<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 23, 2000
REGISTRATION NUMBER 333-35912
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------------
PINNACLE GLOBAL GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TEXAS 6211 76-0583569
(STATE OR OTHER PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OF CLASSIFICATION
ORGANIZATION) CODE NUMBER
5599 SAN FELIPE, SUITE 555
HOUSTON, TEXAS 77056
(713) 993-4610
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------------------
ROBERT E. GARRISON II
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PINNACLE GLOBAL GROUP, INC.
5599 SAN FELIPE, SUITE 555
HOUSTON, TEXAS 77056
(713) 993-4610
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S AGENT FOR SERVICE)
---------------------------
COPIES TO:
CHRIS A. FERAZZI
PORTER & HEDGES, L.L.P.
700 LOUISIANA, SUITE 3400
HOUSTON, TEXAS 77002-2764
(713) 226-0600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, 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, 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 this form is a post-effective amendment filed pursuant to Rule
462(d) 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, check the following box. / /
---------------------------
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 SECURITIES EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID 8(a), MAY DETERMINE.
===============================================================================
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT IS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 23, 2000
PROSPECTUS
7,125,220 SHARES
[LOGO PINNACLE GLOBAL GROUP, INC.]
COMMON STOCK
The selling shareholders identified in this prospectus are offering
up to 7,125,220 shares of our currently issued and outstanding common stock.
We are not offering any shares of our common stock for sale under
this prospectus, and we will not receive any of the proceeds from the sale of
shares by the selling shareholders under this prospectus.
Our common stock is traded on the Nasdaq National Market under the
symbol "PING." The last reported sale price for our common stock on the Nasdaq
National Market on May __, 2000 was $_____.
---------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
---------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is May ___, 2000
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
WHERE YOU CAN FIND MORE INFORMATION...............................................................................1
THE COMPANY.......................................................................................................2
RISK FACTORS......................................................................................................4
USE OF PROCEEDS..................................................................................................15
SELLING SHAREHOLDERS.............................................................................................16
PLAN OF DISTRIBUTION.............................................................................................18
DESCRIPTION OF OUR CAPITAL STOCK.................................................................................19
LEGAL MATTERS....................................................................................................21
EXPERTS..........................................................................................................21
</TABLE>
WHERE YOU CAN FIND MORE INFORMATION
This prospectus constitutes a part of a registration statement on
Form S-3 that we filed with the SEC under the Securities Act. This prospectus,
which forms a part of the registration statement, does not contain all the
information set forth in the registration statement. You should refer to the
registration statement and its related exhibits and schedules for further
information about our company and the shares offered in this prospectus.
Statements contained in this prospectus concerning the provisions of any
document are not necessarily complete and, in each instance, reference is made
to the copy of that document filed as an exhibit to the registration statement
or otherwise filed with the SEC, and each such statement is qualified by this
reference. The registration statement and its exhibits and schedules are on
file at the offices of the SEC and may be inspected without charge.
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file,
including the registration statement, at the SEC's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the Public
Reference Room. Our public filings are also available from commercial document
retrieval services and at the Internet World Wide Web site maintained by the
SEC at "http://www.sec.gov."
SEC rules allow us to include some of the information required to be
in the registration statement by incorporating that information by reference
to other documents we file with them. That means we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is an important part of this prospectus, and
information that we file later with the SEC will automatically update and
supersede this information. We incorporate by reference the documents listed
below and any future filings made with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act of 1934 until all of the securities covered by
this prospectus are sold:
- Annual Report on Form 10-K for the year ended December 31, 1999:
- Quarterly Report on Form 10-Q for the three months ended March 31,
2000;
- Current Reports on Form 8-K as filed on January 12, February 4, and
April 28, 2000; and
<PAGE>
- Definitive Proxy Statement on Schedule 14A dated December 6, 1999,
as supplemented by the Proxy Statement dated January 12, 2000.
You may request a copy of these filings, which we will provide to you
at no cost, by writing or telephoning us at the following address:
Pinnacle Global Group, Inc.
5599 San Felipe, Suite 555
Houston, Texas 77056
(713) 993-4610
Attention: Pamela S. Caloway, Secretary
You should rely only on the information incorporated by reference or
contained this prospectus. We have not authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. The selling shareholders
are not making an offer to sell these securities in any jurisdiction where the
offer or sale is not permitted. You should assume that the information
appearing in this prospectus is accurate as of the date on the front cover of
this prospectus only. Our business, financial condition, results of operations
and prospects may have changed since that date.
---------------------------
THE COMPANY
Pinnacle Global Group, Inc. provides a broad range of financial
services through its wholly owned operating subsidiaries. Our financial
services include institutional and retail brokerage, investment banking,
merchant banking, secondary market loan and loan servicing placement, trust
related services and asset management. We serve a diverse group of
institutional, corporate and individual clients.
We are the successor issuer to TEI Inc., which is now a wholly owned
subsidiary. During 1995, 1996 and 1997, we disposed of all of its operations
other than its liquid waste business and the related facility located in
Charlotte, North Carolina. The liquid waste business is operated as a
discontinued operation through our subsidiary Energy Recovery Resources, Inc.
From January 1997 through the first quarter of 1998, our management
actively evaluated strategies and financial alternatives for maximizing
shareholder value. In late April 1998, we reached an agreement in principle to
combine with three Houston-based financial services firms. These firms were
Harris Webb & Garrison, Inc., a full service regional investment banking,
brokerage and financial services firm serving the southwestern United States,
Pinnacle Management & Trust Company, a Texas state-chartered trust company and
investment management firm, and Spires Financial, L.P., a regional
institutional brokerage services and investment banking firm specializing in
fixed-income securities and whole loan and loan servicing transactions.
On January 29, 1999, Pinnacle completed the combination of Harris
Webb & Garrison, Pinnacle Management & Trust and Spires Financial, with
Pinnacle emerging as the new public holding company. In the combination, just
over 50% of our then outstanding common shares were issued to TEI's former
shareholders in exchange for their TEI common shares, and slightly less than
50% of our then outstanding common shares, or 3,562,500 shares, were issued to
the former owners of the financial services firms. Immediately after the
combination, our board included six former TEI directors and six designees of
the financial services firms. Executive officers of the financial services
firms became our primary executive officers, with TEI's former president and
chief executive officer continuing as our Vice-Chairman.
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In March 1999, our management decided to discontinue the operations
of Energy Recovery Resources' liquid waste business effective December 31,
1998. These operations, which are conducted primarily in Charlotte, North
Carolina and surrounding areas, involve the treating, recycling, and handling
of wastewater, waste oil and other non-hazardous fluid waste for owners and
operators of underground and above ground storage tanks and other commercial
and industrial waste generators. Our management believes the sale of the
liquid waste business and related Charlotte, North Carolina facility will be
accomplished during 2000.
On January 31, 2000, we completed the merger of Harris Webb &
Garrison, our investment banking subsidiary, with Sanders Morris Mundy Inc.
Sanders Morris Mundy survived the merger, was renamed "Sanders Morris Harris
Inc." and became our wholly owned subsidiary. In the Sanders merger, we issued
7,125,220 of our common shares to the former shareholders of the Sanders firm,
increasing our total outstanding common shares to approximately 14.25 million.
As a result of the Sanders merger, three former directors of the Sanders firm
became Pinnacle directors, with one director, Don A. Sanders, becoming our
Vice-Chairman. The other two Sanders director designees retained primary
management responsibility of the new Sanders Morris Harris subsidiary. Sanders
Morris Mundy is a twelve-year-old investment banking and brokerage firm based
in Houston, Texas, with branch offices in New York City, Denver and Chicago.
Pinnacle was incorporated in Texas in August 1998 in connection with
the January 1999 combination. Our principal executive offices are located at
5599 San Felipe, Suite 555, Houston, Texas 77056, and our telephone number is
(713) 993-4610.
3
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RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS BEFORE
INVESTING.
THE SANDERS MERGER DRAMATICALLY IMPACTED VOTING AND MANAGEMENT CONTROL OF OUR
COMPANY.
The 30 former shareholders of the Sanders firm are primarily
comprised of Sanders Morris Harris executives or employees who, as a result of
the closing of recent Sanders merger, have joined the company in management
and professional capacities. As a result of the Sanders merger, these SMH
principals own about 50% of Pinnacle's outstanding common shares. If they act
in concert, they will, as a practical matter, be able to effectively exercise
control over the company's affairs, including the election of the entire board
of directors and, subject to Texas law applicable to related party
transactions, any matter submitted to a vote of shareholders.
Immediately after the Sanders merger:
- new management members from the Sanders firm (represented by those
who have become company officers and directors as a result of the
transaction) beneficially own a combined 36.4% of our outstanding
common shares; and
- our post-closing executive officers and directors together
beneficially own almost 50% of Pinnacle's outstanding common
shares.
Thus, from both the shareholder and management perspectives, the
Sanders merger has significantly impacted "control" of our company.
WE HAVE ONLY A LIMITED COMBINED OPERATING HISTORY OF OUR OWN, AND WE HAVE
COMBINED OPERATING HISTORY WITH THE SANDERS FIRM ONLY SINCE JANUARY 31, 2000.
We became a financial services company only this past January 1999,
when our publicly-owned predecessor, TEI, Inc., which was then in the liquid
waste business, combined with three previously independent and privately owned
financial services firms to form Pinnacle as it exists today. Thus, as a
financial services company, we have a limited operating history. At the same
time, we have a combined operating history with the Sanders firm only since
January 31, 2000. Our short operating history as a financial services company,
combined with our lack of experience with the Sanders firm, makes it difficult
to evaluate both the results of the January 1999 transaction and the prospects
for the Sanders merger.
