Exhibit 4.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of January
30, 1998, by and among Sigma Designs, Inc., a California corporation, with
headquarters located at 00000 Xxxxxxx Xxxxxxx, Xxxxxxx, Xxxxxxxxxx 00000
("Company"), and each of the purchasers set forth on the signature pages hereto
(the "Buyers").
WHEREAS:
A. The Company and the 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 (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act");
B. The Company has authorized a new series of preferred stock,
designated as Series B Convertible Preferred Stock (the "Preferred Stock"),
having the rights, preferences and privileges set forth in the Certificate of
Determination of Rights, Preferences, Privileges and Restrictions attached
hereto as Exhibit "A" (the "Certificate of Determination");
C. The Preferred Stock is convertible into shares of common stock, no
par value per share, of the Company (the "Common Stock"), upon the terms and
subject to the limitations and conditions set forth in the Certificate of
Determination;
D. The Company has authorized the issuance to the Buyers of warrants,
in the form attached hereto as Exhibit "B", to purchase Fifty Thousand (50,000)
shares of Common Stock (the "Warrants");
E. The Buyers desire to purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement, (i) an
aggregate of Five Thousand (5,000) shares of Preferred Stock, and (ii) Warrants
to purchase Fifty Thousand (50,000) shares of Common Stock, for an aggregate
purchase price of Five Million Dollars ($5,000,000).
F. Each Buyer wishes to purchase, upon the terms and conditions stated
in this Agreement, the number of shares of Preferred Stock and number of
Warrants as is set forth immediately below its name on the signature pages
hereto;
G. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto
as Exhibit "C" (the "Registration Rights Agreement"), pursuant to which the
Company has agreed to provide certain registration rights under the 1933 Act and
the rules and regulations promulgated thereunder, and applicable state
securities laws; and
NOW THEREFORE, the Company and each of the Buyers (severally and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
a. Purchase of Preferred Shares and Warrants. The
Company shall issue and sell to each Buyer and each Buyer severally agrees to
purchase from the Company such number of shares of Series B Preferred Stock
(collectively, together with any Preferred Stock issued in replacement thereof
or as a dividend thereon or otherwise with respect thereto in accordance with
the terms thereof, the "Preferred Shares") and number of Warrants for the
aggregate purchase price (the "Purchase Price") as is set forth immediately
below such Buyer's name on the signature pages hereto. The aggregate number of
Preferred Shares to be issued at the Closing (as defined below) is Five Thousand
(5,000) and the aggregate number of Warrants to be issued at the Closing is
Fifty Thousand (50,000), for an aggregate purchase price of Five Million Dollars
($5,000,000).
b. Form of Payment. On the Closing Date (as defined
below), (i) each Buyer shall pay the Purchase Price for the Preferred Shares and
the Warrants to be issued and sold to it at the Closing (as defined below) by
wire transfer of immediately available funds to the Company, in accordance with
the Company's written wiring instructions, against delivery of duly executed
certificates representing such number of Preferred Shares and Warrants which
such Buyer is purchasing and (ii) the Company shall deliver such certificates
representing such number of Preferred Shares and Warrants duly executed on
behalf of the Company, to the Buyer, against delivery of such Purchase Price.
c. Closing Date. Subject to the satisfaction (or
waiver) of the conditions thereto set forth in Section 6 and Section 7 below,
the date and time of the issuance and sale of the Preferred Shares and the
Warrants pursuant to this Agreement (the "Closing Date") shall be 12:00 noon
Eastern Standard Time on February 9, 1998 or such other mutually agreed upon
time. The closing of the transactions contemplated by this Agreement (the
"Closing") shall occur on the Closing Date at the offices of Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx, Professional Corporation, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, XX
00000, or at such other location as may be agreed to be the parties.
2. BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer
severally (and not jointly) represents and warrants to the Company solely as to
such Buyer that:
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a. Investment Purpose. As of the date hereof, the
Buyer is purchasing the Preferred Shares and the shares of Common Stock issuable
upon conversion thereof (the "Conversion Shares") and the Warrants and the
shares of Common Stock issuable upon exercise thereof (the "Warrant Shares" and,
collectively with the Preferred Shares, Warrants and Conversion Shares the
"Securities") for its own account for investment only and not with a present
view towards the public sale or distribution thereof, except pursuant to sales
registered or exempted from registration under the 1933 Act.
b. Accredited Investor Status. The Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. The Buyer understands that
the Securities are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
d. Information. The Buyer and its advisors, if any,
have been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by the Buyer or its advisors. The Buyer and
its advisors, if any, have been afforded the opportunity to ask questions of the
Company and have received what the Buyer believes to be satisfactory answers to
any such inquiries. Neither such inquiries nor any other due diligence
investigation conducted by Buyer or any of its advisors or representatives shall
modify, amend or affect Buyer's right to rely on the Company's representations
and warranties contained in Section 3 below. The Buyer understands that its
investment in the Securities involves a significant degree of risk.
e. Governmental Review. The Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Securities.
f. Transfer or Resale. The Buyer understands that (i)
except as provided in the Registration Rights Agreement, the Securities have not
been and are not being registered under the 1933 Act or any applicable state
securities laws, and may not be transferred unless (a) subsequently included in
an effective registration statement thereunder, or (b) the Buyer shall have
delivered to the Company an opinion of counsel (which opinion shall be
reasonably acceptable to the Company) to the effect that the Securities to be
sold or transferred may be sold or transferred pursuant to an exemption from
such registration or (c) sold or transferred to an "affiliate" of the Buyer or
(d) sold pursuant to Rule 144 promulgated under the 1933 Act (or a
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successor rule); (ii) any sale of such Securities made in reliance on Rule 144
may be made only in accordance with the terms of said Rule and further, if said
Rule is not applicable, any resale of such Securities under circumstances in
which the seller (or the person through whom the sale is made) may be deemed to
be an underwriter (as that term is defined in the 0000 Xxx) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder (in each case, other than pursuant to the Registration
Rights Agreement). Notwithstanding the foregoing or anything else contained
herein to the contrary, the Securities may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement so long
as the Buyer complies with the provisions of this Section 2(f).
g. Legends. The Buyer understands that the Preferred
Shares and the Warrants and, until such time as the Conversion Shares and
Warrant Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement, the Conversion Shares and Warrant Shares, may
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for such
Securities):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be
sold, transferred or assigned in the absence of an effective
registration statement for the securities under said Act, or
an opinion of counsel, in form, substance and scope reasonably
acceptable to the Company, that registration is not required
under said Act or unless sold pursuant to Rule 144 under said
Act."
