<PAGE>
As filed with the Securities and Exchange Commission on September 28, 1999.
Registration No. _____________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SILICON VALLEY RESEARCH, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
California 7372 94-2743735
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Number) Identification No.)
</TABLE>
6360 San Ignacio Avenue
San Jose, California 95119-1231
(408) 361-0333
(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
JAMES O. BENOUIS
President and Chief Executive Officer
SILICON VALLEY RESEARCH, INC.
6360 San Ignacio Avenue
San Jose, California 95119-1231
(408) 361-0333
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box:
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, other than Securities offered only in connection with dividend or
reinvestment plans, 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 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
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<CAPTION>
====================================================================================================================
Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Offering Price Aggregate Offering Registration Fee
Registered Per Share (1) Price (1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, without par
value 17,157,159 shares $0.14 $2,402,002.26 $667.76
====================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(c) and based on the average of the high and
low prices of the Common Stock of Silicon Valley Research, Inc. as
reported on the OTC Bulletin Board on September 24, 1999.
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 such Section 8(a),
may determine.
The exhibit index appears on numbered page II-2.
<PAGE>
PROSPECTUS
- ----------
17,157,159 Shares
SILICON VALLEY RESEARCH, INC.
Common Stock
The 17,157,159 shares of common stock, without par value ("Common Stock"),
of Silicon Valley Research, Inc. ("SVR" or the "Company") offered by this
Prospectus (the "Shares") consist of 5,527,909 outstanding shares and 11,629,250
shares issuable pursuant to the exercise of currently exercisable warrants ("the
Warrants") that may be sold from time to time by or on behalf of certain
shareholders (the "Selling Shareholders") of the Company described in this
Prospectus under "Selling Shareholders." The Selling Shareholders of 2,377,909
shares and 2,377,909 Warrants acquired the shares and Warrants through a private
placement of equity securities by the Company in reliance on Regulation D and/or
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act").
The Unit Purchase Agreement ("the Agreement") entered into in connection with
the private placement requires the Company to file a registration statement
under the Securities Act covering the shares issued in the private placement and
the shares issued or issuable upon exercise of the Warrants and to cause the
registration statement to remain effective until the earlier of (a) the date
ending three years after the effective date of such registration statement, or
(b) the date on which each holder is able to sell all of such holder's
registrable securities in any three-month period without registration under the
Securities Act pursuant to Rule 144. The Selling Shareholders of 3,150,000
shares acquired the shares through a merger of Silicon Valley Research, Inc. and
Quality I.C. Corporation in March 1998. The Agreement and Plan of Reorganization
entered into in connection with the merger requires that the shares be
registered pursuant to a Registration Rights Agreement. The Registration Rights
Agreement requires the Company to file a registration statement under the
Securities Act and use its best efforts to maintain the effectiveness of the
registration statement until the earlier of (A) such time as each of the Holders
may sell all of the Registrable Securities held by him, her or it without
registration pursuant to Rule 144 under the Securities Act within a three-month
period, (B) such time as all of the Registrable Securities have been sold by the
Holders or (C) one year after the closing of the Merger. The Selling Shareholder
of 1,251,341 Warrants acquired the Warrants through a settlement agreement for
the cancellation of a debt. The Warrant Agreement entered into in connection
with the cancellation of debt requires the Company to file a registration
statement under the Securities Act covering the Warrants and use its best
efforts to secure the effectiveness of such registration statement within ninety
(90) days following the date of the Warrant Agreement. The Selling Shareholders
of 8,000,000 Warrants acquired the Warrants through a subordinated debt/warrant
financing closed by the Company on September 24, 1999. The Warrant agreement
entered into in connection with the financing requires the Company to file a
registration statement under the Securities Act covering the shares issuable
upon exercise of the Warrants and use its best efforts to secure the
effectiveness of such registration statement within ninety (90) days following
the date of the warrant.
The Company has been advised by the Selling Shareholders that they intend
to sell all of their respective Shares from time to time on the OTC Bulletin
Board on terms and at prices then obtainable or in negotiated transactions. The
Selling Shareholders and any broker-dealers, agents or underwriters that
participate with the Selling Shareholders in the distribution of any of the
Shares may be deemed to be "underwriters" within the meaning of the Securities
Act, and any commission received by them 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. See "Plan of Distribution."
Except as described in this Prospectus under "Plan of Distribution," the
Company will pay all expenses incident to the offering and sale of the Shares to
the public. See "Plan of Distribution."
THE SHARES HAVE NOT BEEN REGISTERED FOR SALE UNDER THE SECURITIES LAWS OF
ANY STATE OR JURISDICTION AS OF THE DATE OF THIS PROSPECTUS. BROKERS OR DEALERS
EFFECTING TRANSACTIONS IN THE SHARES SHOULD CONFIRM THE REGISTRATION OF THE
SHARES UNDER THE SECURITIES LAWS OF THE STATES IN WHICH SUCH TRANSACTIONS OCCUR,
OR THE EXISTENCE OF ANY EXEMPTIONS FROM SUCH REGISTRATION.
The Company's Common Stock is listed on the OTC Bulletin Board. On
September 24, 1999, the last sale price of the Company's Common Stock as
reported on the OTC Bulletin Board was $0.14.
See "Risk Factors" beginning on page 4 for information that should be
considered by prospective purchasers of the Shares offered hereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is , 1999.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the Commission's public reference room at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, as well as at the Regional Offices of the
Commission located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material can be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of the fees prescribed by the Commission. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The Commission's Web site can be accessed at http://www.sec.gov.
The Company's Common Stock is traded on the OTC Bulletin Board.
The Company has also filed with the Commission a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information, reference is made to the Registration Statement, copies of
which may be obtained from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549, upon payment of the fees prescribed
by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act are incorporated herein by reference: (1) Annual Reports on
Form 10-K for the years ended March 31, 1999 and 1998; (2) Quarterly Reports on
Form 10-Q for the quarters ended June 30, 1998, September 30, 1998, December 31,
1998 and June 30, 1999; (3) Current Report on Form 8-K filed on April 10, 1998;
(4) Current Report on Form 8-K/A filed on June 15, 1998; (5) Current Report on
Form 8-K filed May 21, 1999 and (6) the description of the Company's Common
Stock contained in the Company's Registration Statement on Form 8-A filed on
September 5, 1985.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of this offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the foregoing documents incorporated by reference in this Prospectus (other than
any exhibits thereto). Requests for such documents should be directed to
Silicon Valley Research, Inc. at 6360 San Ignacio Avenue, San Jose, CA 95119-
1231 (telephone number (408) 361-0333), Attn: James O. Benouis.
3
<PAGE>
THE COMPANY
The Company offers a broad line of integrated placement, routing and
floorplanning physical layout software products and design project support
services which enable electronics manufacturers to achieve improved performance
and smaller die size in their integrated circuit ("IC") designs. The Company's
products incorporate proprietary line probe technology to create denser circuit
designs and hence minimize die size, enabling a high performance and cost
efficient IC design. The Company has closely linked its IC design floorplanning
capabilities to its physical layout tools through common placement and routing
algorithms. This enables designers to make placement predictions that closely
match the actual placement during the physical layouts. In addition, the Company
provides design project support services encompassing nearly all aspects of the
physical IC design process, including cell-based APR, FPGA to Gate Array
conversion, custom analog and digital layout and chip assembly capability, and
CAD/EDA tool application methodology consulting services.
The Company was incorporated in California in 1979. The Company's
principal executive offices are located at 6360 San Ignacio Avenue, San Jose,
California 95119-1231, telephone number (408) 361-0333.
RISK FACTORS
The following risk factors should be considered in connection with the
other information included and incorporated by reference in this Prospectus
before purchasing the Common Stock offered hereby. Further, this Prospectus
contains forward-looking statements that involve risks and uncertainties.
Actual results could differ materially from those projected in the forward-
looking statements as a result of risk factors set forth below and elsewhere in
this Prospectus.
Recent and Expected Losses; Accumulated Deficit. The Company incurred a
net loss of approximately $638,000 for the quarter ended June 30, 1999 and had
an accumulated deficit of approximately $44 million as of June 30, 1999. The
Company may incur losses for most of its next fiscal year. There can be no
assurance that the Company will not incur significant additional losses for a
longer period, will generate positive cash flow from its operations, or that the
Company will attain or thereafter sustain profitability in any future period. To
the extent the Company continues to incur losses or grows in the future, its
operating and investing activities may use cash and, consequently, such losses
or growth will require the Company to obtain additional sources of financing in
the future or to reduce operating expenses.
Need for Future Financing. No Assurance of Available Financing. The
Company's primary unused sources of funds at June 30, 1999 consisted of cash and
cash equivalents of $418,000. On June 8, 1998, the Company's $2,000,000 line of
credit with its bank expired and the $285,000 outstanding under the line of
credit became due and payable. $225,000 of this amount remained outstanding as
of May 11, 1999. In addition, $137,000 outstanding on an equipment line with the
same lender also became due and payable. On May 11, 1999, the Company entered
into a Settlement Agreement with the lender whereby SVR agreed to issue a cash
payment for a portion of the debt and to issue warrants to purchase common stock
("Warrants") for cancellation of the remainder. The Settlement Agreement
required that SVR make the cash payment and deliver the Warrants to the lender
by June 8, 1999, which the Company did.
In June 1999, the Company began a subordinated debt/warrant financing. The
financing included approximately $1,000,000 of three-year notes and the sale of
approximately 8,000,000 Warrants at $0.01 per Warrant. The debt bears simple
interest of 10% and the Warrants have a five-year term with an exercise price
per share of $0.125. This financing transaction is comprised of two closings.
The first closing took place on June 7, 1999. The Company received $768,200 cash
proceeds from this closing. This included $711,000 of three-year notes and the
sale of approximately 5,700,000 warrants $0.01 per warrant. The second closing
was to have taken place on July 15, 1999. The closing was extended until
September 24, 1999 pending negotiation of a workout with the Creditors'
Committee through Credit Managers Association ("CMA") to resolve accounts
payable issues that was satisfactory to the majority of the investors. An
agreement has been reached and the Company will receive approximately $311,800
cash proceeds from the second closing. The Company has used part of the proceeds
from the financing to complete the Settlement Agreement with its lender and to
pay other accounts payable and intends to use the balance of the proceeds to
help fund its operations. The Company may require additional financing prior to
year end. A Company director/officer, an affiliate of a Company director and two
Company 10% shareholders participated in the financing.
As of June 30, 1999, the Company's current assets were less than its
current liabilities; however, its cash and cash equivalents were roughly equal
to the cash required to fund its current liabilities as a substantial amount of
the accrued liabilities and deferred revenue do not require cash to fund them at
the present time. Because an agreement was reached with the Creditors' Committee
through the CMA, the Company will receive approximately $311,800 in cash and a
reduction and/or postponement in a portion of its current payables. The
Company's operations have required substantial cash to fund them in the past;
for example $469,000 during the fiscal 2000 first quarter; however, management
has implemented cost reducing measures and expects revenues to increase during
the remainder of fiscal 2000. Assuming management is successful with its cost
reduction and revenue achievement programs, the Company expects not to require
additional financing in order to fund its operations. If the Company is not
successful in these regards, then the Company would require additional
financing. However, the Company's Common Stock was delisted from trading on the
Nasdaq National Market in November 1998 and now trades in the over-the-counter
market. The Company's ability to obtain additional financing through the
issuance of its Common Stock or securities convertible into its Common Stock
could be adversely affected. See "Delisting From Nasdaq; Disclosure Relating to
Low-Priced Stock." The
4
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Company may issue a series of Preferred Stock with rights, preferences, or
privileges senior to those of the Company's Common Stock. The Company has no
commitments or arrangement to obtain any additional funding and there can be no
assurance that the required financing of the Company will be available on
acceptable terms, if at all. The unavailability or timing of any financing could
prevent or delay the continued development and marketing of the Company's
products and services, could require substantial curtailment of the Company's
operations and could result in the Company's bankruptcy. The Company is
currently negotiating with its creditors for the terms and timing for repayment
of amounts due such creditors.
Going Concern Assumptions. The Company's independent accountants' report
on its consolidated financial statements as of and for the years ended March 31,
1997, 1998 and 1999 contained an explanatory paragraph indicating that the
Company's historical operating losses and limited capital resources raise
substantial doubt about its ability to continue as a going concern. The Company
may require substantial additional funds in the near future, and there can be no
assurance that any independent accountant's report on the Company's future
financial statements will not include a similar explanatory paragraph if the
Company is unable to raise sufficient funds or generate sufficient cash from
operations to cover the cost of its operations.
New Products and Rapid Technological Change; Risk of Product Defects. The
Electronic Design Automation ("EDA") industry is characterized by extremely
rapid technological change, frequent new product introductions and enhancements,
evolving industry standards and rapidly changing customer requirements. The
development of more complex ICs embodying new technologies will require
increasingly sophisticated design tools. The Company's future results of
operations will depend, in part, upon its ability to enhance its current
products and to develop and introduce new products on a timely and cost-
effective basis that will keep pace with technological developments and evolving
industry standards and methodologies, as well as address the increasingly
sophisticated needs of the Company's customers. The Company has in the past and
may in the future experience delays in new product development and product
enhancements.
The Company has announced a new product named DCP (Design Cockpit
Platform). There can be no assurance that this new product will gain market
acceptance or that the Company will be successful in developing and marketing
product enhancements or other new products that respond to technological change,
evolving industry standards and changing customer requirements, that the Company
will not experience difficulties that could delay or prevent the successful
development, introduction and marketing of these products or product
enhancements, or that its new products and product enhancements will adequately
meet the requirements of the marketplace and achieve any significant degree of
market acceptance.
In addition, all of the Company's current products operate in, and planned
future products will operate in, the Unix operating system. In the event that
another operating system, such as Windows NT, were to achieve broad acceptance
in the EDA industry, the Company would be required to port its products to such
an operating system, which would be costly and time consuming and could have a
material adverse effect on the Company's business, operating results or
financial condition. Failure of the Company, for technological or other
reasons, to develop and introduce new products and product enhancements in a
timely and cost-effective manner could have a material and adverse effect on the
Company's business, operating results and financial condition. In addition, the
introduction or even announcement of products by the Company or one or more of
its competitors embodying new technologies or changes in industry standards or
customer requirements could render the Company's existing products obsolete or
unmarketable. There can be no assurance that the introduction or announcement
of new product offerings by the Company or one or more of its competitors will
not cause customers to defer purchases of existing Company products. Such
deferment of purchases could have a material adverse effect on the Company's
business, operating results or financial condition.
Software products as complex as those offered by the Company may contain
defects or failures when introduced or when new versions are released. The
Company has in the past discovered software defects in certain of its products
and may experience delays or lost revenue to correct such defects in the future.
Although the Company has not experienced material adverse effects resulting from
any such defects to date, there can be no assurance that, despite testing by the
Company, errors will not be found in new products or releases after commencement
of commercial shipments, resulting in loss of market share or failure to achieve
market acceptance. Any such occurrence could have a material adverse effect
upon the Company's business, operating results or financial condition.
Delisting From Nasdaq; Disclosure Relating to Low-Priced Stock. Effective
November 16, 1998, the Company's common stock was delisted from The Nasdaq Stock
Market ("Nasdaq") for failure to satisfy the requirements for continued listing
on Nasdaq. The Company's common stock immediately began trading on the OTC
Bulletin Board. An investor may find it more difficult to dispose of the
Company's common stock. With the trading price of the common stock less than
$5.00 per share, trading in the common stock will also be subject to certain
rules promulgated under the Exchange Act, which require additional disclosure by
broker-dealers in
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connection with any trades involving a stock defined as a penny stock
(generally, any non-Nasdaq equity security that has a market price of less than
$5.00 per share, subject to certain exceptions). Such rules require the
delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith, and impose
various sales practice requirements on broker-dealers who sell penny stock to
persons other than established customers and accredited investors (generally
institutions). For these types of transactions, the broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transactions prior to sale. The additional
burden imposed upon broker-dealers by such requirements may discourage broker-
dealers from effecting transactions in the common stock, which could severely
limit the market liquidity of the common stock and limit the ability of the
Company's stockholders to sell the common stock in the secondary market. In
addition, the Company's ability to obtain additional financing through the
issuance of common stock or securities convertible into common stock could be
adversely affected.
