As filed with the Securities and Exchange Commission on August 17, 1999
Registration No. 333-84739
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
to
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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PINNACLE SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
California 280 North Bernardo Ave. 94-3003809
(State or other jurisdiction Mountain View, (I.R.S. Employer
of incorporation California 94043 Identification
or organization) (650) 526-1600 Number)
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
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Arthur D. Chadwick
Vice President, Finance and Administration,
Pinnacle Systems, Inc.
280 North Bernardo Avenue
Mountain View, California 94043
(650) 526-1600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
Chris F. Fennell, Esq.
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
(650) 493-9300
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
<CAPTION>
Proposed Proposed
Title of Each Class Amount Maximum Maximum
of Securities to be Offering Price Aggregate Amount of
to be Registered Registered Per Share(1) OfferingPrice(1) Registration fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value(2).......................... 386,586 shares $28.94 $11,187,799 $3,110(3)
====================================================================================================================================
<FN>
(1) Estimated solely for the purpose of computing the amount of the registration fee. The estimate is made pursuant to Rule 457(c)
of the Securities Act of 1933, as amended, based on the average of the high and low prices on August 10, 1999.
(2) Includes Preferred Share Purchase Rights which, prior to the occurrence of certain events, will not be exercisable or evidenced
separately from the Common Stock.
(3) A filing fee of $2,529 was paid on August 6, 1999.
</FN>
</TABLE>
================================================================================
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 SEC, acting pursuant to said Section 8(a), may
determine.
<PAGE>
The information contained in this prospectus is not complete and may be changed.
It is subject to completion or amendment. A registration statement relating to
these securities has been filed with the Securities and Exchange Commission. We
may not sell these securities until the registration statement becomes
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 in which the offer
or sale is not permitted.
PROSPECTUS (SUBJECT TO COMPLETION)
Issued August 17, 1999
386,586 Shares
PINNACLE SYSTEMS, INC.
COMMON STOCK
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These shares may be offered and sold from time to time by
Hewlett-Packard Company, the selling shareholder. See "Selling Shareholder." The
selling shareholder acquired the shares in connection with the acquisition by
Pinnacle Systems, Inc. of certain assets from such selling shareholder.
The selling shareholder will receive all of the net proceeds from the
sale of the shares and will pay all underwriting discounts and selling
commissions, if any, applicable to the sale of the shares. The Company will not
receive any of the proceeds from the sale of the shares.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 4 OF
THIS PROSPECTUS BEFORE PURCHASING ANY OF THE COMMON STOCK OFFERED HEREBY.
Pinnacle's common stock is traded on the Nasdaq National Market under
the symbol "PCLE." On August 16, 1999, the closing sale price of a share of
Pinnacle's Common Stock was $31.875.
----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
----------
August ___, 1999
<PAGE>
TABLE OF CONTENTS
Page
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Available Information........................................................ 2
Information Incorporated by Reference........................................ 2
Forward Looking Information.................................................. 3
The Company.................................................................. 4
Risk Factors................................................................. 4
Use of Proceeds.............................................................. 13
Selling Shareholder.......................................................... 13
Plan of Distribution......................................................... 13
Experts...................................................................... 14
Legal Matters................................................................ 14
You should rely only on the information contained in this prospectus.
We have not authorized anyone to provide you with information different from
that contained in this prospectus. The selling stockholder is offering to sell,
and seeking offers to buy, shares of PCLE common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale of the shares.
In this prospectus, "Pinnacle," "we," "us," and "our" refer to Pinnacle
Systems, Inc. and its subsidiaries.
AVAILABLE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission referred to as the
SEC. You may read and copy any document we file at the SEC's public reference
facilities in Room 1034, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the SEC's regional offices at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite
1300, New York, New York 10048. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public at the SEC's web site at http://www.sec.gov.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be a part of this prospectus, and later information that we file
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 Securities Exchange
Act of 1934, as amended, until the selling stockholders sell all the shares.
This prospectus is part of a Registration Statement we filed with the SEC
(Registration No. 333-84739). The documents we incorporate by reference are:
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<PAGE>
1. our Annual Report on Form 10-K for the fiscal year ended June
30, 1998;
2. our Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998;
3. our Quarterly Report on Form 10-Q for the quarter ended
December 31, 1998;
4. our Quarterly Report on Form 10-Q for the quarter ended March
31, 1999;
5. our Current Report on Form 8-K as filed with the SEC on March
26, 1999;
6. Our Current Report on Form 8-K as filed with the SEC on August
13, 1999;
7. the description of the Company's Common Stock contained in its
Registration Statement on Form 8-A as filed with the SEC on
September 9, 1994; and
8. the description of the Company's Preferred Share Purchase
Rights contained in its Registration Statement on Form 8-A as
filed with the SEC on December 19, 1996, as amended May 19,
1998.
You may request a copy of these filings, at no cost, by written or oral
request to the following address: Chief Financial Officer, Pinnacle Systems,
Inc., 280 North Bernardo Avenue, Mountain View, California 94043; telephone
number (650) 526-1600.
FORWARD LOOKING INFORMATION
This Prospectus, including the information incorporated by reference
herein, contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E
of the Securities Exchange Act of 1934. Actual results could differ materially
from those projected in the forward-looking statements as a result of the risk
factors set forth below. Reference is made in particular to the discussion set
forth under "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Annual Report on Form 10-K for the fiscal year
ended June 30, 1998, incorporated herein by reference. In connection with
forward-looking statements which appear in these disclosures, prospective
purchasers of the Common Stock offered hereby should carefully consider the
factors set forth in this Prospectus under "Risk Factors."
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<PAGE>
THE COMPANY
We design, manufacture, market and support video post-production tools
for high quality real time video processing. The Company's products combine
computer based and specialized video processing technologies which perform a
variety of video post-production functions such as the addition of special
effects, graphics and titles to multiple streams of live or previously recorded
video material. The Company's products address needs in the broadcast, desktop
or professional and consumer video post-production markets.
The Company was incorporated in California in 1986. The Company
maintains its executive offices at 280 North Bernardo Avenue, Mountain View,
California 94043, and its telephone number is (650) 526-1600.
RISK FACTORS
We have grown rapidly and expect to continue to grow rapidly. If we
fail to effectively manage this growth, our financial results could suffer.
We have in the past experienced rapid growth and anticipate that we may
grow at a rapid pace in the future. For example, net sales in fiscal 1998 were
$105.3 million compared to $37.5 million in fiscal 1997 and net sales in the
nine-month period ended March 31, 1999 increased 51.4% over the same period last
year. As a result of recent acquisitions, we have increased the number of
employees, including the addition of approximately 235 employees in connection
with the Hewlett-Packard, Inc., Truevision, Inc. and miro Computer Products AG
acquisitions, and many are now geographically dispersed. This growth places
increasing demands on our management, financial and other resources. We have
built these resources and systems to account for such growth, but continued
and/or accelerated growth may require us to increase our investment in such
systems, or to reorganize our management team. Such changes, should they occur,
could cause an interruption or diversion of focus from our core business
activities and have an adverse effect on financial results.
Any failure to successfully integrate the businesses we have acquired
could negatively impact us.
In August 1999, we closed the transaction with Hewlett-Packard Inc.,
and in March 1999, we completed the acquisitions of Truevision, Inc and
Shoreline Studios, Inc. We may in the near- or long-term pursue acquisitions of
complementary businesses, products or technologies. Integrating acquired
operations is a complex, time-consuming and expensive process. All acquisitions
involve risks that could materially and adversely affect our business and
operating results. These risks include:
- Distracting management from the day-to-day operations of our
business
- Costs, delays and inefficiencies associated with integrating
acquired operations, products and personnel
- The potential to result in dilutive issuance of our equity
securities
- The incurrence of debt and amortization expenses related to
goodwill and other intangible assets
There are various factors which may cause our net revenues and
operating results to fluctuate.
Our quarterly and annual operating results have varied significantly in
the past and may continue to fluctuate because of a number of factors, many of
which are outside our control. These factors include:
- Timing of significant orders from and shipments to major OEM
customers
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<PAGE>
- Timing and market acceptance of new products
- Success in developing, introducing and shipping new products
- Dependence on distribution channels through which our products
are sold
- Increased competition and pricing pressure
- Accuracy of our and our resellers' forecasts of end user
demand
- Accuracy of inventory forecasts
- Ability to obtain sufficient supplies from our subcontractors
- Timing and level of consumer product returns
- Foreign currency fluctuations
- Costs of integrating acquired operations
- General domestic and international economic conditions, such
as the recent economic downturn in Asia and Latin America.
We also experience significant fluctuations in orders and sales due to
seasonal fluctuations, the timing of major trade shows and the sale of consumer
products in anticipation of the holiday season. Sales usually slow down during
the summer months of July and August, especially in Europe. Also, we attend a
number of annual trade shows which can influence the order pattern of products,
including CEBIT in March, the NAB convention held in April, the IBC convention
held in September and the COMDEX exhibition held in November. Our operating
expense levels are based, in part, on our expectations of future revenue and, as
a result, net income would be disproportionately affected by a shortfall in net
sales. Due to these factors, we believe that quarter-to-quarter comparisons of
our results of operations are not necessarily meaningful and should not be
relied upon as indicators of future performance.