OUR CORE FINANCIAL SERVICES BUSINESSES ONLY RECENTLY BECAME MODESTLY
PROFITABLE, AND WE HAVE RECENTLY RECORDED SIGNIFICANT CHARGES RELATED TO OUR
DISCONTINUED BUSINESSES.
Our core financial services businesses had pretax income of $373,000
for 1999, which includes the operations of Harris Webb & Garrison, Pinnacle
Management & Trust and Spires Financial from January 29, 1999, the date we
completed the transaction with those entities, through December 31, 1999.
However, we also recorded charges of $4,604,000 related to our discontinued
businesses, including a $2,807,000 deferred tax asset valuation allowance
charged to continuing operations. As a result, we had a net loss of $4,695,000
in 1999. Before the January transaction:
- TEI, our predecessor, had incurred operating losses during each
of the last four years;
- Harris Webb & Garrison and Pinnacle Management & Trust Company
each had profitable operations for the first time in 1997; and
4
<PAGE>
For 1999, the pro forma combined operating income before income taxes
for all the financial services companies participating in the January 1999
transaction was $373,000.
Thus, we have not yet demonstrated that we can sustain meaningful
profitability on a continuing basis, and we may not be able to do so in the
future.
For a more detailed discussion relating to risks associated with our
discontinued business, see the risk factors relating to discontinued
operations on page 9.
WE COULD EXPERIENCE INTEGRATION AND RELATED PROBLEMS FOLLOWING THE SANDERS
MERGER.
Integration problems (people, systems, procedures, etc.) can follow
any business combination, but they may be more likely to occur when the two
combining entities consider themselves as approximate equals, as was the case
in the Sanders merger. The Sanders firm has more revenues than we do, and it
has a longer operating history than we have. The Sanders firm contributed new
management at both the parent company and subsidiary levels. Under these
circumstances:
- cultures may not mesh and management and operating philosophies may
diverge;
- we could experience difficulty in establishing a new and unified
corporate identity; and
- we could experience difficulty in integrating accounting and
reporting systems and processes which could hinder the flow and
timeliness of information needed by management.
Factors like these might jeopardize what could have otherwise been a
successful combination from a strictly financial point of view.
THE SECURITIES BUSINESS IS VOLATILE.
In recent years, the stock market has experienced significant
volatility, including some of the largest single-day point declines in
history. After the stock market declines in October 1987, October 1989 and
October 1997, many firms in the industry suffered financial losses. In some
areas, the level of individual investor trading activity decreased. Reduced
trading volume and lower prices usually mean reduced transaction revenues for
financial services firms. A future severe market fluctuation could seriously
impact our business, financial condition and operating results, since lower
price levels of securities may result in:
- reduced volumes of securities transactions resulting in lower
commission revenues; and
- reduced management fees calculated as a percentage of managed
assets.
Sudden sharp declines in market values of securities and the failure
of issuers and counter parties to perform their obligations can result in
illiquid securities which could make it difficult for us to sell securities,
hedge securities positions, and invest funds under management.
The securities business is also vulnerable to the following risks,
particularly in volatile or illiquid trading markets:
- trading losses
- losses resulting from the ownership of underwriting of securities
- risks associated with principal activities
- the failure of counter parties to meet commitments
- customer fraud
- employee fraud
- issuer fraud
- litigation and errors
- misconduct and failures in processing transactions
5
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Our retail broker-dealer operations, as well as our investment
banking, institutional sales, proprietary trading, investment advisory and
other services, will be even more susceptible to these risks during volatile
trading markets and fluctuations in the volume of market activity.
We are also subject to risks inherent in extending credit to the
extent our clearing brokers permit our customers to purchase securities on
margin. The margin risk increases during rapidly declining markets when
collateral value may fall below the amount our customer owes us. Any resulting
losses could adversely effect our business, financial condition and operating
results.
OUR INDUSTRY IS PARTICULARLY SENSITIVE TO GENERAL ECONOMIC AND POLITICAL
CONDITIONS.
The securities business is directly affected by:
- economic and political conditions
- broad trends in business and finance
- legislation and regulations affecting the national and
international business and financial communities
- currency values
- inflation
- market conditions
- the availability and cost of short-term or long-term funding and
capital
- the credit capacity of the securities industry in the marketplace
- the level and volatility of interest rates
Any of these factors can contribute to reduced levels of trading
activity, securities offerings and merger and acquisition activities, all of
which can result in lower revenues from our brokerage, trading, institutional
sales and investment banking activities. See "Business of the Company--Effects
of Interest Rates" in our annual report on Form 10-K incorporated by reference
into this prospectus for a discussion of the effects of interest rates on our
business and that of the Sanders firm.
WE ARE A RELATIVELY SMALL COMPANY IN AN INCREASINGLY COMPETITIVE INDUSTRY.
FINANCIAL SERVICES. Our financial services business and the securities
business in general are highly competitive. The principal competitive factors
influencing our financial services business are:
- professional staff
- reputation in the marketplace
- existing client relationships
- ability to commit capital to client transactions
- mix of market capabilities
Our ability to compete effectively in our securities brokerage and
investment banking activities will also be influenced by the adequacy of our
capital levels and by our ability to raise additional capital.
We compete directly with national and regional full service
broker-dealers and, to a lesser extent, with discount brokers, dealers,
investment banking firms, investment advisors and some commercial banks. We
also compete for asset management and fiduciary services with commercial
banks, private trust companies, insurance companies and others. Domestic
commercial banks and large international banks have recently entered the
securities business, including markets in which we compete. We expect
competition from banks to increase as a result of recent and anticipated
legislative and regulatory initiatives in the United States to remove or
relieve restrictions on commercial banks relating to securities sales.
The financial services industry has become considerably more
concentrated as many securities firms have either ceased operations or been
acquired by or merged into other firms. Many of these larger firms have
significantly greater financial and other resources than we do, and can offer
their customers more products and services, lower pricing, broader research
capabilities, and access to international markets and other products, which we
cannot provide.
6
<PAGE>
We also face competition from a rapidly developing discount or
electronic brokerage services industry. These competitors may have lower costs
and may offer their customers more attractive pricing or other terms. We also
anticipate competition from underwriters who attempt to effect public
offerings using non-traditional means of distribution, including through
electronic media like the Internet. Issuers themselves may try to sell their
securities directly to purchasers, including through electronic media. If
issuers and purchasers of securities can transact business without financial
intermediaries like us, then our business could suffer. See "Business of the
Company--Competition" in our annual report on Form 10-K incorporated by
reference into this prospectus for a more detailed discussion of the
competitive environment surrounding us.
LIQUID WASTE. Until its disposition, the results from our liquid
waste operations will be affected by the competitive environment which exists
within that industry. Our liquid waste subsidiary competes with other liquid
waste processing facilities and alternative disposal methods, both legal and
illegal. In addition, competitive products and services will continue to be
successfully developed and marketed by others. The market for the various
resellable by-products we recover is also competitive, and is served by
several large companies and a number of smaller, owner-operated companies.
We also face competition from customers who seek to enhance and
develop their own methods of disposal instead of using the services of third
parties like us. Increased use of internal processing and disposal methods
could also hurt our business.
Some competitors in our liquid waste business offer a broader range
of services, have greater name recognition, offer services or products at a
lower cost and have greater financial and other resources than we do. Also, as
the liquid waste market matures, competition will likely increase. See
"Business of the Company--Competition" in our annual report on Form 10-K
incorporated by reference into this prospectus for a further discussion of
competitive factors involving our liquid waste business.
WE MUST RETAIN AND RECRUIT KEY PERSONNEL.
GENERAL. We depend on the continuing efforts of our executive
officers and senior management. That dependence may be intensified by our
decentralized operating strategy. If executive officers or members of senior
management leave us, until we attract and retain qualified replacements, our
business or prospects could be adversely affected. Further, the recent success
of the companies we acquired earlier this year can in some measure be
attributed to the entrepreneurial spirit of their senior management. To the
extent that we, as a larger, more structured organization than any of the
companies we acquired, fail to sustain this entrepreneurial attitude, the
impetus for our continued success could be reduced.
FINANCIAL SERVICES PERSONNEL. We derive our financial services
revenues from the efforts of senior management and retail investment
executives, and research, investment banking, retail and institutional sales,
trading, asset management and administrative professionals. Our future success
depends, in a large part, on our ability to attract, recruit and retain
qualified financial services professionals. Demand for these professionals is
high and their qualifications make them particularly mobile. Those
circumstances have led to escalating compensation packages in the industry. Up
front payments, increased payouts and guaranteed contracts have made
recruiting these professionals more difficult and can lead to departures from
current employees. Departures can also cause client defections due to close
relationships between clients and the professionals. If our attempts to
attract, recruit and retain skilled professionals are impaired for any reason,
our business could suffer.
THE FULL AND IMMEDIATE EXPECTED BENEFITS FROM THE SANDERS MERGER MAY DEPEND ON
A SINGLE INDIVIDUAL.
Don A. Sanders co-founded the Sanders firm and now serves as our
director and vice-chairman and as chairman of SMH's executive committee. We
believe that the prior growth and success of the Sanders firm is in large part
attributable to Mr. Sanders' efforts and his personal and business
relationships. Notwithstanding that Mr. Sanders is enthusiastic about the
Sanders merger, has assumed a full time management position with us, is our
largest single
7
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shareholder, and is in reported good health, it remains that (a) Mr. Sanders
is 63 years old and (b) he will have no contractual commitment to continue
with us as an executive or in any other management capacity.