Possible Volatility of Stock Price. The market price of the Company's
Common Stock has been volatile. Future announcements concerning the Company or
its competitors, quarterly variations in operating results, announcements of
technological innovations, the introduction of new products or changes in
product pricing policies by the Company or its competitors, proprietary rights
or other litigation, changes in earnings estimates by analysts or other factors
could cause the market price of the Common Stock to fluctuate substantially. In
addition, the stock market has from time to time experienced significant price
and volume fluctuations that have particularly affected the market prices for
the common stocks of technology companies and that have often been unrelated to
the operating performance of particular companies. These broad market
fluctuations may also adversely affect the market price of the Company's Common
Stock. In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has occurred against
the issuing company. There can be no assurance that such litigation will not
occur in the future with respect to the Company. Such litigation could result
in substantial costs and divert management attention and resources, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. Any adverse determination in such litigation could
also subject the Company to significant liabilities.
Potential Fluctuations in Quarterly Operating Results. Numerous factors
may materially and unpredictably affect operating results of the Company,
including the uncertainties of the size and timing of software license fees,
timing of co-development projects with customers, timing of operating
expenditures, increased competition, new product announcements and releases by
the Company and its competitors, gain or loss of significant customers or
distributors, expense levels, renewal of maintenance contracts, pricing changes
by the Company or its competitors, personnel changes, foreign currency exchange
rates, and economic conditions generally and in the electronics industry
specifically. Any unfavorable change in these or other factors could have a
material adverse effect on the Company's operating results for a particular
quarter. Many of the Company's customers order on an as-needed basis and often
delay delivery of firm purchase orders until their project commencement dates
are determined, and, as a result, the Company operates with no significant
backlog. Quarterly revenue and operating results will therefore depend on the
volume and timing of orders received during the quarter, which are difficult to
forecast accurately. Historically, the Company has often recognized a
substantial portion of its license revenues in the last month of the quarter,
with these revenues frequently concentrated in the last two weeks of the
quarter. Operating results would be disproportionately affected by a reduction
in revenue because only a small portion of the Company's expenses vary with its
revenue. Operating results in any period should not be considered indicative of
the results to be expected for any future period, and there can be no assurance
that the Company's revenues will increase or that the Company will achieve
profitability.
Lengthy Sales Cycle. The licensing and sales of the Company's software
products generally involve a significant commitment of capital by prospective
customers, with the attendant delays frequently associated with large capital
expenditures and lengthy acceptance procedures. For these and other reasons,
the sales cycle associated with the licensing of the Company's products is
typically lengthy and subject to a number of significant risks over which the
Company has little or no control. Because the timing of customer orders is hard
to predict, the Company believes that its quarterly operating results are likely
to vary significantly in the future. Actual results of the Company could vary
materially as a result of a variety of factors, including, without limitation,
the high average selling price and long sales cycle for the Company's products,
the relatively small number of orders per quarter, dependence on sales to a
limited number of large customers, timing of receipt of orders, successful
product introduction and acceptance of the Company's products and increased
competition.
Dependence Upon Semiconductor and Electronics Industries; General Economic
and Market Conditions. The Company is dependent upon the semiconductor and,
more generally, the electronics industries. Each of these industries is
characterized by rapid technological change, short product life cycles,
fluctuations in manufacturing capacity and pricing and gross margin pressures.
Each of these industries is highly cyclical and has periodically experienced
significant downturns, often in connection with, or in anticipation of, declines
in general economic conditions during which the number of new IC design projects
often decreases. Purchases of new licenses from the Company are largely
dependent upon the commencement of new design projects, and factors negatively
affecting
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any of these industries could have a material adverse effect on the Company's
business, operating results or financial condition. The Company's business,
operating results and financial condition may in the future reflect substantial
fluctuations from period to period as a consequence of patterns and general
economic conditions in either the semiconductor or electronics industry.
International Sales. International sales, primarily in Japan and Taiwan,
accounted for approximately 25%, 32% and 36% and 2% of the Company's total
revenue in fiscal 1997, 1998, 1999 and the first three months of 2000,
respectively. Declining revenues from international sales were a result of the
reduction in capital expenditures by semiconductor manufacturers, particularly
in Asia as a result of the current financial crisis in that region, and
increased competition in the EDA software market. The Company expects that
international sales will continue to account for a significant portion of its
revenue and plans to continue to expand its international sales and distribution
channels. This revenue involves a number of inherent risks, including economic
downturn in the electronics industry in Asia, traditionally slower adoption of
the Company's products internationally, general strikes or other disruptions in
working conditions, generally longer receivables collection periods, unexpected
changes in or impositions of legislative or regulatory requirements, reduced
protection for intellectual property rights in some countries, potentially
adverse taxes, delays resulting from difficulty in obtaining export licenses for
certain technology and other trade barriers. There can be no assurance that such
factors will not have a material adverse effect on the Company's future
international sales and, consequently, on the Company's results of operations.
Effective December 1998, the Company discontinued operating its Tokyo office and
in March 1999, the Company discontinued operating its Taiwan office. In the
future, the Company will use distributors to service the Japanese and Taiwanese
markets.
Competition. The EDA software market in which the Company competes is
intensely competitive and subject to rapid technological change. The Company
currently faces competition from EDA vendors, including Cadence, which currently
holds the dominant share of the market for IC physical design software, Avant!
and Synopsys. These EDA vendors have significantly greater financial, technical
and marketing resources, greater name recognition and a larger installed
customer base than the Company. These companies also have established
relationships with current and potential customers of the Company and can devote
substantial resources aimed at preventing the Company from enhancing
relationships with existing customers or establishing relationships with
potential customers. The Company believes that competitive factors in the EDA
software market include product performance, price, support of industry
standards, ease of use, delivery schedule, product enhancement, and customer
technical support and service.
Competition from other EDA companies that choose to enter the IC physical
design market could present particularly formidable competition due to their
large installed customer base and their ability to offer a complete integrated
IC design solution, which SVR does not offer. The Company expects additional
competition from other established and emerging companies. In addition, the EDA
industry has become increasingly concentrated in recent years as a result of
consolidations, acquisitions and strategic alliances. Accordingly, it is
possible that new competitors or alliances among competitors could emerge and
rapidly acquire significant market share. There can be no assurance that the
Company will be able to compete successfully against current and future
competitors or that competitive pressures faced by the Company will not have a
material adverse effect on its business, operating results and financial
condition.
Dependence on Certain Customers and Resellers. A small number of customers
account for a significant percentage of the Company's total revenue. In fiscal
1997, HAL Computer Systems, Inc., a subsidiary of Fujitsu Ltd. ("HAL"),
accounted for 14%, Lucent Technologies accounted for 19% and Motorola, Inc.
accounted for 13% of the Company's total revenue. In fiscal 1998, Motorola, Inc.
accounted for 13% and Aspec Technology accounted for 20% of the Company's total
revenue. In fiscal 1999, Motorola, Inc. accounted for 18% of the Company's total
revenue. There can be no assurance that sales to these entities, individually or
as a group, will reach or exceed historical levels in any future period. Any
substantial decrease in sales to one or more of these customers could have a
material adverse effect on the Company's business, operating results or
financial condition. The Company currently sells and markets its products
overseas through a limited number of distributors. The Company has a limited
history of performance by its distributors. In addition, there can be no
assurance that the new distributors will be able to successfully distribute and
support the Company's products on a timely basis or that such distributors will
not reduce their efforts devoted to selling the Company's products or terminate
their relationship with the Company as a result of competition with other
suppliers' products. The loss of, or changes in, the relationship with, or
performance by, one or more of the Company's international distributors could
have an adverse effect on the Company's business.
7
<PAGE>
Management Transition. The Company is experiencing a period of management
transition that has placed, and may continue to place, a significant strain on
its resources, including its personnel. James O. Benouis joined the Company in
March 1998 as its President and Chief Operating Officer. On August 4, 1998, Mr.
Benouis was appointed Chief Executive Officer of the Company. Effective April
2, 1999, Laurence G. Colegate, Jr. resigned as Chief Financial Officer of the
Company. The Company's ability to manage growth successfully will require its
management personnel to work together effectively and will require the Company
to improve its operational, management and financial systems and controls. If
Company management is unable to manage this transition effectively, the
Company's business, competitive position, results of operations and financial
condition will be materially and adversely affected. See "Dependence on Key
Personnel."
Dependence on Key Personnel. The Company's success depends to a
significant extent upon a number of key technical and management employees, in
particular, upon Robert R. Anderson, the Company's Chairman, and James O.
Benouis, the Company's President and Chief Executive Officer. The Company does
not currently have "key man" life insurance on Mr. Anderson or Mr. Benouis. The
loss of services of Mr. Anderson or Mr. Benouis or any of the Company's other
key employees could have a material adverse effect on the Company. See
"Management Transition." The Company's success will depend in large part on its
ability to attract and retain highly-skilled technical, managerial, sales and
marketing personnel. Competition for such personnel is intense. There can be
no assurance that the Company will be successful in retaining its key technical
and management personnel and in attracting and retaining the personnel it
requires to grow.
Legal Proceedings. As with other companies in the Company's industry, the
Company is subject to the risk of adverse claims and litigation on a variety of
matters, including infringement of intellectual property, intentional and/or
negligent misrepresentation of material facts and breach of fiduciary duties.
Due to the Company's cash shortage and resulting inability to pay its vendors,
several of the Company's vendors have initiated collection actions against the
Company. As described above, the Company in June and September 1999 closed on
approximately $1,000,000 subordinated debt financing. Although no assurance can
be given, the Company now believes that it has the cash resources so as to be
able to settle these lawsuits without a material adverse affect on its operating
losses.
Proprietary Rights. The Company relies on contract, trade secret and
copyright law to protect its technology. There can be no assurance that others
will not develop technologies that are similar or superior to the Company's
technology or duplicate the Company's technology. The Company generally enters
into confidentiality or license agreements with its employees, distributors and
customers, and limits access to and distribution of its software, documentation
and other proprietary information. Despite these precautions, it may be
possible for a third party to copy or otherwise obtain and use the Company's
products or technology without authorization, or to develop similar technology
independently. In addition, effective copyright and trade protection may be
unavailable or limited in certain foreign countries.
There has been substantial industry litigation regarding patents and other
intellectual property rights involving technology companies. In the future,
litigation may be necessary to protect and enforce the Company's intellectual
property rights, to defend the Company against claimed infringement of the
rights of others and to determine the scope and validity of the proprietary
rights of others. Any such litigation could be costly and could divert
management's attention, which could have a material adverse effect on the
Company's business, results of operations or financial condition regardless of
the outcome of the litigation. In addition, third parties making claims against
the Company with respect to intellectual property infringement may be able to
obtain injunctive or other equitable relief that could effectively block the
Company's ability to sell its products in the United States and abroad, and
could result in an award of substantial damages. In the event of a claim of
infringement, the Company and its customers may be required to obtain one or
more licenses from third parties. There can be no assurance that the Company or
its customers could obtain necessary licenses from third parties at a reasonable
cost or at all.
Concentration of Stock Ownership. The present directors, executive
officers and 5% shareholders of the Company and their affiliates beneficially
own approximately 76% of the outstanding common stock as of August 11, 1999. As
a result, these shareholders may be able to exercise significant influence over
all matters requiring shareholder approval, including the election of directors
and approval of significant corporate transactions. Such concentration of
ownership may have the effect of delaying or preventing a change in control of
the Company.
Depressive Effect of Warrants. The Company has a substantial number of
common stock warrants outstanding with an exercise price of $0.125 (9,251,341)
and of $0.37 (2,400,000). These warrants may have the effect of causing the
Company's stock price to be lower than it otherwise would be.
Effect of Certain Charter Projections; Blank Check Preferred Stock. The
Company's Board of Directors has the authority to issue up to 1,000,000 shares
of Preferred Stock and to determine the price, rights, preferences, privileges
and restrictions, including voting rights, without any further vote or action by
the Company's
8
<PAGE>
shareholders. The rights of the holders of the common stock will be subject to,
and may be adversely affected by, the rights of the holders of any Preferred
Stock that may be issued in the future. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire a majority of the outstanding voting stock of the
Company.
Shares Eligible for Future Sale. Sales of a substantial number of shares
of Common Stock in the public market following this offering could adversely
affect the market price for the Company's Common Stock. On the date of this
Prospectus, 26,221,220 shares, including 5,527,909 of the 17,157,159 Shares
offered hereby, are eligible for sale, subject in some cases to the volume and
other restrictions of Rule 144 under the Securities Act. An additional
11,629,250 shares of Common Stock issuable upon exercise of the Warrants and
offered hereby, are eligible for sale. An additional 8,602,550 shares of Common
Stock issuable upon exercise of outstanding warrants, other than the Warrants,
are eligible for sale, subject in some cases to the volume and other
restrictions under Rule 144. If such holders cause a large number of shares to
be sold in the public market, such sales could have a material adverse effect on
the market price for the Company's Common Stock.
Inflation. To date, inflation has not had a significant impact on the
results of the Company's operations.
Recent Accounting Pronouncements. In April 1998, the American Institute of
Certified Public Accountants issued Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use" ("SOP
98-1"). SOP 98-1 provides guidance for determining whether computer software is
internal-use software and on accounting for the proceeds of computer software
originally developed or obtained for internal use and then subsequently sold to
the public. It also provides guidance on capitalization of the costs incurred
for computer software developed or obtained for internal use. The Company has
not yet determined the impact, if any, of adopting this statement. The
disclosures prescribed by SOP 98-1 will be effective for the year ending March
31, 2000 consolidated financial statements.
Year 2000 Issue. The "Year 2000 Issue" arises because most computer
systems and programs were designed to handle only a two-digit year, as opposed
to a four digit year. When the year 2000 begins, these computers may interpret
"00" as the year 1900 and could either stop processing date-related computations
or could process them incorrectly. As customers and potential customers of the
Company begin to devote incremental resources to this issue, resources
previously allocated to other information systems requirements may be redirected
to address the Year 2000 issue. To the extent that the Company's products are
not selected as part of customers' overall Year 2000 solution, redirection of
these customer resources could have a material adverse effect on the Company's
results of operations and financial condition. In addition, the Year 2000
Issue creates risk for the Company from unforeseen problems in its internal
computer systems and from third parties with which the Company interacts. Such
failures of the Company's and/or third parties' computer systems could have a
material impact on the Company's ability to conduct its business and to process
and account for the transfer of funds electronically.
9
<PAGE>
MATERIAL CHANGES
Subordinated Debt Financing. In June 1999, the Company began a
subordinated debt/warrant financing. The financing included approximately
$1,000,000 of three-year notes and the sale of approximately 8,000,000 Warrants
at $0.01 per Warrant. The debt bears simple interest of 10% and the Warrants
have a five-year term with an exercise price per share of $0.125. This financing
transaction is comprised of two closings. The first closing took place on June
7, 1999. The Company received $768,200 cash proceeds from this closing. This
included $711,000 of three-year notes and the sale of approximately 5,700,000
warrants at $0.01 per warrant. The second closing was to have taken place on
July 15, 1999. The Closing was extended until September 24, 1999, pending
negotiation of a workout with the Creditors' Committee through the Credit
Managers Association to resolve accounts payable issues that was satisfactory to
the majority of the investors. An agreement has been reached and the Company
will receive approximately $311,800 cash proceeds from the second closing. The
Company has used part of the proceeds from the financing to complete the
Settlement Agreement with its lender and to pay other accounts payable and
intends to use the balance of the proceeds to help fund its operations. Two
Company director/officers, an affiliate of a Company director and two Company
10% shareholders participated in the financing.
MANAGEMENT
As of July 22, 1999, the names of the directors and executive officers of
the Company and their respective ages are as follows:
<TABLE>
<CAPTION>
Name Age Position with the Company
- ---- --- -------------------------
<S> <C> <C>
Robert R. Anderson.................... 61 Chairman of the Board
James O. Benouis...................... 31 President, Chief Executive Officer
and Director
David G. Arscott...................... 55 Director
David Knight.......................... 51 Director
</TABLE>
Robert R. Anderson became Chairman of SVR in January 1994 and re-assumed
the position of Chief Executive Officer in December 1996 until August 1998.
