securities in proportion to the liquidation preference payable
thereon and the number of shares held by each such holder of Series C
Preferred Stock or Pari Passu Securities. After payment has been made to
the holders of the Series C Preferred Stock and the Pari Passu Securities
of the liquidation preferences payable thereon, the holders of the Common
Stock shall be entitled to receive the remaining assets of the
Corporation, if any.
4. Consolidation, Merger, Exchange, Etc. In case the
Corporation shall enter into any consolidation, merger, combination,
statutory share exchange or other transaction in which the Common Stock
is exchanged for or changed into other shares or securities, money and/or
any other property, then in any such case the Series C Preferred Stock
shall at the same time be either, at the option of the Corporation, (a)
similarly exchanged or changed into preferred shares of the surviving
entity providing the holders of such preferred stock with (to the extent
possible) the same relative rights and preferences as the Series C
Preferred Stock or (b) converted into the shares of stock and other
securities, money and/or any other property receivable upon or deemed to
be held by holders of Common Stock immediately following such
consolidation, merger, combination, statutory share exchange or other
transaction, and the holders of the Series C Preferred Stock shall be
entitled upon such event to receive such amount of securities, money
and/or any other property as the shares of the Common Stock of the
Corporation into which such shares of Series C Preferred Stock could have
been converted immediately prior to such consolidation, merger,
combination, statutory share exchange or other transaction would have
been entitled
5. Conversion.
(a) Conversion at the Option of the Holder. Subject
to the redemption provisions of Section 9 below, at the option of the
holder of the Series C Preferred Stock, the Series C Preferred Stock held
by such holder may be converted into fully paid and nonassessable shares
of the Corporation's Common Stock. The number of shares of Common Stock
each share of Series C Preferred Stock shall be convertible into shall be
calculated by dividing the Original Issue Price of the Series C Preferred
Stock to be converted by the lesser of: (x) $7.00 (as appropriately
adjusted for any stock splits, combinations, recapitalizations and the
like of the Corporation's Common Stock after the date the first share of
Series C Preferred Stock is issued (each a "Recapitalization")) and (y)
the average closing sale trading market price of the Corporation's Common
Stock, on the Nasdaq Stock Market or Small-Cap Market, the American Stock
Exchange or the New York Stock Exchange, whichever is the principal
exchange or trading market for the Common Stock (the "Principal
Market"), over the five-day trading period ending on the day prior to
conversion (the "Conversion Price"); provided, however, that the
Conversion Price shall not be less than $4.00 (as appropriately adjusted
for any Recapitalization) in any case.
(b) Automatic Conversion. Any Series C Preferred
Stock that is outstanding on the first anniversary of the initial
issuance of the Series C Preferred Stock will be automatically converted
into shares of the Corporation's Common Stock (the "Automatic
Conversion") as provided above; provided, however, that if the
Conversion Price on such first anniversary date is less than $4.00 (as
appropriately adjusted for any Recapitalization), the Automatic
Conversion shall instead be effected on such date as the average closing
sale trading market price of the Corporation's Common Stock on the
Principal Market shall be no less than $4.00 (as appropriately adjusted
for any Recapitalization) for the five-day trading period ending on such
date as the Automatic Conversion shall be effected.
(c) Reservation of Stock Issuable Upon Conversion.
The Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series C Preferred Stock,
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Series
C Preferred Stock. To the extent that at any time there are fewer shares
of Common Stock available than are required to effect such conversion,
the Common Stock will be allocated on a pro rata basis among holders of
Series C Preferred Stock derived from the proportion of Series C
Preferred Stock each holder of Series C Preferred Stock holds upon the
closing of the transaction. If at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of Series C Preferred Stock,
the Corporation will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares
of Common Stock to such number of shares as shall be sufficient for such
purpose except as limited by Section 5(d).
(d) Mechanisms for Effecting Conversions. The holder
shall effect conversions by surrendering the certificate or certificates
representing the shares of Series C Preferred Stock to be converted to
the Corporation, together with the form of conversion notice attached
hereto as Exhibit A (the "Conversion Notice"). Each Conversion Notice
shall specify the number of shares of Series C Preferred Stock to be
converted, which number shall be no less than 50 shares of Preferred
Stock, and the date on which such conversion is to be effected, which
date may not be prior to the date the holder delivers such Conversion
Notice by facsimile (the "Conversion Date"). If no Conversion Date is
specified in a Conversion Notice, the Conversion Date shall be the date
that the Conversion Notice is deemed delivered pursuant to Section 11.
If the holder is converting less than all shares of Series C Preferred
Stock represented by the certificate or certificates tendered by the
holder with the Conversion Notice, or if a conversion hereunder cannot be
effected in full for any reason, the Corporation shall convert up to the
number of shares of Series C Preferred Stock which can be so converted
and shall promptly deliver to such holder a certificate for such number
of shares as have not been converted.
6. Fractional Shares. In lieu of any fractional shares to
which the holder of the Series C Preferred Stock would otherwise be
entitled, the Corporation shall pay cash equal to such fraction
multiplied by the closing price of one share of the Corporation's Common
Stock on the trading day prior to conversion, if such price is available.
If such price is not available, this Corporation shall pay cash for
fractional shares equal to such fraction multiplied by the fair market
value of one share of Series C Preferred Stock as determined by the Board
of Directors of this Corporation. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of the
total number of shares of Series C Preferred Stock of each holder at the
time converting into Common Stock and the number of shares of Common
Stock issuable upon such aggregate conversion.
7. Minimal Adjustments. No adjustment in the Original
Issue Price need be made if such adjustment would result in a change in
the Conversion Price of less than $0.01. Any adjustment of less than
$0.01 which is not made shall be carried forward and shall be made at the
time of and together with any subsequent adjustment which, on a
cumulative basis, amounts to an adjustment of $0.01 or more in the
Conversion Price.
8. Adjustment of Conversion for Dividend and Distributions.
(a) In the event the Corporation shall at any time
after issuance of the Series C Preferred Stock declare or pay any
dividend or other distribution on Common Stock, payable in Common Stock
or other securities or rights convertible into, or exchangeable for,
Common Stock, or effect a subdivision or combination or consolidation of
the outstanding Common Stock (by reclassification or otherwise) into a
greater or lesser number of Common Stock, then in each such case the
number of Common Stock issuable upon the conversion of the Series C
Preferred Stock shall be adjusted (the "Adjustment") by multiplying the
number of Common Stock to which the holder was entitled before such event
by a multiplier X/Y determined as follows:
X = The number of Common Stock outstanding
immediately after such event.
Y = The number of Common Stock that were outstanding
immediately prior to such event.
(b) In the event the Corporation shall at any time
after issuance of the Series C Preferred Stock, distribute to holders of
its Common Stock, other than as part of a dissolution or liquidation or
the winding up of its affairs, any shares of its capital stock, any
evidence of indebtedness, or other securities or any of its assets (other
than Common Stock or securities convertible into or exchangeable for
Common Stock), then, in any such case, the Preferred Stock holder shall
be entitled to receive, upon conversion of the Series C Preferred Stock,
with respect to each share of Common Stock issuable upon such conversion,
the amount of cash or evidence of indebtedness or other securities or
assets which such Series C Preferred Stock holder would have been
entitled to receive with respect to each such share of Common Stock as a
result of the happening of such event had the Series C Preferred Stock
holder converted to Common Stock immediately prior to the record date or
other date determining the shareholders entitled to participate in such
distribution (the "Determination Date") or, in lieu thereof, if the
Board of Directors of the Corporation should so determine at the time of
such distribution, a reduced Conversion Price determined by multiplying
the Conversion Price on the Determination Date by a fraction, the
numerator of which is the result of such Conversion Price reduced by the
value of such distribution applicable to one share of Common Shares (such
value to be determined in good faith by the Corporation's Board of
Directors) and the denominator of which is such Conversion Price.
(c) In the event an Adjustment is made by the
Corporation, the Corporation shall notify each holder of Series C
Preferred Stock as soon as is commercially practicable and, if deemed
necessary, shall explain briefly to each holder the Adjustment procedure
and the reason for the Adjustment.
9. Redemption at Option of Corporation.
(a) (i) In the event that the average closing sale
trading market price of the Corporation's Common Stock on the Principal
Market for any consecutive five (5) trading day period is equal to or in
excess of $10.00 per share (as appropriately adjusted for any
Recapitalization); or (ii) following the first anniversary of the initial
issuance of the Series C Preferred Stock, in the event that the average
closing sale trading market price of the Corporation's Common Stock on
the Principal Market for any consecutive five (5) trading day period is
less than $4.00 per share (as appropriately adjusted for any
Recapitalization), the Corporation shall have the right to redeem all or
part (on a pro rata basis in proportion to each holder's ownership of
Series C Preferred Stock) of the then outstanding shares of Series C
Preferred Stock at the Original Issue Price of the Series C Preferred
Stock in cash (the "Redemption Price"). In the event the Corporation
elects to effect such redemption of the Series C Preferred Stock, notice
of such election shall be required to be delivered by the Corporation in
accordance with Section 11 hereof and such notice shall specify the date
fixed for redemption, which shall not be greater than twenty (20) days
following deemed delivery of the redemption notice (the "Redemption
Date"), the number of shares to be redeemed, the applicable Redemption
Price and the place at which payment may be obtained. The redemption
notice shall call upon such holder to surrender to the Corporation, in
the manner and at the place designated, the certificate or certificates
representing the shares to be redeemed. Except as provided in
Section 9(c) below, on or after the close of business on the Redemption
Date, each holder of Series C Preferred Stock to be redeemed shall
surrender to the Corporation the certificate or certificates representing
such shares, in the manner and at the place designated in the redemption
notice. Thereupon the applicable Redemption Price of such shares shall
be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof, and each surrendered
certificate shall be canceled.