If Mr. Sanders should become incapacitated, or he for any reason
decides in the near term not to remain active with the company, we might not
realize, at least on a short-term basis, the full expected benefits of the
Sanders merger.
SOME OF OUR BUSINESS IS GEOGRAPHICALLY CONCENTRATED.
Because our brokerage, investment banking and trust management
businesses focus on investors and capital market clients based in the
southwestern United States, a significant economic downturn in that region
could adversely affect our revenues. Brokerage, investment banking and trust
management accounted for approximately 77% of our pro forma combined
revenues for 1999. So, an economic downturn in the Southwest could adversely
affect all companies in the region and reduce our brokerage and underwriting
business from those companies. In addition, a regional economic downturn could
adversely affect our retail clients or emerging and middle-market companies or
growth industries within the region we predominantly serve, which could in
turn adversely affect us.
Our liquid waste business is concentrated within a 150-mile radius of
Charlotte, North Carolina. A significant economic downturn in that area could
adversely affect our liquid waste revenues.
OUR BUSINESS ATTRACTS LITIGATION AND SECURITIES LAW LIABILITY.
Our financial services business involves substantial risks of
liability. From time to time we may be named as defendants in civil litigation
and arbitration proceedings arising from our business activities as
broker-dealers. The plaintiffs in litigation or arbitration may allege
misconduct by our investment executives, claiming, for example, that
investments sold by them were unsuitable for the plaintiffs' portfolios, or
that they engaged in excessive trading in the plaintiffs' accounts. Though we
have not historically incurred material liability for these problems, we are
not immune to them and substantial liabilities from these matters could occur.
In recent years, there has been a substantial amount of litigation
involving the securities brokerage industry, including class action lawsuits
seeking substantial damages and other suits seeking punitive damages.
Companies engaged in the underwriting of securities, as we are, are subject to
substantial potential liability, including for material misstatements or
omissions in prospectuses and other communications in underwritten offerings
of securities or statements made by securities analysts. These liabilities can
arise under federal securities laws, similar state statutes and common law
doctrines. The risk of liability may be higher for an underwriter that, like
us, is active in the underwriting of securities offerings for emerging and
middle-market companies, because of the higher degree of risk and volatility
associated with the securities of these companies. The defense of these or any
other lawsuits or arbitration proceeding may divert the efforts and attention
of our management and staff, and we may incur significant legal expense in
defending litigation or arbitration proceedings.
For example, in October 1999, a brokerage customer initiated an
arbitration proceeding against Harris Webb & Garrison alleging wrongdoing in
the execution of a trade. The customer is seeking damages of $532,000, and a
hearing date has not been scheduled. We are contesting the allegations
vigorously, however, due to the uncertainty involved in actions of this
nature, we are unable to determine the likelihood of an unfavorable outcome in
the proceeding.
In November 1999, Sanders Morris Harris received a letter from the
chairman of the audit committee of Waste Management, Inc. asking for
information concerning investments by Sanders Morris Harris, its clients, and
the Environmental Opportunities Funds in a number of private and public
companies that either purchased assets from Waste Management or were acquired
by Waste Management while John E. Drury was both employed by Waste Management
and associated with Sanders Morris Mundy, the predecessor to Sanders Morris
Harris. Mr. Drury was a former executive officer and director of Waste
Management and a shareholder and director of Sanders Morris.
8
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Mr. Drury died in April 2000 and his share ownership in Waste Management and,
as a result of the Sanders merger, his 2.2% share ownership of our company,
have passed to his estate pending probate of his will. Sanders Morris Harris
has provided information in response to the Waste Management request.
Waste Management has not made any formal claim against Sanders Morris
Harris. However, Waste Management's investigation is continuing. Based on our
own investigation and discussions with management of Sanders Morris Harris, we
believe there is no factual basis or legal basis for any Waste Management
claim against Sanders Morris Harris. While we believe that neither the
existence nor the ultimate resolution of the Waste Management investigation
will have a material adverse effect on the financial condition of Sanders
Morris Harris, we cannot predict the outcome of the investigation and if the
claim is made we cannot determine the significance of the related costs and
management attention required to defend it.
See also "--Our business is highly regulated" for a discussion of
regulatory matters affecting the financial services industry.
WE MAY NOT BE ABLE TO SELL OUR DISCONTINUED LIQUID WASTE BUSINESS OR WE MAY
ONLY BE ABLE TO SELL IT AT A LOSS.
As a result of the January 1999 combination with Harris Webb &
Garrison, Pinnacle Management & Trust and Spires Financial and our change in
focus to the financial services industry, we discontinued our liquid waste
operations effective December 31, 1998. During the fourth quarter of 1998, we
recorded an estimated loss on disposition of this business of about $2.2
million (net of tax). We recorded an additional loss of $230,000 (net of tax)
during the third quarter of 1999 based on estimated operating losses from the
liquid waste business through the anticipated sale date. In the fourth quarter
of 1999, based in part on discussions with a third party, we recorded an
additional estimated loss provision of $1 million. Also, we may not be able to
sell our liquid waste business at a price we consider adequate, or if sold,
recover our current investment. Our liquid waste business may also incur more
operating losses in the future in excess of the recorded amounts, and we may
have to record additional losses in future periods based on the sales price
for the discontinued business.
OUR PREVIOUSLY DISPOSED OF OPERATIONS COULD POSE SPECIAL RISKS.
From 1995 through 1997, we disposed of all of our operating
businesses other than our liquid waste business. In the December 1997 sale of
assets of one of our former subsidiaries, the purchaser agreed to complete
customer contracts of the subsidiary in process at the time of sale. We
remain primarily liable to complete the contracts, and agreed to reimburse
the purchaser if its aggregate completion costs exceed the aggregate contract
price. During the fourth quarter of 1998, we recorded a loss of about $1.3
million (net of tax) for potential liability associated with these contracts,
principally from the cancellation of a major customer contract. During the
third quarter of 1999, the purchaser informed us that additional costs would
be incurred to complete the customer contracts. As a result, we recorded an
additional loss of about $73,000 (net of tax) during the third quarter of
1999. In March 2000, we were informed by a customer that while the projects
under the contract were substantially complete, payments on the contracts
would not be made. Under the purchase agreement, we are liable to the
purchaser for contract payments not made by the customer, and thus, we
recorded an additional liability of $1.2 million. We paid the purchaser
$420,000 with respect to our obligations in March 2000. Also, past estimates
of completion costs have varied significantly, and it is possible that
additional costs could be incurred by the purchaser to complete the
contracts. If the purchaser does not complete the contracts, or if it incurs
more excess costs in completing the contracts, we could incur more liability
to either the former customers or the purchaser.
9
<PAGE>
THERE IS POTENTIAL ENVIRONMENTAL LIABILITY ASSOCIATED WITH OUR LIQUID WASTE
BUSINESS.
Through our Energy Recovery Resources subsidiary, we process and
dispose of various types of non-hazardous wastes at a North Carolina
processing facility. Though ERR is for sale, we have not sold it yet, and we
will be subject to environmentally related risks as long as we own it and
possibly thereafter, depending on the terms of sale. Acts or omissions that
could give rise to environmental liabilities attributable to our liquid waste
business and the nature of the liabilities include:
<TABLE>
<CAPTION>
Act/Omission Nature of Liability
------------ -------------------
<S> <C>
- - one of our owned or operated facility causes - substantial monetary penalties
environmental damage
- - waste transported by us causes environmental - an order reducing or terminating the responsible
damage at another site operations
- - we fail to comply with environmental and land - the revocation or denial of permits or other
use laws and regulations or a permit or consent approvals necessary for continued operations or
order expansion of a facility
- - a facility owned or operated by us or the soil - liability for environmental damage at our facility
or groundwater at the facility is or becomes or on adjacent property or environmental damage
contaminated at another site associated with waste we transport
- liability under CERCLA or comparable state laws
- criminal liability for us or our officers
</TABLE>
Also, citizens' groups, adjacent landowners or governmental entities
could oppose the issuance of one of our permits or approvals or allege
violations of our operating permits or laws or regulations to which we are
subject. Any of these liabilities could have a material adverse effect on
ERR's, and thus our, business, results of operations and financial condition.
The Comprehensive Environmental Response Compensation and Liability Act (or
CERCLA) and comparable state laws impose retroactive strict joint and several
liability on various parties associated with a site at which there has
occurred or been threatened a release of any hazardous substance. Liability
under the Resource Conservation and Recovery Act (or RCRA), CERCLA and
comparable state laws may include responsibility for costs of site
investigations, site clean up, site monitoring, natural resources damages and
property damages. Liabilities under RCRA, CERCLA and comparable state laws
can be substantial. If imposed on us, they could materially and adversely
affect our whole company. See "Business of the Company--Government
Regulation" in our annual report on Form 10-K incorporated by reference in
this prospectus.
During the ordinary course of our operations, we may receive
citations or notices from governmental authorities claiming noncompliance with
our permits or environmental or land use laws and regulations. We would work
with the authorities to resolve issues raised by these citations or notices,
but we may not always be successful, and our failure to resolve a significant
issue could adversely affect our ability to sell our liquid waste operations,
or the proceeds we would receive from such a sale, or our continuing liquid
waste operations if we cannot sell ERR.
WE DEPEND ON SYSTEMS AND SOFTWARE.
Our financial services business depends on communications and
information systems. Any failure or interruption of these systems, or of the
systems of our clearing brokers, could cause delays in securities trading
activities. The delays could hurt our operations. Systems failure or
interruptions can be caused by a natural disaster, power or telecommunications
failure, act of God, act of war or other events. If there is a failure or
interruption, back-up procedures and capabilities may be inadequate.