Prior to that, Mr. Anderson was Chief Executive Officer from April 1994 until
July 1995 and was Chief Financial Officer from September 1994 to November 1995.
Mr. Anderson co-founded KLA Instruments Corporation "KLA," a supplier of
equipment for semiconductor companies, in 1975. He served as Vice-Chairman of
the Board of KLA from November 1991 to March 1994 and served as Chairman of the
Board of KLA from May 1985 to November 1991. Prior to that, Mr. Anderson served
as Chief Operating Officer and Chief Financial Officer of KLA for nine years.
Mr. Anderson currently serves as a director of Applied Science & Technology
Inc., a supplier of systems components for the semiconductor industry.
James O. Benouis became President and Chief Operating Officer of the
Company in March 1998 and was appointed Chief Executive Officer in August 1998.
Mr. Benouis came to the Company from Quality I.C. Corporation ("QIC"), an
integrated circuit design services company based in Austin, Texas, which was
acquired by the Company in March 1998, where he was President from 1995 to 1998.
While at QIC, his roles included project leadership for all IC design projects,
software enhancements and daily business operation management. He holds a
degree in Electrical Engineering from the University of Texas.
David G. Arscott is General Partner and Co-Founder of Compass Technology
Partners which invests in public and private technology companies. He began his
career with Citicorp Venture Capital Limited and in 1973 opened its West Coast
office. In 1978, Mr. Arscott co-founded Arscott Norton & Associates which
formed three venture capital funds. He is a director and past Chairman of Lam
Research Corporation and a director of Cyberstate University. He has formerly
served as President and Director of the Western Association of Venture
Capitalists. Mr. Arscott earned his B.A. degree from the College of Wooster
(1966) and his MBA from the University of Michigan.
David Knight is the Founder, Chairman and CEO of The Shearwater Group,
Inc., a worldwide EDA software distribution and support company founded in 1992
which provides software tools and turnkey hardware/software solutions for
Integrated Circuit ("IC") design. Prior to working at Shearwater, he co-founded
Ultratech Photomask and was Division President of Sierracin/EOI. Mr. Knight has
over thirty years experience in the IC design and manufacturing industry.
10
<PAGE>
SELLING SHAREHOLDERS
The following table lists the Selling Shareholders, the number of shares
of the Company's Common Stock which each beneficially owned as of July 20, 1999,
the number of Shares expected to be sold by each, and the number and the
percentage of the shares of the Company's Common Stock each will beneficially
own after the offering pursuant to the Registration Statement, assuming the sale
of all the Shares expected to be sold.
The Selling Shareholders of 2,377,909 shares of Common Stock and 2,377,909
shares issuable pursuant to the exercise of warrants acquired such shares
pursuant to a Unit Purchase Agreement ("the Agreement") between the Company and
such Selling Shareholders in a private placement by the Company in reliance on
Regulation D and/or Section 4(2) of the Securities Act. The $0.37 exercise price
for the warrants is payable in cash, cancellation of indebtedness, in shares of
the Company's Common Stock, through a "same day sale" commitment or "margin"
commitment from the warrant holder and a broker who is a member of the National
Association of Securities Dealers, Inc. (the "NASD") or by a "net exercise." The
warrants are exercisable for a term of seven years. The Company agreed to file a
registration statement under the Securities Act with respect to the shares
issued or issuable pursuant to the Agreement and to cause the registration
statement to remain effective until the earlier of (a) the date ending three
years after the effective date of the registration statement, or (b) the date on
which the holder of registrable securities is able to sell all of such holder's
registrable securities in any single three month period without registration
under the Securities Act pursuant to Rule 144. The Selling Shareholders of
3,150,000 shares acquired the shares through a merger of Silicon Valley
Research, Inc. and Quality I.C. Corporation in March 1998. The Agreement and
Plan of Reorganization entered into in connection with the merger requires that
the shares be registered pursuant to a Registration Rights Agreement. The
Registration Rights Agreement requires the Company to file a registration
statement under the Securities Act and use its best efforts to maintain the
effectiveness of the registration statement until the earlier of (A) such time
as each of the Holders may sell all of the Registrable Securities held by him,
her or it without registration pursuant to Rule 144 under the Securities Act
within a three-month period, (B) such time as all of the Registrable Securities
have been sold by the Holders or (C) one year after the closing of the Merger.
The Selling Shareholder of 1,251,341 warrants acquired the warrants through a
settlement agreement for the cancellation of debts at annual interest rates of
8.75% and 11.75%, which matured on June 8, 1998. The $0.125 exercise price for
the warrants is payable in cash, cancellation of indebtedness, in shares of the
Company's Common Stock, through a "same day sale" commitment or "margin"
commitment from the warrant holder and a broker who is a member of the NASD or
by a "net exercise." The warrants are exercisable for a term of seven years. The
Warrant Agreement entered into in connection with the cancellation of debts
requires the Company to file a registration statement under the Securities Act
covering the Warrants and use its best efforts to secure the effectiveness of
such registration statement within ninety (90) days following the date of the
Warrant Agreement. The Selling Shareholders of 8,000,000 Warrants acquired the
Warrants through a subordinated debt/warrant financing closed by the Company
on September 24, 1999. The Warrants are exercisable for a term of five years.
The $0.125 exercise price is payable in cash, cancellation of indebtedness, in
shares of the Company's Common Stock, through a "same day sale" commitment or
"margin" commitment from the warrant holder and a broker who is a member of
the National Association of Securities Dealers, Inc. (the "NASD") or by a "net
exercise." The Warrant agreement entered into in connection with the financing
requires the Company to file a registration statement under the Securities Act
covering the shares issuable upon exercise of the Warrants and use its best
efforts to secure the effectiveness of such registration statement within
ninety (90) days following the date of the warrant.
<TABLE>
<CAPTION>
Shares Percentage of
Shares Owned Shares To Owned After Company's
Selling Shareholder Before Offering Be Offered Offering Common Stock
------------------- --------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Robert R. Anderson 2,637,055 (3) 828,838 (19) 1,808,217 6.7
Bay Area Micro-Cap Fund, L.P. 4,155,630 (4) 1,977,674 (20) 2,177,956 8.0
Bay Partners SBIC, L.P. 1,191,584 (5) 348,838 (21) 842,746 3.2
James O. Benouis 2,240,755 (6) 2,135,755 (22) 105,000 *
Clarion Capital Corporation 1,241,078 (7) 659,225 (23) 581,853 2.2
Compass Chicago Partners, L.P. (1) 878,842 (8) 642,206 (24) 236,636 *
Compass Management Partners, L.P. (1) 113,150 (9) 59,036 (25) 54,114 *
Compass Technology Partners, L.P. (1) 1,759,323 (10) 758,484 (26) 1,000,839 3.8
Imperial Bank 1,266,341 (11) 1,251,341 (11) 15,000 *
Isabella Partners 650,167 (12) 316,280 (27) 333,887 1.3
J. F. Shea Co., Inc., 9,547,687 (13) 4,384,186 (28) 5,163,501 18.2
Peninsula Fund, L.P. 944,208 (14) 719,208 (29) 225,000 *
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Shares Percentage of
Shares Owned Shares To Owned After Company's
Selling Shareholder Before Offering Be Offered Offering Common Stock
------------------- --------------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
David R. Reebel 1,384,615 1,384,615 0 *
Rogers Family Trust 1,964,057 (15) 716,280 (30) 1,247,777 4.7
Special Situations Cayman 1,434,042 (16) 162,790 (21) 1,271,252 4.8
Fund, L.P. (2)
Special Situations Private 2,663,568 (17) 162,790 (21) 2,500,778 9.1
Equity Fund, L.P. (2)
William R. Timken 885,476 (18) 649,613 (31) 235,863 *
</TABLE>
- -----------------------
* Less than 1%
(1) David Arscott is a General Partner of Compass Chicago Fund, L.P., Compass
Management Fund, L.P. and Compass Technology Fund, L.P. The three limited
partnerships beneficially owned 9.9% of the Company's outstanding shares
as of July 20, 1999. Mr. Arscott disclaims beneficial ownership of the
portion of the shares that exceeds his proportionate interest in the
partnerships.
(2) Austin Marxe is a General Partner of Special Situations Private Equity
Fund, L.P. and Special Situations Cayman Fund, L.P. He beneficially owned
26.6% of the Company's outstanding shares as of July 20, 1999.
(3) Includes 680,956 shares held in trust of which Mr. Anderson is trustee,
including 610,956 shares held by the Robert R. and Sally E. Anderson
Trust, 12,500 shares held by the Robert K. Anderson Trust, 12,500 shares
held by the Sharon Davidson Trust, 35,000 shares held by the Timothy R.
Anderson Trust and 10,000 shares held by the Steven Davidson Trust. Also
includes 17,550 shares of which Mr. Anderson disclaims beneficial
ownership, including 2,550 shares owned by Sharon Davidson and 15,000
shares owned by Steven Davidson, two of Mr. Anderson's children. Also
includes 561,775 shares, 1,201,775 shares subject to warrants exercisable
within 60 days of July 20, 1999 and 170,832 shares subject to options
exercisable within 60 days of July 20, 1999 held directly by Mr. Anderson.
Mr. Anderson is Chairman of the Board of the Company and beneficially
owned 9.6% of the Company's outstanding shares as of July 20, 1999.
(4) Includes 1,628,165 shares and 2,473,665 shares subject to warrants
exercisable within 60 days of July 20, 1999 held by Bay Area Micro-Cap
Fund, L.P. (of which Gregory F. Wilbur is a General Partner). Also
includes 53,800 shares held directly by Gregory F. Wilbur. Bay Area Micro-
Cap Fund, L.P. beneficially owned 14.5% of the Company's outstanding
shares as of July 20, 1999.
(5) Includes 505,833 shares subject to warrants exercisable within 60 days of
July 20, 1999.
(6) Includes 370,370 shares subject to warrants and 105,000 shares subject to
options exercisable within 60 days of July 20, 1999.
(7) Includes 792,889 shares subject to warrants exercisable within 60 days of
July 20, 1999.
(8) Includes 651,634 shares subject to warrants exercisable within 60 days of
July 20, 1999.
(9) Includes 78,230 shares subject to warrants exercisable within 60 days of
July 20, 1999.
(10) Includes 958,088 shares subject to warrants exercisable within 60 days of
July 20, 1999. Also includes 24,098 shares held directly by David Arscott,
General Partner of Compass Technology Partners.
(11) These Shares are issuable upon exercise of warrants.
(12) Includes 382,611 shares subject to warrants exercisable within 60 days of
July 20, 1999.
(13) Includes 3,460,395 shares held by J.F. Shea Co., Inc., 472,258 shares held
by E&M RP Trust (of which Edmund H. Shea, Jr. is a Trustee), 7,258 shares
held directly by John H. Shea and 7,258 shares held directly by Peter O.
Shea. Edmund H. Shea, Jr., John H. Shea and Peter O. Shea are executive
officers of J.F. Shea Co., Inc. Also includes 5,600,518 shares subject to
warrants held by J.F. Shea Co., Inc. exercisable within 60 days of July
20, 1999. J.F. Shea Co., Inc. beneficially owned 30% of the Company's
outstanding shares as of July 20, 1999.
(14) Includes 544,789 shares subject to warrants exercisable within 60 days of
July 20, 1999.
(15) Includes 878,714 shares and 1,024,554 shares subject to warrants
exercisable within 60 days of July 20, 1999 held by the Rogers Family
Trust (of which Roy L. Rogers is a Trustee). Also includes 15,000 shares
held by the Roy L. Rogers IRA. Also includes 45,789 shares and 10,000
shares subject to options exercisable within 60 days of July 20, 1999 held
directly by Mr. Rogers. Mr. Rogers beneficially owned 7.2% of the
Company's outstanding shares as of July 20, 1999.
12
<PAGE>
(16) Includes 578,521 shares subject to warrants exercisable within 60 days of
July 20, 1999.
(17) Includes 1,331,784 shares subject to warrants exercisable within 60 days
of July 20, 1999.
(18) Includes 690,944 shares subject to warrants exercisable within 60 days of
July 20, 1999.
(19) Includes 654,419 shares subject to warrants exercisable within 60 days of
July 20, 1999.
(20) Includes 1,628,837 shares subject to warrants exercisable within 60 days
of July 20, 1999.
(21) Exactly half of these Shares are issuable upon exercise of warrants.
(22) Includes 370,370 shares subject to warrants exercisable within 60 days of
July 20, 1999.
(23) Includes 542,946 shares subject to warrants exercisable within 60 days of
July 20, 1999.
(24) Includes 584,066 shares subject to warrants exercisable within 60 days of
July 20, 1999.
(25) Includes 53,222 shares subject to warrants exercisable within 60 days of
July 20, 1999.
(26) Includes 642,205 shares subject to warrants exercisable within 60 days of
July 20, 1999.
(27) Includes 258,140 shares subject to warrants exercisable within 60 days of
July 20, 1999.
(28) Includes 3,512,093 shares subject to warrants exercisable within 60 days
of July 20, 1999.
(29) Includes 544,789 shares subject to warrants exercisable within 60 days of
July 20, 1999.
(30) Includes 658,140 shares subject to warrants exercisable within 60 days of
July 20, 1999.
(31) Includes 591,473 shares subject to warrants exercisable within 60 days of
July 20, 1999.
13
<PAGE>
PLAN OF DISTRIBUTION
The Company has been advised by the Selling Shareholders that they, or
their respective pledgees, donees, transferees or successors in interest, intend
to sell all of the Shares from time to time on the OTC Bulletin Board at prices
and at terms prevailing at the time of sale or at prices related to the then
current market price or in negotiated transactions. The Shares may be sold by
one or more of the following methods: (a) an over-the-counter distribution in
accordance with the rules of the OTC Bulletin Board and at prices prevailing at
the time of sale; (b) ordinary brokerage transactions and transactions in which
the broker solicits purchasers; and (c) in privately negotiated transactions.
There is no assurance that the Selling Shareholders will sell any or all of the
Shares.
In effecting sales, brokers or dealers engaged by the Selling Shareholders
may arrange for other brokers or dealers to participate. Brokers or dealers
will receive commissions or discounts from the Selling Shareholder in amounts to
be negotiated prior to the sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales.
With respect to shares offered by the Selling Shareholders, the Company
will pay all expenses incurred in connection with any registration qualification
and compliance requested pursuant to the Agreements (excluding underwriters' or
brokers' discount and commissions), including without limitation all filing
registration and qualification, printers' and accounting fees and the reasonable
fees and disbursements of one counsel for the Selling Shareholders and counsel
for the Company.
The Company has agreed to indemnify in certain circumstances the Selling
Shareholders and various related persons against certain liabilities, including
liabilities under the Securities Act. The Selling Shareholders have agreed to
indemnify in certain circumstances the Company and various related persons
against certain liabilities, including liabilities under the Securities Act.
Pursuant to the Unit Purchase Agreement, the Company agreed to use its
best efforts to cause the Registration Statement, of which this Prospectus
constitutes a part, to remain effective until the earlier of (a) the date ending
three years after the effective date of the Registration Statement, or (b) the
date on which a selling shareholder is able to sell all of such Holder's
registrable securities in any single three-month period without registration
under the Securities Act pursuant to Rule 144. Pursuant to the Registration
Rights Agreement, the Company agreed to use its best efforts to maintain the
effectiveness of the registration statement until the earlier of (A) such time
as each of the Holders may sell all of the Registrable Securities held by him,
her or it without registration pursuant to Rule 144 under the Securities Act
within a three-month period, (B) such time as all of the Registrable Securities
have been sold by the Holders or (C) one year after the closing of the Merger.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Shareholders. The Company could receive up to $1,879,872 upon the
cash exercise of all the Warrants, of which there can be no assurance. The
exercise price for the Warrants is payable in cash, cancellation of
indebtedness, in shares of the Company's Common Stock, through a "same day sale"
commitment or "margin" commitment from the warrant holder and a broker who is a
member of the NASD or by a "net exercise". See "Selling Shareholders". The
Company intends to use any proceeds received from the exercise of Warrants for
general corporate purposes, including working capital.
