SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. __)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
PINNACLE SYSTEMS, INC.
----------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
PINNACLE SYSTEMS, INC.
------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held October 26, 1999
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
PINNACLE SYSTEMS, INC., a California corporation (the "Company"), will be held
on Tuesday, October 26, 1999, at 1:00 p.m., local time, at 280 North Bernardo
Avenue, Mountain View, California, for the following purposes:
1. To elect seven directors to serve until the next Annual
Meeting of Shareholders and until their successors are duly
elected and qualified.
2. To approve an amendment to the 1996 Stock Option Plan to
increase the number of shares of Common Stock reserved for
issuance thereunder by 800,000 shares.
3. To ratify the appointment of KPMG LLP as independent auditors
of the Company for the fiscal year ending June 30, 2000.
4. To transact such other business as may properly come before
the Annual Meeting, including any motion to adjourn to a later
date to permit further solicitation of proxies if necessary.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only shareholders of record at the close of
business on September 15, 1999 are entitled to notice of and to vote at the
meeting.
All shareholders are cordially invited to attend the meeting in person.
However, to ensure representation at the meeting, you are urged to mark, sign,
date and return the enclosed Proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder attending
the meeting may vote in person even if he or she has returned a Proxy.
Sincerely,
/s/ Arthur D. Chadwick
--------------------------------
Arthur D. Chadwick
Secretary
Mountain View, California
September 24, 1999
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT.
IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND
RETURN IT IN THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
<PAGE>
PINNACLE SYSTEMS, INC.
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PROXY STATEMENT FOR
1999 ANNUAL MEETING OF SHAREHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed Proxy is solicited on behalf of the Board of Directors of
PINNACLE SYSTEMS, INC., a California corporation (the "Company" or "Pinnacle"),
for use at the Annual Meeting of Shareholders (the "Annual Meeting") to be held
Tuesday, October 26, 1999, at 1:00 p.m., local time, or at any adjournment
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Shareholders. The Annual Meeting will be held at the Company's
principal executive offices located at 280 North Bernardo Avenue, Mountain View,
California 94043. The Company's telephone number at that location is (650)
526-1600.
These proxy solicitation materials and the Annual Report to
Shareholders for the fiscal year ended June 30, 1999, including all financial
statements, were first mailed on or about September 24, 1999 to all shareholders
entitled to vote at the meeting.
Record Date and Principal Share Ownership
Shareholders of record at the close of business on September 15, 1999
(the "Record Date") are entitled to notice of and to vote at the meeting. The
Company has one series of common shares outstanding, designated Common Stock, no
par value. At the Record Date, 23,723,209 shares of the Company's Common Stock
were issued and outstanding and held of record by 297 shareholders. No shares of
the Company's Preferred Stock were outstanding.
<TABLE>
The following table sets forth certain information regarding the
beneficial ownership of Common Stock of the Company as of September 15, 1999 as
to (i) each person who is known by the Company to own beneficially more than 5%
of the outstanding shares of Common Stock, (ii) each director of the Company,
(iii) each of the executive officers named in the Summary Compensation Table
below and (iv) all directors and executive officers as a group. Except as
otherwise noted, the address for all such persons and entities is c/o Pinnacle
Systems, Inc. 280 North Bernardo Avenue, Mountain View, California 94043.