10
<PAGE>
Through our Spires subsidiary, we use integrated, internally
developed software to solicit and develop client relationships over the
Internet. Because this software is Internet-based and dependent, any failure
of the Internet could adversely effect Spires' ability to solicit and execute
orders. Spires' internally developed software is also dependent on the
efforts of in-house systems and development personnel for maintenance and
system upgrades, as well as source data and programs supplied by third
parties under existing agreements. If we cannot either retain or attract
qualified systems and development personnel or access third-party source data
and programs, Spires' business and operating results, and thus those of the
whole company, could decline. See "Business--Services" and
"Business--Intellectual Property" in our annual report on Form 10-K
incorporated by reference in this prospectus for a discussion of the services
we provide through Spires and its internally developed software.
OUR OPERATING RESULTS MAY FLUCTUATE.
Our revenues and operating results may fluctuate from quarter to
quarter and from year to year due to a combination of factors like:
- the number of underwritten and merger and acquisition transactions
completed by our clients;
- the level of institutional and retail brokerage transactions;
- levels of assets under our management;
- the level of gains from our direct security investments;
- variations in our personnel costs;
- litigation expenses; and
- the expenses of establishing any new business units.
Our revenues from an underwriting transaction will be recorded only
when the underwritten security begins trading. Revenues from a merger or
acquisition transaction are recorded only when the retainer fees are received
or the transaction closes. Accordingly, the timing of recognition of revenue
from a significant transaction can materially affect our quarterly and annual
operating results.
WE MAY BE CONSTRAINED BY NET CAPITAL REQUIREMENTS.
The SEC, the NASD, and various other securities exchanges and other
regulatory bodies in the United States have rules imposing net capital
requirements which affect each of our broker-dealer subsidiaries. These rules
are designed to ensure that broker-dealers maintain adequate net capital in
relation to their liabilities and the size of their customers' business.
These net capital rules have the effect of requiring that a substantial
portion of a broker-dealer's assets be kept in cash or highly liquid
investments. Failure to maintain the required net capital may subject a firm
to suspension or revocation of its registration by the SEC and suspension or
expulsion by the NASD and other regulatory bodies. Ultimately, it could
require the firm's liquidation. Also, under Texas law, our Texas trust
subsidiary, Pinnacle Management & Trust, is required to maintain minimum net
capital of $1.5 million.
Compliance with these net capital rules could limit operations that
require extensive capital, such as underwriting or trading activities. Our
trust management subsidiary could also be limited operationally by the net
capital requirements. These net capital rules could also restrict our ability
to withdraw capital in situations where our broker-dealer and trust company
subsidiaries have more than the minimum required capital. We may be limited in
our ability to pay dividends, implement our strategies, pay interest or repay
principal on our debt and redeem or repurchase our outstanding shares. In
addition, a change in these net capital rules or new rules affecting the
scope, coverage, calculation or amount of the net capital requirements, or a
significant operating loss or significant charge against net capital, could
have similar effects.
11
<PAGE>
OUR BUSINESS IS HIGHLY REGULATED.
FINANCIAL SERVICES. Like the securities industry in general, our
registered broker-dealer and investment advisor subsidiaries are subject to
extensive regulation in the United States at both the federal and state
levels. As broker-dealers, our SMH and Spires subsidiaries are subject to the
regulations covering all aspects of the securities business. Regulated
activities include:
- sales methods
- trade practices among broker-dealers
- use and safekeeping of customers' funds and securities
- capital structure
- record keeping
- limitations on business activities
- conduct of directors, officers and employees
As a matter of public policy, regulatory bodies are charged with
safeguarding the integrity of the securities and other financial markets and
with protecting the interests of customers participating in those markets. In
addition, self-regulatory organizations, called "SROs," and other regulatory
bodies in the United States, such as the SEC, the New York Stock Exchange, the
NASD, and the Municipal Securities Rulemaking Board, require strict compliance
with their rules and regulations. Failure to comply could result in adverse
consequences, including (1) censure, (2) civil penalties, (3) fines, (4)
cease-and-desist orders, (5) the suspension of a broker-dealer, investment
adviser or futures commission merchant, (6) the statutory disqualification of
officers or employees or (7) other consequences which could adversely effect
us. Even if none of these actions are taken, the administrative or judicial
proceedings or arbitrations could have a material adverse effect on our
perceived creditworthiness, reputation and competitiveness. Financial services
clients or others who allege that they have been damaged by a violation of
applicable regulations also may seek to obtain compensation from us, including
the unwinding of their transactions with us. Additional legislation or
regulations, or changes in the methods or enforcement of existing regulations
by governmental entities or SROs may materially and adversely affect us.
Our financial services businesses may be materially affected not only
by regulations applicable to our subsidiaries as financial market
intermediaries, but also by regulations of general application. For example,
the volume of our underwriting, merger and acquisition and principal
investment business in a given period could be affected by (1) existing and
proposed tax legislation, (2) antitrust policy and other governmental
regulations and policies (including the interest rate policies of the Federal
Reserve Board), and (3) changes in interpretation or enforcement of existing
laws and, rules that affect the business and financial communities. From time
to time, various antitakeover legislation and legislation that could affect
the benefits from financing leveraged transactions with high-yield securities
have been proposed. If enacted, they could adversely affect the volume of
merger and acquisition business. This could in turn adversely affect our
underwriting, advisory and trading revenues related to that business.
Our trust subsidiary, Pinnacle Management & Trust, also operates in
a highly regulated environment and is subject to extensive supervision and
examination by Texas regulatory agencies. As a Texas chartered trust company,
Pinnacle Management & Trust is subject to the Texas Trust Company Act, the
rules and regulations under that act, and supervision by the Texas Banking
Commissioner. These laws are intended primarily for the protection of
Pinnacle Management & Trust's clients, not its investors. The Texas Trust
Company Act requires or imposes:
- periodic examinations by the office of the Texas Banking
Commissioner;
- furnishing periodic financial statements to the Banking
Commissioner;
- minimum net capital maintenance;
- fiduciary record-keeping;
- bonding for the protection of clients;
- restrictions on investments of restricted capital;
- lending and borrowing limitations;
- prohibitions against certain activities;
- prior approval from the Banking Commissioner for certain
corporate events (E.G., mergers, sale/purchase of all or
substantially all of the assets and transactions transferring
control of the trust company); and
- broad regulatory powers if the trust company violates certain
provisions of Trust Company Act or is determined to be in a
"hazardous condition."
12
<PAGE>
While we believe Pinnacle Management & Trust is in material
compliance with these laws and regulations, it may not be able to continue
compliance, or these laws or regulations may change adversely. Either event
could have a material adverse effect on Pinnacle Management & Trust, and thus
our company as a whole.
Our ability to comply with laws and rules relating to our financial
services business will depend in large part upon maintaining a system to
monitor compliance, and our ability to attract and retain qualified compliance
personnel. Although we believe we are in material compliance with these laws
and regulations, we may not be able to comply in the future. Any noncompliance
could have a material adverse effect on our company.
LIQUID WASTE. The operations of our liquid waste subsidiary, Energy
Recovery Resources, are subject to numerous and continually evolving federal,
state and local laws, regulations and policies that govern environmental
protection, zoning and other matters, including the Clean Water Act, Resource
Conservation and Recovery Act and the Clean Air Act. If existing regulatory
requirements change, we may have to make significant unanticipated capital and
operating expenditures and the estimate sale proceeds from the disposition of
this subsidiary could be impaired. Although we believe ERR is in material
compliance with applicable laws and regulations, it may not stay in
compliance. Governmental authorities may seek to impose fines and penalties
on ERR or to revoke or deny the issuance or renewal of operating permits for
failure to comply with applicable laws and regulations. Under these
circumstances, we might be required to reduce or cease ERR's operations or
conduct site remediation until a problem is remedied. In addition, if our
liquid waste operations result in the release of hazardous substances, we
could incur liability under the Comprehensive Environmental Response
Compensation and Liability Act.
Our ERR facility also requires permits and approvals from federal,
state and local governments. These permits, approvals or applications may be
denied, revoked or modified under various circumstances. In addition, if new
environmental legislation or regulations are enacted or existing legislation
or regulations are amended or are enforced differently, ERR may have to obtain
additional operating permits or approvals for its facility. The process of
obtaining a required permit or approval may be lengthy and expensive. The
issuance of the permits or the obtaining of the approval may be opposed by the
public. If ERR cannot obtain or maintain all required permits and approvals
for its liquid waste processing facility, its business, results of operations
and financial condition could be adversely affected.
If any of the events described above occur, our ability to dispose
of ERR may be impaired.
WE MAY HAVE PROBLEMS KEEPING SUFFICIENTLY INSURED.
While we will maintain liability insurance, it will be subject to
coverage limits. Some policies exclude coverage for certain securities laws
violations and environmental contamination, risks to which we may be
particularly susceptible. Liability insurance may not continue to be
available to us on commercially reasonable terms. Potential liabilities we
may incur may not be covered by our insurance. The dollar amount of potential
liabilities may exceed our policy limits. The insurance carrier may not
satisfy its obligations under the policy. See "--Our business attracts
litigation and securities law liabilities" and "--There is potential
environmental liability associated with our liquid waste business" for a
discussion of potential liabilities associated with our businesses.
WE COULD SUFFER LOSSES DUE TO FRAUD OR MISTAKES OF CUSTOMERS OR EMPLOYEES.