Our stock price may be volatile.
The trading price of our common stock has in the past and could in the
future fluctuate significantly. The fluctuations have been or could be in
response to numerous factors including:
- Quarterly variations in results of operations
- Announcements of technological innovations or new products by
us, our customers or competitors
- Changes in securities analysts' recommendations
- Announcements of acquisitions
- Earnings estimates for us
- General fluctuations in the stock market
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<PAGE>
Our revenues and results of operations may be below the expectations of
public market securities analysts or investors. This could result in a sharp
decline in the market price of our common stock.
In addition, stock markets have from time to time experienced extreme
price and volume fluctuations. The market prices for high technology companies
have been particularly affected by these market fluctuations and such effects
have often been unrelated to the operating performance of such companies. These
broad market fluctuations may cause a decline in the market price of our common
stock.
In the past, following periods of volatility in the market price of a
company's stock, securities class action litigation has been brought against the
issuing company. Although no such litigation has been brought against us, it is
possible that similar litigation could be brought against us. Such litigation
could result in substantial costs and would likely divert management's attention
and resources. Any adverse determination in such litigation could also subject
us to significant liabilities.
We may fail to sell products in the consumer market.
We entered the consumer market with the purchase of the VideoDirector
product line from Gold Disk in June 1996. We began shipping our first internally
developed consumer product, the VideoDirector Studio 200, in March 1997 and
began shipping a successor product, the Studio 400 in June 1998. In addition,
with the Miro Acquisition in August 1997, we acquired Miro's consumer products
and European sales organization. We aim to continue to expend resources to
develop, market and sell products into the consumer market. In this endeavor, we
need to continue to develop and maintain the following capabilities:
- Marketing and selling products through the consumer
distribution channels.
- Establish relationships with distributors and retailers
- A fully developed infrastructure to support electronic retail
stores and telephone and Internet orders.
Additionally, factors beyond our control could hurt consumer product
sales and consequently our financial condition. These factors include:
- Potential compatibility problems with other manufacturers'
electronic components
- The risk of obsolete inventory and inventory returns
- The growth of the consumer video market is difficult to
predict
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<PAGE>
If our products do not keep pace with the technological developments in
the rapidly changing video post-production equipment industry, then we may be
adversely affected.
The video post-production equipment industry is characterized by
rapidly changing technology, evolving industry standards and frequent new
product introductions. The introduction of products embodying new technologies
or the emergence of new industry standards can render existing products obsolete
or unmarketable. Delays in the introduction or shipment of new or enhanced
products, our inability to timely develop and introduce such new products, the
failure of such products to gain significant market acceptance or problems
associated with new product transitions could materially harm our business,
particularly on a quarterly basis.
We are critically dependent on the successful introduction, market
acceptance, manufacture and sale of new products that offer our customers
additional features and enhanced performance at competitive prices. Once a new
product is developed, we must rapidly commence volume production. This process
requires accurate forecasting of customer requirements and attainment of
acceptable manufacturing costs. The introduction of new or enhanced products
also requires us to manage the transition from older, displaced products in
order to minimize disruption in customer ordering patterns, avoid excessive
levels of older product inventories and ensure that adequate supplies of new
products can be delivered to meet customer demand. For example, the introduction
of DVExtreme, Lightning and Studio 400 has resulted in a significant decline in
sales of Prizm, Flashfile and Studio 200 and a write down of inventory. In
addition, as is typical with any new product introduction, quality and
reliability problems may arise. Any such problems could result in reduced
bookings, manufacturing rework costs, delays in collecting accounts receivable,
additional service warranty costs and a limitation on market acceptance of the
product.
If we do not effectively compete, our business will be harmed.
The market for our products is highly competitive. We compete in the
broadcast, desktop and consumer video production markets. We anticipate
increased competition in each of the broadcast, desktop and consumer video
production markets, particularly since the industry is undergoing a period of
technological change and consolidation. Competition for our broadcast, consumer
and video products is generally based on:
- Product performance
- Breadth of product line
- Quality of service and support
- Market presence
- Price
- Ability of competitors to develop new, higher performance,
lower cost consumer video products
Certain competitors in the broadcast, consumer and video market have
larger financial, technical, marketing, sales and customer support resources,
greater name recognition and larger installed customer bases than we do. In
addition, some competitors have established relationships with current and
potential customers of ours and offer a wide variety of video equipment that can
be bundled in certain large system sales.
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<PAGE>
Principal competitors in the broadcast market include:
Chyron Corporation
Matsushita Electric Industrial Co. Ltd.
Quantel Ltd. (a division of Carlton Communications Plc)
Accom, Inc.
Sony Corporation
Tektronix
SeaChange
Principal competitors in the desktop and consumer markets are:
Quantel Ltd. (a division of Carlton Communications Plc)
Accom, Inc.
Sony Corporation
Avid Technology, Inc.
Digitel Processing Systems, Inc.
Fast Multimedia
Iomega Corp.
Matrox Electronics Systems, Ltd.
Hauppauge
Media 100, Inc.
Adobe Systems, Inc.
These lists are not all-inclusive.
The consumer market in which certain of our products compete is an
emerging market and the sources of competition are not yet well defined. There
are several established video companies that are currently offering products or
solutions that compete directly or indirectly with our consumer products by
providing some or all of the same features and video editing capabilities. In
addition, we expect that existing manufacturers and new market entrants will
develop new, higher performance, lower cost consumer video products that may
compete directly with our consumer products. We expect that potential
competition in this market is likely to come from existing video editing
companies, software application companies, or new entrants into the market, many
of which have the financial resources, marketing and technical ability to
develop products for the consumer video market. Increased competition in any of
these markets could result in price reductions, reduced margins and loss of
market share. Any of these effects could materially harm our business.
We are dependent on contract manufacturers and single or limited source
suppliers for our components. If these manufacturers and suppliers do not meet
our demand either in volume or quality, then we could be materially harmed.
We rely on subcontractors to manufacture our consumer products and the
major subassemblies of our broadcast and desktop products. We and our
manufacturing subcontractors are dependent upon single or limited source
suppliers for a number of components and parts used in our products, including
certain key integrated circuits. Our strategy to rely on subcontractors and
single or limited source suppliers involves a number of significant risks,
including:
- Loss of control over the manufacturing process
- Potential absence of adequate capacity
- Potential delays in lead times
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<PAGE>
- Unavailability of certain process technologies
- Reduced control over delivery schedules, manufacturing yields,
quality and costs
- Unexpected increases in component costs
If any significant subcontractor or single or limited source suppliers
becomes unable or unwilling to continue to manufacture these subassemblies or
provide critical components in required volumes, we will have to identify and
qualify acceptable replacements or redesign our products with different
components. Additional sources may not be available and product redesign may not
be feasible on a timely basis. This could materially harm our business. Any
extended interruption in the supply of or increase in the cost of the products,
subassemblies or components manufactured by third party subcontractors or
suppliers could materially harm our business.
We rely heavily on dealers and OEMs to market, sell, and distribute our
products. In turn, we depend heavily on the success of these resellers. If these
resellers do not succeed in effectively distributing our products, then our
financial performance will be negatively affected.
These resellers may:
- Not effectively promote or market our products
- Experience financial difficulties and even close operations
Our dealers and retailers are not contractually obligated to sell our
products. Therefore, they may, at any time:
- Refuse to promote or pay for our products
- Discontinue our products in favor of a competitor's product
Also, with these distribution channels standing between them and the
actual market, we may not be able to accurately gauge current demand for
products and anticipate demand for newly introduced products. For example,
dealers may place large initial orders for a new product just to keep their
stores stocked with the newest products and not because there is a significant
demand for them.
As to consumer products offerings, we have expanded our distribution
network to include several consumer channels, including large distributors of
products to computer software and hardware retailers, which in turn sell
products to end users. We also sell our consumer products directly to certain
retailers. Rapid change and financial difficulties of distributors have
characterized distribution channels for consumer retail products. These
arrangements have exposed us to the following risks, some of which are out of
our control:
- We are obligated to provide price protection to such retailers
and distributors and, while the agreements limit the
conditions under which product can be returned to us, we may
be faced with product returns or price protection obligations.
- The distributors or retailers may not continue to stock and
sell our consumer products.
- Retailers and retail distributors often carry competing
products.
Any of the foregoing events could materially harm our business.
-9-
<PAGE>
If certain of our key employees leave or are no longer able to perform
services for us, it could have a material adverse effect on our business.
We believe that the efforts and abilities of our senior management and
key technical personnel are very important to our continued success. Only one of
our senior management or key technical personnel is bound by an employment
agreement and none are the subject of key man life insurance.
We may not be able to attract and retain a sufficient number of
managerial personnel and technical employees to compete successfully.
Our success is dependent upon our ability to attract and retain
qualified technical and managerial personnel. There are not enough engineers,
technical support, software services and managers available to meet the current
demands of the computer industry. We may not be able to retain our key technical
and managerial employees or attract, assimilate and retain such other highly
qualified technical and managerial personnel as required in the future. Also,
employees may leave our employ and subsequently compete against us, or
contractors may perform services for competitors of ours. If we are unable to
retain key personnel, our business could be materially harmed.