<CAPTION>
Five Percent Shareholders, Directors Common Stock Percentage
and Certain Executive Officers Beneficially Owned (1) Owned (2)
- ---------------------------------------------------------------------- ------------------------ ------------
<S> <C> <C>
Entities affiliated with Morgan Stanley Dean Witter & Co. (3) ........ 2,260,400 9.5%
1585 Broadway
New York, New York 10036
Entities affiliated with Putnam Investments Inc. (4) ................. 1,331,312 5.6%
One Post Office Square
Boston, Massachusetts 02109
Mark L. Sanders ...................................................... 298,951 1.2%
Ajay Chopra .......................................................... 212,112 *
L. Gregory Ballard ................................................... 5,000 *
Georg Blinn .......................................................... 74,070 *
L. William Krause .................................................... 10,000 *
John Lewis ........................................................... 15,000 *
William Loesch ....................................................... 67,874 *
Nyal D. McMullin ..................................................... 32,200 *
Glenn E. Penisten .................................................... 60,178 *
Charles J. Vaughan ................................................... 96,070 *
Robert Wilson ........................................................ 47,295 *
All directors and executive officers as a group (14 persons) ......... 1,054,383 4.3%
1
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<FN>
- ------------------
* Less than 1%
(1) Includes the following shares subject to options to purchase shares of
the Company's common stock that are currently exercisable or will be
exercisable within 60 days after September 15, 1999: Mark L. Sanders
265,711; Ajay Chopra 74,374; L. Gregory Ballard 5,000; Georg Blinn
71,666; L. William Krause 10,000; John Lewis 15,000; William Loesch
66,374; Nyal D. McMullin 15,000; Glenn E. Penisten 15,000; Charles J.
Vaughan 15,000; Robert Wilson 45,657; and 699,615 for all executive
officers and directors as a group.
(2) Applicable percentage of ownership is based on 23,723,209 shares of
Common Stock outstanding as of September 15, 1999 together with
applicable options for such shareholder. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission, and includes voting and investment power with respect to
shares. Shares of Common Stock subject to options currently exercisable
or exercisable within 60 days after September 15, 1999 are deemed
outstanding for computing the percentage ownership of the person
holding such options, but are not deemed outstanding for computing the
percentage of any other person.
(3) Reflects ownership as reported on Schedule 13G/A dated September 10,
1999 filed with the Securities and Exchange Commission by Morgan
Stanley Dean Witter & Co. ("Morgan") and Miller Anderson & Sherrerd,
LLP, a wholly-owned subsidiary of Morgan, relating to accounts managed
on a discretionary basis by Morgan and Miller Anderson & Sherrerd, LLP,
which are known to have the right to, or the power to direct the
receipt of dividends from, or the proceeds from the sale of such
securities. The address for Miller Anderson & Sherrerd, LLP is 1 Tower
Bridge, Suite 1100, West Conshohocken, Pennsylvania 19428.
(4) Reflects ownership as reported on Schedule 13G/A dated February 11,
1999 filed with the Securities and Exchange Commission by Putnam
Investments, Inc. Putnam Investments, Inc. ("PI"), which is a
wholly-owned subsidiary of Marsh & McLennan Companies, Inc. ("MMC"),
wholly owns two registered investment advisors, Putnam Investment
Management, Inc. ("PIM") and The Putnam Advisory Company, Inc. ("PAC").
PIM has shared dispositive power over 1,034,228 shares of the Company's
Common Stock and PAC has shared dispositive power over 297,084 shares
of the Company's Common Stock (and shared voting power over 187,600 of
such shares). Pursuant to Rule 13(d)-4, MMC and PI declared that the
filing of the 13G should not be deemed an admission by either or both
of them that they are, for the purposes of Section 13(d) or 13(q) the
beneficial owner of the shares beneficially owned by PAC or PIM and
that neither of them have any power to vote or dispose of, or direct
the voting or disposition of, any of the shares beneficially owned by
PAC or PIM. The address for Marsh & McLennan Companies, Inc. is 1166
Avenue of the Americas, New York, New York 10036.
</FN>
</TABLE>
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Secretary of
the Company a written notice of revocation or a duly executed proxy bearing a
later date or attending the meeting and voting in person.
Voting and Solicitation
Each shareholder is entitled to one vote for each share of Common Stock
held by the shareholder on the Record Date. A quorum comprising the holders of a
majority of the outstanding shares of Common Stock on the Record Date must be
present or represented for the transaction of business at the Annual Meeting.
Abstentions and broker non-votes will be counted in establishing the quorum.
