-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OVt2WKKYk1SeJCih+k7lYgXbh86fYuKzCJ752pw2lh5H/hFHcUDGQQezsm8TW22G IITaBX4O7kJEr8RcRnawjA== 0000790715-99-000003.txt : 19990504 0000790715-99-000003.hdr.sgml : 19990504 ACCESSION NUMBER: 0000790715-99-000003 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19990503 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIGMA DESIGNS INC CENTRAL INDEX KEY: 0000790715 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 942848099 STATE OF INCORPORATION: CA FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-77595 FILM NUMBER: 99608882 BUSINESS ADDRESS: STREET 1: 355 FAIRVIEW WAY CITY: MILPITA STATE: CA ZIP: 95035-3024 BUSINESS PHONE: 4082629003 MAIL ADDRESS: STREET 1: 355 FAIRVIEW WAY CITY: MILPITA STATE: CA ZIP: 95035-3024 S-3 1 FORM S-3 As filed with the Securities and Exchange Commission on May 3, 1999 Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------------- FORM S-3 REGISTRATION STATEMENT Under The Securities Act of 1933 --------------------------- Sigma Designs, Inc. (Exact name of Registrant as specified in its charter) --------------------------- CALIFORNIA 7372 94-2848099 (State or other jurisdiction (Primary Standard (I.R.S. Employer of incorporation or Industrial Classification Identification Number) organization) Code Number) 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) --------------------------- 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) --------------------------- Copies to: David J. Segre, Esq. Wilson Sonsini Goodrich & Rosati Professional Corporation 650 Page Mill Road Palo Alto, California 94304-1050 (650) 493-9300 --------------------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check the following box. [X] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If the only securities being delivered pursuant to this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] --------------------------- CALCULATION OF REGISTRATION FEE
============================================================================== 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 - ---------------------------- ------------ ---------- ------------ ------------ Common Stock, no par value 632,225 $6.44 $4,071,529 $1,132 ==============================================================================
(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 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. 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.
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 - ------------------------------------- ------------ ----------- --------- --------- 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
----------------- * 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. 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. 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.
Signature Title Date - ------------------------ ---------------------------------- ----------------- /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
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). EX-3.1 2 CERTIFICATE OF DETERMINATION OF PREFERENCES OF SERIES C PREFERRED STOCK OF SIGMA DESIGNS, INC. 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 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 EX-4.1 3 PRIVATE SECURITIES SUBSCRIPTION AGREEMENT 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) EX-4.2 4 REGISTRATION RIGHTS AGREEMENT 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 EX-4.3 5 FORM OF WARRANT 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. EX-5.1 6 OPINION OF WILSON SONSINI GOODRICH & ROSATI, PROFESSIONAL CORPORATION 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 EX-23.1 7 INDEPENDENT AUDITORS' CONSENT. 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 -----END PRIVACY-ENHANCED MESSAGE-----