We may be unable to protect our proprietary information and procedures
effectively.
We must protect our proprietary technology and operate without
infringing the intellectual property rights of others. We rely on a combination
of patent, copyright, trademark and trade secret laws and other intellectual
property protection methods to protect our proprietary technology. In addition,
we generally enter into confidentiality and nondisclosure agreements with our
employees and OEM customers and limit access to and distribution of our
proprietary technology. These steps may not protect our proprietary information
nor give us any competitive advantage. Others may independently develop
substantially equivalent intellectual property or otherwise gain access to our
trade secrets or intellectual property, or disclose such intellectual property
or trade secrets. If we are unable to protect our intellectual property, our
business could be materially harmed.
We may be adversely affected if we are sued by a third party or if we
decide to sue a third party for infringement.
There has been substantial litigation regarding patent, trademark and
other intellectual property rights involving technology companies. In the
future, litigation may be necessary to enforce any patents issued to us, to
protect our trade secrets, trademarks and other intellectual property rights
owned by us, or to defend us against claimed infringement. This litigation may
- Divert management's attention away from the operation of our
business
- Result in the loss of our proprietary rights
- Subject us to significant liabilities
- Force us to seek licenses from third parties
- Prevent us from manufacturing or selling products.
Any of these results could materially harm our business.
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<PAGE>
In the course of business, we have in the past received communications
asserting that our products infringe patents or other intellectual property
rights of third parties. We investigated the factual basis of such
communications and negotiated licenses where appropriate. It is likely that in
the course of our business, we will receive similar communications in the
future. While it may be necessary or desirable in the future to obtain licenses
relating to one or more of our products, or relating to current or future
technologies, we may not be able to do so on commercially reasonable terms or at
all. These disputes may not be settled on commercially reasonable terms and may
result in long and costly litigation.
Because we sell products internationally, we are subject to additional
risks.
Sales of our products outside of North America represented
approximately 64% of net sales in the nine month period ended March 31, 1999
compared to 57.6%, 39.7% and 38.7% of net sales in the fiscal years that ended
June 30, 1998, 1997 and 1996 respectively. We expect that international sales
will continue to represent a significant portion of our net sales, particularly
in light of our increased European sales as a result of the Miro Acquisition and
the addition of the Miro European sales channel. We make foreign currency
denominated sales in many, primarily European, countries. This exposes us to
risks associated with currency exchange fluctuations. Although the dollar amount
of such foreign currency denominated sales was nominal during fiscal 1997, it
increased substantially during fiscal 1998 and 1999, especially for sales of
consumer and desktop products into Europe. In fiscal 1999 and beyond, we expect
that a majority of our European sales will be denominated in local foreign
currency including the Euro. The Company has developed natural hedges for some
of this risk in that most of the European selling expenses are also denominated
in local currency. In addition to foreign currency risks, international sales
and operations may also be subject to the following risks:
- Unexpected changes in regulatory requirements
- Export license requirements
- Restrictions on the export of critical technology
- Generally longer receivable collection periods and difficulty
in collecting accounts receivable
- Political instability
- Trade restrictions
- Changes in tariffs
- Difficulties in staffing and managing international operations
- Potential insolvency of international dealers
We are also subject to the risks of generally poor economic conditions
in certain areas of the world, most notably Asia. These risks may harm our
future international sales and, consequently, our business.
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<PAGE>
Computer software, components and systems used by or designed by us or
used by third parties with whom we regularly deal may not be able to process
date/time information between the twentieth and twenty-first century. This
inability could cause the disruption or failure of such computer systems. Our
business could be interrupted materially as a result of such disruption or
failure.
Like many other companies, we are potentially susceptible to the year
2000 problem, i.e., computer systems will not correctly recognize and process
date information beyond the year 1999. In addition, moving from 1999 to 2000 may
cause problems since some systems' programming assigns special meaning to
certain dates, such as 9/9/99, and the year 2000 is a leap year.
We are conducting a program to confront these potential problems. This
program involves assessing all areas that may be affected by or responsible for
a year 2000 problem and initiating changes wherever necessary. Some of the
activities include:
- Assessing all major categories of systems used by us,
including manufacturing, sales and financial systems
- Working with key suppliers of products and services to
determine that their operations and products are year 2000
capable, or to monitor their progress toward year 2000
capability
- Discussing contingency planning to address potential problem
areas with internal systems and with suppliers and other third
parties
- Implementing a program to assess the capability of our
products to handle the year 2000
It is expected that assessment, remediation and contingency planning
activities will be ongoing throughout 1999 with the goal of appropriately
resolving all material internal systems and third party issues. Further, we have
contingency plans, but if these planning activities fail, our business could be
materially harmed. It is uncertain to what extent we will be affected by the
year 2000 problem, and if third parties or suppliers have year 2000 problems,
our business may be materially harmed.
To assist customers in evaluating their year 2000 issues, we have
assessed the capability of our current and discontinued products. Products have
been assigned to one of the four following categories: "Year 2000 Compliant,"
"Year 2000 Compliant with minor issues" "Year 2000 non-compliant," "No
evaluation done--will not test." "Year 2000 Compliant" means that when used
properly and in conformity with the product information provided by us, and when
used with "Year 2000 Compliant" computer systems, the product will accurately
store, display, process, provide, and/or receive data from, into, and between
the twentieth and twenty-first centuries, including leap year calculations,
provided that all other technology used in combination with our product properly
exchanges date data with our product. Based on our
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<PAGE>
tests, we believe that all current products shipping, which run under Microsoft
Windows NT or Windows 95, will be "Year 2000 compliant." Final results of our
complete product testing will be published by fall 1999.
The cost which will be incurred by us regarding the implementation of
year 2000 compliant internal information systems, testing of current or older
products for year 2000 compliance, and answering and responding to customer
requests related to year 2000 issues, including both incremental spending and
redeployed resources, is currently not expected to exceed $500,000. The total
cost estimate does not include potential costs related to any customer or other
claims or the cost of internal software and hardware replaced in the normal
course of business. In some instances, the installation schedule of new software
and hardware in the normal course of business is being accelerated to also
afford a solution to year 2000 capability issues. The total cost estimate is
based on the current assessment of the projects and is subject to change. If
actual cost of year 2000 compliance materially exceeds our current estimate, our
business could be harmed.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the shares
by the selling shareholder.
SELLING SHAREHOLDER
Hewlett-Packard Company, the selling shareholder, acquired a total of
675,170 shares in connection with our acquisition of certain of the assets of
the selling shareholder pursuant to an Asset Purchase Agreement dated June 30,
1999. The 773,172 shares held by the selling shareholder represent approximately
3.3% of the outstanding common stock of Pinnacle of the as of August 2, 1999.
All 386,586 of the shares offered hereby are being sold by the selling
shareholder. Upon completion of this offering, the selling shareholder will own
approximately 386,586 of the outstanding shares of Common Stock of Pinnacle,
representing 1.6% of the outstanding common stock of Pinnacle as of August 2,
1999.
Pursuant to the terms of the Stock Restriction and Registration Rights
Agreement dated as of August 2, 1999 (the "Registration Rights Agreement"),
between Pinnacle and the selling shareholder, Pinnacle undertook to use
commercially reasonable efforts to register certain of the shares held by the
selling shareholder within five days of the date of issuance of shares in
connection with the closing of the acquisition. The Registration Rights
Agreement also includes certain indemnification arrangements with the selling
shareholder.
PLAN OF DISTRIBUTION
The shares may be sold from time to time by the selling shareholder or
by pledgees, donees, transferees or other successors in interest. Such sales may
be made in any one or more transactions (which may involve block transactions)
on the Nasdaq National Market, or any exchange on which the common stock of
Pinnacle may then be listed, in the over-the-counter market or otherwise in
negotiated transactions or a combination of such methods of sale, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. The selling shareholder may effect such
transactions by selling shares to or through broker-dealers, and such
broker-dealers may sell the shares as agent or may purchase such shares as
principal and resell them for their own account pursuant to this prospectus.
Such broker-dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the selling shareholder and/or
purchasers the shares, for whom they may act as agent (which compensation may be
in excess of customary commissions). In connection with such sales, the selling
shareholder and any participating brokers or dealers may be deemed to be
"underwriters" as defined in the Securities Act.
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<PAGE>
The Registration Rights Agreement provides that we will indemnify the
selling shareholder against certain liabilities, including liabilities under the
Securities Act.
We may suspend the use of this prospectus for a discrete period of
time, not exceeding 30 days, if, in the good faith determination of our board of
directors, a development has occurred or condition exists as a result of which
the Registration Statement or this prospectus contains or incorporates by
reference a material misstatement or omission, the correction of which would
require the premature disclosure of confidential information that would, in the
good faith determination of the board of directors, materially and adversely
affect the Company. We may not exercise this delay right more than once in any
twelve-month period. We are obligated in the event of such suspension to use our
reasonable efforts to ensure that the use of the prospectus may be resumed as
soon as practicable. This offering will terminate on the earliest of (a) two
years from the date of issuance of the shares or (b) the date on which all
shares offered hereby have been sold by the selling shareholder or (c) such time
as all of the shares can be sold by the selling shareholder within a three-month
period without compliance with the registration requirements of the Securities
Act pursuant to Rule 144 thereunder.