(b) From and after the Redemption Date, unless there
has been a default in payment of the Redemption Price, all dividends, if
any, on the Series C Preferred Stock to be redeemed will cease to accrue
thereon, all rights of holders of such shares of Series C Preferred Stock
(except the right to receive the applicable Redemption Price without
interest upon surrender of the applicable certificate or certificates)
shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books on the Corporation or be deemed to
be outstanding for any purpose whatsoever. If the funds of the
Corporation legally available for redemption of shares of Series C
Preferred Stock on the Redemption Date are insufficient to redeem the
total number of shares of Series C Preferred Stock to be redeemed on such
date, then those funds that are legally available shall be used to redeem
the maximum possible number of shares of Series C Preferred Stock ratably
among the holders in proportion to the amount each such holder otherwise
would be entitled to receive (including declared but unpaid dividends, if
any) if the funds were not insufficient. The shares of Series C
Preferred Stock not redeemed shall remain outstanding and entitled to all
of the rights, privileges and preferences provided herein. At any time
thereafter when additional funds of the Corporation are legally available
for the redemption of shares of the Series C Preferred Stock, such funds
shall immediately be set aside for the redemption of the balance of the
shares that the Corporation has become obligated to redeem as of the
Redemption Date.
(c) Notwithstanding any provision of Section 5 with
respect to limitations on the amount of shares of Series C Preferred
Stock which may be otherwise be converted into shares of the
Corporation's Common Stock, in the event of a notice of redemption as
provided in Section 9(a) above by the Corporation, holders of shares of
Series C Preferred Stock shall be entitled to convert all, but not less
than all, shares of Series C Preferred Stock at the Conversion Price. By
surrendering the certificate or certificates representing the shares of
Series C Preferred Stock to be converted to the Corporation, together
with a Conversion Notice for all of the shares held by such holder of
Series C Preferred Stock on or prior to five (5) days following deemed
delivery of the redemption notice described in Section 9(a). Unless an
earlier Conversion Date is specified in the Conversion Notice, such
conversion shall be deemed to occur on the Redemption Date.
10. Vote to Change the Terms of Series C Preferred Shares.
The approval of the Board of Directors and the affirmative vote at a
meeting duly called by the Board of Directors for such purpose (or the
written consent without a meeting) of the holders of not less than two-
thirds (2/3) of the then outstanding Series C Preferred Stock shall be
required to amend, alter, change or repeal any of the powers,
designations, preferences and rights of the Series C Preferred Stock.
10. Notices. All notices and other communications required
or permitted hereunder shall be in writing and shall be deemed
effectively given upon delivery to the party to be notified in person or
upon delivery by courier service or upon delivery after deposit with the
United States mail, by registered or certified mail, postage prepaid, or
upon receipt by the party of a facsimile copy, addressed (a) if to a
holder of Series C Preferred Stock, at such address of such holder of
Series C Preferred Stock set forth in Exhibit B, or at such other address
as such holder of Series C Preferred Stock shall have furnished to Sigma
Designs, Inc. in writing, or (b) if to any other holder of any Shares, at
such address as such holder shall have furnished Sigma Designs, Inc. in
writing, or, until any such holder so furnishes an address to Sigma
Designs, Inc. then to and at the address of the last holder of such
Shares who has so furnished an address to Sigma Designs, Inc. or (c) if
to Sigma Designs, Inc. one copy should be sent to Sigma Designs, Inc.,
46501 Landing Parkway, Fremont, California 94538 and addressed to the
attention of the Corporate Secretary, or at such other address as Sigma
Designs, Inc. shall have furnished to the holders of Series C Preferred
Stock."
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the undersigned each declares under penalty of
perjury that the matters set out in the foregoing certificate are true of
his and her knowledge, and the undersigned have executed this certificate
at Fremont, California as of the 20th day of January, 1999.
/s/ Thinh Q. Tran
Thinh Q. Tran
President
/s/ Kit Tsui
Kit Tsui
Secretary
<PAGE>
Exhibit A
SIGMA DESIGNS, INC.
CONVERSION NOTICE
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby irrevocably elects to convert the number of shares
of Series C Convertible Preferred Stock indicated below, into shares of
Common Stock, no par value (the "Common Stock"), of Sigma Designs, Inc.
(the "Corporation") according to the conditions hereof, as of the date
written below. If shares are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Corporation in accordance
therewith. No fee will be charged to the Holder for any conversion,
except for such transfer taxes, if any.
Conversion calculations:
----------------------------------------
Date to Effect Conversion
----------------------------------------
Number of Shares of Preferred Stock to
be Converted (Not less than 50 shares
of Preferred Stock)
----------------------------------------
Applicable Conversion Price
----------------------------------------
Signature
----------------------------------------
Name:
----------------------------------------
Address:
Exhibit B
HOLDER ADDRESSES
1. Preferred Hardware Distributors, Inc.
Mailing Address: c/o Mitsuba Southeast, Inc.
4775 River Green Parkway
Duluth, GA 30096
Attention: Walter Huang, President
Fax Number770-622-1680
2. JFIC Inc.
Mailing Address: c/o Utobia Corp
111 N. Hudson Avenue
Industry, CA 91744
Attention: Howard Chan, President
Fax Number:626-855-5072
3. Multiventure Technologies, Inc.
Mailing Address: c/o Multiventure International, Inc.
20370 Town Center Lane, Suite 150
Cupertino, CA 95014
Attention: James Mah, CEO
Fax Number:408-255-0439
4. Jason Chan
Mailing Address: 15961 Viewfield Road
Monte Sereno, CA 95030
Fax Number:510-770-2640
Exhibit 4.1
THIS PRIVATE SECURITIES SUBSCRIPTION AGREEMENT (the "Agreement") has
been executed by the undersigned in connection with the sale in a private
placement pursuant to Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act"), of certain shares of Series C
Convertible Preferred Stock (the "Preferred Stock"), convertible into
shares of common stock (the "Common Stock"), and of certain warrants
(the "Warrants," and each individually, a "Warrant") convertible into
shares of Common Stock (the "Warrant Shares" and, together with the
Common Stock issuable upon conversion of the Preferred Stock, the
"Shares") of Sigma Designs, Inc. ("Sigma Designs"), 46501 Landing
Parkway, Fremont, CA 94538, a corporation organized under the laws of
California, to the persons and entities listed on the Schedule of Buyers
attached as Exhibit A hereto (the "Buyers" and, individually, each a
"Buyer"). Sigma Designs and Buyers (collectively, the "parties") each
hereby represents, warrants and agrees as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(i) Sigma Designs and Buyers are executing and delivering
this Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 under Regulation D ("Regulation D")
as promulgated by the United States Securities and Exchange Commission
("SEC") under the Securities Act; and
(ii) Each Buyer hereby subscribes for the number of shares
of Preferred Stock, convertible into Common Stock in accordance with the
terms set forth in the Certificate of Determination attached as Exhibit B
to this Agreement, specified opposite each Buyer's name in Column B on
the Schedule of Buyers at a cash purchase price of $1,000.00 per share
payable in United States Dollars at the Closing, as defined in
Paragraph 5 hereof.
(iii) Each Buyer shall pay the purchase price by
delivering same day funds in United States Dollars to an escrow agent or
as otherwise agreed between the parties, to be delivered to the order of
Sigma Designs upon delivery of the Preferred Stock.
(iv) Each Buyer shall each receive from Sigma Designs at the
Closing, for no additional consideration, a Warrant to purchase the
number of shares of Common Stock set forth opposite its name in Column C
on the Schedule of Buyers. The Warrant shall be exercisable under the
terms set forth in the Form of Warrant attached as Exhibit C to this
Agreement.
2. BUYER'S REPRESENTATIONS AND AGREEMENTS. Each Buyer
represents, warrants and agrees as follows:
(i) Each Buyer understands that the Preferred Stock, the
Warrant and the Shares have not been registered under the Securities Act
of 1933, as amended (the "Securities Act"), or any other applicable
securities law, and, accordingly, none of the Preferred Stock, the
Warrant nor the Shares may be offered, sold, transferred, pledged,
hypothecated or otherwise disposed of unless registered pursuant to, or
in a transaction exempt from registration under, the Securities Act and
any other applicable securities law;
(ii) Each Buyer is an "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3), or (7) of Regulation D (an
"Accredited Investor") and is acquiring the Preferred Stock and the
Warrant either for its own account or as a fiduciary or agent for one or
more institutional accounts, each of which is an Accredited Investor.
Each Buyer has such knowledge and experience in financial and business
matters is capable of evaluating the merits and risks of an investment in
the Preferred Stock and the Warrant. Each Buyer has had a reasonable
opportunity to ask questions of and receive answers from Sigma Designs
concerning Sigma Designs and the offering of the Preferred Stock and the
Warrant. Buyer is not subscribing for the Preferred Stock and the
Warrant as a result of or pursuant to any advertisement, article, notice,
or other communication published in any newspaper, magazine, or similar
media or broadcast over television or radio. Buyer is aware that it (or
such institutional account) may be required to bear the economic risk of
an investment in the Preferred Stock and the Warrant for an indefinite
period, and it (or such institutional account ) is able to bear such risk
for an indefinite period;
(iii) Buyer is acquiring the Preferred Stock and the
Warrant for its own account or for one or more institutional accounts as
described in Paragraph 2(ii) hereof, in each case for investment purposes
and not with a view to, or for offer or sale in connection with, any
distribution thereof (subject to any requirement of law that the
disposition of its property or the property of such institutional account
or accounts remain within its control). Buyer agrees on its own behalf
and on behalf of any such institutional account for which it is acquiring
the Preferred Stock and the Warrant to offer, sell or otherwise transfer
any Preferred Stock, Warrant or Shares only to Accredited Investors
(subject to any requirement of law that the disposition of its property
or the property of such institutional account or accounts remain within
its control) in conformity with the Securities Act and any other
applicable securities law and with the restrictions on transfer set forth
on the certificate(s) evidencing the Preferred Stock, the Warrant and the
Shares.