The legend set forth above shall be removed and the Company
shall issue a certificate without such legend to the holder of any Security upon
which it is stamped, if, unless otherwise required by applicable state
securities laws, (a) such Security is registered for sale under an effective
registration statement filed under the 1933 Act, or (b) such holder provides the
Company with an opinion of counsel, in form, substance and scope reasonably
acceptable to the Company, to the effect that a public sale or transfer of such
Security may be made without registration under the 1933 Act and such sale or
transfer is effected or (c) such holder provides the Company with reasonable
assurances that such Security can be sold pursuant to Rule 144 under the 1933
Act (or a successor rule thereto) without any restriction as to the number of
Securities acquired as of a particular date that can then be immediately sold.
The Buyer agrees to sell all Securities, including those represented by a
certificate(s) from which the legend has been removed, in compliance with
applicable prospectus delivery requirements, if any.
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h. Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of the Buyer and are valid and binding agreements of the
Buyer enforceable in accordance with their terms.
i. Residency. The Buyer is a resident of the
jurisdiction set forth immediately below such Buyer's name on the signature
pages hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Buyer that:
a. Organization and Qualification. The Company and
each of its Subsidiaries (as defined below), if any, is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, with full power and authority
(corporate and other) to own, lease, use and operate its properties and to carry
on its business as and where now owned, leased, used, operated and conducted.
Schedule 3(a) sets forth a list of all of the Subsidiaries of the Company and
the jurisdiction in which each is incorporated. The Company and each of 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 where the failure to
be so qualified or in good standing would not have a Material Adverse Effect.
"Material Adverse Effect" means any material adverse effect on the business,
operations, assets or financial condition of the Company or its Subsidiaries, if
any, taken as a whole, or on the transactions contemplated hereby or by the
agreements or instruments to be entered into in connection herewith.
"Subsidiaries" means any corporation or other organization, whether incorporated
or unincorporated, in which the Company owns, directly or indirectly, any equity
or other ownership interest.
b. Authorization; Enforcement. Except as disclosed on
Schedule 3(b), (i) The Company has all requisite corporate power and authority
to file and perform its obligations under the Certificate of Determination and
to enter into and perform this Agreement, the Registration Rights Agreement and
the Warrants and to consummate the transactions contemplated hereby and thereby
and to issue the Securities, in accordance with the terms hereof and thereof,
(ii) the execution and delivery of this Agreement, the Registration Rights
Agreement and the Warrants by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including without limitation, the
issuance of the Preferred Shares and the Warrants and the issuance and
reservation for issuance of the Conversion Shares and Warrant Shares issuable
upon conversion or exercise thereof) have been duly authorized by the Company's
Board of Directors and no further consent or authorization of the Company, its
Board of Directors, or its shareholders is required, (iii) this Agreement has
been duly executed and delivered and the Certificate of Determination has been
duly filed by the Company, and (iv) each of this Agreement and the Certificate
of Determination constitutes, and upon execution and delivery by the Company
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of the Registration Rights Agreement and the Warrants, each of such instruments
will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
c. Capitalization. As of January 21, 1998, the
authorized capital stock of the Company consists of (i) 20,000,000 shares of
Common Stock of which 11,646,075 shares are issued and outstanding, 3,454,398
shares are reserved for issuance pursuant to the Company's stock option plans,
2,300,000 shares are reserved for issuance pursuant to securities (other than
the Preferred Shares and the Warrants) exercisable for, or convertible into or
exchangeable for shares of Common Stock and 3,400,000 (2x currently required)
shares are reserved for issuance upon conversion of the Preferred Shares and
exercise of the Warrants (subject to adjustment pursuant to the Company's
covenant set forth in Section 4(h) below); and (ii) 2,000,000 shares of
preferred stock, 26,550 of which shares are issued and outstanding. All of such
outstanding shares of capital stock are, or upon issuance will be, duly
authorized, validly issued, fully paid and nonassessable. No shares of capital
stock of the Company are subject to preemptive rights or any other similar
rights of the stockholders of the Company or any liens or encumbrances imposed
through the actions or failure to act of the Company. Except as disclosed in
Schedule 3(c), as of the effective date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe for, puts, calls,
rights of first refusal, agreements, understandings, claims or other commitments
or rights of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock of the Company
or any of its Subsidiaries, or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries, and (ii) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the 1933 Act (except
the Registration Rights Agreement) and (iii) there are no anti-dilution or price
adjustment provisions contained in any security issued by the Company (or in any
agreement providing rights to security holders) that will be triggered by the
issuance of the Preferred Shares, the Warrants, the Conversion Shares or Warrant
Shares. The Company has furnished to the Buyer true and correct copies of the
Company's Articles of Incorporation as in effect on the date hereof ("Articles
of Incorporation"), the Company's By-laws, as in effect on the date hereof (the
"By-laws"), and the terms of all securities convertible into or exercisable for
Common Stock of the Company and the material rights of the holders thereof in
respect thereto.
d. Issuance of Shares. The Preferred Shares,
Conversion Shares and Warrant Shares are duly authorized and, upon issuance in
accordance with their respective terms of this Agreement (including the issuance
of the Conversion Shares upon conversion of the Preferred Shares in accordance
with the Certificate of Determination and the Warrant Shares upon exercise of
the Warrants in accordance with the terms thereof) will be validly issued, fully
paid and non-assessable, and free from all taxes, liens and charges with respect
to the issue thereof and shall not be subject to preemptive rights or other
similar rights of stockholders of the Company.