Any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under that Rule rather
than pursuant to this Prospectus.
There can be no assurance that the selling shareholder will sell any or
all of the shares of Pinnacle common stock offered by it hereunder.
EXPERTS
The consolidated financial statements and schedule of the Company as of
June 30, 1998 and 1997 and for each of the years in the three-year period ended
June 30, 1998 have been incorporated by reference herein, in reliance upon the
reports of KPMG LLP, independent auditors, incorporated by reference and upon
the authority of said firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby has been
passed upon for Pinnacle by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, payable by the
Company in connection with the sale of Common Stock being registered. All
amounts are estimates except the SEC registration fee and Nasdaq National Market
listing fee.
Amount to be
Paid
------------
SEC registration fee............................................... $ 3,110
Nasdaq National market listing fee................................. 13,503
Printing expenses.................................................. 10,000
Legal fees and expenses............................................ 25,000
Accounting fees and expenses....................................... 7,500
Miscellaneous expenses............................................. 15,887
-----------
Total......................................................... $ 75,000
===========
Item 15. Indemnification of Directors and Officers
As permitted by Section 204(a) of the California General Corporation
Law, the Registrant's Articles of Incorporation eliminate a director's personal
liability for monetary damages to the Registrant and its shareholders arising
from a breach or alleged breach of the director's fiduciary duty, except for
liability arising under Sections 310 and 316 of the California General
Corporation Law or liability for (i) acts or omissions that involve intentional
misconduct or knowing and culpable violation of law, (ii) acts or omissions that
a director believes to be contrary to the best interests of the Registrant or
its shareholders or that involve the absence of good faith on the part of the
director, (iii) any transaction from which a director derived an improper
personal benefit, (iv) acts or omissions that show a reckless disregard for the
director's duty to the Registrant or its shareholders in circumstances in which
the director was aware, or should have been aware, in the ordinary course of
performing a director's duties, of a risk of serious injury to the Registrant or
its shareholders, (v) acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
Registrant or its shareholders, (vi) interested transactions between the
corporation and a director in which a director has a material financial
interest, and (vii) liability for improper distributions, loans or guarantees.
This provision does not eliminate the directors' duty of care, and in
appropriate circumstances equitable remedies such as an injunction or other
forms of non-monetary relief would remain available under California law.
Sections 204(a) and 317 of the California General Corporation Law
authorize a corporation to indemnify its directors, officers, employees and
other agents in terms sufficiently broad to permit indemnification (including
reimbursement for expenses) under certain circumstances for liabilities arising
under the Securities Act. The Registrant's Articles of Incorporation and Bylaws
contain provisions covering indemnification to the maximum extent permitted by
the California General Corporation Law of corporate directors, officers and
other agents against certain liabilities and expenses incurred as a result of
proceedings involving such persons in their capacities as directors, officers
employees or agents, including proceedings under the Securities Act or the
Securities Exchange Act of 1934. The Company has entered into Indemnification
Agreements with its directors and executive officers.
The Registration Rights Agreement provides that the Company will
indemnify the Selling Shareholder identified therein against certain
liabilities, including liabilities under the Securities Act.
II-1
<PAGE>
At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Registrant in which
indemnification is being sought, nor is the Registrant aware of any threatened
litigation that may result in a claim for indemnification by any director,
officer, employee or other agent of the Registrant.
Item 16. Exhibits
Exhibit No. Description
- ----------- -----------
4.1 Stock Restriction and Registration Rights Agreement dated August
2, 1999 by and between the Registrant and Hewlett-Packard
Company.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
23.1 Consent of KPMG LLP, independent auditors.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1* Power of Attorney.
* Previously filed.
Item 17. Undertakings
The 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:
(a) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(b) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement;
(c) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement; provided,
however, that paragraphs (a) and (b) above do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Company pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") that are incorporated by reference in the Registration Statement.
2. That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, as amended, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Exchange Act, (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that
is incorporated by reference in the Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-2
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
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 its Registration Statement on Form S-3 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Mountain
View, State of California, on the 17th day of August, 1999.
PINNACLE SYSTEMS, INC.
By: /S/ MARK L. SANDERS
--------------------------------
Mark L. Sanders
President and Chief Executive Officer
II-4
<PAGE>
<TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ MARK L. SANDERS President, Chief Executive Officer and Director August 17, 1999
- --------------------------- (Principal Executive Officer)
Mark L. Sanders
/s/ ARTHUR D. CHADWICK* Vice President, Finance and Administration and August 17, 1999
- --------------------------- Chief Financial Officer (Principal Financial and
Arthur D. Chadwick Accounting Officer)
Chairman of the Board, Vice President, Desktop
- --------------------------- Products
Ajay Chopra
/s/ JOHN LEWIS* Director August 17, 1999
- ---------------------------
John Lewis
/s/ CHARLES J. VAUGHNAN* Director August 17, 1999
- ---------------------------
Charles J. Vaughan
Director
- ---------------------------
Nyal D. McMullin
/s/ GLENN E. PENISTEN* Director August 17, 1999
- ---------------------------
Glenn E. Penisten
/s/ L. GREGORY BALLARD* Director August 17, 1999
- ---------------------------
L. Gregory Ballard
/s/ L. WILLIAM KRAUSE* Director August 17, 1999
- ---------------------------
L. William Krause
By: /s/ Mark L. Sanders
----------------------
Mark L. Sanders,
Attorney-in-fact
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
4.1 Stock Restriction and Registration Rights Agreement dated August
2, 1999 by and between the Registrant and Hewlett-Packard
Company.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
23.1 Consent of KPMG LLP, independent auditors.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1* Power of Attorney.
- --------
* Previously filed.
II-6
STOCK RESTRICTION AND
REGISTRATION RIGHTS AGREEMENT
THIS STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT (this
"Agreement") is made effective as of August 2, 1999 by and between PINNACLE
SYSTEMS, INC., a California corporation (the "Company"), and HEWLETT-PACKARD
COMPANY, a Delaware corporation ("HP").
RECITALS
A. Pursuant to the terms of the Asset Purchase Agreement dated
June 30, 1999 (the "Purchase Agreement"), by and between the
Company and HP, HP shall acquire from the Company Six Hundred
Seventy-Five Thousand One Hundred Seventy (675,170) fully paid
and nonassessable shares (the "Pinnacle Shares") of the
Company's Common Stock, no par value (the "Common Stock") as
partial payment of the Purchase Price (as such term is defined
in the Purchase Agreement) for the sale of certain assets and
the transfer of certain liabilities of HP to the Company.
B. The transactions contemplated by the Purchase Agreement are to
be consummated at the "Closing Date", as such term is defined
in the Purchase Agreement.
C. In connection with the Asset Purchase Agreement, the Company
has agreed to provide the registration rights set forth in
this Agreement with respect to one-half of the Pinnacle Shares
issued to HP at the Closing Date and one-half of any
additional shares of Common Stock issued to HP on a later date
in accordance with Section 3.1(c) of the Purchase Agreement
and HP has agreed to certain restrictions with respect to the
disposition of the remainder of such shares. NOW, THEREFORE,
in consideration of the representations, warranties, covenants
and conditions herein and in the Purchase Agreement, the
parties hereto hereby agree as follows:
SECTION 1
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement:
(a) The term "beneficially owned" refers to the meaning of
such terms as provided in Rule 13d-3 promulgated under the Exchange Act.
(b) The term "Company Public Sale Event" shall mean any sale
by the Company of Common Stock for its own account as contemplated by Section
3.2 pursuant to an effective Registration Statement filed by the Company, filed
on Form S-1 or any other form for the general
<PAGE>
registration of securities with the Commission (other than a Registration
Statement filed by the Company on either Form S-4 or Form S-8 or any
registration in connection with a standby underwriting in connection with the
redemption of outstanding convertible securities).
(c) The term "Company Sale Notice" shall mean a Notice of
Offering pursuant to Subsection 3.1 from the Company to each Holder stating that
the Company proposes to effect a Company Public Sale Event.
(d) The term "Exchange Act" means the Securities Exchange Act
of 1934, as amended, or any similar federal statute and the rules and
regulations of the SEC thereunder, all as the same shall be in effect from time
to time.
(e) The term "person" shall mean any person, individual,
corporation, partnership, limited liability company, joint stock company,
unincorporated association, joint venture, trust or other nongovernmental entity
or any governmental agency, court, authority or other body (whether foreign,
federal, state, local or otherwise).
(f) The term "Holder" means HP and any transferee of
Registrable Securities pursuant to Section 3.9 of this Agreement, provided that
any such person shall cease to be a Holder on the Termination Date.
(g) The term "Preliminary Prospectus" shall mean each
preliminary prospectus included in a Registration Statement or in any amendment
thereto prior to the date on which such Registration Statement is declared
effective under the Securities Act, including any prospectus filed with the SEC
pursuant to Rule 424(a) under the Securities Act.
(h) The term "Prospectus" shall mean each prospectus included
in a Registration Statement (including, without limitation, a prospectus that
discloses information previously omitted from a prospectus filed as part of an
effective Registration Statement in accordance with Rule 430A), together with
any supplement thereto, and any material incorporated by reference into such
Prospectus, all as filed with, or transmitted for filing to, the SEC pursuant to
Rule 424(b) under the Securities Act.