LEGAL MATTERS
The legality of the Shares is being passed upon by Rosenblum, Parish &
Isaacs, P.C.
EXPERTS
The consolidated financial statements as of March 31, 1999 have been so
incorporated in reliance on the report (which contains an explanatory paragraph
relating to the Company's ability to continue as a going concern as described in
Note 1 to the consolidated financial statements) of Moss Adams LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting. See "Incorporation of Certain Documents by Reference."
The consolidated financial statements as of March 31, 1998 and for each of
the two years then ended incorporated in this Prospectus by reference to the
Annual Report on Form 10-K for the year ended March 31, 1999 have been so
incorporated in reliance on the report (which contains an explanatory paragraph
relating to the Company's ability to continue as a going concern as described in
Note 1 to the consolidated financial statements) of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
14
<PAGE>
No dealer, salesman or other person has been
authorized to give any information or to make
any representations other than those
contained or incorporated by reference in
this Prospectus in connection with the
offering described herein, and, if given or
made, such information or representation must
not be relied upon as having been authorized
by the Company or by any Underwriter. This
Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy,
any securities other than the registered
securities to which it relates, or an offer
to sell, or a solicitation of an offer to
buy, in any jurisdiction in which it is
unlawful to make such offer or solicitation.
Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any
circumstances, create an implication that
there has been no change in the affairs of
the Company since the date hereof or that the
information contained herein is correct as of
any time subsequent to the date hereof.
TABLE OF CONTENTS
Page
----
Available Information................... 3
Incorporation of Certain
Documents by Reference.................. 3
The Company............................. 4
Risk Factors............................ 4
Material Changes........................ 10
Management.............................. 10
Selling Shareholders.................... 11
Plan of Distribution.................... 14
Use of Proceeds......................... 14
Legal Matters........................... 14
Experts................................. 14
17,157,159 Shares
SILICON VALLEY
RESEARCH, INC.
COMMON STOCK
---------------
PROSPECTUS
---------------
, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses payable by the Company
in connection with the sale and distribution of the securities being registered,
other than underwriting discounts and commissions. All of the amounts shown are
estimates, except the Securities and Exchange Commission registration fee.
<TABLE>
<CAPTION>
To Be Paid
By The
Registrant
----------
<S> <C>
Securities and Exchange Commission registration fee............ $ 668
Accounting fees and expenses................................... 4,000
Printing expenses.............................................. 0
Transfer agent and registrar fees and expenses................. 0
Blue Sky fees and expenses (including legal fees).............. 0
Legal fees and expenses........................................ 4,000
Miscellaneous expenses......................................... 2,086
----------
Total....................................................... $10,754
==========
</TABLE>
Item 15. Indemnification of Directors and Officers.
Section 204(10) of the California General Corporation Law ("California
Law") permits indemnification of officers, directors, and other corporate agents
under certain circumstances and subject to certain limitations. The Company's
Articles of Incorporation and Bylaws provide that the Company shall indemnify
its directors, officers, or agents to the full extent permitted by California
Law. The right to indemnification conferred to such parties is a contract
right. These indemnification provisions may be sufficiently broad to permit
indemnification of the Registrant's officers and directors for liabilities
(including reimbursement of expenses incurred) arising under the Securities Act
of 1933, as amended (the "Securities Act").
The Company has obtained liability insurance for the benefit of its
directors and officers.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Company in which
indemnification is being sought.
II-1
<PAGE>
Item 16. Exhibits
The following exhibits are filed with this Registration Statement:
<TABLE>
<CAPTION>
Exhibit Description of Exhibit
No.
<C> <S>
4.01 Form of Note and Warrant Credit Agreement among the Company and several investors
dated June 4, 1999.
4.02 Warrant Agreement between the Company and Imperial Bank dated May 11, 1999.
5.1 Opinion and Consent of Rosenblum, Parish & Isaacs, P. C..
23.1 Consent of Moss Adams LLP
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Rosenblum, Parish & Isaacs, P. C. (included in Exhibit 5.1).
24.1 Power of Attorney (included in the Signature Page contained in Part II of the
Registration Statement).
</TABLE>
Item 17. Undertakings.
A. 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:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) 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; provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. 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
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
C. Insofar as indemnification 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, 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.
D. The undersigned Registrant hereby undertakes that:
(1) For the purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Jose, State of California, on the 28th day of
September, 1999.
SILICON VALLEY RESEARCH, INC.
By: /s/James O. Benouis
James O. Benouis
President and Chief Executive Officer
POWER OF ATTORNEY
Each of the officers and directors of Silicon Valley Research, Inc. whose
signature appears below hereby constitutes and appoints Robert R. Anderson and
James O. Benouis and each of them, their true and lawful attorneys and agents,
with full power of substitution, each with power to act alone, to sign and
execute on behalf of the undersigned any amendment or amendments to the
Registration Statement on Form S-3 and to perform any acts necessary in order to
file such amendments, and each of the undersigned does hereby ratify and confirm
all that said attorneys and agents, or their or his substitutes, shall do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on September 28, 1999 by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title
<S> <C>
/s/ Robert R. Anderson Chairman of the Board
- ----------------------
Robert R. Anderson
/s/ James O. Benouis President and Chief Executive Officer
- ---------------------- (Principal Executive Officer) and Director
James O. Benouis
/s/ David G. Arscott Director
- ----------------------
David G. Arscott
/s/ David Knight Director
- ----------------------
David Knight
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description of Exhibit
- ------- ----------------------
No.
---
<C> <S>
4.01 Form of Note and Warrant Credit Agreement among the Company
and several investors dated June 4, 1999.
4.02 Warrant Agreement between the Company and Imperial Bank
dated May 11, 1999.
5.1 Opinion and Consent of Rosenblum, Parish & Isaacs, P. C.
23.1 Consent of Moss Adams LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Rosenblum, Parish & Isaacs, P. C. (included in
Exhibit 5.1).
24.1 Power of Attorney (included in the Signature Page contained
in Part II of the Registration Statement).
</TABLE>
<PAGE>
EXHIBIT 4.01
NOTE AND WARRANT CREDIT AGREEMENT
This NOTE AND WARRANT CREDIT AGREEMENT (this "Agreement") is made as of
June 4, 1999 by and among Silicon Valley Research, Inc., a California
corporation (the "Company"), and the parties listed on the Schedule of Investors
attached to this Agreement as Exhibit A (individually an "Investor" and
collectively the "Investors").
RECITALS
A. The Company is currently in need of funds to help finance expenses for
an upcoming trade show, new product development and marketing activities.
B. The Company wishes to borrow $790,000 in the aggregate from the
Investors and the Investors are willing to loan certain sums to the Company in
exchange for the issuance to them of (i) certain subordinated promissory notes
evidencing the Company's obligation to repay the Investors' loans, and (ii)
certain warrants to purchase shares of the Company's capital stock, all in
accordance with the terms and conditions of this Agreement.
NOW THEREFORE, the parties hereby agree as follows:
Section 1. COMMITMENT TO LEND.
1.1 Commitment to Lend. Subject to the terms and conditions of this
Agreement, each of the Investors agrees, severally and not jointly, to make a
loan of funds to the Company on a non-revolving basis in the principal amount
set forth next to such Investor's name on Exhibit A (such loans being
collectively hereinafter referred to as "Loans" and each individually as a
"Loan"), in an aggregate total principal amount of $790,000.
1.2 Notes and Warrants. The Company's indebtedness to each of the
Investors under each Loan will be evidenced by a subordinated promissory note of
the Company in the form attached hereto as Exhibit B (each a "Note" and
collectively the "Notes") in the principal amount of the Loan advanced by such
Investor. Furthermore, at the time of the making of the Loans and the execution
and delivery of the Notes by the Company, the Company will execute and deliver
to each Investor a warrant for the purchase of common stock of the Company in
the form attached hereto as Exhibit C (each a "Warrant" and collectively the
"Warrants") for the number of shares of common stock of the Company set forth
next to such Investor's name on Exhibit A. The obligation of the Company to
issue any Warrant, however, is subject to the receipt by the Company from the
Investor receiving the Warrant of a purchase price for such Warrant in an amount
equal to $0.01 for each share of common stock covered by the Warrant.
1.3 Terms of Notes. All principal and accrued but unpaid interest on the
Notes shall be due and payable on June 15, 2002. Other terms for the repayment
and/or prepayment of principal and interest under the Notes are set forth
herein.
<PAGE>
1.4 Payments. All payments made under the Notes on account of principal
and interest shall be made to the Investors not later than 11:00 a.m., San
Francisco time, on each date of payment, in lawful money of the United States of
America and in the form of a wire transfer of immediately available funds to
such Investor, or such other form of payment as such Investor may approve, at
such places in the United States as such Investor shall specify.
1.5 Taxes. All payments to be made by the Company to or for the Investors
under this Agreement or the Notes shall be made without setoff or counterclaim
and clear of, and without deduction for, any taxes or amounts in consequence of
taxes, including without limitation any stamp, registration or other like taxes
payable on or in respect of the Loans, the Notes or any document or obligation
relating thereto, and of any levies, imposts, duties, charges, fees, deductions,
withholdings, restrictions and conditions of any nature (other than taxes on or
in respect of the overall income of any Investor) now or hereafter imposed by
any State or government or any political subdivision or taxing authority thereof
or therein unless the Company is compelled by law to deduct or withhold any such
taxes, levies, imposts, duties, charges or fees in respect of any Investor. If
the Company is so compelled, it will, concurrently with the payment of interest
hereunder, pay to such Investor the necessary amount to enable such Investor to
receive a net amount equal to the full amount which it would have received had
no such deduction been made.
1.6 Expenses. The Company shall pay all out-of-pocket expenses incurred
by the Investors, including any stamp or other taxes and the fees and expenses
of counsel for the Investors, in connection with (i) the interpretation,
enforcement or waiver of any provision hereof, of the Notes or of the Warrants,
and (ii) any filings required to be made (or, in the opinion of the Investor,
advisable to be made) by the Investor with the Securities and Exchange
Commission ("SEC") relating in any way to any or all of the Securities (as that
term is defined herein), including without limitation any expenses incurred to
make any such filing under EDGAR. In addition, the Company shall at the time of
the funding of the Loan pay (out of the proceeds of the Loans or in another
manner satisfactory to the Investors) the fees and expenses of McCutchen, Doyle,
Brown & Enersen, LLP, counsel for J.F. Shea Co., Inc., in the preparation,
negotiation, execution and delivery of this Agreement, the Notes and the
Warrants.
1.7 Proceeds of Loans. The Company agrees that the uses to which the
proceeds of the Loans may be put shall be limited to the payment of expenses for
(i) the Company's participation in the Design Automation Conference trade show
in New Orleans, Louisiana in June 1999, (ii) new product development, (iii)
marketing of products, (iv) payment of back rent on the Company's headquarters
in San Jose, California, (v) payment of $135,000 to Imperial Bank ("Imperial")
under that certain Settlement Agreement between the Company and Imperial dated
May 11, 1999, and (vi) other accounts payable. The payment to Imperial under the
above-referenced Settlement Agreement shall be paid directly to Imperial on
behalf of the Company from the proceeds of the Loans.
2
<PAGE>
Section 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Investor that the
statements in the following paragraphs of this Section 2 are all true and
complete:
2.1 Organization, Good Standing and Qualification. The Company has been
duly incorporated and organized, and is validly existing in good standing, under
the laws of the State of California. The Company has the corporate power and
authority to own and operate its properties and assets and to carry on its
business as currently conducted and as presently proposed to be conducted.
2.2 Corporate Power. The Company has the corporate power and authority to
execute and deliver this Agreement, the Notes and the Warrants to be purchased
by the Investors hereunder, to issue the Notes and the Warrants and to carry out
and perform all its obligations under this Agreement, the Notes and the
Warrants. The Company has the corporate power and authority to issue the shares
of stock of the Company issuable upon conversion of the Notes (the "Conversion
Stock") and upon exercise of the Warrants (the "Warrant Stock").
2.3 Due Authorization. All corporate action on the part of the Company's
directors and shareholders necessary for the authorization, execution and
delivery of, and the performance of all obligations of the Company under, this
Agreement, the Notes and the Warrants (including the issuance of the Conversion
Stock and the Warrant Stock) has been taken, and this Agreement constitutes, and
the Notes and the Warrants when executed and delivered by the Company will
constitute, valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms, except as may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditor's rights
generally, and (ii) the effect of rules of law governing the availability of
equitable remedies.
2.4 Valid Issuance.
(a) The Conversion Stock and the Warrant Stock, when and if issued, sold
and delivered in accordance with the terms of the Notes or the Warrants,
respectively, for the consideration provided for herein, will be duly and
validly issued, fully paid and nonassessable. The Company has validly reserved
for issuance the maximum number of shares, as of the date of funding, of the
Conversion Stock and the Warrant Stock.
(b) Based in part on the representations made by the Investors in Section
3 hereof, the offer and sale of the Notes and the Warrants solely to the
Investors in accordance with the Agreement are exempt from the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the securities registration and qualification requirements of
the currently effective provisions of the securities laws of the State of
California.
3
<PAGE>
2.5 No Violation. The execution, delivery and performance by the Company
of this Agreement, the Notes and the Warrants (and, if required, the issuance of
the Conversion Stock and the Warrant Stock) do not violate the Articles of
Incorporation or By-Laws of the Company or any provision of applicable law or
regulation, or result in a breach of or constitute a default under any
agreement, note, indenture, lease or other instrument to which the Company is a
party or by which the Company or any of its properties is or may be bound.
2.6 Accuracy of Financial Statements. The financial statements of the
Company for the quarter ended March 31, 1999 are accurate and complete and
present fairly the financial condition of the Company, and have been prepared in
accordance with generally accepted accounting principles consistently applied.
Since the date of such financial statements, there has been no material adverse
change in the financial condition or operations of the Company.
2.7 Title to Property. The Company (after giving effect to the payment to
Imperial referred to in Section 1.7) has good and marketable title to its
properties subject to no mortgage, deed of trust, pledge, lien, encumbrance or
security interest except as disclosed in the financial statements referred to in
Section 2.6.
2.8 Defaults, Etc. Attached hereto as Schedule 1 is a complete and accurate
list of all (i) defaults, judgments or liens filed or claimed against the
Company or any of its assets, (ii) all notices of default received by the
Company that have not been fully cured or waived, and (iii) all pending or
threatened lawsuits against the Company.
Section 3 REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF INVESTORS.
Each Investor hereby severally (and not jointly) represents and warrants
to, and agrees with, the Company that:
3.1 Authorization. This Agreement constitutes such Investor's valid and
legally binding obligation, enforceable in accordance with its terms except as
may be limited by (i) applicable bankruptcy, insolvency, reorganization or other
laws of general application relating to or affecting the enforcement of
creditors' rights generally, and (ii) the effect of rules of law governing the
availability of equitable remedies. Each Investor represents that such Investor
has full power and authority to enter into this Agreement and has duly
authorized the execution and delivery of the same.
3.2 Purchase for Own Account. The Notes, the Warrants, the Conversion Stock
and the Warrant Stock (collectively the "Securities") will be acquired for
investment for such Investor's own account, not as a nominee or agent, and not
with a view to the distribution thereof within the meaning of the 1933 Act.
3.3 Disclosure of Information. Such Investor believes that such Investor
has received or has had full access to all the information it considers
necessary or appropriate to make an informed investment decision with respect to
the Securities. Such Investor further has had an opportunity to ask questions
and receive answers from the Company regarding the
4
<PAGE>
terms and conditions of the offering of the Securities and to obtain additional
information necessary to verify any information furnished to such Investor or to
which such Investor had access. The foregoing, however, does not in any way
limit or modify the representations and warranties made by the Company in
Section 2.