Every shareholder voting for the election of directors (Proposal One)
may cumulate such shareholder's votes and give one candidate a number of votes
equal to the number of directors to be elected multiplied by the number of
shares that such shareholder is entitled to vote, or distribute such
shareholder's votes on the same principle among as many candidates as the
shareholder may select, provided that votes cannot be cast for more than seven
candidates. However, no shareholder shall be entitled to cumulate votes unless
the candidate's name has been placed in nomination prior to the voting and the
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shareholder, or any other shareholder, has given notice at the meeting, prior to
the voting, of the intention to cumulate the shareholder's votes. On all other
matters, each share of Common Stock has one vote.
This solicitation of proxies is made by the Company, and all related
costs will be borne by the Company. In addition, the Company may reimburse
brokerage firms and other persons representing beneficial owners of shares for
their expenses in forwarding solicitation material to such beneficial owners.
Proxies may also be solicited by certain of the Company's directors, officers
and regular employees, without additional compensation, personally or by
telephone or telegram.
Deadline for Receipt of Shareholder Proposals for 2000 Annual Meeting
Shareholders are entitled to present proposals for action at a
forthcoming meeting if they comply with the requirements of the proxy rules
promulgated by the Securities and Exchange Commission. Proposals of shareholders
of the Company that are intended to be presented by shareholders at the
Company's 2000 Annual Meeting of Shareholders must be received by the Company no
later than May 27, 2000 in order that they may be considered for inclusion in
the proxy statement and form of proxy relating to that meeting. The attached
proxy card grants the proxy holders discretionary authority to vote on any
matter properly raised at the Annual Meeting. If a shareholder intends to submit
a proposal at the 2000 Annual Meeting, which is not eligible for inclusion in
the proxy statement and form of proxy relating to that meeting, the shareholder
must do so no later than August 10, 2000. If such shareholder fails to comply
with the foregoing notice provision, the proxy holders will be allowed to use
their discretionary voting authority when the proposal is raised at the 2000
Annual Meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
Nominees
A board of seven directors is to be elected at the Annual Meeting.
Unless otherwise instructed, the proxy holders will vote the proxies received by
them for the Company's seven nominees named below, all of whom are presently
directors of the Company. In the event that any nominee of the Company is unable
or declines to serve as a director at the time of the Annual Meeting of
Shareholders, the proxies will be voted for any nominee who shall be designated
by the present Board of Directors to fill the vacancy. The Company is not aware
of any nominee who will be unable or will decline to serve as a director. In the
event that additional persons are nominated for election as directors, the proxy
holders intend to vote all proxies received by them in such a manner (in
accordance with cumulative voting) as will ensure the election of as many of the
nominees listed below as possible, and, in such event, the specific nominees to
be voted for will be determined by the proxy holders. The term of office for
each person elected as a director will continue until the next Annual Meeting of
Shareholders or until a successor has been elected and qualified.
Vote Required
If a quorum is present and voting, the seven nominees receiving the
highest number of votes will be elected to the Board of Directors. Abstentions
and broker non-votes are not counted in the election of directors.
3
<PAGE>
<TABLE>
The names of the nominees and certain information about them are set
forth below:
<CAPTION>
Director
Name of Nominee Age Position with Company Since
- ------------------------------- ----- ------------------------------------------------- ----------
<S> <C> <C> <C>
Mark L. Sanders ............... 56 President, Chief Executive Officer and Director 1990
Ajay Chopra ................... 42 Chairman of the Board and Vice President, 1986
General Manager, Desktop Products
L. Gregory Ballard(1) ......... 45 Director 1998
L. William Krause(2) .......... 57 Director 1999
John C. Lewis(2) .............. 63 Director 1995
Glenn E. Penisten(1) .......... 67 Director 1986
Charles J. Vaughan(2) ......... 61 Director 1986
<FN>
- ------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
</FN>
</TABLE>
There is no family relationship between any director or executive
officer of the Company.
Mr. Sanders has served as President, Chief Executive Officer and a
director of the Company since January 1990. From 1988 to January 1990, Mr.