(i) The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or ordering
by the SEC of the effectiveness of such registration statement.
(j) The term "Registration Expenses" shall have the meaning
contained in Section 3.2 hereof.
(k) The term "Registrable Securities" shall refer to 337,585
of the Pinnacle Shares, representing of the total number of shares issued on the
Closing Date in connection with Purchase Agreement, (ii) 1/2 of any shares of
Common Stock issued to HP pursuant to Section 3.1(c) of the Purchase Agreement,
and (iii) any Common Stock of the Company issued by the Company to HP in respect
of the shares identified in clause (i) or (ii) upon any stock split, stock
dividend,
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<PAGE>
recapitalization, or similar event; provided, that if, upon any stock dividend,
recapitalization or similar event, the Company issues securities which are not
immediately convertible into Common Stock, the term "Registrable Securities"
shall also include such securities.
(l) The term "Registration Statement" shall mean any
registration statement (including the Preliminary Prospectus, the Prospectus,
any amendments (including any post-effective amendments) thereof, any
supplements and all exhibits thereto and any documents incorporated therein by
reference pursuant to the rules and regulations of the SEC), filed by the
Company with the SEC under the Securities Act in connection with the SEC
provisions of Section 3.
(m) The term "Restricted Securities" shall mean the securities
of the Company required to bear the legend set forth in Section 2.2 hereof.
(n) The term "Securities Act" means the Securities Act of
1933, as amended, or any similar federal statute and the rules and regulations
of the SEC thereunder, all as the same shall be in effect at the time.
(o) The term "SEC" means the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(p) The term "Termination Date" means shall mean the earlier
of the respective dates on which the Company has no further obligation under the
terms of this Agreement to file or keep effective the Shelf Registration
Statement under Subsection 3.1(b).
(q) The term "Unregistered Shares" shall mean all of the
shares of common stock issued to HP in connection with the Acquisition that are
not Registrable Securities.
1.2 Definitions Generally. Capitalized terms used herein but otherwise
not defined herein shall have the meanings ascribed to them in the Purchase
Agreement.
SECTION 2
RESTRICTIONS ON TRANSFERABILITY;
COMPLIANCE WITH SECURITIES ACT
2.1 Restrictions on Transferability. HP agrees that the Pinnacle Shares
shall not be sold, assigned, transferred or pledged unless (i) such sale,
transfer or other disposition is within the limitations of and in compliance
with Rule 144 promulgated by the SEC under the Securities Act and HP furnishes
Pinnacle with reasonable proof of compliance with such Rule, (ii) in the opinion
of counsel to the transferring shareholder, reasonably satisfactory to Pinnacle
and its counsel, some other exemption from registration under the Securities Act
is available with respect to any such proposed sale, transfer, or other
disposition of Pinnacle Shares, or (iii) the offer and sale of the Pinnacle
Shares is registered under the Securities Act or (iv) such sale, transfer or
other disposition is otherwise in compliance with the Securities Act and the
rules and regulations thereunder. HP will
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<PAGE>
cause any proposed purchaser, assignee, transferee, or pledgee of the Pinnacle
Shares held by HP to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Section 2.
2.2 Restrictive Legends.
(a) Each certificate representing the Pinnacle Shares,
including any new certificates issued upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless
otherwise permitted by the provisions of Section 2.3 below) be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT FOR DISTRIBUTION, AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). SUCH SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED (1) IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT THERETO UNDER THE ACT (2) UNLESS SOLD
PURSUANT TO RULE 144 OF THE ACT, (3) IN THE OPINION OF COUNSEL
TO THE TRANSFERRING SHAREHOLDER (WHICH SHALL BE REASONABLY
SATISFACTORY TO THE ISSUER) SOME OTHER EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE OR (4) UNLESS THE SALE
IS OTHERWISE EXEMPT FROM REGISTRATION UNDER THE ACT.
Each holder of a certificate evidencing the Restricted Securities as
set forth in this Section 2.2(a) consents to the Company making a notation on
its records and giving instructions to any transfer agent of the Common Stock in
order to implement the restrictions on transfer established in this Section 2.
(b) Each certificate representing the Unregistered Shares,
including any new certificates issued upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless
otherwise permitted by the provisions of Section 2.3 below) be stamped or
otherwise imprinted with an additional legend in the following form (in addition
to any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS OF THAT CERTAIN STOCK RESTRICTION AND REGISTRATION
RIGHTS AGREEMENT DATED AUGUST 2, 1999 AND MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED UNTIL AUGUST 2, 2001
EXCEPT IN ACCORDANCE WITH THE TERMS OF SUCH AGREEMENT.
Each holder of a certificate evidencing the Unregistered Shares as set
forth in this section 2.2(b) consents to the Company making a notation on its
records and giving instructions to
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<PAGE>
any transfer agent of the Company's Common Stock in order to implement the
restrictions on transfer established in this Section 2.
2.3 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 2.3. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities (other than a
transfer not involving a change in beneficial ownership), and, in the case of
Unregistered Shares, for a period of two years after the Closing Date, unless in
either case there is in effect a registration statement under the Securities Act
covering the proposed transfer, the holder thereof shall give written notice to
the Company of such holder's intention to effect such transfer, sale, assignment
or pledge. Each such notice shall describe the manner and circumstances of the
proposed transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied, at such holder's expense by evidence of satisfaction of Section 2.1
hereof, and, as applicable such documentation or opinions as necessary under
Section 2.1, whereupon the holder of such Restricted Securities shall be
entitled to transfer such Restricted Securities in accordance with the terms of
the notice delivered by the holder to the Company. Each certificate evidencing
the Restricted Securities transferred as above provided shall bear, except if
such transfer is made pursuant to Rule 144, the appropriate restrictive legend
set forth in Section 2.2 above, except that such certificate shall not bear such
restrictive legend if in the opinion of counsel for such holder and the Company
such legend is not required in order to establish compliance with any provision
of the Securities Act.
SECTION 3
REGISTRATION RIGHTS
3.1 Shelf Registration.
(a) Form S-3 Registration. As promptly as practicable and in
any event within 5 days after the issuance of the Pinnacle Shares in connection
with the Closing under the Purchase Agreement, the Company shall file a
registration statement on Form S-3 under the Securities Act covering the resale
of the Registrable Securities by the Holders thereof. Within 5 days after the
issuance of any shares of Common Stock to HP pursuant to Section 3.1(c) of the
Purchase Agreement, Pinnacle shall amend such Form S-3 to cover of such
additional shares of Common Stock as necessary so that all of the Registrable
Securities are covered by such Form S-3. Nothing herein shall be deemed to
provide any registration rights with respect to the Unregistered Shares.
(b) Obligations of the Company. In connection with any
registration of Registrable Securities pursuant to this Section 3.1, the Company
shall use its best efforts to cause such registration statement to become
effective as soon as practicable thereafter and to remain effective until the
earlier of (A) the second anniversary of the date of issuance of the Pinnacle
Shares, (B) the sale of all of such shares of Registrable Securities so
registered or (C) ninety days after the date as all of the Registrable
Securities can be sold by Holders within a three-month period without compliance
with the volume requirements of the Securities Act pursuant to Rule 144
thereunder.
-5-
<PAGE>
3.2 Company Sale Events.
(a) Determination. Subject to Section 3.5(b) the Company may
at any time effect a Company Public Sale Event pursuant to a Registration
Statement filed by the Company if the Company gives each Holder a Company Sale
Notice, provided that such Company Sale Notice is given not less than 21 days
prior to the initial filing of the related Registration Statement. The
obligation of the Company to give to each Holder a Company Sale Notice and to
permit piggyback registration rights to Holders with respect to Registrable
Securities in connection with Company Sale Events in accordance with this
Section 3.2 shall terminate in accordance with Section 3.11.
(b) Notice. The Company Sale Notice shall offer the Holders
the opportunity to participate in such offering and include the number of shares
of Registrable Securities which represents the best estimate of the lead
managing underwriter (or, if not known or applicable, the Company) that will be
available for sale by the Holders in the proposed offering.
(c) Piggyback Rights of Holders. (A) If the Company shall have
delivered a Company Sale Notice, Holders shall be entitled to participate on the
same terms and conditions as the Company in the Company Public Sale Event to
which such Company Sale Notice relates and to offer and sell shares of
Registrable Securities therein only to the extent provided in this Section
3.2(a). Each Holder desiring to participate in such offering shall notify the
Company no later than ten (10) days following receipt of a Company Sale Notice
of the aggregate number of shares of Registrable Securities that such Holder
then desires to sell in the offering. (B) Each Holder desiring to participate in
a Company Public Sale Event may include shares of Registrable Securities in any
Registration Statement relating to a Company Public Sale Event to the extent
that the inclusion of such shares shall not reduce the number of shares of
Common Stock to be offered and sold by the Company to be included therein. If
the lead managing underwriter selected by the Company for a Company Public Sale
Event advises the Company in writing that the total number of shares of Common
Stock to be sold by the Company together with the shares of Registrable
Securities which such Holders intend to include in such offering would be
reasonably likely to adversely affect the price or distribution of the Common
Stock offered in such Company Public Sale Event or the timing thereof, then
there shall be included in the offering only that number of shares of
Registrable Securities, if any, that such lead managing underwriter reasonably
and in good faith believes will not jeopardize the marketing of the offering;
provided that if the lead managing underwriter determines that such factors
require a limitation on the number of shares of Registrable Securities to be
offered and sold as aforesaid and so notifies the Company in writing, the number
of shares of Registrable Securities to be offered and sold by Holders desiring
to participate in the Company Public Sale Event, shall be allocated among those
Holders desiring to participate in such Company Public Sale Event on a pro rata
basis based on their holdings of Registrable Securities. If any Holder does not
request inclusion of the maximum number of shares of Registrable Securities
allocated to it pursuant to the above-described procedure, the remaining portion
of its allocation shall be reallocated among those requesting Holders whose
allocation did not satisfy their requests pro rata on the basis of the number of
shares of Registrable Securities held by such Holders, and this procedure shall
be repeated until all of the shares of Registrable Securities which may be
included in the underwriting have been so allocated.