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The term Conversion Shares and Warrant Shares includes the shares of Common
Stock issuable upon conversion of the Preferred Shares or exercise of the
Warrants, including without limitation, such additional shares, if any, as are
issuable as a result of the events described in Section 2(c) of the Registration
Rights Agreement. The Company understands and acknowledges the potentially
dilutive effect to the Common Stock upon the issuance of the Conversion Shares
and Warrant Shares upon conversion or exercise of the Preferred Shares or
Warrants. The Company further acknowledges that its obligation to issue
Conversion Shares and Warrant Shares upon conversion of the Preferred Shares or
exercise of the Warrants in accordance with the terms of and subject to the
limitations set forth in this Agreement, the Certificate of Determination and
the Warrants is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other stockholders of
the Company.
e. No Conflicts. Except as disclosed in Schedule
3(e), the execution, delivery and performance of this Agreement the Registration
Rights Agreement and the Warrants by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without
limitation, the filing of the Certificate of Determination and the issuance and
reservation for issuance of the Conversion Shares and Warrant Shares) will not
(i) conflict with or result in a violation of any provision of the Articles of
Incorporation or By-laws or (ii) violate or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which with notice or
lapse of time or both could become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its Subsidiaries or by which
any property or asset of the Company or any of its Subsidiaries is bound or
affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). Except as disclosed in Schedule
3(e), neither the Company nor any of its Subsidiaries is in violation of its
Articles of Incorporation, By-laws or other organizational documents and neither
the Company nor any of its Subsidiaries is in default (and no event has occurred
which with notice or lapse of time or both could put the Company or any of its
Subsidiaries in default) under, and neither the Company nor any of its
Subsidiaries has taken any action or failed to take any action that would give
to others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party or by which any property or assets of the Company or any
of its Subsidiaries is bound or affected, except for possible defaults as would
not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its Subsidiaries, if any, are not being conducted
in violation of any law, ordinance or regulation of any governmental entity.
Except as specifically contemplated by this Agreement and as required under the
1933 Act and any applicable state securities laws, the Company is not required
to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or self
regulatory agency
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in order for it to execute, deliver or perform any of its obligations under this
Agreement, the Registration Rights Agreement or the Warrants in accordance with
the terms hereof or thereof. Except as disclosed in Schedule 3(e), all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company is not in violation of the listing
requirements of the Nasdaq National Market ("Nasdaq") and has not received any
notice from Nasdaq that the Common Stock will be delisted by the Nasdaq. The
Company and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.
f. SEC Documents, Financial Statements. Since January
31, 1995, the Company has timely filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than
exhibits) incorporated by reference therein, being hereinafter referred to
herein as the "SEC Documents"). The Company has delivered to each Buyer true and
complete copies of the SEC Documents, except for such exhibits and incorporated
documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles ("GAAP"),
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). Except as
set forth in the financial statements of the Company included in the SEC
Documents, the Company has no liabilities, contingent or otherwise, other than
(i) liabilities incurred in the ordinary course of business subsequent to
January 31, 1997 and (ii) obligations under contracts and commitments incurred
in the ordinary course of business and not required under generally accepted
accounting principles to be reflected in such financial statements, which,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company.
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g. Absence of Certain Changes. Except as disclosed in
Schedule 3(g), since January 31, 1997, there has been no change and no
development which would have a Material Adverse Effect.
h. Absence of Litigation. There is no action, suit,
claim, proceeding, inquiry or investigation before or by any court, public
board, government agency, self-regulatory organization or body pending or, to
the knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company or any of its Subsidiaries that could reasonably be
expected to have a Material Adverse Effect. Schedule 3(h) contains a complete
list and summary description of any pending or threatened proceeding against or
affecting the Company or any of its Subsidiaries, without regard to whether it
would have a Material Adverse Effect.
i. Patents, Copyrights, etc. The Company and each of
its Subsidiaries owns or possesses the requisite licenses or rights to use all
patents, patent rights, inventions, know-how, trade secrets, trademarks, service
marks, service names, trade names and copyrights ("Intellectual Property")
necessary to enable it to conduct its business as now operated (and, except as
set forth in Schedule 3(i) hereof, to the Company's knowledge, as presently
contemplated to be operated in the future); there is no claim or action by any
person pertaining to, or proceeding pending, or to the Company's knowledge
threatened which challenges the right of the Company or of a Subsidiary with
respect to any Intellectual Property necessary to enable it to conduct its
business as now operated (and, except as set forth in Schedule 3(i) hereof, to
the Company's knowledge, as presently contemplated to be operated in the
future); to the Company's knowledge, the Company's or its Subsidiaries, current
and intended products, services and processes do not infringe on any
Intellectual Property or other rights held by any person; and the Company is
unaware of any facts or circumstances which might give rise to any of the
foregoing. The Company and each of its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of their
Intellectual Property.
j. [Intentionally Omitted]
k. Tax Status. Except as set forth on Schedule 3(k),
the Company and each of its Subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the Company knows of no basis for any
such claim.
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l. Certain Transactions. Except as set forth on
Schedule 3(l) and except for arm's length transactions pursuant to which the
Company or any of its Subsidiaries makes payments in the ordinary course of
business upon terms no less favorable than the Company or any of its
Subsidiaries could obtain from third parties and other than the grant of stock
options disclosed on Schedule 3(c), none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
m. Disclosure. All written information relating to or
concerning the Company or any of its Subsidiaries set forth in this Agreement
and provided to the Buyers pursuant to Section 2(d) hereof and otherwise in
connection with the transactions contemplated hereby is true and correct in all
material respects and the Company has not omitted to state any material fact
necessary in order to make the statements made herein or therein, in light of
the circumstances under which they were made, not misleading. No event or
circumstance has occurred or exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed (assuming for this purposes that the Company's
reports filed under the 1934 Act are being incorporated into an effective
registration statement filed by the Company under the 1933 Act).
n. Acknowledgment Regarding Buyers' Purchase of
Securities. The Company acknowledges and agrees that the Buyers are acting
solely in the capacity of arm's length purchasers with respect to this Agreement
and the transactions contemplated hereby. The Company further acknowledges that
no Buyer is acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to the Buyers, purchase of the
Securities. The Company further represents to each Buyer that the Company's
decision to enter into this Agreement has been based solely on the independent
evaluation of the Company and its representatives.
o. No Integrated Offering. Neither the Company, nor
any of its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales in any security or solicited any
offers to buy any security under circumstances that would require registration
under the 1933 Act of the issuance of the Securities to the Buyers. The
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issuance of the Securities to the Buyers will not be integrated with any other
issuance of the Company's securities (past, current or future) which requires
stockholder approval under the rules of The Nasdaq Stock Market.
p. No Brokers. The Company has taken no action which
would give rise to any claim by any person for brokerage commissions, finder's
fees or similar payments relating to this Agreement or the transactions
contemplated hereby, except for dealings with Tsunami Capital, whose commissions
and fees will be paid for by the Company.
q. Permits; Compliance. The Company and each of its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted except where the failure to
possess would not have a Material Adverse Effect (collectively, the "Company
Permits"), and there is no action pending or, to the knowledge of the Company,
threatened regarding suspension or cancellation of any of the Company Permits.