We will be exposed to the risk of significant losses from customer
fraud, employee errors, misconduct and fraud (including unauthorized
transactions by brokers and traders) and failures relating to processing of
securities transactions. Our risk management procedures and internal controls
may not prevent these losses or detect them before they become meaningful.
13
<PAGE>
THERE ARE MARKET, CREDIT AND LIQUIDITY RISKS ASSOCIATED WITH OUR
MARKET-MAKING, PRINCIPAL TRADING, ARBITRAGE AND UNDERWRITING ACTIVITIES.
Our market making, principal trading and underwriting activities will
involve the purchase, sale or short sale of securities as principal. These
activities will subject our capital to significant risks from markets that may
be illiquid or are susceptible to rapid fluctuations in liquidity. These
market conditions could limit our resale of purchased securities or the
repurchase of securities sold short. They could also subject our capital to
significant risks, including market, credit, counter party and liquidity
risks. Market risk relates to the risk of fluctuating values and the ability
of third parties to whom we have extended credit to repay us. Counter party
risk relates to whether a counter party on a transaction will fulfill its
contractual obligations, which may include delivery of securities or payment
of funds. Liquidity risk relates to our inability to liquidate assets or
redirect illiquid investments.
In our underwriting and merchant banking activities, we may have
large position concentrations in securities of, or commitments to, a single
issuer or issuers engaged in a specific industry. Also, the trend in all major
capital markets toward larger commitments on the part of lead underwriters
means that an underwriter (including a co-manager) may retain significant
position concentrations in individual securities. These concentrations
increase our exposure to specific credit and market risks.
OUR STOCK PRICE MAY BE VOLATILE DUE TO THIN TRADING AND OTHER FACTORS.
The market price of our common stock may be subject to significant
fluctuations in response to many factors, including variations in our reported
financial results and changing conditions in the economy in general, in our
businesses in particular, or in the industry of one of our major client
groups. Also, the stock markets periodically experience significant price and
volume volatility which may affect the market price of our common stock for
reasons unrelated to us or our operating performance.
These potential problems could be accentuated by a lack of public
float in the market for our shares. As a result of the Sanders merger, about
77.8% of our outstanding shares are held by our officers, directors and
employees, leaving about 22.2% in the hands of the general public. Resultant
"thin trading" could depress our stock price and contribute to heightened
price volatility.
LATER ISSUED PREFERRED STOCK COULD REDUCE THE VALUE OR VOTING POWER OF YOUR
COMMON STOCK.
Our charter allows our board to serially issue preferred stock and to
determine its rights, powers and preferences. Future preferred stock issued
under the board's authority could enjoy preferences over your common stock as
to dividends, distributions and voting power. Holders of preferred stock
could, for example, be given the right to separately elect some number of our
directors in all or specified events, or an independent veto right over
certain transactions, and redemption rights and liquidation preferences
assigned to preferred stockholders could affect the residual value of your
common stock.
THERE COULD BE IMPEDIMENTS TO A TAKEOVER OR CHANGE OF CONTROL OF OUR COMPANY,
EVEN IF THE CHANGE COULD BENEFIT OUR STOCKHOLDERS.
Provisions of our corporate documents and Texas law may delay or
prevent an attempt to obtain control of our company, whether by means of a
tender offer, business combination, proxy contest or otherwise. These
provisions include:
- the authorization of "blank check" preferred stock;
- classification of the board of directors;
- a limitation on the removal of directors only for cause, and then
only on approval of the holders of two-thirds of the outstanding
voting stock;
- a restriction on the ability of shareholders to take actions by
less than unanimous written consent; and
- a restriction on business combinations with interested parties.
14
<PAGE>
However, at our 2000 annual shareholders' meeting, we intend to
solicit a proposal from our shareholders to declassify our board of directors.
See "Description of Our Capital Stock" (pages 19 to 21) for a
discussion of the attributes associated with ownership of our capital stock.
YOU SHOULD NOT PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS.
With the exception of historical information, the matters in this
prospectus and those matters incorporated into this document by reference to
our SEC filings may include "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements generally can be identified
by the use of forward-looking terminology, such as "may," "will," "expect,"
"intend," "estimate," "anticipate," or "believe," or similar terminology.
The forward-looking statements include discussions about business
strategy and expectations concerning market position, future operations,
margins, profitability, liquidity and capital resources, and statements
concerning the integration into our business of the operations we have
combined or acquired. Although we believe that the expectations in such
statements are reasonable, these expectations are inherently uncertain. We
caution you not to place undue reliance on these forward-looking statements,
which speak only as of the date of this prospectus. Our operations are subject
to several uncertainties, risks and other influences, many of which are
outside our control any one of which could cause our results to be
significantly different from management's expectations, and thus from the
results discussed in the forward looking statements. Important factors that
may cause such differences include those described in "Risk Factors" and
elsewhere in this prospectus.
USE OF PROCEEDS
We will not receive any proceeds from the sale of our common stock by
the selling shareholders under this prospectus.
15
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth certain information concerning each of
the selling shareholders. Assuming that the selling shareholders offer all of
their shares of our common stock, the selling shareholders will not have any
beneficial ownership except as otherwise provided in the table. The shares are
being registered to permit the selling shareholders and certain of their
respective donees, transferors or other successors in interest to offer the
shares for resale from time to time. See "Plan of Distribution."
<TABLE>
<CAPTION>
Number of Shares
Owned and to be Number of Number of Percentage of
Owned Prior to Shares Being Shares Owned Shares Owned
Selling Shareholders (1) Offering (2) Offered (2) After Offering (3) After Offering (3)
------------------------ ---------------- ------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Don A. Sanders (4).................. 2,083,156 2,083,156 0 *
Ben T. Morris (5)................... 1,201,438 1,201,438 0 *
George L. Ball (6).................. 1,201,438 1,201,438 0 *
Sanders 1998 Children's Trusts (7).. 703,968 703,968 0 *
R. Larry Kinney (8)................. 512,137 512,137 0 *
Estate of John E. Drury (9)......... 305,053 305,053 0 *
Wyatt A. Williams Jr. (10) ......... 150,884 150,884 0 *
John I. Mundy (11) ................. 146,660 146,660 0 *
Bruce R. McMaken (12) .............. 135,045 135,045 0 *
James S. Jordan (13) ............... 117,446 117,446 0 *
Charles L. Davis (14) .............. 106,652 106,652 0 *
Michael S. Chadwick (15) ........... 101,137 101,137 0 *
Kenneth Leung (16) ................. 77,906 77,906 0 *
W. Bradley Deason (17) ............. 41,769 41,769 0 *
Brede Klefos (18) .................. 35,434 35,434 0 *
Humbert Powell (19) ................ 35,434 35,434 0 *
John H. Malanga (20) ............... 28,277 28,277 0 *
Bret D. Sanders (21) ............... 28,277 28,277 0 *
William C. Conroy (22) ............. 25,109 25,109 0 *
Melville L. Cody (23) .............. 19,477 19,477 0 *
M. Lynn Detrick (24) ............... 19,242 19,242 0 *
Rune Medhus (25) ................... 7,040 7,040 0 *
David Giannini (26) ................ 7,040 7,040 0 *
Dean Oakey (27) .................... 7,040 7,040 0 *
Irene Haas (28) .................... 7,040 7,040 0 *
Karen D. Kane (29) ................. 6,806 6,806 0 *
Sandra J. Williams (30) ............ 3,755 3,755 0 *
Lori D. Johnston (31) .............. 3,520 3,520 0 *
Ann M. Smoot (32) .................. 3,520 3,520 0 *
Thomas J. Anderson (33) ............ 3,520 3,520 0 *
</TABLE>
- -----------------------
* Less than 1%.
(1) Each of the selling shareholders received their shares included in this
table in exchange for their shares of Sanders Morris Mundy Inc. as part of
the merger of Harris Webb & Garrison, our former investment banking
subsidiary, with Sanders Morris Mundy completed on January 31, 2000.
(2) Ownership is determined in accordance with Rule 13d-3 under the Exchange
Act. The actual number of shares beneficially owned and offered for sale
is subject to adjustment and could be materially less or more than the
estimated account indicated depending upon factors which we cannot predict
at this time.
(3) Assumes the sale of all of the shares offered hereby to persons who are
not affiliates of the selling shareholders.
(4) Don A. Sanders is a director of the Company and currently serves as one of
our Vice-Chairmen. He also serves as a director of Sanders Morris Harris
and as the chairman of its Executive Committee. Mr. Sanders is subject to
restrictions on transfer of his shares until January 31, 2001. See "Plan
of Distribution."
16
<PAGE>
(5) Ben T. Morris is a director of the Company and a member of our Executive
Committee. He also serves as a director and President and Chief Executive
Officer of Sanders Morris Harris and as a director of Pinnacle Management
& Trust, Spires Financial G.P., Inc. and PGG Capital, Inc. Mr. Morris is
subject to restrictions on transfer of his shares until January 31, 2001.
See "Plan of Distribution."
(6) George L. Ball is a director of the Company. He also is a director and
Chairman of the Board of Sanders Morris Harris and a director of Pinnacle
Management & Trust, Spires Financial G.P, Inc. and PGG Capital, Inc. Mr.
Ball is subject to restrictions on transfer of his shares until January
31, 2001. See "Plan of Distribution."
(7) The Sanders 1998 Children's Trust was created by Don A. Sanders for the
benefit of his children. Ben T. Morris is a co-trustee of the trust. The
Trust is subject to restrictions on transfer of its shares until January
31, 2001. See "Plan of Distribution."