3.4 Investment Experience. Such Investor understands that the purchase of
the Securities involves substantial risk. Such Investor has experience as an
investor in securities in technology companies and acknowledges that such
Investor is able to fend for itself, can bear the economic risk of such
Investor's investment in the Securities and has such knowledge and experience in
financial or business matters that such Investor is capable of evaluating the
merits and risks of this investment in the Securities and protecting its own
interests in connection with this investment.
3.5 Accredited Investor Status. Such Investor is an "accredited investor"
within the meaning of Regulation D promulgated under the 1933 Act.
3.6 Restricted Securities. Such Investor understands that the Securities
are characterized as "restricted securities" under the 1933 Act and Rule 144
promulgated thereunder inasmuch as they are being acquired from the Company in a
transaction not involving a public offering, and that under the 1933 Act and
applicable regulations thereunder such securities may be resold without
registration under the 1933 Act only in certain limited circumstances. In this
connection, such Investor represents that such Investor is familiar with Rule
144 of the SEC, as presently in effect, and understands the resale limitations
imposed thereby and by the 1933 Act. Such Investor understands that the Company
is under no obligation to register any of the securities sold hereunder.
3.7 No Solicitation. At no time was the Investor presented with or
solicited by any publicly issue or circulated newspaper, mail, radio, television
or other form of general advertising or solicitation in connection with the
offer, sale and purchase of the Securities.
3.8 Legends. It is understood that the certificates evidencing the
Securities will bear legends substantially similar to those set forth below:
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF
CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
5
<PAGE>
(b) Any legend required by the laws of the State of California, including
any legend required by the California Department of Corporations or any other
state securities laws.
The legend set forth in (a) above shall be removed by the Company from any
certificate evidencing the Securities upon delivery to the Company of an opinion
of counsel, reasonably satisfactory to the Company, that a registration
statement under the 1933 Act is at that time in effect with respect to the
legended security or that such security can be freely transferred in a sale
without such a registration statement being in effect and that such transfer
will not jeopardize the exemption or exemptions from registration pursuant to
which the Company issued the Securities.
Section 4 CONDITIONS TO CLOSING.
4.1 Conditions to Investors' Obligations. The obligations of each Investor
under Section 1 of this Agreement are subject to the fulfillment or waiver, on
or before the closing, of each of the following conditions, the waiver of which
shall not be effective against any Investor who does not consent to such waiver,
which consent must be given by written communication:
(a) Each of the representations and warranties of the Company contained in
Section 2 shall be true and correct on and as of the date of closing with the
same effect as though such representations and warranties had been made on and
as of the date thereof;
(b) The Company shall have performed and complied with all agreements,
obligations and conditions contained in this Agreement that are required to be
performed or complied with by it on or before the closing and shall have
obtained all approvals, consents and qualifications necessary to complete the
advance of the Loans;
(c) The Investors shall have received an incumbency certificate of persons
authorized to execute this Agreement, the Notes and the Warrants for the Company
and a copy of the resolutions authorizing, approving and ratifying each of the
foregoing documents and the transactions contemplated herein and therein, duly
adopted by the Board of Directors of the Company, together with a certificate of
the Secretary of the Company, dated the date hereof, that each such copy is a
true and correct copy of resolutions duly adopted at a meeting, or by the
unanimous written consent, of the Board of Directors of the Company and that
such resolutions have not been modified, amended, rescinded or revoked in any
respect and are in full force and effect as of the date hereof;
(d) No Event of Default shall have occurred and be continuing; and
(e) Investors shall have made the Loan in the aggregate principal amount of
$650,000.
4.2 Condition to Company's Obligations. The obligations of the Company to
each Investor under this Agreement are subject to the fulfillment or waiver on
or before the Initial Closing of the following condition by such Investor.
6
<PAGE>
(a) The representations and warranties of such Investor contained in
Section 3 shall be true and correct on the date of the Initial Closing with the
same effect as though such representations and warranties had been made on and
as of the Initial Closing.
Section 5. COVENANTS.
The Company further agrees that until payment in full of the Notes and all
other amounts due hereunder, the Company will not without prior written consent
of the Noteholders:
5.1 Additional Indebtedness. Create, incur, assume or suffer to exist any
indebtedness or liabilities in an aggregate amount in excess of $500,000
resulting from borrowings by the Company, loans or advances to the Company,
purchase money financing of assets by the Company or leases under which the
Company is the lessee that are classified as capital leases under GAAP.
5.2 Transfers or Further Encumbrances. Transfer any of its assets other
than in the ordinary course of business or create, incur, assume or suffer to
exist any mortgage, pledge, encumbrance, lien, security interest or charge upon
its properties other than (i) liens arising by operation of law securing amounts
that are not yet due and payable, (ii) matters disclosed by the financial
statements referred to in Section 2.6, or (iii) security interests to secure
indebtedness of the types described in Section 5.1 and in an aggregate amount
not exceeding $500,000.
5.3 Merger, Consolidation or Sale of Assets. Merge into, or merge or
consolidate with, any corporation or other entity, or acquire all or
substantially all of the properties of any other corporation or entity; or sell,
lease, assign, transfer or otherwise dispose of all or substantially all of its
properties.
5.4 Guaranties. Guarantee or become liable in any way as surety, endorser
(other than as endorser of negotiable instruments in the ordinary course of
business) or accommodation endorser or otherwise for the debt or obligations or
any other person or entity.
5.5 Loans or Advances. Make any loans, advances or investments in or to any
person, corporation or other entity, other than short term investments in prime
commercial paper or certificates of deposit issued by major banks or those
loans, advances or investments disclosed on the financial statements referred to
in Section 2.6.
5.6 Dividends or Distributions. Declare or pay any dividend either in cash,
stock or other property; or redeem, retire, purchase or otherwise acquire any
shares of any class of the Company's stock now or hereafter outstanding.
5.7 Purchase of Property. Purchase any real or personal property other than
required in the ordinary course of business at a reasonable market value.
5.8 Permit from California Department of Corporations. The Company shall,
within one week of the date of the making of the Loans, file at its own expense
an
7
<PAGE>
application with the California Department of Corporations for qualification by
permit of the Notes and the Warrants in order to avail itself of the benefit of
the provisions of Section 25116 of the California Corporations Code. The Company
shall use its best efforts to obtain said permit as soon as practicable.
Section 6. DEFAULT; REMEDIES.
6.1 Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement and the Notes, whether
such occurrence shall be voluntary or involuntary, or come about or be effected
by operation of law or otherwise:
(a) The Company shall fail to pay when due any principal, interest, fees
or other amounts payable under this Agreement or any of the Notes;
(b) Any representation or warranty made by the Company under this
Agreement, any of the Notes or any of the Warrants shall prove to be at any time
incorrect or misleading in any respect;
(c) The Company shall fail to observe or perform any obligation, agreement,
covenant or other provision contained in this Agreement or in any of the Notes
or the Warrants (other than as set forth in subsections (a) or (b) above), if
such default shall continue for a period of ten business days from the date of
written notice of such default from any Investor;
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than this Agreement, any of the Notes or any of the Warrants), in each case not
cured or waived within any applicable cure period, pursuant to which the Company
has incurred any indebtedness for borrowed money or financed the purchase of any
asset or leased any property with a book value greater than $25,000;
(e) The filing of a notice of judgment lien in excess of $25,000 against
the Company, or the recording of any abstract of judgment in excess of $25,000
against the Company, or the service of a notice of levy and/or of a writ of
attachment or execution, or other like process, against the assets of the
Company with respect to any claim in excess of $25,000;
(f) The Company shall suffer or consent to or apply for the appointment of
a receiver, trustee, custodian or liquidator of itself or any of its property,
or shall generally fail to pay its debts as they become due or shall make a
general assignment for the benefit of creditors; the Company shall file a
voluntary petition in bankruptcy, or seek reorganization or any other relief,
under the Bankruptcy Reform Act, Title 11 of the United States Code, as amended
or recodified from time to time (the "Bankruptcy Code"), or under any state or
federal law granting relief to debtors, whether now or hereafter in effect, or
any involuntary petition or proceeding pursuant to said Bankruptcy Code or any
other applicable state or federal law relating to bankruptcy, reorganization or
other relief for debtors is filed or commenced against the Company if such
involuntary proceeding shall remain undismissed and unstayed for a period of 30
days or the Company shall file an answer admitting the
8
<PAGE>
jurisdiction of the court and the material allegations of any involuntary
petition, or the Company shall be adjudicated a bankrupt, or an order for relief
shall be entered by any court of competent jurisdiction under the Bankruptcy
Code or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors; or
(g) The dissolution or liquidation of the Company, or the Company shall
take action seeking to effect the dissolution or liquidation of the Company.
6.2 Remedies.
(a) If any Event of Default described in Section 6.1(f) shall occur, each
Investor immediately shall be discharged from the performance of any obligation
under this Agreement, or any Note or Warrant held by such Investor which has not
performed as of the time of such Event of Default, and the aggregate outstanding
principal amount of all of the Notes, along with all accrued interest, shall
immediately become due and payable.
(b) If any Event of Default other than those referred to in Section 6.2(a)
shall occur and be continuing, any Investor, at its option, shall immediately be
discharged from the performance of any obligation under this Agreement, or any
Note or Warrant held by such Investor which has not been performed as of the
time of such Event of Default, and any Investor, at its option, may declare the
aggregate outstanding principal amount of all of the Notes held by it, along
with all accrued interest, to be due and payable immediately. If any Investor
accelerates the payment of its Notes pursuant to this Section 6.2(b), said
Investor shall provide a copy of its acceleration notice to the Company and to
every other Investor at the time of said notice.
(c) At any time after the aggregate outstanding principal amount of the
Note(s) of any Investor has been declared due and payable in accordance with
Section 6.2(a) or 6.2(b), such Investor may proceed to protect and enforce its
rights, either by suit in equity or by action at law, or both, whether for the
specific performance of any covenant, condition or agreement contained in this
Agreement or any Note or in aid of the exercise of any power granted in this
Agreement or any Note, or proceed to enforce the payment of the Note(s) held by
it or to enforce any other legal or equitable rights of such Investor. All
payments received by such Investor shall be applied in the following order:
(i) To all costs and expenses (including attorneys' fees) incurred by
such Investor in enforcing any debt of the Company hereunder or in collecting
any payments due hereunder or under the Note(s) held by it;
(ii) To accrued and unpaid interest on the Note(s) held by it;
(iii) To the principal amount of the Note(s) held by it outstanding;
and
(iv) To any other debt of the Company owing to such Investor.
All rights, powers and remedies of the Investors may be exercised at any
time by any Investor and from time to time after the occurrence of an Event of
Default. All rights, powers and remedies of the Investors in connection with
this Agreement, the Notes and the
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<PAGE>
Warrants are cumulative and not exclusive of and shall be in addition to any
other rights, powers or remedies provided bylaw or equity.
Section 7. GENERAL PROVISIONS.
7.1 Survival of Warranties. The representations, warranties and covenants
of the Company and the Investors contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and shall in no way
be affected by any investigation of the subject matter thereof made by or on
behalf of any of the Investors or the Company, as the case may be.
7.2 Governing Law. This Agreement shall be governed by and construed under
the internal laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California, without reference to principles of conflict of laws or choice of
laws.
7.3 Counterparts. This Agreement may be executed in two or more counterpart
signature pages, all of which when combined shall be deemed an original, but all
of which together shall constitute one and the same instrument.
7.4 Notices. Any and all notices required or permitted to be given to a
party pursuant to the provisions of this Agreement will be in writing and will
be effective and deemed given and received under this Agreement on the earliest
of the following: (i) at the time of personal delivery, if delivery is in
person; (ii) at the time of transmission by facsimile or telecopier, addressed
to the other party at its facsimile number or telecopier address specified
herein (or hereafter modified by subsequent notice to the parties hereto), with
confirmation of receipt made by both telephone and printed confirmation sheet
verifying successful transmission of the facsimile; (iii) one (1) business day
after deposit with an express overnight courier service, with proof of delivery
from the courier requested; or (iv) three (3) business days after deposit in the
United States mail by registered or certified mail (return receipt requested).
All notices not delivered personally or by facsimile will be sent with
postage and/or other charges prepaid and properly addressed to the party to be
notified at the address set forth on the signature pages to this Agreement, or
at such other address as such other party may designate by 10 days' advance
written notice to the other parties hereto. Notices to the Company will be
marked "Attention: President" and notices to each Investor will be addressed to
the person who signed this Agreement for such Investor.
7.5 Amendments and Waivers. Any term of this Agreement, the Notes and the
Warrants may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and all of the
Investors, respectively, except that the provisions of Section 5 hereof or of
any Event of Default covered by Sections 6.1(b)(e) may be waived by Investors
holding an aggregate of 66-2/3% of the principal amount of the Notes then
outstanding. Any amendment or waiver effected in accordance with this Section
7.5
10
<PAGE>
shall be binding upon each holder of any of the Notes and Warrants at the time
outstanding, each future holder of such securities, and the Company.
7.6 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision(s) shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in accordance with its
terms.
7.7 Entire Agreement. This Agreement, the Notes and the Warrants, together
with all exhibits and schedules hereto, constitute the entire agreement and
understanding of the parties with respect to the subject matter hereof and
supersedes any and all prior negotiations, correspondence, agreements,
understandings, duties or obligations between the parties with respect to the
subject matter hereof.
7.8 Further Assurances. From and after the date of this Agreement, upon the
request of any Investor or the Company, the Company and the Investors shall
execute and deliver such instruments, documents or other writings as may be
reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
7.9 Assignment. The rights and obligations of the Company and the Investors
shall be binding upon and benefit the successors, assigns, heirs, administrators
and transferees of the parties; provided, however that no assignment or transfer
of the rights and obligations of either the Company or the Investors shall be
effected without the prior written consent of the other party.
7.10 Additional Investors. Until July 15, 1999, but not thereafter, the
Company may issue additional subordinated promissory notes of the tenor of the
Notes in consideration for new loans in an additional aggregate initial
principal amount of $210,000, such that the total initial principal amount of
all subordinated promissory notes (including the Notes issued for the Loans)
does not exceed $1,000,000. The payees of such Notes shall also be issued
warrants for common stock of the Company of the same tenor as the Warrants in an
amount calculated by using the same proportion as the principal amount of the
Loans made by each Investor on Schedule A bears to the number of shares of
common stock for which such Investor received a Warrant. Each such additional
lender shall become a party to this Agreement, shall have all of the rights and
obligations of an Investor hereunder and shall be considered an Investor for all
purposes hereof (including the making of all representations and warranties
under Section 3 hereof), and the note and warrant issued to such Investor and
the loan made by such Investor shall be considered a Note, a Warrant and a Loan
hereunder.
IN WITNESS WHEREOF, the parties have executed this Note and Warrant Credit
Agreement as of the date first hereinabove written.
THE COMPANY INVESTORS
- ----------- ---------
11
<PAGE>
Attachments:
Schedule 1 - Certain Disclosures
Exhibit A - Schedule of Investors
Exhibit B - Form of Note
Exhibit C - Form of Warrant
12
<PAGE>
EXHIBIT C
FORM OF WARRANT
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
SILICON VALLEY RESEARCH, INC.
WARRANT TO PURCHASE COMMON STOCK
Void after June 15, 2004
1. Warrant to Purchase Common Stock.
(a) Warrant to Purchase Shares. This warrant (the "Warrant") certifies that
--------------------------
in consideration of the receipt of $0.01 per share and for other good and
valuable consideration duly received, ___________________ (the "Warrant Holder")
is entitled, effective as of June __, 1999, subject to the terms and conditions
of this Warrant, to purchase from Silicon Valley Research, Inc., a California
corporation (the "Company"), up to a total of ___ shares of Common Stock, no par
value (the "Common Stock"), of the Company (the "Shares") at the price of $0.125
per share (the "Exercise Price") at any time or from time to time during the
period commencing on the date hereof until 5:00 p.m. Pacific Time on June 15,
2004 (the "Expiration Date"). This Warrant must be exercised, if at all, on or
before the Expiration Date. Unless the context otherwise requires, the term
"Shares" shall mean and include the stock and other securities and property at
any time receivable or issuable upon exercise of this Warrant. The term
"Warrant" as used herein, shall include this Warrant and any warrants delivered
in substitution or exchange therefor as provided herein.