Neither the Company nor any of its Subsidiaries is in conflict with, or in
default or violation of, any of the Company Permits, except for any such
conflicts, defaults or violations which, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect. Since January 31,
1997, neither the Company nor any of its Subsidiaries has received any
notification with respect to possible conflicts, defaults or violations of
applicable laws, except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have a Material
Adverse Effect.
r. Environmental Matters.
(i) Except as set forth in Schedule 3(r),
there are, to the Company's knowledge, with respect to the Company or any of its
Subsidiaries or any predecessor of the Company, no past or present violations of
Environmental Laws (as defined below), releases of any material into the
environment, actions, activities, circumstances, conditions, events, incidents,
or contractual obligations which may give rise to any common law environmental
liability or any liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 or similar federal, state, local or
foreign laws and neither the Company nor any of its Subsidiaries has received
any notice with respect to any of the foregoing, nor is any action pending or,
to the Company's knowledge, threatened in connection with any of the foregoing.
The term "Environmental Laws" means all federal, state, local or foreign laws
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws relating to
emissions, discharges, releases or threatened releases of chemicals, pollutants
contaminants, or toxic or hazardous substances or wastes (collectively,
"Hazardous Materials") into the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous
11
Materials, as well as all authorizations, codes, decrees, demands or demand
letters, injunctions, judgments, licenses, notices or notice letters, orders,
permits, plans or regulations issued, entered, promulgated or approved
thereunder.
(ii) Other than those that are or were
stored, used or disposed of in compliance with applicable law, to the Company's
knowledge, no Hazardous Materials are contained on or about any real property
currently owned, leased or used by the Company or any of its Subsidiaries, and,
to the Company's knowledge, no Hazardous Materials were released on or about any
real property previously owned, leased or used by the Company or any of its
Subsidiaries during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of the Company's
or any of its Subsidiaries' business.
(iii) Except as set forth in Schedule 3(r),
to the Company's knowledge, there are no underground storage tanks on or under
any real property owned, leased or used by the Company or any of its
Subsidiaries that are not in compliance with applicable law.
s. Title to Property. The Company and its
Subsidiaries have good and marketable title in fee simple to all real property
and good and marketable title to all personal property owned by them which is
material to the business of the Company and its Subsidiaries, in each case free
and clear of all liens, encumbrances and defects except such as are described in
Schedule 3(s) or such as would not have a Material Adverse Effect. Any real
property and facilities held under lease by the Company and its Subsidiaries are
held by them under valid, subsisting and enforceable leases with such exceptions
as would not have a Material Adverse Effect.
t. Insurance. The Company and each of its
Subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as management of the Company
believes to be prudent and customary in the businesses in which the Company and
its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has
any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect.
u. Internal Accounting Controls. The Company and each
of its Subsidiaries maintain a system of internal accounting controls
sufficient, int he judgment of the Company's board of directors, to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization and (iv) the recorded
12
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
4. COVENANTS.
a. Best Efforts. The parties shall use their best
efforts to satisfy timely each of the conditions described in Section 6 and 7 of
this Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file
a Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to each Buyer promptly after such filing. The Company
shall, on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for sale to the
Buyers at the applicable closing pursuant to this Agreement under applicable
securities or "blue sky" laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to each Buyer on or prior to the Closing Date.
c. Reporting Status; Eligibility to Use Form S-3. The
Company's Common Stock is registered under Section 12(g) of the 1934 Act. So
long as any Buyer beneficially owns any of the Securities, the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination. The Company currently
meets, and will take all necessary action to continue to meet, the "registrant
eligibility" requirements set forth in the general instructions to Form S-3.
d. Use of Proceeds. The Company shall use the
proceeds from the sale of the Preferred Shares and the Warrants in the manner
set forth in Schedule 4(d) attached hereto and made a part hereof and shall not,
directly or indirectly, use such proceeds for any loan to or investment in any
other corporation, partnership, enterprise or other person (except in connection
with its currently existing direct or indirect Subsidiaries).
e. Additional Equity Capital; Right of First Refusal.
Subject to the exceptions described below, the Company will not, without the
prior written consent of a majority-in-interest of the Buyers, negotiate or
contract with any party to obtain additional equity financing (including debt
financing with an equity component), during the period (the "Lock-up Period")
beginning on the Closing Date and ending on the later of (i) one hundred
thirty-five (135) days from the Closing Date and (ii) forty-five (45) days from
the date the Registration Statement (as defined in the Registration Rights
Agreement) is declared effective (plus any days for which sales cannot be made
thereunder). In addition, subject to the exceptions described below, the Company
will not conduct any equity financing (including debt with an equity component)
("Future
13
Offerings") during the period beginning on the Closing Date and ending one
hundred eighty (180) days after the end of the Lock-up Period, unless it shall
have first delivered to each Buyer, at least fifteen (15) business days prior to
the closing of such Future Offering, written notice describing the proposed
Future Offering, including the material terms and conditions thereof and the
proposed definitive documentation to be entered into in connection therewith,
and providing each Buyer an option during the ten (10) day period following
delivery of such notice to purchase its pro rata share (based on the ratio that
the number of Preferred Shares purchased by it hereunder bears to the aggregate
number of Preferred Shares purchased hereunder) of the securities being offered
in the Future Offering on the same terms as contemplated by such Future Offering
(the limitations referred to in this sentence are collectively referred to as
the "Capital Raising Limitations"). In the event the material terms and
conditions of a proposed Future Offering are amended in any respect after
delivery of the notice to the Buyers concerning such proposed Future Offering,
the Company shall deliver a new notice to each Buyer describing the material
amended terms and conditions of the proposed Future Offering and each Buyer
thereafter shall have an option during the ten (10) day period following
delivery of such new notice to purchase its pro rata share (based on the ratio
that the aggregate principal amount of the Debentures purchased by it hereunder
bears to the aggregate principal amount of Debentures purchased hereunder). The
Capital Raising Limitations shall not apply to any transaction involving (i)
issuances of securities in a firm commitment underwritten public offering
(excluding a continuous offering pursuant to Rule 415 under the 0000 Xxx) or
(ii) issuances of securities as consideration for a merger, consolidation or
sale of assets, or in connection with any strategic partnership or joint venture
(the primary purpose of which is not to raise equity capital), or in connection
with the disposition or acquisition of a business, product or license by the
Company. The Capital Raising Limitations also shall not apply to (i) the
issuance of securities upon exercise or conversion of the Company's options,
warrants or other convertible securities outstanding as of the date hereof or to
the grant of additional options or warrants, or the issuance of additional
securities under any Company stock option, restricted stock option or employee
stock purchase plan approved by a majority of the Company's disinterested
directors or as incentive related distributions to employees approved by a
majority of the Company's disinterested directors, (ii) the issuance of
securities in connection with equipment financing or (iii) the issuance of
securities in connection with any commercial bank financing.