(iv) Each Buyer acknowledges that Sigma Designs or any
transfer agent of Sigma Designs shall register the transfer or exchange
of any of the Preferred Stock, the Warrant or Shares only upon receipt of
the certificate(s) evidencing such Preferred Stock, Warrant or Shares
with the transfer notice set forth thereon appropriately completed and
upon receipt in writing from the transferee or the recipient of such
Preferred Stock, Warrant or Shares in such transfer or exchange (as the
case may be) of a certificate setting forth the representations in
Paragraph 2 hereof;
(v) Each Buyer acknowledges that Sigma Designs and others
will rely upon the truth and accuracy of the foregoing acknowledgments,
representations and agreements and further agrees that if, prior to the
closing, any of such acknowledgments, representations and agreements made
by Buyer are no longer accurate, Buyer will promptly notify Sigma
Designs;
(vi) Each Buyer has received all information from Sigma
Designs, including but not limited to Sigma Designs' latest Form 10-K,
all Forms 10-Q and 8-K filed thereafter, and the Proxy Statement for its
latest fiscal year (collectively, the "Public Documents") and Buyer
acknowledges this information is sufficient to make an informed business
decision;
(vii) This Agreement and the matters contemplated
herein have been duly authorized, and this Agreement has been validly
executed, and delivered on behalf of Buyer and is a valid and binding
agreement enforceable in accordance with its terms, subject to general
principles of equity and to bankruptcy or other laws affecting the
enforcement of creditors' rights generally;
(viii) Each Buyer has no existing short or other hedged
position with respect to the Common Stock of Sigma Designs and agrees
that it shall not without the written consent of Sigma Designs enter into
any short sales, pledge, contract to sell, option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, or other hedging transactions (or any
similar transaction designed to transfer the economic risk of loss) with
respect to the Preferred Stock or Common Stock of Sigma Designs at any
time after the execution of this Agreement by Buyer. Each Buyer agrees
that within five (5) days of receipt of a written request by Sigma
Designs for such certificate, such Buyer will deliver, in writing, an
executed certificate of such Buyer to Sigma Designs certifying that such
Buyer has at no time breached the provisions of this Section 2(viii);
(ix) Each Buyer agrees not to effectuate or cause a third
party to effectuate a sale of, offer for sale, or solicit a purchase or
offer to purchase Sigma Designs' Common Stock with the intention of
causing a reduction in the Conversion Price (as defined in the
Certificate of Determination of Preferences of Series C Preferred Stock
of Sigma Designs, Inc. (the "Certificate of Determination")); and
(x) Each Buyer further agrees that, at all times after the
execution of this Agreement by Buyer and prior to the date on which the
Preferred Stock becomes convertible, they will each keep their purchase
of the Preferred Stock, Warrant or the Shares confidential, except as
required by law and except as necessary in the ordinary course of
business of each Buyer.
3. SIGMA DESIGNS' REPRESENTATIONS AND AGREEMENTS. Sigma Designs
represents, warrants and agrees as follows:
(i) Sigma Designs and its subsidiaries are corporations
duly organized and validly existing in good standing under the laws of
the jurisdiction in which they are incorporated, and have the requisite
corporate power to own their properties and to carry on their business as
now being conducted. Each of Sigma Designs and its subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted by it
makes such qualification necessary, except to the extent that the failure
to be so qualified or be in good standing would not have a material
adverse effect on Sigma Designs and its subsidiaries taken as a whole (a
"Material Adverse Effect").
(ii) As set forth in the Second Restated Articles of
Incorporation of Sigma Designs, as amended (the "Articles of
Incorporation"), the authorized capital stock of Sigma Designs consists
of 20,000,000 shares of Common Stock, of which 15,167,068 shares were
issued and outstanding at December 31, 1998, 2,000,000 shares of
Preferred Stock, 50,000 of which were designated Series A Preferred
Stock, none of which were issued and outstanding, 5,000 of which were
designated Series B Preferred Stock, 1,600 of which were issued and
outstanding at January 18, 1999, and 3,000 of which were designated
Series C Preferred Stock, none of which were issued and outstanding prior
to the date hereof. All of such outstanding shares have been validly
issued and are fully paid and nonassessable. No shares of Common Stock
or Preferred Stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by Sigma
Designs. Sigma Designs has furnished or made available to the Buyers
true and correct copies of Sigma Designs' Articles of Incorporation and
Bylaws as in effect on the date hereof, and the terms of all outstanding
securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto.
(iii) Neither Sigma Designs, nor any of its affiliates,
nor any person acting on its or their behalf has, directly or indirectly,
made any offers or sales of any security or solicited any offers to buy
any security, under circumstances that would require registration of the
Preferred Stock, the Warrant or the Shares under the Securities Act or
cause this offering of Preferred Stock, the Warrant or the Shares to be
integrated with prior offerings by Sigma Designs for purposes of the
Securities Act or any applicable stockholder approval provisions.
(iv) Neither Sigma Designs nor any of its subsidiaries is
involved in any labor dispute nor, to the knowledge of Sigma Designs or
any of its subsidiaries, is any such dispute threatened. None of Sigma
Designs' or its subsidiaries' employees is a member of a union and Sigma
Designs and its subsidiaries believe that their relations with their
employees are good.
(v) Except as disclosed in the Public Documents, Sigma
Designs and its subsidiaries have sufficient trademarks, trade names,
patent rights, copyrights, licenses, approvals and governmental
authorizations to conduct their businesses as described in the Public
Documents; the expiration of any trademarks, trade names, patent rights,
copyrights, licenses, approvals or governmental authorizations would not
have a Material Adverse Effect; and Sigma Designs has no knowledge of any
material infringement by it or its subsidiaries of trademark, trade name
rights, patent rights, copyrights, licenses, trade secret or other
similar rights of others, and there is no claim being made against Sigma
Designs or its subsidiaries regarding trademark, trade name, patent,
copyright, license, trade secret or other infringement which would
reasonably be expected to have a Material Adverse Effect.
(vi) Sigma Designs and its subsidiaries are (i) in
compliance, in all material respects, with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), (ii) have received all material permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance, in all material
respects, with all terms and conditions of any such permit, license or
approval.
(vii) Any real property and facilities held under lease
by Sigma Designs and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not materially interfere with the use made of such
property and buildings by Sigma Designs and its subsidiaries.
(viii) Each of Sigma Designs and its subsidiaries
maintains insurance of the types and in the amounts generally deemed
adequate for its business all of which insurance is in full force and
effect.
(ix) Sigma Designs and its subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct
their respective businesses with such exceptions that would not have a
Material Adverse Effect, and neither Sigma Designs nor any such
subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or
permit, with such exceptions that would not have a Material Adverse
Effect.
(x) Sigma Designs and each of its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specified authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
asset accountability, (iii) access to assets is permitted only in accor-
dance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to
any differences.
(xi) Neither Sigma Designs nor any of its subsidiaries is
subject to any charter, corporate or other legal restriction, or any
judgment, decree, order, rule or regulation which in the judgment of
Sigma Designs' executive officers has a Material Adverse Effect. Neither
Sigma Designs nor any of its subsidiaries is a party to any contract or
agreement which in the judgment of Sigma Designs' executive officers has
a Material Adverse Effect.
(xii) Sigma Designs has filed all material federal,
state, local and foreign income tax returns which have been required to
be filed and have paid all material taxes indicated by said returns and
all assessments received by them or any of them to the extent that such
taxes have become due and are not being contested in good faith. All tax
liabilities have been adequately provided for in the financial statements
of Sigma Designs.
(xiii) Sigma Designs has not conducted any general
solicitation or general advertising (as defined in Regulation D) with
respect to any of its securities that are not the subject of a
registration statement;
(xiv) The Preferred Stock, the Warrant and Shares when
issued and delivered will be duly and validly authorized and issued,
fully-paid and nonassessable, free and clear of any taxes, liens, encum-
brances, charges, or adverse claims of any nature whatsoever, and will
not subject the holders thereof to personal liability by reason of being
such holders;
(xv) This Agreement, the Registration Rights Agreement, the
Warrants, and any related agreements, have been duly authorized, validly
executed and delivered on behalf of Sigma Designs and are valid and
binding agreements in accordance with their respective terms, subject to
general principles of equity and to bankruptcy or other laws affecting
the enforcement of creditors' rights generally;
(xvi) The execution and delivery of this Agreement, the
Registration Rights Agreement, the Warrants and any related agreements
and the consummation of the issuance of the Preferred Stock, the Warrants
and the Shares and the transactions contemplated by such agreements do
not and will not conflict with or result in a breach by Sigma Designs of
any of the terms or provisions of, or constitute a default under, the
Articles of Incorporation or Bylaws of Sigma Designs, or to the knowledge
of the executive officers of Sigma Designs, any indenture, mortgage, deed
of trust, or any statute, rule or regulation applicable to Sigma Designs
or its subsidiaries or other material agreement or instrument to which
Sigma Designs is a party or by which it or any of its properties or
assets are bound, or any existing applicable decree, judgment or order of
any court, federal or state regulatory body, administrative agency or
other governmental body having jurisdiction over Sigma Designs or any of
its properties or assets, or to the knowledge of the Sigma Designs any
statute, rule or regulation applicable to Sigma Designs or its
subsidiaries, except for such conflict, breach or default as would not
result in a Material Adverse Effect;
(xvii) No authorization, approval or consent of or
filing with any federal, state or local governmental body of the United
States is legally required for the issuance and sale of the Preferred
Stock, the Warrant and the Shares as contemplated by this Agreement or
any related agreements;
(xviii) None of the Public Documents, as of their
respective dates, contains any untrue statement of a material fact or
omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstance under which they are
made, not misleading. Since October 31, 1998, there has been no Material
Adverse Effect on Sigma Designs.