(8) R. Larry Kinney is a director of Sanders Morris Harris and serves as its
Executive Vice President and Director of Trading Activities. Mr. Kinney is
subject to restrictions on transfer of his shares until January 31, 2001.
See "Plan of Distribution."
(9) John E. Drury died in April 2000 and his shares have become part of his
estate pending probate of his will. Mr. Drury previously served as a
director of Sanders Morris Harris before his resignation in October 1999.
(10) Wyatt A. Williams Jr. is President of Institutional Sales & Research of
Sanders Morris Harris.
(11) John I. Mundy served as a director of Sanders Morris Harris until December
1999 and previously served as one of its Vice Presidents until March 1997.
(12) Bruce R. McMaken is a Vice President in the Investment Banking Division, a
Managing Director in the Corporate Finance Division and a Co-Investment
Manager of the Environmental Funds of Sanders Morris Harris.
(13) James S. Jordan is a Managing Director in the Corporate Finance Division
of Sanders Morris Harris.
(14) Charles L. Davis is a Vice President in the Investment Banking Division
and a Managing Director in the Corporate Finance Division of Sanders
Morris Harris.
(15) Michael S. Chadwick is a Senior Vice President in the Investment Banking
Division and a Managing Director in the Corporate Finance Division of
Sanders Morris Harris.
(16) Kenneth Leung is a Managing Director in the Corporate Finance Division and
a Co-Investment Manager of the Environmental Funds of Sanders Morris
Harris.
(17) W. Bradley Deason is a Vice President in the Institutional Sales Division
of Sanders Morris Harris.
(18) Brede Klefos is a Sales Manager and a Manager of the Financial Advisory
Division of Sanders Morris Harris.
(19) Humbert Powell is a Managing Director in the Corporate Finance Division of
Sanders Morris Harris.
(20) John H. Malanga is a Vice President in the Investment Banking Division and
a Associate in the Corporate Finance Division of Sanders Morris Harris.
(21) Bret D. Sanders is a Vice President in the Trading Division of Sanders
Morris Harris.
(22) William C. Conroy is a Vice President in the Institutional Sales Division
of Sanders Morris Harris.
(23) Melville L. Cody is a Vice President in the Securities Analyst Division of
Sanders Morris Harris.
(24) M. Lynn Detrick is a Vice President in the Securities Analyst Division of
Sanders Morris Harris.
(25) Rune Medhus is a Senior Financial Advisor of Sanders Morris Harris.
(26) David Giannini is a Vice President in the Institutional Sales Division of
Sanders Morris Harris.
(27) Dean Oakey is a Senior Financial Advisor of Sanders Morris Harris.
(28) Irene Haas is a Vice President in the Securities Analyst Division of
Sanders Morris Harris.
(29) Karen D. Kane is a Vice President in the Securities Analyst Division of
Sanders Morris Harris.
(30) Sandra J. Williams is Administrative Manager and Corporate Secretary of
Sanders Morris Harris.
(31) Lori D. Johnston is a Vice President in the Trading Division of Sanders
Morris Harris.
(32) Ann M. Smoot is a Controller of Sanders Morris Harris.
(33) Thomas J. Anderson is Director of Compliance of Sanders Morris Harris.
17
<PAGE>
PLAN OF DISTRIBUTION
This prospectus covers the resale of shares of our common stock by
the selling shareholders. As used in this prospectus, "selling stockholders"
includes holders of shares of our common stock received from a selling
shareholder after the date of this prospectus and who received such shares by
gift or other transfer by such selling shareholder to an immediate family
member of such shareholder, by will or through operation of the laws of
descent and distribution, and their respective administrators, guardians,
receivers, executors or other persons acting in a similar capacity. The
selling shareholders may sell their shares of common stock under this
prospectus:
- through one or more broker-dealers acting as either principal or
agent;
- through underwriters;
- directly to investors; or
- any combination of these methods.
The selling shareholders will fix a price or prices, and they may
change the price, of the shares of common stock offered based upon:
- market prices prevailing at the time of sale;
- prices related to those market prices; or
- negotiated prices.
These sales may be effected in one or more of the following transactions
(which may involve crosses and block transactions);
- on any securities exchange or U.S. inter-dealer system of a
registered national securities association on which the common
stock may be listed or quoted at the time of sale;
- in the over-the-counter market;
- in private transactions;
- through the writing of options, whether the options are listed on
an option exchange or otherwise; or
- through the settlement of short sales.
Broker-dealers, underwriters or agents may receive compensation in
the form of discounts, concessions from the selling shareholder or the
purchasers. These discounts, concessions or commissions may be more than those
customary for the transaction involved. If any broker-dealer purchases the
shares of common stock as principal, it may effect resales of the shares
through other broker-dealers, and other broker-dealers may receive
compensation from the purchasers for whom they act as agents.
Under the Sanders merger agreement, each of Don A. Sanders, Ben T.
Morris, George L. Ball, the Sanders' 1998 Children's Trust and R. Larry Kinney
executed lock-up letters under which each of them agreed, for a period of one
year expiring January 31, 2001, not to sell, grant any option or otherwise
transfer any shares of our common stock or securities convertible into, or
exercisable for, our common stock. Registration of their shares will not
release their obligations under the lock-up arrangements.
To comply with the securities laws of some states, if applicable, the
shares may be sold in these jurisdictions only through registered or licensed
brokers or dealers. In addition, in some states the shares may not be sold
unless they have been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied with.
The selling shareholders and any underwriters, broker-dealers or
agents that participate in the sale of the shares may be "underwriters" within
the meaning of the Securities Act. Any discounts, commissions, concessions or
profit they earn on any resale of the shares may be underwriting discounts and
commissions under the Securities
18
<PAGE>
Act. Selling shareholders who are "underwriters" within the meaning of the
Securities Act will be subject to the prospectus delivery requirements of the
Securities Act.
Any shares covered by this prospectus which qualify for sale under
Rule 144 of the Securities Act may be sold under Rule 144 rather than under
this prospectus. A selling shareholder may not sell any shares described in
this prospectus and may not transfer, devise or gift these securities by other
means not described in this prospectus.
To the extent required, the specific shares to be sold, the names of
the selling shareholders, the respective purchase prices and public offering
prices, the names of any agent, dealer or underwriter, and any applicable
commissions or discounts with respect to a particular offer will be set forth
in an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement which includes this prospectus.
We have agreed to pay substantially all of the expenses in connection
with the registration, offering and sale of the shares covered by this
prospectus, other than commissions, fees and discounts of underwriters,
brokers, dealers and agents.
We have agreed to keep the registration statement, which includes
this prospectus, effective until May 25, 2002, subject to extension for any
suspension or blackout periods during which shares covered by this prospectus
cannot be sold.
DESCRIPTION OF OUR CAPITAL STOCK
Our charter authorizes us to issue 110,000,000 shares of stock,
consisting of 100,000,000 shares of common stock, par value $.01 per share,
and 10,000,000 shares of preferred stock, par value $.01 per share. The
following summary description of our capital stock is not complete and does
not give effect to applicable statutory or common law. The summary is also
subject to applicable provisions of our charter.
COMMON STOCK
Our common shareholders are entitled to one vote per common share in
the election of directors and on all other matters on which shareholders are
entitled or permitted to vote. Holders of our common shares do not have
cumulative voting rights. Therefore, subject to any voting rights that may be
later granted to holders of our preferred stock, under our bylaws, holders of
a plurality of the common shares present in person or represented by proxy at
the meeting and entitled to vote can elect all of our directors. Subject to
the rights of any outstanding series of our preferred stock, the common
shareholders are entitled to dividends when and if declared by our board of
directors out of funds legally available for that purpose. Our common stock is
not subject to any calls or assessments. Upon liquidation or dissolution,
common shareholders are entitled to share ratably in all net assets
distributable to shareholders after payment of any liquidation preferences to
holders of our preferred stock. Holders of our common stock have no
redemption, conversion or preemptive rights.
PREFERRED STOCK
We can issue shares of our preferred stock without shareholder
approval. Our board can issue up to 10,000,000 shares of preferred stock in
one or more series and can determine, for any series of preferred stock, the
terms and rights of the series, including:
- the number of shares, designation and stated value of the series,
- the rate and times at which dividends will be payable on shares of
the series, and the status of dividends as cumulative or
non-cumulative and as participating or non-participating,
- the voting rights, if any, for shares of the series,
19
<PAGE>
- any prices, times and terms at or on which shares of the series
may be redeemed,
- any rights and preferences of shares of the series upon any
liquidation, dissolution or winding up of our affairs or any
distribution of our assets,
- any rights to convert shares of the series into, or exchange
shares of the series for, shares of any other class of our stock,
- the terms of any retirement or sinking fund for shares of the
series,
- any limitations on the payment of dividends or making of
distributions on, or the acquisition of, our common stock or any
other junior class of stock,
- any conditions or restrictions on our indebtedness or issuances
of any additional stock, and
- any other powers, preferences and relative, participating,
optional and other special rights, and their limitations.
We have no current plans to issue any shares of our preferred stock.
Any issuance of our preferred stock may adversely affect the voting powers or
rights of the holders of our common stock.
ANTI-TAKEOVER PROVISIONS
Our charter and bylaws contain provisions that could impede us being
acquired by a tender or exchange offer, a proxy contest or otherwise. This
summary of these provisions is subject to the pertinent sections of our
charter and bylaws and the Texas Business Corporation Act.