f. Expenses. The Company shall reimburse Xxxx Xxxx
Capital Management, L.P. ("RGC") for all expenses incurred by it in connection
with the negotiation, preparation, execution, delivery and performance of this
Agreement and the other agreements to be executed in connection herewith,
including, without limitation, attorneys' and consultants' fees and expenses.
The Company's obligation to reimburse RGC's expenses under this Section 4(f)
shall be limited to Thirty-Five Thousand Dollars ($35,000).
g. Financial Information. The Company agrees to send
the following reports to each Buyer until such Buyer transfers, assigns, or
sells all of the Securities: (i) within
14
ten (10) days after the filing with the SEC, a copy of its Annual Report on Form
10-K, its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K;
(ii) within two (2) days after release, copies of all press releases issued by
the Company or any of its Subsidiaries; and (iii) contemporaneously with the
making available or giving to the stockholders of the Company, copies of any
notices or other information the Company makes available or gives to such
stockholders.
h. Reservation of Shares. The Company shall at all
times have authorized, and reserved for the purpose of issuance, a sufficient
number of shares of Common Stock to provide for the full conversion or exercise
of the outstanding Preferred Shares and Warrants and issuance of the Conversion
Shares and Warrant Shares in connection therewith (based on the Conversion Price
of the Preferred Shares or Exercise Price of the Warrants in effect from time to
time). The Company shall not reduce the number of shares of Common Stock
reserved for issuance upon conversion of Preferred Shares and exercise of the
Warrants without the consent of each Buyer. The Company shall use its best
efforts at all times to maintain the number of shares of Common Stock so
reserved for issuance at no less than two (2) times the number that is then
actually issuable upon full conversion of the Preferred Shares and exercise of
the Warrants (based on the Conversion Price of the Preferred Shares or Exercise
Price of the Warrants in effect from time to time). If at any time the number of
shares of Common Stock authorized and reserved for issuance is below the number
of Conversion Shares and Warrant Shares issued and issuable upon conversion of
the Preferred Shares and exercise of the Warrants (based on the Conversion Price
of the Preferred Shares or Exercise price of the Warrants then in effect), the
Company will promptly take all corporate action necessary to authorize and
reserve a sufficient number of shares, including, without limitation, calling a
special meeting of shareholders to authorize additional shares to meet the
Company's obligations under this Section 4(h), in the case of an insufficient
number of authorized shares, and using its best efforts to obtain shareholder
approval of an increase in such authorized number of shares.
i. Listing. The Company shall promptly secure the
listing of the Conversion Shares and Warrant 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 Conversion Shares and Warrant Shares from time to time issuable
upon conversion of the Preferred Shares or exercise of the Warrants. The Company
will obtain and maintain the listing and trading of its Common Stock on Nasdaq,
the Nasdaq SmallCap Market ("Nasdaq SmallCap"), the New York Stock Exchange
("NYSE"), or the American Stock Exchange ("AMEX") and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the National Association of Securities Dealers ("NASD") and
such exchanges, as applicable. The Company shall promptly provide to each Buyer
copies of any notices it receives from Nasdaq or any other securities exchange
or other
15
securities market on which the Common Stock is then listed, regarding the
continued eligibility of the Common Stock for listing on such exchanges or
markets.
j. Corporate Existence. So long as a Buyer
beneficially owns any Preferred Shares or Warrants, the Company shall maintain
its corporate existence and shall not sell all or substantially all of the
Company's assets, except in the event of a merger or consolidation or sale of
all or substantially all of the Company's assets, where the surviving or
successor entity in such transaction (i) assumes the Company's obligations
hereunder and under the agreements and instruments entered into in connection
herewith and (ii) is a publicly traded corporation whose Common Stock is listed
for trading on Nasdaq, Nasdaq SmallCap, NYSE or AMEX.
k. No Integration. The Company will not conduct any
future offering that will be integrated with the issuance of the Securities
solely for purposes of Rule 4460(i) of the Nasdaq Stock Market.
l. Solvency. The Company (both before and after
giving effect to the transactions contemplated by this Agreement) is solvent
(i.e., its assets (as defined in accordance with GAAP) have a fair market value
in excess of the amount required to pay its liabilities (as defined in
accordance with GAAP) on its existing debts as they become absolute and
matured). The Company did not receive a qualified opinion from its auditors with
respect to its most recent fiscal year end and does not anticipate or know of
any basis upon which its auditors might issue a qualified opinion in respect of
its current fiscal year.