(xix) Sigma Designs will issue one or more certificates
representing the Preferred Stock and the Warrant in the name of each
Buyer in such denominations to be specified by each Buyer prior to
Closing. The Preferred Stock, Warrants and Shares will bear the
restrictive legend specified in Paragraph 4 of this Agreement. Sigma
Designs further warrants that no instructions other than these
instructions and stop transfer instructions to give effect to
Paragraph 2(i) hereof will be given at any time to the transfer agent and
also warrants that the Preferred Stock, Warrants and Shares shall
otherwise be transferable on the books and records of Sigma Designs as
and to the extent provided in this Agreement, subject to compliance with
federal and state securities laws. As soon as commercially practicable
after the date hereof, Sigma Designs agrees to furnish new instructions
to the transfer agent instructing them to issue the Shares without a
restrictive legend, but only if and when a registration statement
registering the resale of such Shares has been declared effective by the
SEC. Nothing in this Paragraph shall affect in any way each Buyer's
obligations and agreement to comply with all applicable securities laws
upon resale of the Shares. Sigma Designs shall promptly notify the
Transfer Agent of the effectiveness or suspension of a registration
statement registering the Shares for resale.
(xx) There is no action, suit, notice of violation,
proceeding or investigation pending or, to the best knowledge of Sigma
Designs, threatened against or affecting Sigma Designs or any of its
subsidiaries of any of their respective properties before or by any
court, governmental or administrative agency or regulatory authority
which relates to the validity of enforceability of any documents related
to the transaction contemplated hereby, the Preferred Stock, the Warrant,
or the Shares which may reasonably likely result in a Material Adverse
Effect.
(xxi) Sigma Designs is, and at the Closing Date will
be, eligible to register securities for resale with the SEC under Form S-
3 or any successor form thereto.
(xxii) Neither Sigma Designs nor any of its subsidiaries
is currently in default under or in violation of (i) any indenture, loan,
credit agreement, or any other agreement or instrument by which it is
bound (except as further described in the last sentence of this
paragraph), (ii) any order of any court, arbitrator or governmental body
or (iii) any statute, rule or regulation of any governmental authority,
except in the case of both (i) and (ii) as does not have a Material
Adverse Effect. Sigma Designs' bank loans are subject to certain
covenants relating to profitability and financial ratios. Sigma Designs
did not meet the profitability covenant for the fiscal quarter ended
October 31, 1998; however, Sigma Designs has obtained a waiver from the
bank for the fiscal quarter ended October 31, 1998 releasing Sigma
Designs from meeting the profitability covenant. There is no assurance
that such waiver will be granted for future fiscal quarters in the event
that Sigma Designs reports net losses.
4. LEGENDS.
Each certificate evidencing the Preferred Stock, the Warrants and
the Shares shall bear a legend in substantially the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "ACT" OR THE "SECURITIES
ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND
HAVE BEEN ISSUED IN 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 ACT OR PURSUANT TO
A TRANSACTION WHICH, IN AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO SIGMA DESIGNS, IS EXEMPT
FROM, OR NOT SUBJECT TO, SUCH REGISTRATION."
Upon conversion of the Preferred Stock and the exercise of
the Warrants, Sigma Designs shall issue a Common Stock certificate
without such legend to the holder of such shares if and to the extent
that (a) the SEC has declared a registration statement effective under
which such Common Stock is sold or (b) such holder has provided Sigma
Designs with an opinion of counsel reasonably acceptable to Sigma Designs
to the effect that a public sale or a transfer of such security may be
made without registration under the Securities Act, or (c) such holder
has provided Sigma Designs with reasonable assurances that such security
can be sold free of any volume limitations pursuant to Rule 144 under the
Securities Act (or a successor thereto).
The certificates representing the Warrants, the shares of
Preferred Stock and underlying Common Stock shall also bear any other
legends required by applicable federal or state securities laws, which
legends shall be removed when not required in accordance with this
Section 4.
5. COVENANTS.
(i) Each party shall use its reasonable best efforts
timely to satisfy each of the conditions to be satisfied by it as provided in
this Agreement.
(ii) Sigma Designs agrees to file a Form D with respect
to the Preferred Stock, the Warrants and the Shares as required under
Regulation D. Sigma Designs shall, on or before the Closing Date, take
such action as Sigma Designs shall reasonably determine is necessary to
qualify the Preferred Stock, the Warrants, and the Shares or obtain
exemption for the Preferred Stock, the Warrants, and the Shares, for sale
to the Buyers at the Closing pursuant to this Agreement under applicable
securities or "Blue Sky" laws of the states of the United States.
(iii) Until the earlier of (i) the date as of which the
Buyers may sell all of the Shares without restriction pursuant to
Rule 144(k) promulgated under the Securities Act (or successor thereto),
or (ii) the date on which (A) the Buyers shall have sold all the Shares
and (B) none of the Preferred Stock or Warrants is outstanding (the
"Registration Period"), Sigma Designs shall file all reports required
to be filed with the SEC pursuant to the Exchange Act of 1934, as amended
(the "Exchange Act"), and Sigma Designs shall not terminate its status
as an issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would otherwise
permit such termination.
(iv) Sigma Designs shall take all action necessary to at
all times have authorized, and reserved for the purpose of issuance, no less
than 150% of the number of shares of Common Stock needed to provide for
the issuance of the Shares.
(v) Sigma Designs shall promptly secure the listing of
the Shares upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all
Shares from time to time issuable upon conversion of the Preferred Stock
and exercise of the Warrants. Sigma Designs shall maintain the Common
Stock's authorization for quotation in the over-the counter market.
Sigma Designs shall promptly provide to each Buyer copies of any notices
it receives regarding the continued eligibility of the Common Stock for
trading in the over-the-counter market.
(vi) Unless Sigma Designs otherwise consents in writing,
each Buyer shall take such action as may be required so that all of the
Preferred Stock owned by such Buyer is voted in accordance with the
recommendation of the Board of Directors of Sigma Designs on all matters
to be voted on by holders of Sigma Designs' outstanding Preferred Stock
(including any matters requiring a class vote of the outstanding
Preferred Stock) in not less than the same proportion as the votes cast
by holders of Sigma Designs' outstanding Common Stock with respect to
such matters. Each Buyer, as a holder of shares of Sigma Designs'
Preferred Stock shall be present, in person or by proxy, at all meetings
of shareholders of Sigma Designs, so that all shares of Sigma Designs'
outstanding Preferred Stock beneficially owned by the Buyer may be
counted for the purposes of determining the presence of a quorum at such
meetings.
6. TRANSFER AGENT INSTRUCTIONS. Sigma Designs shall issue
irrevocable instructions to its transfer agent to issue certificates,
registered in the name of each Buyer, for the Shares in such amounts as
specified from time to time by the Buyers to Sigma Designs upon
conversion of the Preferred Stock or exercise of the Warrants (the
"Irrevocable Transfer Agent Instructions"). Prior to registration of
the Shares under the Securities Act, all such certificates shall bear the
restrictive legend specified in Section 4 of this Agreement. Sigma
Designs warrants that no instruction other than the Irrevocable Transfer
Agent Instructions referred to in this Section 6, and stop transfer
instructions to give effect to Section 4 hereof (in the case of the
Shares, prior to registration of such shares under the Securities Act)
will be given by Sigma Designs to its transfer agent and that the
Preferred Stock, the Warrants, and the Shares shall otherwise be freely
transferable on the books and records of Sigma Designs as and to the
extent provided in this Agreement, the Registration Rights Agreement, the
Warrants and applicable laws, including securities laws. Nothing in this
Section 6 shall affect in any way the Buyers' obligations and agreement
to comply with all applicable securities laws upon resale of the
Preferred Stock, the Warrants, or the Shares. If either (a) a Buyer
provides Sigma Designs with an opinion of counsel, reasonably
satisfactory in form and substance to Sigma Designs, that registration of
a resale by such Buyer of any of the Preferred Stock, the Warrant, or
Shares is not required under the Securities Act or (b) the Shares held by
such Buyer are registered under the Securities Act, Sigma Designs shall
permit the transfer, and, in the case of the Shares, promptly instruct
its transfer agent to issue one or more certificates in such name and in
such denominations as specified by such Buyer.
7. CLOSING. Share certificates shall be delivered to Buyers and
the funds therefor shall be delivered to Sigma Designs on January 22,
1999 (the "Closing") or such later date as each of the conditions set
forth in Paragraph 8 and 9 shall have been satisfied or waived, or at
such time to be mutually agreed.
8. CONDITIONS TO CLOSING OF BUYERS. The Buyers' obligations to
purchase the Preferred Stock and the Warrants at the Closing are, at the
option of each Buyer, subject to the fulfillment on or prior to the
Closing Date of each of the following conditions, each of which may be
waived by each Buyer in its sole discretion:
(i) Delivery of certificate(s) representing the
Preferred Stock as described in Paragraph 1(ii) hereto and a Warrant as
described in Paragraph 1(iv) hereto,
(ii) Delivery of an opinion of counsel to Sigma Designs
in substantially the form attached hereto as Exhibit D; and
(iii) Sigma Designs and Buyers shall have entered into
a Registration Rights Agreement substantially in the form of Exhibit E
hereto.
9. CONDITIONS TO CLOSING OF SIGMA DESIGNS. The obligation of
Sigma Designs to sell and issue the Preferred Stock and the Warrants at
the Closing is, at the option of Sigma Designs, subject to the
fulfillment of the following conditions, each of which may be waived by
Sigma Designs in its sole discretion:
(i) Delivery into escrow or otherwise as agreed between
Buyers and Sigma Designs by Buyers of the amount set forth in Paragraph 1
hereof.