PREFERRED STOCK. Although our board does not now intend to do so, it
could issue a series of our preferred stock that could, depending on its
terms, impede the completion of a merger, tender offer or other takeover
attempt. Any board decision to issue such stock will be based on the board's
judgment as to the best interests of the company and its shareholders. Our
board could issue preferred stock having terms that could discourage an
acquisition attempt through which an acquiror could otherwise change the
composition of the board of directors, including a tender or exchange offer or
other transaction that some, or a majority, of our shareholders might believe
to be in their best interests, or in which shareholders might receive a
premium for their stock over its then-market price.
REMOVAL OF DIRECTORS. Our charter provides that directors may be
removed only for cause, and then only by the affirmative vote of holders of at
least two-thirds of all outstanding voting stock.
SHAREHOLDER MEETINGS. Our charter provides that our shareholders can
act at an annual or special meeting. The charter is silent as to shareholder
action by written consent in lieu of a meeting. Therefore, under Texas law,
shareholder action by unanimous consent is permitted. Our charter and bylaws
provide that special meetings of shareholders can be called only by a majority
of the board of directors, the chairman of the board or the president. The
business which can be conducted at any special meeting of shareholders is
limited to the business brought before the meeting as set forth in the notice
of the meeting. These provisions would prevent non-director shareholders from
taking action by written consent or otherwise without proper notice to the
board.
Our bylaws require advance notice to us of any business to be brought
by a shareholder before an annual meeting of shareholders and establish
procedures to be followed by shareholders in nominating persons for election
to our board. Generally, these provisions require written notice to the
secretary of the company by a shareholder:
- if the shareholder proposes to bring any business before an
annual meeting, and
20
<PAGE>
- if the shareholder wants to nominate any person for election to
our board of directors,
in each case not less than 60 nor more than 180 days before the anniversary
date of the immediately preceding annual meeting of shareholders (with certain
exceptions if the date of the annual meeting is different by more than
specified periods from the anniversary date). The shareholder's notice must
set forth specific information regarding the shareholder and his business and
director nominee, as described in our bylaws.
ANTI-TAKEOVER LEGISLATION. As a Texas corporation, we are subject to
Article 13 of the Texas Business Corporation Act. In general, Article 13
prevents an "affiliated shareholder" (defined generally as a person owning 20%
or more of a corporation's outstanding voting stock) from engaging in a
"business combination" (as the act defines that term) with a Texas corporation
for three years following the date the person became an affiliated shareholder
unless:
- before the person became an affiliated shareholder, the board of
directors of the corporation approved the transaction in which the
affiliated shareholder became interested or approved the business
combination; or
- following the transaction in which the person became an affiliated
shareholder, the business combination was approved by the board of
directors of the corporation and authorized by the affirmative
vote of the holders of 66 2/3% of the outstanding voting stock of
the corporation not owned by the affiliated shareholder at a
meeting of shareholders duly called not less than six months after
the transaction in which the affiliated shareholder became
affiliated.
Article 13's restrictions also do not apply to business combinations
with an affiliated shareholder who became affiliated through a transfer of
shares by will or intestate succession and was continuously affiliated until
the business combination announcement date or business combinations involving
a domestic wholly owned subsidiary not affiliated with the affiliated
shareholder other than through his interest in the parent corporation.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Harris Trust
and Savings Bank, Chicago, Illinois.
LEGAL MATTERS
The validity of the shares of our common stock offered in this
prospectus will be passed upon for us by Porter & Hedges, L.L.P., Houston,
Texas.
EXPERTS
The financial statements incorporated in this Registration Statement
on Form S-3 by reference to the Annual Report on Form 10-K of Pinnacle Global
Group, Inc. for the year ended December 31, 1999 have been so incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The financial statements of Sanders Morris Mundy Inc. incorporated in
this Registration Statement on Form S-3 by reference to the Form 8-K dated
April 28, 2000 of Pinnacle Global Group, Inc. have been so incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The financial statements of Spires Financial, L.P. incorporated in
this Registration Statement on Form S-3 by reference to the Definitive Proxy
Statement on Schedule 14A dated December 6, 1999, as supplemented by the Proxy
Statement dated January 12, 2000 of Pinnacle Global Group, Inc. have been so
incorporated in reliance on the
21
<PAGE>
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The audited financial statements at December 31, 1998 and 1997, and
for each of the three years in the period ended December 31, 1998 of Harris
Webb & Garrison, Inc. incorporated by reference in this registration statement
have been audited by Cheshier & Fuller, L.L.P., independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm
as experts in auditing and accounting in giving said reports.
The financial statements of Pinnacle Management & Trust Company as
of December 31, 1998 and 1997 and for each of the years then ended have been
incorporated by reference herein and in the registration statement in
reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The audited financial statements of Pinnacle Management & Trust
Company for year ended December 31, 1996 incorporated by reference in this
registration statement have been audited by Grant Thornton LLP, independent
public accountants, as indicated in their reports with respect thereto, and
are incorporated by reference herein in reliance upon the authority of said
firm as experts in auditing and accounting in giving said reports.
22
<PAGE>
===============================================================================
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. WE HAVE NOT AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH
DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT
INFORMATION, YOU SHOULD NOT RELY ON IT. WE ARE NOT MAKING AN OFFER TO SELL
THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
YOU SHOULD ASSUME THAT THE INFORMATION APPEARING IN THIS PROSPECTUS IS
ACCURATE AS OF THE DATE ON THE FRONT COVER OF THIS PROSPECTUS ONLY. OUR
BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROSPECTUS MAY HAVE
CHANGED SINCE THAT DATE.
---------------------------
TABLE OF CONTENTS
Where You Can Find More Information..................1
The Company..........................................2
Risk Factors.........................................4
Use of Proceeds.....................................15
Selling Shareholders................................16
Plan of Distribution................................18
Description of Capital Stock........................19
Legal Matters.......................................21
Experts.............................................21
===============================================================================
===============================================================================
7,125,220 SHARES
PINNACLE GLOBAL
GROUP, INC.
COMMON STOCK
----------
PROSPECTUS
----------
===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following tables sets forth the expenses (other than underwriting
discounts and commissions) in connection with the offering described in this
Registration Statement, all of which shall be paid by us. All of such amounts
(except the SEC Registration Fee) are estimated.
SEC Registration Fee................................... $ 6,467
Printing and Mailing Costs............................. 10,000
Legal Fees and Expenses................................ 25,000
Accounting Fees and Expenses........................... 30,000
Miscellaneous.......................................... 5,000
-------
Total................................ $76,467
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Article 1302-7.06 of the Texas Miscellaneous Corporation Laws
Act, the articles of incorporation of a Texas corporation may provide that a
director of that corporation shall not be liable, or shall be liable only to
the extent provided in the articles of incorporation, to the corporation or
its shareholders for monetary damages for acts or omissions in the director's
capacity as a director, except that the articles of incorporation cannot
provide for the elimination or limitation of liability of a director to the
extent that the director is found liable for (1) a breach of the director's
duty of loyalty to the corporation or its shareholders, (2) acts or omissions
not in good faith that constitute a breach of duty of the director to the
corporation or an act or omissions not in good faith that constitute a breach
of duty of the director to the corporation or an act or omission that involves
intentional misconduct or a knowing violation of the law, (3) any transaction
from which the director received an improper benefit, or (4) an act or
omission for which the liability of a director is expressly provided by an
applicable statute. Article IX of the Registrant's Articles of Incorporation,
as amended, states that a director of the Registrant shall not be liable to
the Registrant or its shareholders for monetary damages except to the extent
otherwise expressly provided by the statutes of the state of Texas.
In addition, Article 2.02-1 of the Texas Business Corporation Act
(the "TBCA") authorizes a Texas corporation to indemnify a person who was, is,
or is threatened to be made a named defendant or respondent in a proceeding,
including any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, arbitrative, or investigative because
the person is or was a director. The TBCA provides that unless a court of
competent jurisdiction determines otherwise, indemnification is permitted only
if it is determined that the person (1) conducted himself in good faith; (2)
reasonably believed (a) in the case of conduct in his official capacity as a
director of the corporation, that his conduct was in the corporation's best
interests; and (b) in all other cases, that his conduct was at least not
opposed to the corporation's best interests; and (3) in the case of any
criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. A person may be indemnified under Article 2.02-1 of the TBCA against
judgments, penalties (including excise and similar taxes), fines, settlements,
and reasonable expenses actually incurred by the person (including court costs
and attorneys' fees), but if the person is found liable to the corporation or
is found liable on the basis that personal benefit was improperly received by
him, the indemnification is limited to reasonable expenses actually incurred
and shall not be made in respect of any proceeding in which the person has
been found liable for willful or intentional misconduct in the performance of
his duty to the corporation. A corporation is obligated under Article 2.02-1
of the TBCA to indemnify a director or officer against
II-1
<PAGE>
reasonable expenses incurred by him in connection with a proceeding in which
he is named defendant or respondent because he is or was director or officer
if he has been wholly successful, on the merits or otherwise, in the defense
of the proceeding. Under Article 2.02-1 of the TBCA a corporation may (1)
indemnify and advance expenses to an officer, employee, agent or other persons
who are or were serving at the request of the corporation as a director,
officer, partner, venturer, proprietor, trustee, employee, agent or similar
functionary of another entity to the same extent that it may indemnify and
advance expenses to its directors, (2) indemnify and advance expenses to
directors and such other persons identified in (1) to such further extent,
consistent with law, as may be provided in the corporation's articles of
incorporation, bylaws, action of its board of directors, or contract or as
permitted by common law and (3) purchase and maintain insurance or another
arrangement on behalf of directors and such other persons identified in (1)
against any liability asserted against him and incurred by him in such a
capacity or arising out of his status as such a person.