Sanders was an independent business consultant. Prior to that time, Mr. Sanders
served in a variety of management positions, most recently as Vice President and
General Manager of the Recording Systems Division, of Ampex, Inc. a manufacturer
of video broadcast equipment.
Mr. Chopra, a founder of the Company, has served as Chairman of the
Board of Directors since January 1990, and has served as a director of the
Company since its inception in May 1986. Mr. Chopra has served as Vice
President, General Manager, Desktop Products since April 1997. He previously
served as Chief Technology Officer from June 1996 to April 1997, Vice President
of Engineering from January 1990 to June 1996, and President and Chief Executive
Officer of the Company from its inception to January 1990.
Mr. Ballard has served as a director of the Company since July 1998.
Mr. Ballard has been the President, Chief Executive Officer and a director of
3dfx Interactive Inc. ("3dfx"), a developer of 3D mediaprocessors, since
December 1996. Prior to joining 3dfx, Mr. Ballard was President at Capcom
Entertainment, Inc., a video game and multimedia entertainment company, from May
1995 through November 1996. Prior to that, Mr. Ballard served as Chief Operating
Officer and Chief Financial Officer of Digital Pictures, Inc., a video game
company, from May 1994 to June 1995. Mr. Ballard was President and Chief
Executive Officer of Warner Custom Music Corporation, a multimedia marketing
division of Time Warner, Inc., from October 1992 to May 1994, and he was
President and Chief Operating Officer of Personics Corporation, a predecessor to
Warner Music, from January 1991 to October 1992. Mr. Ballard also serves as a
director of THQ, Inc., a publisher and developer of interactive software.
Mr. Krause has served as a director of the Company since July 1999.
Since November 1998, Mr. Krause has been President of LWK Ventures, a private
investment company. Mr. Krause served as President, Chief Executive Officer and
as a director of Storm Technology, Inc., a provider of computer peripherals for
digital imaging, from October 1991 until November 1998 when it filed for
protection under federal bankruptcy laws. Prior to that, Mr. Krause spent ten
years at 3Com Corporation, a manufacturer of networking systems, where he served
as President and Chief Executive Officer until he retired in September 1990. Mr.
Krause continued as Chairman of the Board for 3Com Corporation until 1993.
Previously, Mr. Krause served in various marketing and general management
positions at Hewlett-Packard Company. Mr. Krause currently serves as a director
of Andromedia, Inc., Aureal, Inc., Infoseek Corporation, Ramp Networks, Inc.,
and Sybase, Inc.
Mr. Lewis has served as a director of the Company since December 1995.
Mr. Lewis has been Chairman of the Board of Amdahl Corporation, a developer of
high performance computer systems, since 1987 and was reelected President and
Chief Executive Officer of Amdahl in March 1996, where he served until April
1998. He previously served as President of Amdahl from 1977 until 1987 and as
Chief Executive Officer from 1983 until 1992. He is a director of Cygnus, Inc.,
Cypress Semiconductor Corporation and Vitesse Semiconductor Corporation.
4
<PAGE>
Mr. Penisten has served as a director of the Company since October
1986. Mr. Penisten has been General Partner of Alpha Venture Partners, a venture
capital investment firm, since 1985, and serves on the Board of Directors of
IKOS Systems, Inc., a software and hardware developer to support integrated
circuits and ASIC-based electronic systems, Bell Microproducts, Inc., a
distributor of semiconductor products and a contract manufacturer, and
Superconductor Technologies, Inc., a developer of products utilizing
superconductivity materials, and serves as Chairman of the Board of Network
Peripherals, Inc., a developer of integrated high performance network solutions.
Mr. Penisten was Chairman of the American Electronics Association in 1982.
Mr. Vaughan has served as a director since June 1986. Mr. Vaughan has
been a partner of VLCO Investments, a private investment firm that he founded,
since 1985. During the period of May 1989 to January 1992 he served in various
positions at Homestead Financial Corporation and its subsidiaries, including
Executive Vice President and Chief Operating Officer of this diversified
financial services company. Earlier Mr. Vaughan held a number senior management
and financial positions with General Electric Company, GE is a diversified
services, technology, and manufacturing company, including Vice
President-Auditing and Chief Financial Officer of the International and Consumer
Products Sectors.