(ii) Sigma Designs and Buyers shall have entered into a
Registration Rights Agreement substantially in the form of Exhibit E
hereto.
(iii) The Certificate of Determination shall have been
filed with the Secretary of State of the State of California.
(iv) All of the outstanding shares of Sigma Designs'
Series B Preferred Stock shall have been repurchased or converted into Common
Stock.
10. EXPENSES. Sigma Designs and the Buyers shall each bear their
own expenses and legal fees with respect to this Agreement and the
transactions contemplated hereby.
11. GOVERNING LAW; INTERPRETATION. This Agreement shall be
governed by and construed in accordance with the laws of the State of
California without giving effect to the provisions governing the conflict
of laws. The parties jointly consent to personal jurisdiction in any
state or federal court located in the State of California, waive any
objection as to jurisdiction or venue, and agree not to assert any
defense based on lack of jurisdiction or venue. Facsimile signatures of
this agreement shall be binding on all parties hereto.
12. CONVERSION. (a) Sigma Designs shall use its reasonable best
efforts to issue and deliver to each Buyer a certificate or certificates
for the number of Common Stock to which such Buyer shall be entitled
within five (5) business days after such Buyer has fulfilled all
conditions required for conversion as set forth in this Agreement and in
the Certificate of Determination (the "Deadline").
(b) Sigma Designs agrees that, in addition to any other
remedies which may be available to a Buyer requesting conversion of its
Preferred Stock, in the event Sigma Designs fails for any reason to
effect delivery to such Buyer of certificates representing Common Stock
within five (5) business days following receipt by Sigma Designs of a
notice of conversion, such Buyer may, at its sole election, revoke the
notice of conversion by delivering a notice of such effect to Sigma
Designs, whereupon Sigma Designs and such Buyer shall each be restored to
their respective positions immediately prior to delivery of such notice
of conversion.
13. NOTICE. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively
given upon delivery to the party to be notified in person or upon
delivery by courier service or upon delivery after deposit with the
United States mail, by registered or certified mail, postage prepaid, or
upon receipt by the party of a facsimile copy, addressed (a) if to a
Buyer, at such Buyer's address set forth in Exhibit A, or at such other
address as such Buyer shall have furnished to Sigma Designs in writing,
or (b) if to any other holder of any Shares, at such address as such
holder shall have furnished Sigma Designs in writing, or, until any such
holder so furnishes an address to Sigma Designs, then to and at the
address of the last holder of such Shares who has so furnished an address
to Sigma Designs, or (c) if to Sigma Designs, one copy should be sent to
at 46501 Landing Parkway, Fremont, CA 94538, and addressed to the
attention of the Corporate Secretary, or at such other address as Sigma
Designs shall have furnished to the Buyers.
14. ARBITRATION; REMEDIES. Any dispute that arises between the
parties to this Agreement shall first be submitted for resolution to
arbitration under the rules of the American Arbitration Association of
Santa Clara County, California. In the event of a breach or a threatened
breach by any party to this Agreement of its obligations under this
Agreement, any party injured or to be injured by such breach will be
entitled to specific performance of its rights under this Agreement or to
injunctive relief, in addition to being entitled to exercise all rights
provided in this Agreement and granted by law. The parties agree that
the provisions of this Agreement shall be specifically enforceable, it
being agreed by the parties that the remedy at law, including monetary
damages, for breach of any such provision will be inadequate compensation
for any loss and that any defense or objection in any action for specific
performance or injunctive relief that a remedy at law would be adequate
is waived.
15. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which may be executed by less than all of the
Buyers, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute
one instrument.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by the undersigned, thereunto duly authorized, as of the
date first set forth above.
SIGMA DESIGNS, INC.
By:
Thinh Q. Tran
Chairman and Chief Executive Officer
PREFERRED HARDWARE DISTRIBUTORS, INC.
By:
Walter Huang
President
JFIC Inc.
By:
Howard Chan
President
MULTIVENTURE TECHNOLOGIES, INC.
By:
James Mah
Chief Executive Officer
[SUBSCRIPTION AGREEMENT SIGNATURE PAGE]
S-1
Exhibit A
Schedule of Buyers
A B C
---------- ---------- ----------
Number of
Aggregate Shares of Number of
Purchase Preferred Warrant
Name of Purchaser Price Stock Shares
----------------------------------------- ---------- ---------- ----------
1. Preferred Hardware Distributors, Inc. $500,000 500 25,000
2. JFIC, Inc. $500,000 500 25,000
3. Multiventure Technologies, Inc. $100,000 100 5,000
4. Jason Chan $100,000 100 5,000
Address of Purchasers
-----------------------------------------
Preferred Hardware Distributors, Inc.
Mailing Address: c/o Mitsuba Southeast, Inc.
4775 River Green Parkway
Duluth, GA 30096
Attention: Walter Huang, President
Fax Number: 770-622-1680
JFIC Inc.
Mailing Address: c/o Utobia Corp
111 N. Hudson Avenue
Industry, CA 91744
Attention: Howard Chan, President
Fax Number: 626-855-5072
Multiventure Technologies, Inc.
Mailing Address: c/o Multiventure International, Inc.
20370 Town Center Lane, Suite 150
Cupertino, CA 95014
Attention: James Mah, CEO
Fax Number: 408-255-0439
Jason Chan
Mailing Address: 15961 Viewfield Road
Monte Sereno, CA 95030
Fax Number:510-770-2640
Exhibit B
(Certificate of Determination - See Exhibit 3.1)
Exhibit C
(Form of Warrant See Exhibit 4.3)
Exhibit D
January 22, 1999
To the Purchasers Listed in Exhibit A
to the Sigma Designs, Inc.
Series C Preferred Stock Subscription
Agreement Dated as of January 22, 1999
Ladies and Gentlemen:
Reference is made to that certain Private Securities Subscription
Agreement, dated as of January 22, 1999 (the "Subscription Agreement")
by and among Sigma Designs, Inc., a California corporation (the
"Company"), and the purchasers listed in Exhibit A to the Subscription
Agreement (the "Investors"), which provides for the issuance by the
Company to the Investors of up to 3,000 shares of Series C Preferred
Stock of the Company, without par value (the "Series C Preferred
Stock"). This opinion is rendered to you pursuant to Section 8(ii) of
the Subscription Agreement, and all terms used herein have the meanings
defined for them in the Subscription Agreement unless otherwise defined
herein.
We have acted as counsel for the Company in connection with the
negotiation of the Subscription Agreement and the issuance of the Series
C Preferred Stock. As such counsel, we have made such legal and factual
examinations and inquiries as we have deemed advisable or necessary for
the purpose of rendering this opinion. In addition, we have examined
originals or copies of documents, corporate records and other writings
which we consider relevant for the purposes of this opinion. In such
examination we have assumed the genuineness of all signatures on original
documents, the conformity to original documents of all copies submitted
to us and the due execution and delivery of all documents where due
execution and delivery are a prerequisite to the effectiveness thereof.
As used in this opinion, the expression "to our knowledge,"
"known to us" or similar language with reference to matters of fact
means that, after an examination of documents made available to us by the
Company, and after inquiries of officers of the Company, but without any
further independent factual investigation, we find no reason to believe
that the opinions expressed herein are factually incorrect. Further, the
expression "to our knowledge", "known to us" or similar language with
reference to matters of fact refers to the current actual knowledge of
the attorneys of this firm who have worked on matters for the Company
solely in connection with the Subscription Agreement and the transactions
contemplated thereby. Except to the extent expressly set forth herein or
as we otherwise believe to be necessary to our opinion, we have not
undertaken any independent investigation to determine the existence or
absence of any fact, and no inference as to our knowledge of the
existence or absence of any fact should be drawn from our representation
of the Company or the rendering of the opinion set forth below.
For purposes of this opinion, we are assuming that you have all
requisite power and authority, and have taken any and all necessary
corporate or partnership action, to execute and deliver the Subscription
Agreement, and we are assuming that the representations and warranties
made by the Investors in the Subscription Agreement and pursuant thereto
are true and correct. We are also assuming that the Investors have
purchased the Series C Preferred Stock for value, in good faith and
without notice of any adverse claims within the meaning of the California
Uniform Commercial Code.
The opinions hereinafter expressed are subject to the following
qualifications:
(a) We express no opinion as to the effect of applicable
bankruptcy and other similar laws affecting the rights of creditors
generally;
(b) We express no opinion as to the effect of rules of law
governing specific performance, liquidated damages, injunctive relief or
other equitable remedies;
(c) We express no opinion as to compliance with applicable anti-
fraud provisions of federal or state securities laws;
(d) We express no opinion as to the enforceability of the voting
provisions of Section 5(vi) of the Subscription Agreement; and
(e) We are members of the Bar of the State of California and we
are not expressing any opinion as to any matter relating to the laws of
any jurisdiction other than the laws of the United States of America and
the laws of the State of California.
Based upon and subject to the foregoing, we are of the opinion
that:
1. The Series C Preferred Stock issued under the Subscription
Agreement are validly issued, fully paid and nonassessable, free and
clear of any liens, encumbrances, and preemptive rights or similar rights
contained in the Company's Second Restated Articles of Incorporation or
Bylaws;
2. The Subscription Agreement has been duly authorized, and
validly executed and delivered by the Company;
3. The execution and delivery of the Subscription Agreement and
the consummation of the issuance of the Series C Preferred Stock do not
violate any provision of the Second Restated Articles of Incorporation or
Bylaws of the Company, or, to our knowledge, any material indenture,
mortgage, deed of trust or other material agreement or instrument listed
as an Exhibit in the Company's most recent Form 10-K filed under the
Securities Exchange Act of 1934, as amended, or, to our knowledge, any
existing applicable decree, judgment or order of any court, federal or
state regulatory body, administrative agency or other governmental body
having jurisdiction over the Company or any of its properties or assets;
4. No authorization, approval or consent of or filing with any
federal, state or local governmental body of the United States is legally
required for the issuance and sale of the Series C Preferred Stock as
contemplated by the Subscription Agreement.