The Bylaws of the Registrant set forth specific provisions for
indemnification of directors, officers, agents and other persons which are
substantially identical to the provisions of Article 2.02-1 of the TBCA
described above.
The Registrant maintains directors' and officers' insurance. Pinnacle
has entered into agreements to indemnify each of its directors and certain of
its executive officers regarding liabilities that may result from such
officer's service as an officer or director of Pinnacle.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
Exhibit
Number Description
------- -----------
2.1 -- Amended and Restated Agreement and Plan of
Reorganization dated November 12, 1999 among the Company,
Harris Webb & Garrison, Inc. ("HWG"), Sanders Morris
Mundy Inc. ("SMM") and the SMM shareholders (Filed as
Appendix A to the Definitive Proxy Statement on Schedule
14A of the Company dated December 6, 1999 and
incorporated herein by reference).
2.2 -- Amended and Restated Plan of Merger dated November 12,
1999, among the Company, HWG and SMM (Filed as Appendix B
to the Definitive Proxy Statement on Schedule 14A of the
Company dated December 6, 1999 and incorporated herein by
reference).
2.3 -- Amended and Restated Agreement and Plan of
Reorganization dated October 2, 1998 among the Company,
TEI, Inc. ("TEI"), HWG, Pinnacle Management & Trust
Company ("PMT"), Spires Financial, L.P. ("Spires") and
certain direct and indirect owners of HWG, PMT and Spires
(Filed as Appendix A to the Proxy Statement/Prospectus of
the Company dated December 31, 1998 (Reg. No. 333-65417)
and incorporated herein by reference).
2.4 -- Plan of Merger dated October 2, 1998, among TEI, TEI
Combination Corporation and the Company (Filed as
Appendix B to the Proxy Statement/Prospectus of the
Company dated December 31, 1998 (Reg. No. 333-65417) and
incorporated herein by reference).
2.5 -- Plan of Merger dated October 2, 1998, among HWG, HWG
Combination Corporation and the Company (Filed as Exhibit
C to the Proxy Statement/Prospectus of the Company dated
December 31, 1998 (Reg. No. 333-65417) and incorporated
herein by reference).
II-2
<PAGE>
Exhibit
Number Description
------- -----------
2.6 -- Plan of Merger dated October 2, 1998, among PMT, PMT
Combination Corporation and the Company (Filed as Exhibit
D to the Proxy Statement/Prospectus of the Company dated
December 31, 1998 (Reg. No. 333-65417) and incorporated
herein by reference).
+5.1 -- Opinion of Porter & Hedges, L.L.P.
*23.1 -- Consent of PricewaterhouseCoopers LLP.
*23.2 -- Consent of Cheshier & Fuller, L.L.P.
*23.3 -- Consent of KPMG LLP.
*23.4 -- Consent of Grant Thornton LLP.
23.5 -- Consent of Porter & Hedges, L.L.P. (contained in
Exhibit 5.1).
- ------------------------
* Filed herewith.
+ Previously filed.
(b) FINANCIAL STATEMENT SCHEDULES. All schedules are omitted
because they are not applicable or because the applicable
financial statements have been previously included in a filing
with the Commission.
ITEM 17. UNDERTAKINGS.
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;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration
statement (or the most recent post-effect 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.
II-3
<PAGE>
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 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.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provisions, the
registrant has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the 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 goverened by the final adjudication of such issue.
II-4
<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
Amendment No. 1 to this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on May 23, 2000.
PINNACLE GLOBAL GROUP, INC.
By: /s/ ROBERT E. GARRISON II
-------------------------------------------
Robert E. Garrison II
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act, this Amendment
No. 1 to this Registration Statement has been signed by the following persons
in the indicated capacities and on May 23, 2000.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ ROBERT E. GARRISON II
- -------------------------------------- Director, President and Chief Executive
Robert E. Garrison II Officer (Principal Executive Officer)
/s/ TITUS H. HARRIS, JR.
- -------------------------------------- Chairman of the Board and Director
Titus H. Harris, Jr.
/s/ DONALD R. CAMPBELL
- -------------------------------------- Director and Vice-Chairman (Principal
Donald R. Campbell Financial and Accounting Officer)
/s/ DON A. SANDERS
- -------------------------------------- Director and Vice-Chairman
Don A. Sanders
/s/ STEPHEN M. RECKLING
- -------------------------------------- Director
Stephen M. Reckling
/s/ PETER W. BADGER
- -------------------------------------- Director
Peter W. Badger
/s/ RICHARD C. WEBB
- -------------------------------------- Director
Richard C. Webb
*
- -------------------------------------- Director
Tony Coehlo
II-5
<PAGE>
Signature Title
--------- -----
*
- -------------------------------------- Director
W. Blair Waltrip
*
- -------------------------------------- Director
James H. Greer
*
- -------------------------------------- Director
John H. Styles
*
- -------------------------------------- Director
T. Craig Benson
/s/ BEN T. MORRIS
- -------------------------------------- Director
Ben T. Morris
/s/ GEORGE L. BALL
- -------------------------------------- Director
George L. Ball
*By: /s/ ROBERT E. GARRISON II
---------------------------------
Robert E. Garrison II,
As Attorney-In-Fact
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
------- -----------
2.1 -- Amended and Restated Agreement and Plan of
Reorganization dated November 12, 1999 among the Company,
Harris Webb & Garrison, Inc. ("HWG"), Sanders Morris
Mundy Inc. ("SMM") and the SMM shareholders (Filed as
Appendix A to the Definitive Proxy Statement on Schedule
14A of the Company dated December 6, 1999 and
incorporated herein by reference).
2.2 -- Amended and Restated Plan of Merger dated November 12,
1999, among the Company, HWG and SMM (Filed as Appendix B
to the Definitive Proxy Statement on Schedule 14A of the
Company dated December 6, 1999 and incorporated herein by
reference).
2.3 -- Amended and Restated Agreement and Plan of
Reorganization dated October 2, 1998, among the Company,
TEI, Inc. ("TEI"), HWG, Pinnacle Management & Trust
Company ("PMT"), Spires Financial, L.P. ("Spires") and
certain direct and indirect owners of HWG, PMT and Spires
(Filed as Appendix A to the Proxy Statement/Prospectus of
the Company dated December 31, 1998 (Reg. No. 333-65417)
and incorporated herein by reference).
2.4 -- Plan of Merger dated October 2, 1998, among TEI, TEI
Combination Corporation and the Company (Filed as
Appendix B to the Proxy Statement/Prospectus of the
Company dated December 31, 1998 (Reg. No. 333-65417) and
incorporated herein by reference).
2.5 -- Plan of Merger dated October 2, 1998, among HWG, HWG
Combination Corporation and the Company (Filed as Exhibit
C to the Proxy Statement/Prospectus of the Company dated
December 31, 1998 (Reg. No. 333-65417) and incorporated
herein by reference).
2.6 -- Plan of Merger dated October 2, 1998, among PMT, PMT
Combination Corporation and the Company (Filed as Exhibit
D to the Proxy Statement/Prospectus of the Company dated
December 31, 1998 (Reg. No. 333-65417) and incorporated
herein by reference).
+5.1 -- Opinion of Porter & Hedges, L.L.P.
*23.1 -- Consent of PricewaterhouseCoopers LLP.
*23.2 -- Consent of Cheshier & Fuller, L.L.P.
*23.3 -- Consent of KPMG LLP.
*23.4 -- Consent of Grant Thornton LLP.
23.5 -- Consent of Porter & Hedges, L.L.P. (contained in
Exhibit 5.1).
- ----------------------------
* Filed herewith.
+ Previously filed.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated March 17, 2000 relating to the
financial statements and financial statement schedule, which appears in
Pinnacle Global Group's Annual Report on Form 10-K for the year ended
December 31, 1999. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated February 25, 2000 relating to the
financial statements of Sanders Morris Mundy Inc., which appear in the
Current Report on Form 8-K dated April 28, 2000 of Pinnacle Global Group,
Inc. We also consent to the reference to us under the heading "Experts" in
such Registration Statement.
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated February 24, 1999 relating to the
financial statements of Spires Financial, L.P., which appear in the
Definitive Proxy Statement on Schedule 14A dated December 6, 1999, as
supplemented by the Proxy Statement dated January 12, 2000 of Pinnacle Global
Group, Inc. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
May 22, 2000
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this registration statement on Form S-3
our report dated February 11, 1999 (except for Note 18 for which the date is
March 15, 1999), on our audit of the financial statements of Harris, Webb &
Garrison, Inc. at December 31, 1998 and 1997, and for each of the three years
in the period ended December 31, 1998 incorporated by reference in this
registration statement. We also consent to the references to our firm under
the captions "Experts."
/s/ CHESHIER & FULLER, L.L.P.
CHESHIER & FULLER, L.L.P.
Dallas, Texas
May 22, 2000
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Pinnacle Management & Trust Co.:
We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
May 22, 2000
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated February 7, 1997, accompanying the
financial statements of Pinnacle Management & Trust Company contained in the
Definitive Proxy Statement dated December 6, 1999 of Pinnacle Global Group,
Inc. on Schedule 14A, as supplemented by the Proxy Statement dated January 12,
2000, which is incorporated by reference in this Registration Statement on
Form S-3. We consent to the incorporation by reference in this Registration
Statement of the aforementioned report, and to the use of our name as it
appears under the caption "Experts."
/s/ GRANT THORNTON LLP
GRANT THORNTON LLP
Houston, Texas
May 22, 2000