5. TRANSFER AGENT INSTRUCTIONS. The Company shall issue
irrevocable instructions to its transfer agent to issue certificates, registered
in the name of each Buyer or its nominee, for the Conversion Shares and Warrant
Shares in such amounts as specified from time to time by each Buyer to the
Company upon conversion of the Preferred Shares or exercise of the Warrants in
accordance with the terms therewith (the "Irrevocable Transfer Agent
Instructions"). Prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act, all such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5, and stop transfer instructions to give effect to Section 2(f)
hereof (in the case of the Conversion Shares and Warrant Shares, prior to
registration of the Conversion Shares and Warrant Shares under the 1933 Act),
will be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way the Buyer's obligations and
agreement set forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any, upon resale of the Securities. If a
Buyer provides the Company with an opinion of counsel, reasonably satisfactory
to the Company in form, substance and scope, that
16
registration of a resale by such Buyer of any of the Securities is not required
under the 1933 Act, the Company shall permit the transfer, and, in the case of
the Conversion Shares and Warrant Shares, promptly instruct its transfer agent
to issue one or more certificates in such name and in such denominations as
specified by such Buyer. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyers, by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section, that the
Buyers shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate transfer, without the
necessity of showing economic loss and without any bond or other security being
required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The
obligation of the Company hereunder to issue and sell the Preferred Shares and
Warrants to a Buyer at the Closing is subject to the satisfaction, at or before
the Closing Date of each of the following conditions thereto, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
a. The applicable Buyer shall have executed this
Agreement and the Registration Rights Agreement, and delivered the same to the
Company.
b. The applicable Buyer shall have delivered the
Purchase Price in accordance with Section 1(b) above.
c. The Certificate of Determination shall have been
accepted for filing with the Secretary of State of the State of California.
d. The representations and warranties of the
applicable Buyer shall be true and correct in all material respects as of the
date when made and as of the Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date), and the
applicable Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the applicable Buyer at
or prior to the Closing Date.
e. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
17
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The
obligation of each Buyer hereunder to purchase the Preferred Shares and Warrants
at the Closing is subject to the satisfaction, at or before the Closing Date of
each of the following conditions, provided that these conditions are for such
Buyer's sole benefit and may be waived by such Buyer at any time in its sole
discretion:
a. The Company shall have executed this Agreement and
the Registration Rights Agreement, and delivered the same to the Buyer.
b. The Company shall have delivered to such Buyer
duly executed certificates (in such denominations as the Buyer shall request)
representing the Preferred Shares and Warrants in accordance with Section 1(b)
above.
c. The Certificate of Determination shall have been
accepted for filing with the Secretary of State of the State of California, and
a copy thereof certified by such Secretary of State shall have been delivered to
such Buyer.
d. The Irrevocable Transfer Agent Instructions, in
form and substance satisfactory to a majority-in-interest of the Buyers, shall
have been delivered to and acknowledged in writing by the Company's Transfer
Agent.
e. The representations and warranties of the Company
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at such time (except for representations
and warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate or certificates, executed by the chief executive
officer of the Company, dated as of the Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by such Buyer
including, but not limited to certificates with respect to the Company's
Articles of Incorporation, Bylaws and Board of Directors' resolutions relating
to the transactions contemplated hereby.
f. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
18
g. The Conversion Shares and Warrant Shares shall
have been authorized for quotation on Nasdaq and trading in the Common Stock on
Nasdaq shall not have been suspended by the SEC or Nasdaq.
h. The Buyer shall have received an opinion of the
Company's counsel, dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer and in substantially the same form as
Exhibit "D" attached hereto.
i. The Buyer shall have received officers'
certificates in form and substance satisfactory to the Buyer dated as of the
Closing Date.
j. Since the date of execution of this Agreement,
there has been no change and no development which would have a Material Adverse
Effect.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of California without
regard to the principles of conflict of laws.
b. Counterparts; Signatures by Facsimile. This
Agreement may be executed in two or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party.
This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and
the instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
19
f. Notices. Any notices required or permitted to be
given under the terms of this Agreement shall be sent by certified or registered
mail (return receipt requested) or delivered personally or by courier (including
a recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular U.S. mail, or
upon receipt, if delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile, in each case addressed to a party.
The addresses for such communications shall be:
If to the Company:
Sigma Designs, Inc.
00000 Xxxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
With copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxx
Xxxxxxx Xxxxxxx
If to a Buyer: To the address set forth immediately below such
Buyer's name on the signature pages hereto.
Each party shall provide notice to the other party of any
change in address.
g. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
assigns. Neither the Company nor any Buyer shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights hereunder to any person that purchases Securities in a private
transaction from a Buyer or to any of its "affiliates," as that term is defined
under the 1934 Act, without the consent of the Company.
h. Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
20
i. Survival. The representations and warranties of
the Company and the agreements and covenants set forth in Sections 3, 4, 5 and 8
shall survive until the second (2nd) anniversary of the Closing Date
notwithstanding any due diligence investigation conducted by or on behalf of the
Buyers. The Company agrees to indemnify and hold harmless each of the Buyers and
all their officers, directors, employees and agents for loss or damage arising
as a result of or related to any breach or alleged breach by the Company of any
of its representations, warranties and covenants set forth in Sections 3 and 4
hereof or any of its covenants and obligations under this Agreement or the
Registration Rights Agreement, including advancement of expenses as they are
incurred.
j. Publicity. The Company and each of the Buyers
shall have the right to review a reasonable period of time before issuance of
any press releases, SEC, Nasdaq or NASD filings, or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of each of the Buyers,
to make any press release or SEC, Nasdaq or NASD filings with respect to such
transactions as is required by applicable law and regulations (although a single
firm of counsel designated by the Buyers shall be consulted by the Company in
connection with any such press release prior to its release and shall be
provided with a copy thereof and be given an opportunity to comment thereon).
k. Further Assurances. Each party shall do and
perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
l. No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
21
IN WITNESS WHEREOF, the undersigned Buyers and the Company
have caused this Agreement to be duly executed as of the date first above
written.
SIGMA DESIGNS, INC.
By:
--------------------------------------
Xxxxx X. Xxxx
Chief Executive Officer
RGC INTERNATIONAL INVESTORS, LDC
By: Xxxx Xxxx Capital Management, L.P., Investment Manager
By: RGC General Partner Corp., as General Partner
By:
--------------------------------------
Xxxxx X. Xxxxx
Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o Xxxx Xxxx Capital Management, L.P.
0 Xxxx Xxxxx Xxxx, Xxxxx 000
000 Xx. Xxxxxx Xxxx
Xxxx Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Shares of Preferred Stock: 5,000
Number of Warrants: 50,000
Aggregate Purchase Price: $5,000,000
22
Exhibit A
(Certificate of Determination--See Exhibit 4.3)
1
Exhibit B
(Stock Purchase Warrant--See Exhibit 4.4)
Exhibit C
[Registration Rights Agreement - See Exhibit 4.2]
Exhibit D
February 10, 1998
RGC International Investors, LDC
c/o Xxxx Xxxx Capital Management, L.P.