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<PAGE>
(d) Discretion of the Company. In connection with any Company
Public Sale Event, subject to the provisions of this Agreement, the Company, in
its sole discretion, shall determine whether (a) to proceed with, withdraw from
or terminate such Company Public Sale Event, (b) to enter into a purchase
agreement or underwriting agreement for such Company Public Sale Event, and (c)
to take such actions as may be necessary to close the sale of Common Stock
contemplated by such offering, including, without limitation, waiving any
conditions to closing such sale which have not been fulfilled.
(e) Market-Standoff Agreement. In connection with a Company
Public Sale Event, securities in connection with an effective registration
statement under the Securities Act, each Holder agrees, upon the request of the
Company or the underwriters managing any underwritten offering of the Company's
securities, not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any securities of the Company (other than
those included in the registration) without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time after
the effectiveness of the registration statement as specified by such
underwriters, not to exceed one hundred eighty (180) days; provided that all
officers, directors and 5% stockholders of the Company are bound by and have
entered into similar agreements. Each Holder agrees that the Company may
instruct its transfer agent to place stop-transfer notations in its records to
enforce the provisions of this Section 3.2(e).
3.3 Agreements Concerning Offerings. Subject to the terms and
conditions hereof, in connection with any Registration Statement, the Company
will:
(a) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus (the "Prospectus")
used in connection therewith as may be necessary to make and to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all securities
proposed to be registered in such registration statement.
(b) Furnish to the participating Holders or the underwriters
such number of copies of any Prospectus (including any preliminary Prospectus
and any amended or supplemented Prospectus), in conformity with the requirements
of the Securities Act, as the Holders may reasonably request in order to effect
the offering and sale of the shares of Registrable Securities to be offered and
sold, but only while the Company shall be required under the provisions hereof
to cause the registration statement to remain current.
(c) Provide to any Holder requesting to include Registrable
Securities in such Registration Statement and any managing underwriter(s)
participating in any distribution thereof and to any attorney, accountant or
other agent retained by such Holder or managing underwriter(s), reasonable
access to appropriate officers and directors of the Company, its independent
auditors and counsel to ask questions and to obtain information (including any
financial and other records and pertinent corporate documents) reasonably
requested by any such Holder, managing underwriter(s), attorney, accountant or
other agent in connection with such Registration Statement or any amendment
thereto, provided, however, that (i) in connection with any such access or
request, any
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such requesting persons shall cooperate to the extent reasonably practicable to
minimize any disruption to the operation by the Company of its business and (ii)
any records, information or documents shall be kept confidential by such
requesting persons, unless (i) such records, information or documents are in the
public domain or otherwise publicly available or (ii) disclosure of such
records, information or documents is required by court or administrative order
or by applicable law (including, without limitation, the Securities Act).
(d) Use its best efforts to register or qualify the shares of
Registrable Securities covered by such registration statement under the
securities or Blue Sky laws of such states as the participating Holders shall
reasonably request, maintain any such registration or qualification current
until the earlier of (A) the second anniversary of the date of this Agreement,
(B) the sale of all the shares of Registrable Securities so registered or (C)
such time as all of the Registrable Securities can be sold by Holders within a
three-month period without compliance with the registration requirements of the
Securities Act pursuant to Rule 144 thereunder; provided, however, that the
Company shall not be required to take any action that would subject it to the
general jurisdiction of the courts of any jurisdiction in which it is not so
subject or to qualify as a foreign corporation in any jurisdiction where the
Company is not so qualified.
(e) Take all such other action either necessary or desirable
to permit the shares of Registrable Securities held by the Holders to be
registered and disposed of in accordance with the method of disposition
described herein.
(f) Enter into and perform its obligations under an
underwriting agreement, in usual and customary form, with the managing
underwriter of such offering. Each participating Holder participating in such
underwriting shall also enter into and perform its obligations under any such
agreement.
(g) Cause all Registrable Securities registered pursuant to
this Section 3.13(g) to be listed on The Nasdaq National Market or such other
exchange as the Company's Common Stock is then listed or quoted.
(h) Provide for or designate a transfer agent and registrar
(which may be the same entity) for the Registrable Securities covered by the
Registration Statement from and after the effective date of such Registration
Statement.
(i) Cooperate with the selling Holders of Registrable
Securities and any managing underwriters to facilitate the timely issuance and
delivery to any underwriters to which any Holder may sell Registrable Securities
in such offering certificates evidencing shares of the Registrable Securities
not bearing any restrictive legends and in such denominations and registered in
such names as the managing underwriters may request.
(j) The Company will keep the Holders informed of the
Company's best estimate of the earliest date on which such Registration
Statement or any post-effective amendment thereto will become effective and will
notify each Holder, Holders' Counsel and the managing underwriter(s), if any,
participating in the distribution pursuant to such Registration Statement
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promptly (i) when such Registration Statement or any post-effective amendment to
such Registration Statement is filed or becomes effective, (ii) of any request
by the Commission for an amendment or any supplement to such Registration
Statement or any related Prospectus, or any other information request by any
other governmental agency directly relating to the offering, and promptly
deliver to each Holder participating in the offering and the managing
underwriter(s), if any, copies of all correspondence between the Commission or
any such governmental agency or self-regulatory body and all written memoranda
relating to discussions with the Commission or its staff with respect to the
Registration Statement or proposed sale of shares, to the extent not covered by
attorney-client privilege or constituting attorney work product, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of
such Registration Statement or of any order preventing or suspending the use of
any related Prospectus or the initiation or threat of any proceeding for that
purpose, (iv) of the suspension of the qualification of any shares of Common
Stock included in such Registration Statement for sale in any jurisdiction or
the initiation or threat of a proceeding for that purpose, (v) of any
determination by the Company that an event has occurred (the nature and pendency
of which need not be disclosed during a "black-out period" pursuant to Section
3.5(a)) which makes untrue any statement of a material fact made in such
Registration Statement or any related Prospectus or which requires the making of
a change in such Registration Statement or any related Prospectus in order that
the same will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (vi) of the completion of the distribution contemplated by
such Registration Statement if it relates to a Company Sale Event.
(k) In the event of the issuance of any stop order suspending
the effectiveness of such Registration Statement or of any order suspending or
preventing the use of any related Prospectus or suspending the qualification of
any shares of Common Stock included in such Registration Statement for sale in
any jurisdiction, the Company will obtain its withdrawal at the earliest
possible time.
3.4 Expenses.
(a) All expenses, other than discounts and commissions,
incurred in connection with any registration pursuant to Sections 3.1 and 3.2
shall be borne by the Company. The costs and expenses of any such registration
shall include, without limitation, the reasonable fees and expenses of the
Company's counsel and its accountants, the reasonable fees and expenses of one
counsel for the Holders and all other costs and expenses of the Company incident
to the preparation, printing and filing under the Securities Act of the
registration statement and all amendments and supplements thereto and the cost
of furnishing copies of each preliminary prospectus, each final prospectus and
each amendment or supplement thereto to underwriters, dealers and other
purchasers of the securities so registered, the costs and expenses incurred in
connection with the qualification of such securities so registered under the
"blue sky" laws of various jurisdictions, the fees and expenses of the Company's
transfer agent and all other costs and expenses of complying with the provisions
of this Section 3 with respect to such registration (collectively, "Registration
Expenses").
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(b) Excluding the Registration Expenses, the participating
Holders shall pay all other expenses incurred on their behalf with respect to
any registration pursuant to Sections 3.1 and 3.2 including any counsel for the
participating Holders (other than counsel as provided in Section 3.4(a)) and all
underwriting discounts and selling commissions with respect to the Registrable
Securities sold by them pursuant to such registration statement.
3.5 Blackout Periods.
(a) Black-Out Periods for Holders. No Holder shall offer to
sell or sell any shares of Registrable Securities pursuant to the Shelf
Registration Statement, and the Company shall not be required to supplement or
amend any Registration Statement or otherwise facilitate the sale of Registrable
Securities pursuant thereto, during the 30-day period (or such lesser number of
days until the Company makes its next required filing under the Exchange Act)
immediately following the receipt by each Holder of a certificate of an
authorized officer of the Company to the effect that the Board of Directors of
the Company has determined in good faith that such offer, sale, supplement or
amendment is likely to require the disclosure of confidential information that
would materially and adversely affect the Company. The Company may not exercise
this postponement right more than once in any twelve (12) month period. Any
period described in Section 3.5(a) during which Holders are not able to sell
shares of Registrable Securities pursuant to the Shelf Registration Statement is
herein referred to as a "black-out" period. The Company shall notify each Holder
of the expiration or earlier termination of any "black-out" period (the nature
and pendency of which need not be disclosed during such "black-out" period).