This opinion is furnished to the Investors solely for their benefit
in connection with the purchase of the Shares, and may not be relied upon
by any other person without our prior written consent.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
Exhibit E
(Form of Registration Rights Agreement - See Exhibit 4.2)
Exhibit 4.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as
of January 22, 1999 is made and entered into between SIGMA DESIGNS, INC.,
a California corporation (the "Company"), and the persons and entities
listed on Exhibit A to the Subscription Agreement (defined below) (the
"Investors").
WHEREAS, the Company and the Investors have entered into that
certain Private Securities Subscription Agreement, dated as of the date
hereof (the "Subscription Agreement"), pursuant to which the Company
will issue to the Investors shares of its Series C Preferred Stock (the
"Preferred Stock") that are convertible into shares of Common Stock of
the Company, no par value (the "Common Stock");
WHEREAS, pursuant to the terms of, and in partial consideration
for, the Investors' agreement to enter into the Subscription Agreement,
the Company has issued to each Investor a warrant (the "Warrant") dated
as of the date hereof, exercisable from time to time for the purchase of
that number of shares as is set forth on Exhibit A to the Subscription
Agreement at the exercise price specified in such Warrant;
WHEREAS, pursuant to the terms of, and in partial consideration
for, the Investors' agreement to enter into the Subscription Agreement,
the Company has agreed to provide the Investors with certain registration
rights with respect to the Conversion Shares (as defined below);
NOW, THEREFORE, in consideration of the premises, the
representations, warranties, covenants and agreements contained herein
and in the Subscription Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. Capitalized terms defined in the
Subscription Agreement or the Warrant shall have the same meanings herein
as are ascribed to them therein. In addition, the following terms shall
have the meanings ascribed below:
"Act" means the Securities Act of 1933, as amended.
"Material Event" means the happening of any event during the
period that the registration statement described in Section 2 hereof is
required to be effective as a result of which, in the reasonable judgment
of the Company, such registration statement or the related prospectus
contains or may contain any untrue statement of a material fact or omits
or may omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
"Registrable Securities" means all of the Common Stock and any
other securities issued or issuable upon conversion of the Preferred
Stock or upon exercise of the Warrants as provided therein (together, the
"Conversion Shares"); provided, however, that any such Conversion
Shares which have been resold to the public under the Act shall cease to
be Registrable Securities upon such resale.
"Registration Statement" shall have the meaning given in
Section 2.1(a) below.
"Rule 144" means Rule 144 promulgated under the Act.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1 FORM S-3 REGISTRATION STATEMENT.
(a) Filing of Form S-3 Registration Statement. Subject to
the terms and conditions of this Agreement, the Company shall file with
the Securities and Exchange Commission (the "SEC") no later than sixty
(60) days following the date of this Agreement a registration statement
on Form S-3 under the Act (the "Registration Statement") for the
registration of the resale by the Investors of Common Stock to be issued
upon conversion of the Preferred Stock and upon exercise of the Warrant
(or, if such form is unavailable for such registration, on such other
form as is available for such registration, which Registration Statement
shall state that, in accordance with Rule 416 promulgated under the Act,
such Registration Statement also covers such indeterminate number of
additional shares of Common Stock).
(b) Effectiveness of Registration Statements. The Company
will use its reasonable best efforts to have the Registration Statement
declared effective by the SEC by no later than one hundred twenty (120)
days following the date of this Agreement and to have the Registration
Statement remain in effect until the termination of this Agreement as
provided in Section 5.1.
(c) Material Event. The Investors agree that, upon receipt
of any notice from the Company of the happening of a Material Event, the
Investors will forthwith discontinue disposition of the Registrable
Securities pursuant to any Registration Statement described in Section 2
until the Investors' receipt of copies of supplemented or amended
prospectuses prepared by the Company (which the Company will use its
commercially reasonable efforts to prepare and file promptly), and, if so
directed by the Company, the Investors will deliver to the Company all
copies in their possession, other than permanent file copies then in the
Investors' possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice. In no event
shall the Company delay causing to be effective a supplement or post-
effective amendment to any Registration Statement pursuant to Section 2
or the related prospectus, for more than sixty (60) days during any
twelve (12) month period.
ARTICLE III
REGISTRATION PROCEDURES
SECTION 3.1 FILINGS; INFORMATION. Whenever the Company is
required to effect or cause the registration of Registrable Securities
pursuant to Section 2.1, the Company will use reasonable best efforts to
effect the registration of such Registrable Securities in accordance with
the intended method of disposition thereof as quickly as practicable, and
in connection with any such request:
(a) The Company will as expeditiously as possible but in no
event later than the time period prescribed by Section 2.1(a), prepare
and file with the SEC a registration statement on Form S-3 (if use of
such form is then available to the Company pursuant to the rules of the
SEC and, if not, on such other form promulgated by the SEC for which the
Company then qualifies and which counsel for the Company shall deem
appropriate and which form shall be available for the sale of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement and in accordance with the intended method
of disposition of such Registrable Securities), and use reasonable best
efforts to cause such filed Registration Statement to become and remain
effective (pursuant to Rule 415 under the Act or otherwise), and the
Company will as expeditiously as possible prepare and file with the SEC
such amendments and supplements to such Registration Statement and the
prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective for the time periods prescribed by
Section 2.1(b), and comply with the provisions of the Act with respect to
the disposition of all securities covered by such Registration Statement
during such period in accordance with the intended methods of disposition
by the Investors set forth in such Registration Statement. Such
Registration Statement shall cover the resale of the Registrable
Securities only. No other securities shall be registered under such
Registration Statement.
(b) The Company will, prior to filing a Registration
Statement or prospectus or any amendment or supplement thereto (excluding
amendments deemed to result from the filing of documents incorporated by
reference therein), furnish to the Investors and one counsel representing
the Investors, copies of such Registration Statement as proposed to be
filed, together with exhibits thereto, which documents will be subject to
review and approval by such parties, and thereafter furnish to the
Investors and their counsel for their review and comment such number of
copies of such Registration Statement, each amendment and supplement
thereto (in each case including all exhibits thereto), the prospectus
included in such Registration Statement (including each preliminary
prospectus) and such other documents or information as the Investors or
counsel may reasonably request in order to facilitate the disposition of
the Registrable Securities.
(c) After the filing of the Registration Statement, the
Company will promptly notify the Investors of any stop order issued or
threatened by the SEC in connection therewith and take all reasonable
actions required to prevent the entry of such stop order or to remove it
if entered.
(d) The Company will use reasonable best efforts to
(i) register or qualify such Registrable Securities under such other
securities or blue sky laws of such jurisdictions in the United States as
the Investors may reasonably (in light of its intended plan of
distribution) request, and (ii) cause such Registrable Securities to be
registered with or approved by such other governmental agencies or
authorities in the United States as may be necessary by virtue of the
business and operations of the Company and do any and all other acts and
things that may be reasonably necessary or advisable to enable the
Investors to consummate the disposition of the Registrable Securities;
provided that the Company will not be required to (A) qualify generally
to do business in any jurisdiction where it would not otherwise be
required to qualify but for this paragraph (d), (B) subject itself to
taxation in any such jurisdiction or (C) consent or subject itself to
general service of process in any such jurisdiction.
(e) The Company will promptly notify the Investors upon the
occurrence of any of the following events in respect of a Registration
Statement or related prospectus in respect of an offering of Registrable
Securities: (i) the declaration of the effectiveness of a Registration
Statement; (ii) receipt of any request for additional information by the
SEC or any other federal or state governmental authority during the
period of effectiveness of the Registration Statement for amendments or
supplements to the Registration Statement or related prospectus;
(iii) the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that
purpose; (iv) receipt of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (v) the happening of any
event which makes any statement made in the Registration Statement or
related prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or which
requires the making of any changes in the Registration Statement, related
prospectus or documents so that the Registration Statement and the
related prospectus will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances in which they were made; and (vi) the Company's
reasonable determination that a post-effective amendment to the
Registration Statement would be appropriate; and the Company will
promptly make available to the Investors any such supplement or amendment
to the related prospectus.
(f) The Company will enter into customary agreements and
take such other actions as are reasonably required in order to expedite
or facilitate the disposition of such Registrable Securities (the
Investors may, at their option, require that any or all of the
representations, warranties and covenants of the Company also be made to
and for the benefit of the Investors). The Investors understand that no
sales of Registrable Securities may be underwritten and the Company is
under no obligation to enter into an underwriting agreement.
(g) The Company will otherwise comply with all applicable
rules and regulations of the SEC, including, without limitation,
compliance with applicable reporting requirements under the Exchange Act
of 1934, as amended (the "Exchange Act"), and will make available to
its security holders, as soon as reasonably practicable, an earning
statement covering a period of twelve (12) months, beginning within three
(3) months after the effective date of the Registration Statement, which
earning statement shall satisfy the provisions of Section 11(a) of the
Act.
(h) The Company will use commercially reasonable efforts to
list all such Registrable Securities covered by such Registration
Statement on the Nasdaq Stock Market.
(i) The Company will appoint a transfer agent and registrar
for all such Registrable Securities covered by such Registration
Statement not later than the effective date of such Registration
Statement.