0 Xxxx Xxxxx Xxxx, Xxxxx 000
000 Xx. Xxxxxx Xxxx
Xxxx Xxxxxx, XX 00000
Ladies and Gentlemen:
Reference is made to the Securities Purchase Agreement, dated as of
January 30, 1998 (the "Agreement"), complete with all listed exhibits thereto,
by and among Sigma Designs, Inc., a California corporation (the "Company"), and
RCG International Investors, LDC (the "Investors"), which provides for the
issuance by the Company to the Investors of shares of Series B Preferred Stock
of the Company (the "Shares") and Warrants to purchase 50,000 shares of Common
Stock (the "Warrants"). This opinion is rendered to you pursuant to Section 7(h)
of the Agreement, and all terms used herein have the meanings defined for them
in the Agreement unless otherwise defined herein.
We have acted as counsel for the Company in connection with the
negotiation of the Agreement and the Registration Rights Agreement and the
issuance of the Shares and Warrants. 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 such corporate records of the Company, certificates of
public officials and such other documents which we consider necessary or
advisable for the purpose of rendering this opinion. In such examination we have
assumed the genuineness of all signatures on original documents, the
authenticity and completeness of all documents submitted to us as originals, the
conformity to original documents of all copies submitted to us and the due
execution and delivery of all documents (except as to due execution and delivery
by the Company) 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 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 Agreement, and we are assuming
that the representations and warranties made by the Investors in the Agreement
and pursuant thereto are true and correct. We are also assuming that the
Investors have purchased the Shares 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, insolvency, reorganization, moratorium or other similar federal or
state laws affecting the rights of creditors;
(b) We express no opinion as to the effect of rules of law
governing specific performance, injunctive relief or other equitable remedies
(regardless of whether any such remedy is considered in a proceeding at law or
in equity);
(c) We express no opinion as to compliance with the anti-fraud
provisions of applicable securities laws;
(d) We express no opinion as to the enforceability of the
indemnification provisions of Sections 6 and 7 of the Registration Rights
Agreement to the extent the provisions thereof may be subject to limitations of
public policy and the effect of applicable statutes and judicial decisions; and
(e) We express no opinion as to whether the Agreement, the
Certificate of Determination, the Registration Rights Agreement and the Warrants
or the several transaction contemplated thereby violate or constitute a default
under the Certificate of Determination for the Series A Preferred Stock, and
several documents executed by and among the Company and the several purchasers
of the Series A Preferred Stock of the Company (collectively, the "Series A
Documents") or whether the consent or approval of the holders of the Series A
Preferred Stock is required for the execution, delivery and performance of and
compliance with the terms of the Agreement, and the issuance of the Shares and
Warrants (and the Common Stock issuable upon conversion and exercise thereof).
2
(f) We are members of the Bar of the State of California and,
except as set forth in paragraph 7 below with respect to the securities laws of
other states, we express no opinion as to any matter relating to the laws of any
jurisdiction other than the federal laws of the United States of America and the
laws of the State of California. To the extent this opinion addresses applicable
securities laws of states other than the State of California, we have not
retained nor relied on the opinion of counsel admitted to the bar of such
states, but rather have relied on compilations of the securities laws of such
states contained in reporting services presently available to us.
Based upon and subject to the foregoing, and except as set forth in the
Schedule of Exceptions to the Agreement, we are of the opinion that:
1. The Company is a corporation duly organized and validly existing
under, and by virtue of, the laws of the State of California and is in good
standing under such laws. The Company has requisite corporate power to own and
operate its properties and assets, and to carry on its business as presently
conducted.
2. The Company has all requisite legal and corporate power to execute
and deliver the Agreement and the Registration Rights Agreement, to sell and
issue the Shares and Warrants thereunder, to issue the Common Stock of the
Company ("Common Stock") issuable upon conversion of the Shares and the exercise
of the Warrants and to carry out and perform its obligations under the terms of
the Agreement and the Registration Rights Agreement.
3. As of January 21, 1998, the authorized capital stock of the Company
consists of 20,000,000 shares of Common Stock, 11,646,075 shares of which are
issued and outstanding, and 50,000 shares of Series A Preferred Stock ("Series A
Preferred"), 45,000 shares of which are issued and outstanding. Each share of
outstanding Common Stock also represents an associated Right as such term is
defined in and pursuant to that certain Common Shares Rights Agreement, dated as
of September 15, 1989, between the Company and Bank of America, N.T.& S.A., a
national banking association. All such issued and outstanding shares of Series A
Preferred and Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable. Three million four hundred thousand (3,400,000)
shares of Common Stock issuable upon conversion of the Shares and the exercise
of the Warrants have been duly and validly reserved, and when issued in
accordance with the Company's Articles of Incorporation will be validly issued,
fully paid and nonassessable and free of any liens, encumbrances and preemptive
or similar rights, subject to the requirements of Rule 4460(i) of the NASD or
any rule substantially similar on an exchange or quotation system on which the
Common Stock is traded. Upon consummation of the several transactions
contemplated by the Agreement and subject to the terms of conditions of the
Agreement, the Shares and Warrants issued under the Agreement shall be validly
issued, fully paid and nonassessable and free of any liens, encumbrances and
preemptive or similar rights contained in the Articles of Incorporation or
Bylaws of the Company, or, to our knowledge, in any agreement to which the
Company is a party, and which agreement is described in or filed as an exhibit
to the SEC Documents, the Series A Documents, or the Amended and Restated
Business Loan Agreement between the Company and Silicon Valley Bank dated
effective as of October 1, 1996 together with all modifications and waivers
thereto (the "Loan Agreement"), except as specifically provided in the
Agreement; provided, however, that the Shares and Warrants (and the Common Stock
issuable upon conversion or exercise thereof) may be subject to restrictions on
transfer under state and/or federal securities laws as set forth in the
3
Agreement. To our knowledge, except as disclosed in Schedule 3(c) to the
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or arrangements by which the Company or any
of its subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its subsidiaries, and (ii) there are no
agreements or arrangements under which the Company or any of its subsidiaries
currently is obligated to register the sale of any of its or their securities
under the 1933 Act (except the Registration Rights Agreement).