(b) Adjustment of Exercise Price and Number of Shares. The number and
-------------------------------------------------
character of Shares issuable upon exercise of this Warrant (or any shares of
stock or other securities or property at the time receivable or issuable
13
<PAGE>
upon exercise of this Warrant) and the Exercise Price therefor are subject to
adjustment upon occurrence of the following events:
(A) Adjustment for Stock Splits, Stock Dividends, Recapitalizations,
----------------------------------------------------------------
etc. The Exercise Price of this Warrant and the number of Shares issuable
---
upon exercise of this Warrant shall each be proportionally adjusted to
reflect any stock dividend, stock split, reverse stock split, combination
of shares, reclassification, recapitalization or other similar event
altering the number of outstanding shares of the Company's Common Stock.
(B) Adjustment for Other Dividends and Distributions. In case the
------------------------------------------------
Company shall make or issue, or shall fix a record date for the
determination of eligible holders entitled to receive, a dividend or other
distribution with respect to the Shares payable in securities of the
Company then, and in each such case, the Warrant Holder, on exercise of
this Warrant at any time after the consummation, effective date or record
date of such event, shall receive, in addition to the Shares (or such other
stock or securities) issuable on such exercise prior to such date, the
securities of the Company to which such Warrant Holder would have been
entitled upon such date if such Warrant Holder had exercised this Warrant
immediately prior thereto (all subject to further adjustment as provided in
this Warrant).
(c) Adjustment for Capital Reorganization, Consolidation, Merger. If any
------------------------------------------------------------
capital reorganization of the capital stock of the Company, or any consolidation
or merger of the Company with or into another corporation, or the sale of all or
substantially all of the Company's assets to another corporation shall be
effected in such a way that holders of the Company's Common Stock will be
entitled to receive stock, securities or assets with respect to or in exchange
for the Company's Common Stock, and in each such case the Warrant Holder, upon
the exercise of this Warrant, at any time after the consummation of such capital
reorganization, consolidation, merger, or sale, shall be entitled to receive, in
lieu of the stock or other securities and property receivable upon the exercise
of this Warrant prior to such consummation, the stock or other securities or
property to which such Warrant Holder would have been entitled upon such
consummation if such Warrant Holder had exercised this Warrant immediately prior
to the consummation of such capital reorganization, consolidation, merger, or
sale, all subject to further adjustment as provided in this Section 1(c); and in
each such case, the terms of this Warrant shall be applicable to the shares of
stock or other
14
<PAGE>
securities or property receivable upon the exercise of this Warrant after such
consummation.
2. Manner of Exercise.
------------------
(a) Exercise Agreement. This Warrant may be exercised, in whole or in part,
------------------
on any business day on or prior to the Expiration Date. To exercise this
Warrant, the Warrant Holder must surrender to the Company this Warrant and
deliver to the Company: (i) a duly executed exercise agreement in the form
attached hereto as Exhibit A, or in such other form as may be approved by the
Company from time to time (the "Warrant Exercise Agreement"); (ii) if
applicable, a spousal consent in the form attached hereto as Exhibit B; and
(iii) payment in full of the Exercise Price for the number of Shares to be
purchased upon exercise hereof. If someone other than the Warrant Holder
exercises this Warrant, then such person must submit documentation reasonably
acceptable to the Company that such person has the right to exercise this
Warrant. Upon a partial exercise, this Warrant shall be surrendered, and a new
Warrant of the same tenor for purchase of the number of remaining Shares not
previously purchased shall be issued by the Company to the Warrant Holder. This
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the Shares issuable upon such exercise shall be
treated for all purposes as the holder of record of such Shares as of the close
of business on such date.
(b) Limitations on Exercise. This Warrant may not be exercised for fewer
-----------------------
than 1,000 Shares unless it is exercised for all Shares as to which this Warrant
is then exercisable.
(c) Payment. The Warrant Exercise Agreement shall be accompanied by full
-------
payment of the Exercise Price for the Shares being purchased in cash (by check),
or where permitted by law:
(A) by cancellation of indebtedness of the Company to the Warrant
Holder;
(B) by surrender of Shares of the Company's Common Stock that are
clear of all liens, claims, encumbrances or security interests or were
obtained by the Warrant Holder in the public market;
(C) provided that a public market for the Company's stock exists, (1)
through a "same-day-sale" commitment from the Warrant Holder and a broker-
dealer that is a member of the National Association of
15
<PAGE>
Securities Dealers (an "NASD Dealer") whereby the Warrant Holder
irrevocably elects to exercise this Warrant and to sell a portion of the
Shares so purchased to pay for the Exercise Price and whereby the NASD
Dealer irrevocably commits upon receipt of such Shares to forward the
Exercise Price directly to the Company, or (2) through a "margin"
commitment from the Warrant Holder and an NASD Dealer whereby the Warrant
Holder irrevocably elects to exercise this Warrant and to pledge the Shares
so purchased to the NASD Dealer in a margin account as security for a loan
from the NASD Dealer in the amount of the Exercise Price, and whereby the
NASD Dealer irrevocably commits upon receipt of such Shares to forward the
Exercise Price directly to the Company;
(D) by "Net Exercise," in which case the Company shall deliver to the
Warrant Holder (without payment of any additional Exercise Price) that
number of Shares equal to the quotient obtained by dividing:
1) the value of the Shares purchased upon exercise at the time of
exercise (such value to be determined by subtracting (i) the aggregate
Exercise Price for such Shares as in effect immediately prior to
exercise from (ii) the aggregate Fair Market Value (as defined in
Section 12 below) for such Shares immediately prior to the exercise of
this Warrant), by
2) the Fair Market Value of one (1) Share immediately prior to
exercise; or
(E) by any combination of the foregoing.
(d) Tax Withholding. Prior to the issuance of the Shares upon exercise of
---------------
this Warrant, the Warrant Holder must pay or provide for any applicable federal
or state withholding obligations of the Company.
(e) Issuance of Shares. Provided that the Exercise Agreement and payment
------------------
have been received by the Company as provided above, the Company shall issue the
Shares (adjusted as provided herein) registered in the name of the Warrant
Holder, the Warrant Holder's authorized assignee, or the Warrant Holder's legal
representative, and shall deliver certificates representing the Shares with the
appropriate legends affixed thereto.
3. Compliance with Laws and Regulations. The exercise of this Warrant and
------------------------------------
the issuance and transfer of Shares shall be subject to compliance by the
Company and the Warrant Holder with all applicable requirements of federal
16
<PAGE>
and state securities laws and with all applicable requirements of any stock
exchange and/or over-the-counter market on which the Company's Common Stock may
be listed at the time of such issuance or transfer.
4. Transfer and Exchange. This Warrant and the rights hereunder may not be
---------------------
transferred, in whole or in part, without the Company's prior written consent,
which consent shall not be unreasonably withheld, and may not be transferred
unless such transfer complies with all applicable securities laws. If a transfer
of all or part of this Warrant is permitted as provided in the preceding
sentence, then this Warrant and all rights hereunder may be transferred, in
whole or in part, on the books of the Company maintained for such purpose at the
principal office of the Company, by the Warrant Holder hereof in person, or by a
duly authorized attorney, upon surrender of this Warrant properly endorsed and
upon payment of any necessary transfer tax or other governmental charge imposed
upon such transfer. Upon any permitted partial transfer, the Company will issue
and deliver to the Warrant Holder a new Warrant or Warrants with respect to the
Warrants not so transferred. Each taker and holder of this Warrant, by taking or
holding the same, consents and agrees to be bound by the terms, conditions,
representations and warranties hereof (and as a condition to any transfer of
this Warrant the transferee shall execute an agreement confirming the same) and,
when this Warrant shall have been so endorsed, the person in possession of this
Warrant may be treated by the Company, and all other persons dealing with this
Warrant, as the absolute owner hereof for any purpose and as the person entitled
to exercise the rights represented hereby, any notice to the contrary
notwithstanding; provided, however, that until a transfer of this Warrant is
-------- -------
duly registered on the books of the Company, the Company may treat the Warrant
Holder hereof as the owner of this Warrant for all purposes.
5. Registration Rights. The Company agrees to file a registration statement
-------------------
under the 1933 Act for the Warrant Shares on or before June 8, 1999 and
thereafter shall use its best efforts to secure the effectiveness of such
registration statement within ninety (90) days following the date of this
Warrant. The Company will pay all expenses incurred in connection with the
preparation and filing of such registration statement.
6. Privileges of Stock Ownership. The Warrant Holder shall not have any of
-----------------------------
the rights of a shareholder with respect to any Shares until the Warrant Holder
exercises this Warrant and pays the Exercise Price.
17
<PAGE>
7. Entire Agreement. The Warrant Exercise Agreement is incorporated herein
----------------
by reference. This Warrant and the Warrant Exercise Agreement constitute the
entire agreement of the parties and supersede all prior undertakings and
agreements with respect to the subject matter hereof.
8. Notices. Any notice required to be given or delivered to the Company
-------
under the terms of this Warrant shall be in writing and addressed to the
Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to the Warrant Holder shall be in
writing and addressed to the Warrant Holder at the address indicated below or to
such other address as such party may designate in writing from time to time to
the Company. All notices shall be deemed to have been given or delivered upon:
personal delivery; five (5) days after deposit in the United States mail by
certified or registered mail (return receipt requested); one (1) business day
after deposit with any return receipt express courier (prepaid); or one (1)
business day after transmission by fax or telecopier.
9. Successors and Assigns. This Warrant shall be binding upon and inure to
----------------------
the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer set forth herein, this Warrant shall be binding upon
the Warrant Holder and the Warrant Holder's heirs, executors, administrators,
legal representatives, successors and assigns.
10. Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California.
11. Acceptance. The Warrant Holder has read and understands the terms and
----------
provisions of this Warrant, and accepts this Warrant subject to all the terms
and conditions hereof. The Warrant Holder acknowledges that there may be adverse
tax consequences upon exercise of this Warrant or disposition of the Shares and
that the Warrant Holder should consult a tax adviser prior to such exercise or
disposition.
12. Definition of Fair Market Value. As used herein, "Fair Market Value"
-------------------------------
means, as of any date, the value of a share of the Company's Common Stock
determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National Market
or the Nasdaq SmallCap Market, its last reported sale price on the Nasdaq
National Market or the Nasdaq SmallCap Market or, if no such
18
<PAGE>
reported sale takes place on such date, the average of the closing bid and
asked prices;
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, the last reported sale price or, if no such
reported sale takes place on such date, the average of the closing bid and
asked prices on the principal national securities exchange on which the
Common Stock is listed or admitted to trading;
(c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market or the Nasdaq SmallCap Market, nor listed or
admitted to trading on a national securities exchange, the average of the
closing bid and asked prices on such date, as reported by The National
Quotation Bureau, for the over-the-counter market; or
(d) if none of the foregoing is applicable, by the Board of Directors
of the Company in good faith.
19
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed in
duplicate by its duly authorized representative and the Warrant Holder has
executed this Warrant in duplicate as of June __ 1999.
SILICON VALLEY RESEARCH, INC. WARRANT HOLDER
-------------------------------------
By:
-------------------------------- -------------------------------------
(Signature)
-------------------------------- -------------------------------------
(Please print name and title) (Please print name and title)
By: Address:
--------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------- -------------------------------------
(Please print name and title)
Address:
6360 San Ignacio Avenue
San Jose, CA 95119
20
<PAGE>
EXHIBIT A
SILICON VALLEY RESEARCH, INC.
WARRANT EXERCISE AGREEMENT
SILICON VALLEY RESEARCH, INC.
6360 San Ignacio Avenue
San Jose, California 95119-1231
The Warrant Holder hereby elects to purchase the number of shares (the
"Shares") of the Common Stock of Silicon Valley Research, Inc. (the "Company")
as set forth below, pursuant to that certain Warrant dated as of the date set
forth below (the "Warrant"), the terms and conditions of which are hereby
incorporated by reference (please print):
Warrant Holder: Warrant Date:
--------------------- ------------------------
Social Security or Date of Exercise:
Federal Tax I.D. No.: --------------------
--------------- Exercise Price Per Share:
------------
Address: Number of Shares Purchased:
---------------------------- ----------
Total Exercise Price:
----------------
The Warrant Holder hereby delivers to the Company the Total Exercise Price
as follows (check and complete as appropriate):
[ ] in cash in the amount of $________, receipt of which is
acknowledged by the Company;
[ ] by cancellation of indebtedness of the Company to the Warrant
Holder in the amount of $________;
[ ] by delivery of ___________ fully paid, nonassessable and vested
shares of the Common Stock of the Company either owned by the
Warrant Holder or obtained by the Warrant Holder in the open public
market valued at the current fair market value of $___________ per
share;
[ ] through a "same-day-sale" commitment from the Warrant Holder and
the broker named below in the amount of $_________ and
substantially in the form attached hereto as Attachment 1;
[ ] through a "margin" commitment from the Warrant Holder and the
broker named below in the amount of $_________ and substantially in
the form attached hereto as Attachment 2;
or
[ ] by "Net Exercise".
Broker Name __________________ Brokerage Firm _______________________
<PAGE>
EXHIBIT B
SPOUSE CONSENT
The undersigned spouse of the Warrant Holder has read, understands, and
hereby approves the Warrant Exercise Agreement between the Warrant Holder and
the Company (the "Agreement"). In consideration of the Company's granting my
spouse the right to purchase the Shares as set forth in the Agreement, the
undersigned hereby agrees to be irrevocably bound by the Agreement and further
agrees that any community property interest shall similarly be bound by the
Agreement. The undersigned hereby appoints the Warrant Holder as my
attorney-in-fact with respect to any amendment or exercise of any rights under
the Agreement.
Date:
------------------ ----------------------------------------------
Purchaser's Spouse
Address:
----------------------------------------------
----------------------------------------------
----------------------------------------------
22
<PAGE>
The Warrant Holder hereby confirms, represents and warrants the
following:
(a) Purchase for Own Account for Investment. Such Warrant Holder is
purchasing the Shares for investment purposes only and not with a view to, or
for sale in connection with, a distribution of the Shares within the meaning of
the Securities Act of 1933, as amended (the "1933 Act"). Such Warrant Holder
has no present intention of selling or otherwise disposing of all or any portion
of the Shares.
(b) Access to Information. Such Warrant Holder has had an opportunity
to ask questions of the Company's representatives concerning the Company, its
present and prospective business, assets, liabilities and financial condition
that such Warrant Holder reasonably considers important in making the decision
to purchase the Shares.
(c) Understanding of Risks. Such Warrant Holder is fully aware of:
(i) the highly speculative nature of the investment in the Shares; (ii) the
financial hazards involved; (iii) the lack of liquidity of the Shares and the
restrictions on the transferability of the Shares (e.g., that such Warrant
Holder may not be able to sell or dispose of the Shares); and (iv) the tax
consequences of an investment in the Shares.
(d) Warrant Holder's Qualifications. Such Warrant Holder is an
"accredited" investor as defined under Regulation D under the 1933 Act. Such
Warrant Holder is aware of the general business and financial circumstances of
the Company and, by reason of such Warrant Holder's business or financial
experience, such Warrant Holder is capable of evaluating the merits and risks of
this investment and is financially capable of bearing a total loss of this
investment.
(e) Compliance with Securities Laws. Such Warrant Holder understands
and acknowledges that, in reliance upon the representations and warranties made
by such Warrant Holder herein, the Shares are not currently registered with the
U.S. Securities and Exchange Commission (the "SEC") under the 1933 Act or being
qualified under the California
A-2
<PAGE>
Corporate Securities Law of 1968, as amended (the "California Law"), but instead
are being issued under an exemption or exemptions from the registration and
qualification requirements of the 1933 Act and the California Law or other
applicable state securities laws which impose certain restrictions on such
Warrant Holder's ability to transfer the Shares and Warrant Shares.