The Company may require the Investors to promptly
furnish in writing to the Company such information regarding the
distribution of the Registrable Securities as the Company may from time
to time reasonably request and such other information as may be legally
required in connection with such registration including, without
limitation, all such information as may be requested by the SEC or the
National Association of Securities Dealers, Inc. (the "NASD"). The
Investors agree to provide such information as shall be reasonably
requested in connection with such registration within ten (10) business
days after receiving such written request and the Company shall not be
responsible for any delays in obtaining or maintaining the effectiveness
of the Registration Statement caused by the Investors' failure to timely
provide such information. The Investors agree that, upon receipt of any
notice from the Company of the happening of any event of the kind
described in Section 3.1(e) hereof, the Investors will forthwith
discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until the
Investors' receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3.1(e) hereof, and, if so directed by
the Company, the Investors will deliver to the Company all copies, other
than permanent file copies then in the Investors' possession, of the most
recent prospectus covering such Registrable Securities at the time of
receipt of such notice. In the event the Company shall give such notice,
the Company shall extend the period during which such Registration
Statement shall be maintained effective (including the period referred to
in Section 3.1(a) hereof) by the number of days during the period from
and including the date of the giving of notice pursuant to Section 3.1(e)
hereof to the date when the Company shall make available to the Investors
a prospectus supplemented or amended to conform with the requirements of
Section 3.1(e) hereof.
SECTION 3.2 REGISTRATION EXPENSES. In connection with each
Registration Statement, the Company shall pay the following registration
expenses incurred in connection with the registration thereunder (the
"Registration Expenses"): (i) all registration and filing fees,
(ii) fees and expenses of compliance with securities or blue sky laws,
(iii) printing expenses, (iv) the Company's internal expenses (including,
without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), (v) the fees and
expenses incurred in connection with the listing of the Registrable
Securities, and (vi) the fees and expenses of any special experts and
legal counsel retained by the Company in connection with such
registration. The Company shall have no obligation to pay any
underwriting fees, discounts or commissions attributable to the sale of
Registrable Securities, or the cost of any special audit required by the
Investors, such costs to be borne by the Investors.
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
SECTION 4.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless each Investor, its partners, Affiliates,
officers, directors, employees and duly authorized agents, and each
Person or entity, if any, who controls such Investor within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, together with
the partners, Affiliates, officers, directors, employees and duly
authorized agents of such controlling Person or entity (collectively, the
"Controlling Persons"), from and against any loss, claim, damage,
liability, reasonable attorneys' fees, costs or expenses and costs and
expenses of investigating and defending any such claim (collectively,
"Damages"), joint or several, and any action in respect thereof to
which each Investor, its partners, Affiliates, officers, directors,
employees and duly authorized agents, and any such Controlling Person may
become subject under the Act or otherwise, insofar as such Damages (or
proceedings in respect thereof) arise out of, or are based upon, any
untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement, prospectus, supplement or amendment
relating to the Registrable Securities or any preliminary prospectus, or
arises out of, or are based upon, any omission or alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, except insofar as the same
are based upon information furnished in writing to the Company by each
Investor expressly for use therein, and shall reimburse each Investor,
its partners, Affiliates, officers, directors, employees and duly
authorized agents, and each such Controlling Person for any legal and
other expenses reasonably incurred by such Investor, its partners,
Affiliates, officers, directors, employees and duly authorized agents, or
any such Controlling Person in investigating or defending or preparing to
defend against any such Damages or proceedings; provided, however, that
the Company shall not be liable to such Investor to the extent that
(i) such Investor failed to send or deliver a copy of the final
prospectus with or prior to the delivery of written confirmation of the
sale by such Investor to the Person asserting the claim from which such
Damages arise, and (ii) the final prospectus would have corrected such
untrue statement or alleged untrue statement or such omission or alleged
omission upon which the claim is asserted and from which the Damages
arise.
SECTION 4.2 INDEMNIFICATION BY THE INVESTORS. Each Investor
agrees to indemnify and hold harmless the Company, its partners,
Affiliates, officers, directors, employees and duly authorized agents and
each Person or entity, if any, who controls the Company within the mean-
ing of Section 15 of the Act or Section 20 of the Exchange Act (a
"Controlling Person"), together with the partners, Affiliates,
officers, directors, employees and duly authorized agents of such
Controlling Person or entity, to the same extent as the foregoing
indemnity from the Company to the Investor, but only with reference to
information related to the Investor or its plan of distribution,
furnished in writing by the Investor or on the Investor's behalf
expressly for use in any Registration Statement or prospectus relating to
the Registrable Securities, or any amendment or supplement thereto, or
any preliminary prospectus. In case any action or proceeding shall be
brought against the Company or its partners, Affiliates, officers,
directors, employees or duly authorized agents or any such Controlling
Person or its partners, Affiliates, officers, directors, employees or
duly authorized agents, in respect of which indemnity may be sought
against the Investor, the Investor shall have the rights and duties given
to the Company, and the Company or its partners, Affiliates, officers,
directors, employees or duly authorized agents, or such Controlling
Person, or its partners, Affiliates, officers, directors, employees or
duly authorized agents, shall have the comparable rights and duties given
to the Investor by Section 4.1. The Company shall be entitled to receive
indemnities on customary terms from Underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in
the distribution, to the same extent as provided above, with respect to
information so furnished in writing by such persons specifically for
inclusion in any prospectus or Registration Statement.
SECTION 4.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly
after receipt by any person or entity in respect of which indemnity may
be sought pursuant to Section 4.1 or 4.2 (an "Indemnified Party") of
notice of any claim or the commencement of any action, the Indemnified
Party shall, if a claim in respect thereof is to be made against the
person or entity from whom such indemnity may be sought (an
"Indemnifying Party"), promptly notify the Indemnifying Party in
writing of the claim or the commencement of such action. In the event an
Indemnified Party shall fail to give such notice as provided in this
Section 4.3 and the Indemnifying Party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, the
indemnification provided for in Section 4.1 or 4.2 shall be reduced to
the extent of any actual prejudice resulting from such failure to so
notify the Indemnifying Party; provided, that the failure to notify the
Indemnifying Party shall not relieve the Indemnifying Party from any
liability which it may have to an Indemnified Party other than that
liability arising under Section 4.1 or 4.2. If any such claim or action
shall be brought against an Indemnified Party, and it shall notify the
Indemnifying Party thereof, the Indemnifying Party shall be entitled to
participate therein, and, to the extent that it wishes, jointly with any
other similarly notified Indemnifying Party, to assume the defense
thereof. After notice from the Indemnifying Party to the Indemnified
Party of its election to assume the defense of such claim or action, the
Indemnifying Party shall not be liable to the Indemnified Party for any
legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation; provided that the Indemnified Party shall have the right
to employ separate counsel to represent the Indemnified Party and its
controlling persons who may be subject to liability arising out of any
claim in respect of which indemnity may be sought by the Indemnified
Party against the Indemnifying Party, but the fees and expenses of such
counsel shall be for the account of such Indemnified Party unless (i) the
Indemnifying Party and the Indemnified Party shall have mutually agreed
to the retention of such counsel or (ii) in the reasonable judgment of
the Company and such Indemnified Party, representation of both parties by
the same counsel would be inappropriate due to actual or potential
conflicts of interest between them, it being understood, however, that
the Indemnifying Party shall not, in connection with any one such claim
or action or separate but substantially similar or related claims or
actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more
than one separate firm of attorneys (together with appropriate local
counsel) at any time for all Indemnified Parties, or for fees and
expenses that are not reasonable. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement
of any claim or pending or threatened proceeding in respect of which the
Indemnified Party is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Party, unless such settlement
includes an unconditional release of such Indemnified Party from all
liability arising out of such claim or proceeding. Whether or not the
defense of any claim or action is assumed by the Indemnifying Party, such
Indemnifying Party will not be subject to any liability for any
settlement made without its consent.
SECTION 4.4 CONTRIBUTION. If the indemnification provided for in
this Article 4 is unavailable to the Indemnified Parties in respect of
any Damages referred to herein, then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid
or payable by such Indemnified Party as a result of such Damages as
between the Company on the one hand and the Investors on the other, in
such proportion as is appropriate to reflect the relative fault of the
Company and of the Investors in connection with such statements or
omissions, as well as other equitable considerations. The relative fault
of the Company on the one hand and of the Investors on the other shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such
party, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company and each Investor agrees that it would not be just and
equitable if contribution pursuant to this Section 4.4 were determined by
pro rata allocation or by any other method of allocation which does not
take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an
Indemnified Party as a result of the Damages referred to in the
immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably
incurred by such Indemnified Party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of
this Section 4.4, contribution by any seller of Registrable Securities
shall be limited to the gross amount of proceeds received by such seller
from the sale of such Registrable Securities. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any Person who was not guilty
of such fraudulent misrepresentation.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 TERM. The registration rights provided to the holders
of Registrable Securities hereunder shall terminate on the earlier of:
(i) the second anniversary of the date of this Agreement, or (ii) as to
any Buyer, the date as of which such Buyer may sell all of the
Registrable Securities that it holds in reliance upon Rule 144
promulgated under the Securities Act (or successor thereto), provided,
however, that the provisions of Article 4 hereof shall survive any
termination of this Agreement.
SECTION 5.2 RULE 144. The Company covenants that it will file all
reports required to be filed by it under the Act and the Exchange Act in
a timely manner and that it will take such further action as holders of
Registrable Securities may reasonably request, all to the extent required
from time to time to enable the Investors to sell Registrable Securities
without registration under the Act within the limitation of the
exemptions provided by (a) Rule 144, as such Rule may be amended from
time to time, or (b) any similar rule or regulation hereafter adopted by
the SEC. If at any time the Company is not required to file such
reports, it will, upon the request of any holder of Registrable
Securities, make publicly available other information so long as
necessary to permit sales pursuant to Rule 144. Upon the request of the
Investors, the Company will deliver to the Investors a written statement
as to whether it has complied with such requirements.