(b) The period during which the Company is required pursuant
to Subsection 3.1 to keep the Shelf Registration Statement continuously
effective shall be extended by a number of days equal to the number of days, if
any, of any "black-out" period applicable to Holders pursuant to this Section
3.5 occurring during such period, plus a number of days equal to the number of
days during such period, if any, of any period during which the Holders are
unable to sell any shares of Registrable Securities pursuant to the Shelf
Registration Statement as a result of the happening of any event of the nature
described in Sections 3.7(b)(ii), 3.7(b)(iii) or 3.7(b)(v).
3.6 Black-Out Period for the Company. Except for offers to sell and
sales of Common Stock pursuant to a Registration Statement on Form S-8 or on
Form S-4, standby underwritings in connection with the redemption of outstanding
convertible securities, the conversion of outstanding convertible securities or
in connection with the acquisition by the Company of another company or
business, the Company shall not publicly offer to sell or sell any shares of
capital stock of the Company during the 60-day period immediately following the
initial sale of shares by any Holder in an underwritten public offering of
shares in connection with a Company Sale Event.
3.7 Indemnification and Contribution.
(a) To the extent permitted by law, the Company agrees to
indemnify and hold harmless each Holder and each person, if any, who controls
such Holder within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, and each of their respective officers, directors and
employees against any losses, claims, damages or liabilities, or actions in
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respect thereof to which such Holder or persons may become subject under the
Securities Act, or otherwise (collectively, "Losses"), insofar as such Losses
arise out of, or are based upon, any untrue statement or alleged untrue
statement of any material fact contained in Registration Statement, any related
Preliminary Prospectus or any related Prospectus, or any amendment or supplement
thereto, or arise out of, or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse such Holder or persons
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Losses; provided, however, that the Company
shall not be so liable to the extent that any such Losses arise out of, or are
based upon, an untrue statement or alleged untrue statement of a material fact
or an omission or alleged omission to state a material fact in said Registration
Statement in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of such Holder specifically for use
therein. Notwithstanding the foregoing, the Company shall not be liable in any
such instance to the extent that any such Losses arise out of, or are based
upon, an untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus if (i) after the Company had made
available sufficient number of copies of the Prospectus, such Holder failed to
send or deliver a copy of the Prospectus with or prior to the delivery of
written confirmation of the sale of Registrable Securities to the person
asserting such Losses or who purchased the Registrable Securities the purchase
of which is the basis of the action if, in either instance, such delivery by
such Holder is required by the Securities Act and (ii) the Prospectus would have
corrected such untrue statement or alleged untrue statement or alleged omission;
and the Company shall not be liable in any such instance to the extent that any
such Losses arise out of, or are based upon, an untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact in the Prospectus, if such untrue statement or alleged untrue
statement, omission or alleged omission is corrected in an amendment or
supplement to the Prospectus and if, having previously been furnished by or on
behalf of the Company with copies of the Prospectus as so amended or
supplemented, such Holder thereafter fails to deliver such Prospectus as so
amended or supplemented, prior to or concurrently with the sale of Registrable
Securities if such delivery by such Holder is required by the Securities Act.
This indemnity agreement will be in addition to any liability which the Company
may otherwise have and shall remain in full force and effect regardless of any
investigation made by or on behalf of such Holder or any such Person and shall
survive the Termination Date and the transfer of Registrable Securities by such
Holder as otherwise permitted hereby.
(b) To the extent permitted by law, each Holder severally
agrees to indemnify and hold harmless the Company, each other Holder and each
person, if any, who controls the Company or such other Holder within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act, and their
respective officers, directors and employees, against any Losses to which the
Company, such other Holder or such persons may become subject under the
Securities Act, or otherwise, insofar as such Losses arise out of, or are based
upon, any untrue statement or alleged untrue statement of any material fact
contained in such Registration Statement, any related Preliminary Prospectus or
any related Prospectus, or any amendment or supplement thereto, or arise out of,
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Company, such other Holder or such
persons for any legal or other expenses reasonably incurred by
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them in connection with investigating or defending any such Losses, in each
instance to the extent, but only to the extent, that any such Losses arise out
of, or are based upon, an untrue statement or alleged untrue statement of a
material fact or an omission or alleged omission to state a material fact in
said Registration Statement, said Preliminary Prospectus or said Prospectus, or
any said amendment or supplement thereto in reliance upon, and in conformity
with, written information furnished to the Company by or on behalf of such
Holder specifically for use therein; provided, however, that the liability of
each Holder under this Section 3.7(b) shall be limited to an amount equal to the
proceeds of the sale of shares of Registrable Securities by such Holder in the
offering which gave rise to the liability (net of underwriting commissions paid
or incurred by such Holder in connection with the registration, if any, and
sale). This indemnity agreement will be in addition to any liability which
Holder may otherwise have and shall remain in full force and effect regardless
of any investigation made by or on behalf of the Company or any such person and
shall survive the Termination Date and the transfer of Registrable Securities by
such Holder as otherwise permitted hereby.
(c) Promptly after any person entitled to indemnification
under this Section 3.8 receives notice of any claim or the commencement of any
action, the indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party pursuant to the indemnification provisions of
this Section 3.7, notify the indemnifying party in writing of the claim or the
commencement of such action; provided, however, that the failure or delay to so
notify the indemnifying party shall not relieve it from any liability which it
may have to the indemnified party hereunder unless and to the extent such
failure or delay has prejudiced the rights of the indemnifying party and shall
not, in any event, relieve it from any liability which it may have to the
indemnified party other than pursuant to the indemnification provisions of this
Section 3.7. If any such claim or action shall be brought against an indemnified
party, and it has notified the indemnifying party thereof in accordance with the
terms hereof, the indemnifying party shall be entitled to participate in the
defense of such claim, or, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party, upon written notice to
the indemnified party of such assumption. After notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
claim or action, (i) the indemnifying party shall not be liable to the
indemnified party pursuant to the indemnification provisions hereof for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, (ii) the indemnifying party shall not be liable for the costs and
expenses of any settlement of such claim or action unless such settlement was
effected with the consent of the indemnifying party (which consent shall not be
unreasonably withheld or delayed) and (iii) the indemnified party shall be
obligated to cooperate with the indemnifying party in the investigation of such
claim or action; provided, however, that any indemnified party hereunder shall
have the right to employ separate counsel and to participate in the defense of
such claim assumed by the indemnifying party, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (a) the
employment of such counsel has been specifically authorized in writing by the
indemnifying party, (b) the indemnifying party shall have failed to assume the
defense of such claim from the person entitled to indemnification hereunder and
failed to employ counsel within a reasonable period following such assumption,
or (c) in the reasonable judgment of the indemnified party, based upon
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<PAGE>
advice of its counsel, a material conflict of interest may exist between such
indemnified party and the indemnifying party with respect to such claims or
there may be one or more material legal defenses available to it which are
different from or additional to those available to the indemnifying party (in
which case, if the indemnified party notifies the indemnifying party in writing
that the indemnified party elects to employ separate counsel at the expense of
the indemnifying party, the indemnifying party shall not have the right to
assume the defense of such claim on behalf of the indemnified party).
Notwithstanding the foregoing, the Holders (together with their respective
controlling persons and officers, directors and employees) shall have the right
to employ at the expense of the Company only one separate counsel to represent
such Holders (and their respective controlling persons and officers, directors
and employees) who may be subject to liability arising out of any one action (or
separate but substantially similar actions in the same jurisdiction arising out
of the same general allegations or circumstances) in respect of which indemnity
may be sought by such Holders against the Company pursuant to the
indemnification provisions of this Section 3.7. If such defense is not assumed
by the indemnifying party, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such consent will not
be unreasonably withheld or delayed). No indemnifying party will consent to
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation. All fees and expenses to be paid by the indemnifying party hereunder
shall be paid a commercially reasonable time after they are billed to the
indemnified party, subject to receipt of a written undertaking from the
indemnified party to repay such fees and expenses if indemnity is not ultimately
determined to be available to such indemnified party under this Section 3.7.