4. All corporate action on the part of the Company, its directors and
shareholders necessary for the authorization, execution and delivery of the
Agreement and the Registration Rights Agreement by the Company, the
authorization, sale, issuance and delivery of the Shares (and the Common Stock
issuable upon conversion thereof) and the performance of the Company's
obligations under the Agreement has been taken subject to the requirements of
Rule 4460(i) of the NASD or any rule substantially similar on an exchange or
quotation system on which the Common Stock is traded. The Agreement and the
Registration Rights Agreement has been duly and validly executed and delivered
by the Company and constitutes a valid and binding obligation of the Company.
5. The execution, delivery and performance of and compliance with the
terms of the Agreement, and the issuance of the Shares and Warrants (and the
Common Stock issuable upon conversion or exercise thereof), do not violate any
provision of the Articles of Incorporation or Bylaws, or, to our knowledge, any
provision of any applicable federal or state law, rule or regulation. To our
knowledge, the execution, delivery and performance of and compliance with the
Agreement and the Registration Rights Agreement, and the issuance of the Shares
and Warrants (and the Common issuable upon conversion or exercise thereof) do
not violate, or constitute a default under, any material contract, agreement,
instrument, judgment or decree binding upon the Company and which contract,
agreement, instrument, judgement or decree has been disclosed in or filed as an
exhibit to the Company's SEC Documents, the Series A Documents, or the Loan
Agreement.
6. Except as identified in the Agreement, to our knowledge, there are
no actions, suits, proceedings or investigations pending against the Company or
its properties before any court or governmental agency (nor, to our knowledge,
has the Company received any written threat thereof), which, either in any case
or in the aggregate, would have a Material Adverse Effect or which would
adversely affect the validity or the enforceability of the Agreement or the
Registration Rights Agreement or any action taken or to be taken by the Company
in connection therewith.
7. No consent, approval or authorization of or designation, declaration
or filing with any governmental authority or the Nasdaq Stock Market (the
"Nasdaq") on the part of the Company is required in connection with the valid
execution and delivery of the Agreement and the Registration Rights Agreement,
or the offer, sale or issuance of the Shares and Warrants (and the Common Stock
issuable upon conversion or exercise thereof) or the consummation of any other
transaction contemplated by the Agreement, except (a) filing of the Certificate
of Determination in the Office of the Secretary of State of the State of
California, (b) qualification (or taking such action as may be necessary to
secure an exemption from qualification, if available) under the California
Corporate Securities Law and other applicable blue sky laws (but excluding
jurisdictions outside of the United States) of the offer and sale of the Shares
(and the Common Stock issuable upon conversion thereof)
4
and (c) the filing of an application for the listing of additional shares with
the Nasdaq. The filing referred to in clause (a) above has been accomplished and
is effective. Our opinion herein is otherwise subject to the timely and proper
completion of all filings and other actions contemplated herein where such
filings and actions are to be undertaken on or after the date hereof.
8. Subject to the accuracy of the Investors' representations in Section
2 of the Agreement and their responses (if any) to the Company's inquiries, we
are of the opinion that the offer, sale and issuance of the Shares in conformity
with the terms of the Agreement constitute transactions exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended.
5
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 or for any other purpose without our prior written consent.
Very truly yours,
XXXXXX XXXXXXX XXXXXXXX & XXXXXX
Professional Corporation
6
DISCLOSURE SCHEDULE
3a. Organization
None.
-2-
3b. Authorization; Enforcement
Series A Preferred Stock (Copies of the Certificate of Determination,
Subscription Agreement, Registration Rights Agreement and Warrant are attached
as Addendum 3b).
-3-
3c. Capitalization
1. Series A Preferred Stock (See documents attached to Schedule
3b).
2. Sigma Designs 1994 Stock Option Plan.
3. Sigma Designs 1994 Director Stock Option Plan.
4. Active Design Stock Option Plan.
5. Each share of Common Stock incorporates a purchase right which
entitles the shareholder to buy, under certain circumstances,
one newly issued share of the Common Stock at an exercise
price per share of $75. The rights become exercisable if a
person or group acquires 20% or more of the Common Stock or
announces a tender or exchange offer for 30% or more of the
Common Stock under certain circumstances. In the event of
certain merger or sale transactions, each Right will then
entitle the holder to acquire shares having a value of twice
the Right's exercise price. The Company may redeem the Rights
at $.01 per Right prior to the earlier of the expiration of
the Rights on November 27, 1999 or at the time that 20% or
more of the Company's common stock has been acquired by a
person or group. Until the Rights become exercisable, they
have no dilutive effect on the earnings of the Company.
-4-
3e. No Conflicts
Series A Preferred Stock (See documents attached to Schedule 3b).
-5-
3g. Absence of Certain Changes
The Company incurred a charge to earnings related to accounts
receivable in the second quarter of fiscal year 1998. Please the attached
Quarterly Report on Form 10-Q dated as of September 12, 1997.
-6-
3h. Absence of Litigation
1) The Company is the subject of:
A) A lawsuit filed by Xxxxxxxx Electronics alleging a breach of
contract. Case number 774607-7 filed in Alameda County
Superior Court on March 6, 1997.
B) A lawsuit filed by Compudata, Inc. for an unpaid balance in
the amount of $10,600.00 Case Number 083920, Alameda County
Superior Court.
C) A lawsuit filed by Xxxxxxx Xxxxx on February 26, 1997, former
V.P., Marketing, for wrongful termination and unpaid business
expenses, Case Number CV764366, Santa Xxxxx County Superior
Court.
2) The Company has received a:
A) Letter dated August 8, 1995, from Tandy Corporation, regarding
dispute over outstanding amount allegedly owed.
B) Letter dated January 3, 1997 from attorney representing
Mindscope in re: alleged unpaid software development licensing
fee.
C) Verbal communication from counsel representing former employee
in lawsuit filed by the Company that cross-complaint may be
filed.
-7-
3i. Patents, Copyrights, etc.
None.
-8-
3k. Tax matters.
None.
-9-
3l. Certain Transactions.
None.
-10-
3r. Environmental Matters.
None.
-11-
3t. Title to Property.
None.
-12-
4d. Use of Proceeds.
The net proceeds to be received by the Company from the sale of the
Securities will be used for general corporate purposes.
-13-
Addendum 3b.
(See Exhibits 4.1 and 4.2 of Registration Statement No. 333-33147.)
-14-