(f) Restrictions on Transfer. Such Warrant Holder understands that
such Warrant Holder may not transfer any of the Shares unless such Shares are
registered under the 1933 Act or unless, in the opinion of counsel to the
Company, exemptions from such registration and qualification requirements are
available. Such Warrant Holder understands that only the Company may file a
registration statement with the SEC. Such Warrant Holder has also been advised
that exemptions from registration and qualification may not be available or may
not permit such Warrant Holder to transfer all or any of the Shares in the
amounts or at the times proposed by such Warrant Holder.
(g) Rule 144. In addition, such Warrant Holder has been advised that
SEC Rule 144 ("Rule 144") promulgated under the 1933 Act, which permits certain
limited sales of unregistered securities, is not presently available with
respect to the Shares solely due to the holding periods required thereunder and,
in any event, requires that the Shares be held for a minimum of one year after
they have been purchased and paid for (within the meaning of Rule 144), before
they may be resold under Rule 144. Such Warrant Holder understands that Rule
144 may indefinitely restrict transfer of the Shares if such Warrant Holder is
an "affiliate" of the Company and "current public information" about the Company
(as defined in Rule 144) is not publicly available.
(h) Legends and Stop-Transfer Orders. Such Warrant Holder understands
that certificates or other instruments representing any of the Shares acquired
by such Warrant Holder may bear legends substantially similar to the following,
in addition to any other legends required by federal or state laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF ANY OTHER STATE. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE
SECURITIES
A-3
<PAGE>
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS
SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS
OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF
THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS UNLESS SOLD PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT.
In order to ensure and enforce compliance with the restrictions imposed by
applicable law and those referred to in the foregoing legend, or elsewhere
herein, the Company may issue appropriate "stop transfer" instructions to its
transfer agent, if any, with respect to any certificate or other instrument
representing the Shares and Warrant Shares, or if the Company transfers its own
securities, it may make appropriate notations to the same effect in the
Company's records. Any legend endorsed on a certificate pursuant to this
Subsection (i) and the related stop transfer instructions with respect to such
securities shall be removed, and the Company shall issue a certificate without
such legend to the holder thereof, if such securities are registered under the
Securities Act and a prospectus meeting the requirements of Section 10 of the
Securities Act is available, if such legend may be properly removed under the
terms of Rule 144 promulgated under the Securities Act or if such holder
provides the Company with an opinion of counsel for such holder, reasonably
satisfactory to legal counsel for the Company, to the effect that a sale,
transfer or assignment of such securities may be made without registration.
(i) Tax Consequences. THE COMPANY IS UNDER NO OBLIGATION TO REPORT THE
EXERCISE OF YOUR WARRANT TO THE INTERNAL REVENUE SERVICE OR ANY STATE OR LOCAL
INCOME TAX AUTHORITY. THE WARRANT HOLDER UNDERSTANDS THAT THE WARRANT HOLDER
MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF THE WARRANT HOLDER'S PURCHASE
OR DISPOSITION OF THE SHARES. THE WARRANT HOLDER REPRESENTS THAT THE WARRANT
HOLDER HAS CONSULTED WITH ANY TAX CONSULTANT(S) THE WARRANT HOLDER DEEMS
ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND THAT
THE WARRANT HOLDER IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE.
-------------------------------------
Signature of Warrant Holder
A-4
<PAGE>
ATTACHMENT 1
SAME-DAY-SALE COMMITMENT
Date:
-------------
SILICON VALLEY RESEARCH, INC.
6360 San Ignacio Avenue
San Jose, California 95119-1231
The undersigned Warrant Holder ("Warrant Holder") desires to exercise
that certain warrant described in the attached Warrant Exercise Agreement (the
"Warrant") with respect to ________ shares of your Common Stock (the "Number of
Shares"), and to sell immediately ________ of the Number of Shares (the "Same-
Day-Sale Shares") through the undersigned broker (the "Broker") and for the
Broker to pay directly to you from the proceeds from such sale $___________ (the
"Exercise Price").
Accordingly, the Warrant Holder hereby represents as follows: (i)
Warrant Holder hereby irrevocably exercises the Warrant with respect to the
Number of Shares; and (ii) Warrant Holder hereby irrevocably elects to sell
through Broker the Same-Day-Sale Shares and unconditionally authorizes you or
your transfer agent to deliver certificates representing the Same-Day-Sale
Shares to the Broker.
The Broker hereby represents as follows: (i) the Broker is a member in
good standing of the National Association of Securities Dealers; and (ii) the
Broker irrevocably commits to pay to you, no more than one (1) business day
after receiving certificates representing the Same-Day-Sale Shares, the Exercise
Price by check or wire transfer to an account specified by you.
WARRANT HOLDER: BROKER:
- ------------------------------ -----------------------------------
(Signature) (Name of Firm)
- ------------------------------ -----------------------------------
(Printed Name and Title) (Signature)
-----------------------------------
(Printed Name)
-----------------------------------
(Title)
<PAGE>
ATTACHMENT 2
MARGIN COMMITMENT
Date:
------------
SILICON VALLEY RESEARCH, INC.
6360 San Ignacio Avenue
San Jose, California 95119-1231
The undersigned Warrant Holder ("Warrant Holder") desires to exercise
that certain warrant described in the attached Warrant Exercise Agreement (the
"Warrant") with respect to _________ shares of your Common Stock (the "Number of
Shares"), and to sell immediately ________ of the Number of Shares (the "Margin
Shares") through the undersigned broker (the "Broker") and for the Broker to pay
directly to you from the proceeds from such sale $___________ (the "Exercise
Price").
Accordingly, the Warrant Holder hereby represents as follows: (i)
Warrant Holder hereby irrevocably exercises the Warrant with respect to the
Number of Shares; and (ii) Warrant Holder hereby irrevocably elects to sell
through Broker the Margin Shares and unconditionally authorizes you or your
transfer agent to deliver certificates representing the Margin Shares to the
Broker.
The Broker hereby represents as follows: (i) the Broker is a member in
good standing of the National Association of Securities Dealers; and (ii) the
Broker irrevocably commits to pay to you, no more than one (1) business day
after receiving certificates representing the Margin Shares, the Exercise Price
by check or wire transfer to an account specified by you.
WARRANT HOLDER: BROKER:
- ------------------------------ -----------------------------------
(Signature) (Name of Firm)
- ------------------------------ -----------------------------------
(Printed Name and Title) (Signature)
-----------------------------------
(Printed Name)
-----------------------------------
(Title)
<PAGE>
Exhibit 4.02
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
SILICON VALLEY RESEARCH, INC.
WARRANT TO PURCHASE COMMON STOCK
Void after May 11, 2006
1. Warrant to Purchase Common Stock.
(a) Warrant to Purchase Shares. This warrant (the "Warrant")
certifies that for good and valuable consideration duly received, Imperial Bank
(the "Warrant Holder") is entitled, effective as of May 11, 1999, subject to the
terms and conditions of this Warrant, to purchase from Silicon Valley Research,
Inc., a California corporation (the "Company"), up to a total of 1,251,341
shares of Common Stock, no par value (the "Common Stock"), of the Company (the
"Shares") at the price of $0.125 per share (the "Exercise Price") at any time or
from time to time during the period commencing on the date hereof until 5:00
p.m. Pacific Time on May 11, 2006 (the "Expiration Date"). This Warrant must be
exercised, if at all, on or before the Expiration Date. Unless the context
otherwise requires, the term "Shares" shall mean and include the stock and other
securities and property at any time receivable or issuable upon exercise of this
Warrant. The term "Warrant" as used herein, shall include this Warrant and any
warrants delivered in substitution or exchange therefor as provided herein.
(b) Adjustment of Exercise Price and Number of Shares. The number and
character of Shares issuable upon exercise of this Warrant (or any shares of
stock or other securities or property at the time receivable or issuable upon
exercise of this Warrant) and the Exercise Price therefor are subject to
adjustment upon occurrence of the following events:
(A) Adjustment for Stock Splits, Stock Dividends, Recapitalizations,
etc. The Exercise Price of this
<PAGE>
Warrant and the number of Shares issuable upon exercise of this Warrant
shall each be proportionally adjusted to reflect any stock dividend, stock
split, reverse stock split, combination of shares, reclassification,
recapitalization or other similar event altering the number of outstanding
shares of the Company's Common Stock.
(B) Adjustment for Other Dividends and Distributions. In case the
Company shall make or issue, or shall fix a record date for the
determination of eligible holders entitled to receive, a dividend or other
distribution with respect to the Shares payable in securities of the
Company then, and in each such case, the Warrant Holder, on exercise of
this Warrant at any time after the consummation, effective date or record
date of such event, shall receive, in addition to the Shares (or such other
stock or securities) issuable on such exercise prior to such date, the
securities of the Company to which such Warrant Holder would have been
entitled upon such date if such Warrant Holder had exercised this Warrant
immediately prior thereto (all subject to further adjustment as provided in
this Warrant).
(c) Adjustment for Capital Reorganization, Consolidation, Merger. If
any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with or into another corporation, or the
sale of all or substantially all of the Company's assets to another corporation
shall be effected in such a way that holders of the Company's Common Stock will
be entitled to receive stock, securities or assets with respect to or in
exchange for the Company's Common Stock, and in each such case the Warrant
Holder, upon the exercise of this Warrant, at any time after the consummation of
such capital reorganization, consolidation, merger, or sale, shall be entitled
to receive, in lieu of the stock or other securities and property receivable
upon the exercise of this Warrant prior to such consummation, the stock or other
securities or property to which such Warrant Holder would have been entitled
upon such consummation if such Warrant Holder had exercised this Warrant
immediately prior to the consummation of such capital reorganization,
consolidation, merger, or sale, all subject to further adjustment as provided in
this Section 1(c); and in each such case, the terms of this Warrant shall be
applicable to the shares of stock or other securities or property receivable
upon the exercise of this Warrant after such consummation.
2
<PAGE>
2. Manner of Exercise.
(a) Exercise Agreement. This Warrant may be exercised, in whole or in
part, on any business day on or prior to the Expiration Date. To exercise this
Warrant, the Warrant Holder must surrender to the Company this Warrant and
deliver to the Company: (i) a duly executed exercise agreement in the form
attached hereto as Exhibit A, or in such other form as may be approved by the
Company from time to time (the "Warrant Exercise Agreement"); (ii) if
applicable, a spousal consent in the form attached hereto as Exhibit B; and
(iii) payment in full of the Exercise Price for the number of Shares to be
purchased upon exercise hereof. If someone other than the Warrant Holder
exercises this Warrant, then such person must submit documentation reasonably
acceptable to the Company that such person has the right to exercise this
Warrant. Upon a partial exercise, this Warrant shall be surrendered, and a new
Warrant of the same tenor for purchase of the number of remaining Shares not
previously purchased shall be issued by the Company to the Warrant Holder. This
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the Shares issuable upon such exercise shall be
treated for all purposes as the holder of record of such Shares as of the close
of business on such date.
(b) Limitations on Exercise. This Warrant may not be exercised for
fewer than 1,000 Shares unless it is exercised for all Shares as to which this
Warrant is then exercisable.
(c) Payment. The Warrant Exercise Agreement shall be accompanied by
full payment of the Exercise Price for the Shares being purchased in cash (by
check), or where permitted by law:
(A) by cancellation of indebtedness of the Company to the Warrant
Holder;
(B) by surrender of Shares of the Company's Common Stock that are
clear of all liens, claims, encumbrances or security interests or were
obtained by the Warrant Holder in the public market;
(C) provided that a public market for the Company's stock exists, (1)
through a "same-day-sale" commitment from the Warrant Holder and a broker-
dealer that is a member of the National Association of
3
<PAGE>
Securities Dealers (an "NASD Dealer") whereby the Warrant Holder
irrevocably elects to exercise this Warrant and to sell a portion of the
Shares so purchased to pay for the Exercise Price and whereby the NASD
Dealer irrevocably commits upon receipt of such Shares to forward the
Exercise Price directly to the Company, or (2) through a "margin"
commitment from the Warrant Holder and an NASD Dealer whereby the Warrant
Holder irrevocably elects to exercise this Warrant and to pledge the Shares
so purchased to the NASD Dealer in a margin account as security for a loan
from the NASD Dealer in the amount of the Exercise Price, and whereby the
NASD Dealer irrevocably commits upon receipt of such Shares to forward the
Exercise Price directly to the Company;
(D) by "Net Exercise," in which case the Company shall deliver to the
Warrant Holder (without payment of any additional Exercise Price) that
number of shares equal to the quotient obtained by dividing:
1) the value of the Shares purchased upon exercise at the time
of exercise (such value to be determined by subtracting (i) the
aggregate Exercise Price for such Shares as in effect immediately
prior to exercise from (ii) the aggregate Fair Market Value (as
defined in Section 12 below) for such Shares immediately prior to the
exercise of this Warrant), by
2) the Fair Market Value of one (1) Share immediately prior to
exercise; or
(E) by any combination of the foregoing.
(d) Tax Withholding. Prior to the issuance of the Shares upon
exercise of this Warrant, the Warrant Holder must pay or provide for any
applicable federal or state withholding obligations of the Company.
(e) Issuance of Shares. Provided that the Exercise Agreement and
payment have been received by the Company as provided above, the Company shall
issue the Shares (adjusted as provided herein) registered in the name of the
Warrant Holder, the Warrant Holder's authorized assignee, or the Warrant
Holder's legal representative, and shall deliver certificates representing the
Shares with the appropriate legends affixed thereto.
3. Compliance with Laws and Regulations. The exercise of this
Warrant and the issuance and transfer of
4
<PAGE>
Shares shall be subject to compliance by the Company and the Warrant Holder with
all applicable requirements of federal and state securities laws and with all
applicable requirements of any stock exchange and/or over-the-counter market on
which the Company's Common Stock may be listed at the time of such issuance or
transfer.
4. Transfer and Exchange. This Warrant and the rights hereunder may
not be transferred, in whole or in part, without the Company's prior written
consent, which consent shall not be unreasonably withheld, and may not be
transferred unless such transfer complies with all applicable securities laws.
If a transfer of all or part of this Warrant is permitted as provided in the
preceding sentence, then this Warrant and all rights hereunder may be
transferred, in whole or in part, on the books of the Company maintained for
such purpose at the principal office of the Company, by the Warrant Holder
hereof in person, or by a duly authorized attorney, upon surrender of this
Warrant properly endorsed and upon payment of any necessary transfer tax or
other governmental charge imposed upon such transfer. Upon any permitted
partial transfer, the Company will issue and deliver to the Warrant Holder a new
Warrant or Warrants with respect to the Warrants not so transferred. Each taker
and holder of this Warrant, by taking or holding the same, consents and agrees
to be bound by the terms, conditions, representations and warranties hereof (and
as a condition to any transfer of this Warrant the transferee shall execute an
agreement confirming the same) and, when this Warrant shall have been so
endorsed, the person in possession of this Warrant may be treated by the
Company, and all other persons dealing with this Warrant, as the absolute owner
hereof for any purpose and as the person entitled to exercise the rights
represented hereby, any notice to the contrary notwithstanding; provided,
however, that until a transfer of this Warrant is duly registered on the books
of the Company, the Company may treat the Warrant Holder hereof as the owner of
this Warrant for all purposes.
5. Registration Rights. The Company agrees to file a registration
statement under the 1933 Act for the Warrant Shares on or before June 8, 1999
and thereafter shall use its best efforts to secure the effectiveness of such
registration statement within ninety (90) days following the date of this
Warrant. The Company will pay all expenses incurred in connection with the
preparation and filing of such registration statement.
6. Privileges of Stock Ownership. The Warrant Holder shall not have
any of the rights of a shareholder with respect to any Shares until the Warrant
Holder exercises this
5
<PAGE>
Warrant and pays the Exercise Price.
7. Entire Agreement. The Warrant Exercise Agreement is incorporated
herein by reference. This Warrant and the Warrant Exercise Agreement constitute
the entire agreement of the parties and supersede all prior undertakings and
agreements with respect to the subject matter hereof.