(d) In order to provide for just and equitable contribution
between the Company and such Holders in circumstances in which the
indemnification provisions of this Section 3.7 are for any reason insufficient
or inadequate to hold the indemnified party harmless, the Company and such
Holders shall contribute to the aggregate Losses (including any investigation,
legal and other fees and expenses reasonably incurred in connection with, and
any amount paid in settlement of, any action, suit or proceeding or any claims
asserted, but after deducting any contribution actually received from persons
other than the Company and such Holders) to which the Company and one or more of
its directors or its officers who sign such Registration Statement or such
Holders or any controlling person of any of them, or their respective officers,
directors or employees may become subject, under the Securities Act, under any
other statute, at common law or otherwise, insofar as such Losses or actions in
respect thereof arise out of, or are based upon, any untrue statement or alleged
untrue statement of any material fact contained in such Registration Statement
or arise out of, or are based upon, the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading. Such contributions shall be in such amounts
that the portion of such Losses for which each such Holder shall be responsible
under this Section 3.7(d) shall be limited to the portion of such Losses which
are directly attributable to an untrue statement of a material fact or an
omission to state a material fact in said Registration Statement in reliance
upon, and in conformity with, written information furnished to the Company by or
on behalf of any such Holder specifically for use therein, and the Company shall
be responsible for the balance of such Losses; provided, however, that the
liability of each such Holder to make such contribution shall be limited to an
amount equal to the proceeds of the sale of shares of
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Registrable Securities by such Holder in the offering which gives rise to the
liability (net of underwriting commissions and disbursements) paid or incurred
in connection with the registration, if any, and sale). As among themselves,
such Holders agree to contribute to amounts payable by other such Holders in
such manner as shall, to the extent permitted by law, give effect to the
provisions in Section 3.7(b). The Company and such Holders agree that it would
not be just and equitable if their respective obligations to contribute pursuant
to this Section were to be determined by pro rata allocation (other than as set
forth above) of the aggregate Losses by reference to the proceeds realized by
such Holders in a sale pursuant to said Registration Statement or said
Prospectus or by any other method of allocation which does not take account of
the considerations set forth in this Section 3.7(d). No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution under this Section from any
person who was not guilty of such fraudulent misrepresentation.
3.8 Information by Holder. The Holders whose securities are included in
any registration effected pursuant to this Section 3 shall furnish in writing to
the Company such information regarding such persons and the distribution
proposed by such persons as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Section 3. The Company's obligations under this Section 3
are conditioned upon compliance by such persons with the provisions of this
Section 3.8.
3.9 Transfer of Registration Rights. The rights to cause the Company to
register securities granted by the Company under Sections 3.1 and 3.2 may be
assigned by HP to the transferee or assignee of not less than 20% of Registrable
Securities (as adjusted for stock splits and the like) and provided that the
Company is given written notice of any such transfer within thirty (30) days of
the date of said transfer, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
rights are being assigned and provided further that the transferee or assignee
of such rights is not deemed by the Board of Directors of the Company, in its
reasonable judgment, to be a competitor of the Company and provided further that
the transferee or assignee of such rights assumes in writing in a form
reasonably acceptable to the Company the obligations of any Holder under this
Agreement. If the stock certificates of a transferring Holder bear a restrictive
legend, the stock certificates of its transferee to whom the rights hereunder
are being transferred shall, subject to the terms of this Agreement, also bear
such a restrictive legend. Except with respect to transfers pursuant to this
Section 3.9, a transferee of Registrable Securities shall neither assume any
liabilities or obligations nor enjoy any rights hereunder and shall not be bound
by any of the terms hereof Each Holder hereby agrees that any transfer of shares
of Registrable Securities by such Holder shall be made (i) in compliance with
the registration requirements of the Securities Act or (ii) in a transaction
exempt from the registration requirements of the Securities Act. The Company may
request, as a condition to the transfer of any Registrable Securities, that the
transferring Holder provide the Company with an opinion of securities counsel
reasonably satisfactory to it with regard to compliance with the terms of this
Agreement.
3.10 Termination of Registration Rights. The registration rights
granted pursuant to this Section 3 shall terminate as to any Holder on the
Termination Date.
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3.11 Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of a majority of the outstanding Registrable Securities, enter
into any agreement with any holder or prospective holder of any securities of
the Company which would allow such holder or prospective holder to include such
securities in any registration filed under Sections 3.1 or 3.2 hereof, unless
under the terms of such agreement, such holder or prospective holder may include
such securities in any such registration only to the extent that the inclusion
of his securities will not reduce the amount of the Registrable Securities of
the Holders which is included.
SECTION 4
UNREGISTERED SHARES
4.1 Lock-Up. HP irrevocably agrees that it will not, directly or
indirectly, sell, lend, offer, contract to sell, transfer the economic risk of
ownership in, make any short sale, pledge or otherwise dispose of the
Unregistered Shares without the prior written consent of Pinnacle until August
2, 2001.
SECTION 5
EXCHANGE ACT REPORTING
5.1 Exchange Act Reporting. At any time until the sale of all of the
Registrable Shares and the Unregistered Shares, the Company agrees to:
(a) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act or the
Exchange Act; and
(b) furnish to any Holder, forthwith upon request (A) a
written statement by the Company that it has complied with the current public
information and reporting requirements of Rule 144 and the Exchange Act, (B) a
copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (C) such other information as
may be reasonably requested in connection with any Holder availing itself of any
rule or regulation of the SEC which permits the selling of any such securities
without registration or pursuant to such rule or regulation.
5.2 Form 144. If any Holder is required to file a Form 144 with respect
to any sale of shares of Registrable or Restricted Securities, such Holder shall
promptly deliver to the Company a copy of such completed Form 144 filed with the
SEC.
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SECTION 6
MISCELLANEOUS
6.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of California as applied to contracts entered into solely
between residents of, and to be performed entirely within, such state.
6.2 Successors and Assigns. Except for transfers permitted by Section
2.1 and 3.10, neither party may, directly or indirectly, in whole or in part,
neither by operation of law or otherwise, assign or transfer this Agreement or
delegate any of its obligations under this Agreement without the other party's
written consent. Any attempted assignment, transfer or delegation without such
prior written consent will be void. Notwithstanding the foregoing, HP, or its
permitted successive assignees or transferees, may assign or transfer this
Agreement or delegate any rights or obligations hereunder without consent: (1)
to any entity controlled by, or under common control with, HP, or its permitted
successive assignees or transferees; or (2) in connection with a merger,
reorganization, transfer, sale of assets or product lines, or change of control
or ownership of HP, or its permitted successive assignees or transferees.
Without limiting the foregoing, this Agreement will be binding upon and inure to
the benefit of the parties and their permitted successors and assigns.
6.3 Entire Agreement; Amendment. This Agreement contains the entire
understanding and agreement between the parties with regard to the subject
matter hereof and thereof and supersedes all prior agreements and understandings
among the parties relating to the subject matter hereof. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
6.4 Notices and Dates. All notices or other communications required or
permitted under this Agreement shall be made in the manner provided in Section
12.4 of the Purchase Agreement. In the event that any date provided for in this
Agreement falls on a Saturday, Sunday or legal holiday, such date shall be
deemed extended to the next business day.
6.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become a binding agreement when one or more counterparts have been signed
by each party and delivered to the other party.
6.6 Severability. If any provision of this Agreement or portion thereof
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the date aforesaid.
"COMPANY" PINNACLE SYSTEMS, INC.,
a California corporation
By: /S/Arthur D. Chadwick
-------------------------------------------------
Name: Arthur D. Chadwick
----------------------------------------------
Title: Vice President, Finance and Administration
----------------------------------------------
"HP" HEWLETT-PACKARD COMPANY,
a Delaware corporation
By: /S/Tom White
-------------------------------------------------
Name: Tom White
----------------------------------------------
Title: Vice President, Communications Solutions Group
----------------------------------------------
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EXHIBIT 5.1
[LETTERHEAD OF WILSON SONSINI GOODRICH & ROSATI]
August 17, 1999
Pinnacle Systems, Inc.
280 North Bernardo Avenue
Mountain View, California 94043
RE: Registration Statement on Form S-3
Ladies and Gentlemen:
We have examined Amendment No. 1 to the Registration Statement on Form
S-3 to be filed by you with the SEC on August 17, 1999 (the "Registration
Statement"), in connection with the registration under the Securities Act of
1933, as amended, of 386,586 shares of your Common Stock, no par value (the
"Shares"), all of which are authorized and have been previously issued to the
selling shareholder named therein in connection with the acquisition by the
Company of certain of the assets of the selling shareholder. The Shares are to
be offered by the selling shareholder for sale to the public as described in the
Registration Statement. As your counsel in connection with this transaction, we
have examined the proceedings taken and proposed to be taken in connection with
the sale of the Shares.
It is our opinion that, upon completion of the proceedings being taken
or contemplated to be taken prior to the registration of the Shares, including
such proceedings to be carried out in accordance with the securities laws of the
various states, where required, the Shares, when sold in the manner referred to
in the Registration Statement, will be legally and validly issued, fully paid
and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendment thereto.
Very truly yours,
/s/ WILSON SONSINI GOODRICH & ROSATI
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
EXHIBIT 23.1
Consent of Independent Auditors
The Board of Directors
Pinnacle Systems, Inc.:
We consent to incorporation herein by reference of our reports dated July 21,
1998, relating to the consolidated balance sheets of Pinnacle Systems, Inc. and
subsidiaries as of June 30, 1998 and 1997, and the related consolidated
statements of operations, comprehensive income, shareholders' equity, and cash
flows for each of the years in the three-year period ended June 30, 1998, and
the related schedule, which reports appear in the June 30, 1998, annual report
on Form 10-K of Pinnacle Systems, Inc. We also consent to the reference to our
firm under the heading "Experts" in the registration statement.
/s/ KPMG LLP
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Mountain View, California
August 16, 1999