SECTION 5.3 AMENDMENT AND MODIFICATION. Any provision of this
Agreement may be waived, provided that such waiver is set forth in a
writing executed by the party against whom the enforcement of such waiver
is sought. The provisions of this Agreement, including the provisions of
this sentence, may not be amended, modified or supplemented, and waivers
or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of the holders of a
majority of the then outstanding Registrable Securities. Notwithstanding
the foregoing, the waiver of any provision hereof with respect to a
matter that relates exclusively to the rights of holders of Registrable
Securities whose securities are being sold pursuant to a Registration
Statement, and does not directly or indirectly affect the rights of other
holders of Registrable Securities, may be given by holders of at least a
majority of the Registrable Securities being sold by such holders;
provided that the provisions of this sentence may not be amended, modi-
fied or supplemented except in accordance with the provisions of the
immediately preceding sentence. No course of dealing between or among
any person having any interest in this Agreement will be deemed effective
to modify, amend or discharge any part of this Agreement or any rights or
obligations of any person under or by reason of this Agreement.
SECTION 5.4 SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT. This
Agreement and all of the provisions hereof shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns. The Investors may assign their rights under this
Agreement to any subsequent holder of Preferred Stock, Warrants or
Conversion Shares, provided that the Company shall have the right to
require any holder of Registrable Securities to execute a counterpart of
this Agreement as a condition to such holder's claim to any rights
hereunder. This Agreement, together with the Subscription Agreement and
the Warrants sets forth the entire agreement and understanding between
the parties as to the subject matter hereof and merges and supersedes all
prior discussions, agreements and understandings of any and every nature
among them.
SECTION 5.5 SEPARABILITY. In the event that any provision of this
Agreement or the application of any provision hereof is declared to be
illegal, invalid or otherwise unenforceable by a court of competent
jurisdiction, the remainder of this Agreement shall not be affected
except to the extent necessary to delete such illegal, invalid or
unenforceable provision unless that provision held invalid shall
substantially impair the benefits of the remaining portions of this
Agreement.
SECTION 5.6 NOTICES. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given
hereunder or which are given with respect to this Agreement shall be in
writing and shall be personally served or deposited in the mail,
registered or certified, return receipt requested, postage prepaid, or
delivered by reputable air courier service with charges prepaid, or
transmitted by hand delivery, telegram, telex or facsimile, addressed as
set forth below, or to such other address as such party shall have
specified most recently by written notice:
(i) if to the Company, to:
Sigma Designs, Inc.
46501 Landing Parkway
Fremont, CA 94538
Attention: Carol Kaplan, Director of Investor Relations
Facsimile No.: (510) 770-2691
with copies (which shall not constitute notice) to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attention: David Segre, Esq.
Facsimile No.: (650) 493-6811
and
(ii) if to the Investors, to the address and facsimile number set
forth following such Investors' names in Exhibit A to the
Subscription Agreement.
Notice shall be deemed given on the date of service or transmission
if personally served or transmitted by telegram, telex or facsimile.
Notice otherwise sent as provided herein shall be deemed given on the
third business day following the date mailed or on the second business
day following delivery of such notice by a reputable air courier service.
SECTION 5.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA,
WITHOUT GIVING EFFECT TO PROVISIONS GOVERNING CONFLICTS OF LAWS THEREOF.
SECTION 5.8 HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not constitute a part of this
Agreement, nor shall they affect their meaning, construction or effect.
SECTION 5.9 COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall be deemed to be an original
instrument and all of which together shall constitute one and the same
instrument.
SECTION 5.10 FURTHER ASSURANCES. Each party shall cooperate and
take such action as may be reasonably requested by another party in order
to carry out the provisions and purposes of this Agreement and the
transactions contemplated hereby.
SECTION 5.11 ARBITRATION; REMEDIES. Any dispute that arises
between the parties to this Agreement shall first be submitted for
resolution to arbitration under the rules of the American Arbitration
Association of Santa Clara County, California. In the event of a breach
or a threatened breach by any party to this Agreement of its obligations
under this Agreement, any party injured or to be injured by such breach
will be entitled to specific performance of its rights under this
Agreement or to injunctive relief, in addition to being entitled to
exercise all rights provided in this Agreement and granted by law. The
parties agree that the provisions of this Agreement shall be specifically
enforceable, it being agreed by the parties that the remedy at law,
including monetary damages, for breach of any such provision will be
inadequate compensation for any loss and that any defense or objection in
any action for specific performance or injunctive relief that a remedy at
law would be adequate is waived.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by the undersigned, thereunto duly authorized, as of the
date first set forth above.
SIGMA DESIGNS, INC.
By:
Thinh Q. Tran
Chairman and Chief Executive Officer
PREFERRED HARDWARE DISTRIBUTORS, INC.
By:
Walter Huang
President
JFIC Inc.
By:
Howard Chan
President
MULTIVENTURE TECHNOLOGIES, INC.
By:
James Mah
Chief Executive Officer
[REGISTRATION RIGHTS SIGNATURE PAGE
Exhibit 4.3
FORM OF WARRANT
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR
ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF,
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO A TRANSACTION WHICH IS EXEMPT FROM, OR NOT
SUBJECT TO, SUCH REGISTRATION.
January 22, 1999
WARRANT NO. __________
Warrant to Purchase up to _____________ Shares
of Common Stock of Sigma Designs, Inc.
Sigma Designs, Inc., a California corporation (the "Company"), hereby
acknowledges that ____________ (the "Buyer") or any other Warrant
Holder (hereinafter defined) is entitled, on the terms and conditions set
forth below, to purchase from the Company beginning the day after the six
month anniversary date of the closing of the purchase of this warrant
(the "Warrant") and ending twenty-four (24) months after the original
issuance of this Warrant, up to _____________ fully paid and
nonassessable shares of common stock, no par value, of the Company (the
"Common Stock"), as the same may be adjusted pursuant to Section 5
herein, at the purchase price of $5.16 per share, as the same may be
adjusted pursuant to Section 5 herein (the "Purchase Price"). 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 Buyer
dated as of January 22, 1999 (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.
(b) The term "Warrant Shares" shall mean the shares of Common
Stock or other securities issuable upon exercise of this
Warrant.
(c) The term "Agreement" shall mean the Series C Preferred
Stock Private Securities Subscription Agreement, dated as of
January 22, 1999, between the Company and the Buyer.
(d) Other capitalized terms used herein which are defined in the
Agreement shall have the same meanings herein as therein.
2. Exercise of Warrant.
(a) This Warrant may be exercised by the Warrant Holder, in whole
or in part, at any time during the life of this Warrant as
described herein, and from time to time by surrender of this
Warrant, together with the form of subscription at the end
hereof duly executed by Warrant Holder, together with the
full Purchase Price (in cash, by cashier's check drawn on a
United States bank or by wire transfer) 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.
(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.
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 Stock 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 Stock 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 Stock
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 assure
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 Stock Market, for the legal and valid issuance of
this Warrant and the Warrant Shares to the Warrant Holder.
(d) From the date hereof through the last date on which this
Warrant is exercisable, the Company shall take all steps
reasonably necessary and within its control to assure 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 or decreased number of securities for which this
Warrant is exercisable shall be the same as the aggregate
Purchase Price in effect immediately prior to such
adjustments.
(b) Stock Dividend. If at any time after the date hereof the
Company declares a dividend or other distribution on Common
Stock payable in Common Stock or other securities or rights
convertible into or exchangeable for Common Stock ("Common
Stock Equivalents"), without payment of any consideration by
holders of Common Stock for the additional shares of Common
Stock or the Common Stock Equivalents (including the
additional shares of Common Stock issuable upon exercise or
conversion thereof), then the number of shares of Common
Stock for which this Warrant may be exercised shall be
increased as of the record date (or the date of such dividend
distribution if no record date is set) for determining which
holders of Common Stock shall be entitled to receive such
dividends, in proportion to the increase in the number of
outstanding shares (and shares of Common Stock issuable upon
conversion of all such Common Stock Equivalents) of Common
Stock as a result of such dividend, and the Purchase Price
shall be adjusted so that the aggregate amount payable for
the purchase of all the Warrant Shares issuable hereunder
immediately after the record date (or on the date of such
distribution, if applicable) for such dividend shall equal
the aggregate amount so payable before the record date (or
before the date of such distribution, if applicable).
(c) 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.
(d) 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.
(e) 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 shareholder
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
shareholder 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.
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 satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender
and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
10. Consent to Jurisdiction. Each of the Company and the Warrant
Holder 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 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 certificates representing the Warrants and the underlying
shares of 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 12.
(c) Assignment. Assuming the conditions of subparagraph (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, Director of Investor Relations
Fax: (510) 770-2640
to the Warrant Holder: At the address and fax number set
forth on the signature page hereto.
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.
[Remainder of Page Intentionally Left Blank]
COMPANY:
SIGMA DESIGNS, INC.
By:
Thinh Q. Tran
Chairman of the Board and
Chief Executive Officer
Attest:
By:
Kit Tsui
Secretary
WARRANT HOLDER:
By:
Name:
Title:
Address:
Phone:
Fax:
[WARRANT SIGNATURE 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, wire transfer or cashier's check drawn on a United
States bank in the amount of $____, 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
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, address (including zip code
number) and fax number of assignee
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.
Exhibit 5.1
May 3, 1999
Sigma Designs, Inc.
355 Fairview Way
Milpitas, CA 95035
RE: SIGMA DESIGNS, INC. REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed
by you with the Securities and Exchange Commission on May 3, 1999 (the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of 632,225 shares of your Common
Stock, no par value (the "Shares"), by 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 to the use of our name wherever
appearing in the Registration Statement, including the Prospectus
constituting a part thereof, any amendment thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ Wilson Sonsini Goodrich & Rosati
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Sigma Designs, Inc. on Form S-3 of our report dated
February 25, 1999, appearing in the Annual Report on Form 10-K of Sigma
Designs, Inc. for the year ended January 31, 1999 and to the reference to
us under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
/s/ Deloitte & Touche LLP
San Jose, California
April 27, 1999