8. Notices. Any notice required to be given or delivered to the
Company under the terms of this Warrant shall be in writing and addressed to the
Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to the Warrant Holder shall be in
writing and addressed to the Warrant Holder at the address indicated below or to
such other address as such party may designate in writing from time to time to
the Company. All notices shall be deemed to have been given or delivered upon:
personal delivery; five (5) days after deposit in the United States mail by
certified or registered mail (return receipt requested); one (1) business day
after deposit with any return receipt express courier (prepaid); or one (1)
business day after transmission by fax or telecopier.
9. Successors and Assigns. This Warrant shall be binding upon and
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer set forth herein, this Warrant shall be binding
upon the Warrant Holder and the Warrant Holder's heirs, executors,
administrators, legal representatives, successors and assigns.
10. Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of California as such laws are applied
to agreements between California residents entered into and to be performed
entirely within California.
11. Acceptance. The Warrant Holder has read and understands the
terms and provisions of this Warrant, and accepts this Warrant subject to all
the terms and conditions hereof. The Warrant Holder acknowledges that there may
be adverse tax consequences upon exercise of this Warrant or disposition of the
Shares and that the Warrant Holder should consult a tax adviser prior to such
exercise or disposition.
12. Definition of Fair Market Value. As used herein, "Fair Market
Value" means, as of any date, the value of a share of the Company's Common Stock
determined as follows:
6
<PAGE>
(a) if such Common Stock is then quoted on the Nasdaq National Market
or the Nasdaq SmallCap Market, its last reported sale price on the Nasdaq
National Market or the Nasdaq SmallCap Market or, if no such reported sale
takes place on such date, the average of the closing bid and asked prices;
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, the last reported sale price or, if no such
reported sale takes place on such date, the average of the closing bid and
asked prices on the principal national securities exchange on which the
Common Stock is listed or admitted to trading;
(c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market or the Nasdaq SmallCap Market, nor listed or
admitted to trading on a national securities exchange, the average of the
closing bid and asked prices on such date, as reported by The National
Quotation Bureau, for the over-the-counter market; or
(d) if none of the foregoing is applicable, by the Board of Directors
of the Company in good faith.
7
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
in duplicate by its duly authorized representative and the Warrant Holder has
executed this Warrant in duplicate as of May 11, 1999.
SILICON VALLEY RESEARCH, WARRANT HOLDER
INC.
---------------------------------
By:
------------------------------- ---------------------------------
(Signature)
- ----------------------------------- ---------------------------------
(Please print name and title) (Please print name and title)
Address: Address:
6360 San Ignacio Avenue ---------------------------------
San Jose, CA 95119 ---------------------------------
---------------------------------
---------------------------------
[Signature page to Silicon Valley Research, Inc. Warrant to purchase Common
Stock]
8
<PAGE>
EXHIBIT A
SILICON VALLEY RESEARCH, INC.
WARRANT EXERCISE AGREEMENT
SILICON VALLEY RESEARCH, INC.
6360 San Ignacio Avenue
San Jose, California 95119-1231
The Warrant Holder hereby elects to purchase the number of shares (the
"Shares") of the Common Stock of Silicon Valley Research, Inc. (the "Company")
as set forth below, pursuant to that certain Warrant dated as of the date set
forth below (the "Warrant"), the terms and conditions of which are hereby
incorporated by reference (please print):
Warrant Holder: Warrant Date:
---------------------- ----------------------
Social Security or Date of Exercise:
------------------
Federal Tax I.D. No.: Exercise Price Per Share:
---------------- ----------
Address: Number of Shares Purchased:
----------------------------- --------
Total Exercise Price:
- ------------------------------------- --------------
- -------------------------------------
The Warrant Holder hereby delivers to the Company the Total Exercise
Price as follows (check and complete as appropriate):
[ ] in cash in the amount of $________, receipt of which is acknowledged
by the Company;
[ ] by cancellation of indebtedness of the Company to the Warrant Holder
in the amount of $________;
[ ] by delivery of ___________ fully paid, nonassessable and vested shares
of the Common Stock of the Company either owned by the Warrant Holder
or obtained by the Warrant Holder in the open public market valued at
the current fair market value of $___________ per share;
[ ] through a "same-day-sale" commitment from the Warrant Holder and the
broker named below in the amount of $_________ and substantially in
the form attached hereto as Attachment 1;
[ ] through a "margin" commitment from the Warrant Holder and the broker
named below in the amount of $_________ and substantially in the form
attached hereto as Attachment 2;
or
[ ] by "Net Exercise".
Broker Name: Brokerage Firm:
----------------------- ---------------------------
<PAGE>
The Warrant Holder hereby confirms, represents and warrants the
following:
(a) Purchase for Own Account for Investment. Such Warrant Holder is
purchasing the Shares for investment purposes only and not with a view to, or
for sale in connection with, a distribution of the Shares within the meaning of
the Securities Act of 1933, as amended (the "1933 Act"). Such Warrant Holder
has no present intention of selling or otherwise disposing of all or any portion
of the Shares.
(b) Access to Information. Such Warrant Holder has had an opportunity
to ask questions of the Company's representatives concerning the Company, its
present and prospective business, assets, liabilities and financial condition
that such Warrant Holder reasonably considers important in making the decision
to purchase the Shares. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 3 of this Agreement or
the rights of the Warrant Holder to rely thereon.
(c) Understanding of Risks. Such Warrant Holder is fully aware of:
(i) the highly speculative nature of the investment in the Shares; (ii) the
financial hazards involved; (iii) the lack of liquidity of the Shares and the
restrictions on the transferability of the Shares (e.g., that such Warrant
Holder may not be able to sell or dispose of the Shares); and (iv) the tax
consequences of an investment in the Shares. The foregoing, however, does not
limit or modify the representations and warranties of the Company in Section 3
of this Agreement and the rights of the Warrant Holder to rely thereon.
(d) Warrant Holder's Qualifications. Such Warrant Holder is an
"accredited" investor as defined under Regulation D under the 1933 Act. Such
Warrant Holder is aware of the general business and financial circumstances of
the Company and, by reason of such Warrant Holder's business or financial
experience, such Warrant Holder is capable of evaluating the merits and risks of
this investment and is financially capable of bearing a total loss of this
investment.
(e) Compliance with Securities Laws. Such Warrant Holder understands
and acknowledges that, in reliance upon the representations and warranties made
by such Warrant Holder herein, the Shares are not currently registered with the
U.S. Securities and Exchange Commission (the "SEC") under the 1933 Act or being
qualified under the California
A-2
<PAGE>
Corporate Securities Law of 1968, as amended (the "California Law"), but instead
are being issued under an exemption or exemptions from the registration and
qualification requirements of the 1933 Act and the California Law or other
applicable state securities laws which impose certain restrictions on such
Warrant Holder's ability to transfer the Shares and Warrant Shares.
(f) Restrictions on Transfer. Such Warrant Holder understands that
such Warrant Holder may not transfer any of the Shares unless such Shares are
registered under the 1933 Act or unless, in the opinion of counsel to the
Company, exemptions from such registration and qualification requirements are
available. Such Warrant Holder understands that only the Company may file a
registration statement with the SEC. Such Warrant Holder has also been advised
that exemptions from registration and qualification may not be available or may
not permit such Warrant Holder to transfer all or any of the Shares in the
amounts or at the times proposed by such Warrant Holder.
(g) Rule 144. In addition, such Warrant Holder has been advised that
SEC Rule 144 ("Rule 144") promulgated under the 1933 Act, which permits certain
limited sales of unregistered securities, is not presently available with
respect to the Shares solely due to the holding periods required thereunder and,
in any event, requires that the Shares be held for a minimum of one year after
they have been purchased and paid for (within the meaning of Rule 144), before
they may be resold under Rule 144. Such Warrant Holder understands that Rule
144 may indefinitely restrict transfer of the Shares if such Warrant Holder is
an "affiliate" of the Company and "current public information" about the Company
(as defined in Rule 144) is not publicly available.
(h) Legends and Stop-Transfer Orders. Such Warrant Holder understands
that certificates or other instruments representing any of the Shares acquired
by such Warrant Holder may bear legends substantially similar to the following,
in addition to any other legends required by federal or state laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF ANY OTHER STATE. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE
SECURITIES
A-3
<PAGE>
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS
SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS
OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF
THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS UNLESS SOLD PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT.
In order to ensure and enforce compliance with the restrictions imposed by
applicable law and those referred to in the foregoing legend, or elsewhere
herein, the Company may issue appropriate "stop transfer" instructions to its
transfer agent, if any, with respect to any certificate or other instrument
representing the Shares and Warrant Shares, or if the Company transfers its own
securities, it may make appropriate notations to the same effect in the
Company's records. Any legend endorsed on a certificate pursuant to this
Subsection (i) and the related stop transfer instructions with respect to such
securities shall be removed, and the Company shall issue a certificate without
such legend to the holder thereof, if such securities are registered under the
Securities Act and a prospectus meeting the requirements of Section 10 of the
Securities Act is available, if such legend may be properly removed under the
terms of Rule 144 promulgated under the Securities Act or if such holder
provides the Company with an opinion of counsel for such holder, reasonably
satisfactory to legal counsel for the Company, to the effect that a sale,
transfer or assignment of such securities may be made without registration.
Tax Consequences. THE COMPANY IS UNDER NO OBLIGATION TO REPORT THE
EXERCISE OF YOUR WARRANT TO THE INTERNAL REVENUE SERVICE OR ANY STATE OR LOCAL
INCOME TAX AUTHORITY. THE WARRANT HOLDER UNDERSTANDS THAT THE WARRANT HOLDER
MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF THE WARRANT HOLDER'S PURCHASE
OR DISPOSITION OF THE SHARES. THE WARRANT HOLDER REPRESENTS THAT THE WARRANT
HOLDER HAS CONSULTED WITH ANY TAX CONSULTANT(S) THE WARRANT HOLDER DEEMS
ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND THAT
THE WARRANT HOLDER IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE.
-------------------------------------
Signature of Warrant Holder
A-4
<PAGE>
ATTACHMENT 1
SAME-DAY-SALE COMMITMENT
Date:
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SILICON VALLEY RESEARCH, INC.
6360 San Ignacio Avenue
San Jose, California 95119-1231
The undersigned Warrant Holder ("Warrant Holder") desires to exercise
that certain warrant described in the attached Warrant Exercise Agreement (the
"Warrant") with respect to ________ shares of your Common Stock (the "Number of
Shares"), and to sell immediately ________ of the Number of Shares (the "Same-
Day-Sale Shares") through the undersigned broker (the "Broker") and for the
Broker to pay directly to you from the proceeds from such sale $___________ (the
"Exercise Price").
Accordingly, the Warrant Holder hereby represents as follows: (i)
Warrant Holder hereby irrevocably exercises the Warrant with respect to the
Number of Shares; and (ii) Warrant Holder hereby irrevocably elects to sell
through Broker the Same-Day-Sale Shares and unconditionally authorizes you or
your transfer agent to deliver certificates representing the Same-Day-Sale
Shares to the Broker.
The Broker hereby represents as follows: (i) the Broker is a member in
good standing of the National Association of Securities Dealers; and (ii) the
Broker irrevocably commits to pay to you, no more than one (1) business day
after receiving certificates representing the Same-Day-Sale Shares, the Exercise
Price by check or wire transfer to an account specified by you.
WARRANT HOLDER: BROKER:
- ------------------------------ -----------------------------------
(Signature) (Name of Firm)
- ------------------------------ -----------------------------------
(Printed Name and Title) (Signature)
-----------------------------------
(Printed Name)
-----------------------------------
(Title)
<PAGE>
ATTACHMENT 2
MARGIN COMMITMENT
Date:
------------
SILICON VALLEY RESEARCH, INC.
6360 San Ignacio Avenue
San Jose, California 95119-1231
The undersigned Warrant Holder ("Warrant Holder") desires to exercise
that certain warrant described in the attached Warrant Exercise Agreement (the
"Warrant") with respect to _________ shares of your Common Stock (the "Number of
Shares"), and to sell immediately ________ of the Number of Shares (the "Margin
Shares") through the undersigned broker (the "Broker") and for the Broker to pay
directly to you from the proceeds from such sale $___________ (the "Exercise
Price").
Accordingly, the Warrant Holder hereby represents as follows: (i)
Warrant Holder hereby irrevocably exercises the Warrant with respect to the
Number of Shares; and (ii) Warrant Holder hereby irrevocably elects to sell
through Broker the Margin Shares and unconditionally authorizes you or your
transfer agent to deliver certificates representing the Margin Shares to the
Broker.
The Broker hereby represents as follows: (i) the Broker is a member in
good standing of the National Association of Securities Dealers; and (ii) the
Broker irrevocably commits to pay to you, no more than one (1) business day
after receiving certificates representing the Margin Shares, the Exercise Price
by check or wire transfer to an account specified by you.
WARRANT HOLDER: BROKER:
- ------------------------------ -----------------------------------
(Signature) (Name of Firm)
- ------------------------------ -----------------------------------
(Printed Name and Title) (Signature)
-----------------------------------
(Printed Name)
-----------------------------------
(Title)
<PAGE>
EXHIBIT B
SPOUSE CONSENT
The undersigned spouse of the Warrant Holder has read, understands,
and hereby approves the Warrant Exercise Agreement between the Warrant Holder
and the Company (the "Agreement"). In consideration of the Company's granting
my spouse the right to purchase the Shares as set forth in the Agreement, the
undersigned hereby agrees to be irrevocably bound by the Agreement and further
agrees that any community property interest shall similarly be bound by the
Agreement. The undersigned hereby appoints the Warrant Holder as my attorney-in-
fact with respect to any amendment or exercise of any rights under the
Agreement.
Date:
------------------- -----------------------------------
Purchaser's Spouse
Address:
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----------------------------
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<PAGE>
EXHIBIT 5.1
September 27, 1999
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Silicon Valley Research, Inc. Registration Statement on Form S-3
Ladies and Gentlemen:
As legal counsel to Silicon Valley Research, Inc., a California corporation
(the "Company"), we are rendering this opinion in connection with the
preparation and filing of a registration statement on Form S-3 (the
"Registration Statement") relating to the registration under the Securities Act
of 1933, as amended (the "Act") of 5,527,909 shares (the "Outstanding Shares")
of Common Stock, without par value, of the Company (the "Common Stock") held by
certain selling security holders and 11,629,250 shares (the "Warrant Shares") of
Common Stock issuable by the Company upon the exercise of warrants (the
"Warrants") issued to the selling security holders as set forth in the
Registration Statement to which this opinion is being filed as Exhibit 5.1.
We have examined such instruments, documents and records which we deemed
relevant and necessary for the basis of our opinion hereinafter expressed. In
such examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity to
the originals of all documents submitted to us as copies.
Based on such examination, we are of the opinion that the Outstanding Shares
are duly authorized, validly issued, fully paid and nonassessable and the
Warrant Shares are duly authorized and, if and when issued upon exercise of the
Warrants in accordance with the respective warrant agreements, will be validly
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the above-
referenced Registration Statement and to the use of our name wherever it appears
in said Registration Statement, including the Prospectus constituting a part
thereof, as originally filed or as subsequently amended. This consent is not to
be construed as an admission that we are a person whose consent is required to
be filed with the Registration Statement under the provisions of Section 7 of
the Act.
This opinion is to be used only in connection with the sale of the Shares
while the Registration Statement is in effect, and may not be used for other
purposes.
Respectfully submitted,
/s/ Rosenblum, Parish & Isaacs, P. C.
<PAGE>
EXHIBIT 23.1
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
Silicon Valley Research, Inc. on Form S-3, our report on the consolidated
financial statements of Silicon Valley Research, Inc. and its subsidiaries dated
June 10, 1999, appearing in the Annual Report on Form 10-K of Silicon Valley
Research, Inc. for the year ended March 31, 1999. We also consent to the
reference to our firm under the caption "Experts" in the Prospectus forming part
of such Registration Statement.
/s/ Moss Adams LLP
San Francisco, California
September 27, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated June 12, 1998 relating to the
consolidated financial statements as of March 31, 1998 and for each of the two
years then ended, which appears in Silicon Valley Research, Inc.'s Annual Report
on Form 10-K for the year ended March 31, 1999. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
San Jose, California
September 27, 1999