Board Meetings and Committees
The Board of Directors of the Company held a total of 7 meetings during
fiscal 1999. No director attended fewer than 75% of the meetings of the Board of
Directors and committees thereof, if any, upon which such director served held
subsequent to his becoming a director. The Board of Directors has an Audit
Committee and a Compensation Committee. The Board of Directors has no nominating
committee or any committee performing such functions.
The Audit Committee, which consisted of John C. Lewis and Charles J.
Vaughan during fiscal 1999, is responsible for overseeing actions taken by the
Company's independent auditors and reviewing the Company's internal financial
controls. The Audit Committee met once during fiscal 1999.
The Compensation Committee, which consisted of Nyal McMullin and Glenn
Penisten during fiscal 1999, met once during fiscal 1999. The duties of the
Compensation Committee include determining salaries, incentives and other forms
of compensation for directors, officers and other employees of the Company and
administering various incentive compensation and benefit plans.
Compensation Committee Interlocks and Insider Participation
Mr. Sanders, who is President and Chief Executive Officer of the
Company, has participated in all discussions and decisions regarding salaries
and incentive compensation for all employees and consultants to the Company,
except that Mr. Sanders was excluded from discussions regarding his own salary
and incentive compensation. See "Certain Transactions with Management" for a
discussion of reportable transactions with a member of the Compensation
Committee.
Certain Transactions with Management
In March 1994, the Company and Bell Microproducts Inc. ("Bell") entered
into a Master Agreement (the "Agreement") under which value-added turnkey
services are to be performed by Bell on behalf of the Company. Glenn Penisten, a
director of the Company, is also a director of Bell. Pursuant to the Agreement,
Bell builds certain products in accordance with the Company's specifications. In
particular, Bell is performing certain services for the Company with respect to
the Alladin product. During the fiscal year ended June 30, 1999, the Company
purchased materials totaling $11.3 million from Bell pursuant to the Agreement.
In August 1997, the Company acquired the digital video group of miro
Computer Products AG (the "miro Acquisition"). In connection with the miro
Acquisition, the Company hired Georg Blinn, who had been with miro AG, as Vice
President, General Manager, Pinnacle Systems GmbH, the Company's German
subsidiary. Following the miro Acquisition, Mr. Blinn retained certain
responsibilities at miro AG and remained an officer of miro AG until May 1999.
The Company and Pinnacle Systems GmbH
5
<PAGE>
have entered into several transactions with miro AG and affiliated companies,
including a lease agreement for the facilities in Germany occupied by Pinnacle
Systems GmbH from September 1997 until May 1999, services contracts relating to
such property, including telephone, cafeteria and janitorial services, and
professional services relating to the accounting system acquired in the miro
Acquisition. During the fiscal year ended June 30, 1999, the Company paid
approximately $440,000 to miro AG or affiliated companies in connection with
such transactions.
The Company believes that the transactions set forth above were made on
terms no less favorable to the Company than could be obtained from unaffiliated
third parties. All future transactions, including loans, between the Company and
its officers, directors, principal shareholders and their affiliates will be
approved by a majority of the Board of Directors, including a majority of the
independent and disinterested outside directors and will continue to be on terms
no less favorable to the Company than could be obtained from unaffiliated third
parties.
PROPOSAL TWO
AMENDMENT TO 1996 STOCK OPTION PLAN
At the Annual Meeting, the shareholders are being asked to approve the
amendment of the Company's 1996 Stock Option Plan (the "Plan") to increase the
number of shares of Common Stock reserved for issuance thereunder by 800,000
shares. The amendment to the Plan was approved by the Board of Directors in July
1999. As of September 15, 1999, options to purchase an aggregate of 2,221,287
shares of the Company's Common Stock were outstanding under the Plan with a
weighted average exercise price of $15.65 per share, and 19,491 shares
(excluding the 800,000 shares subject to shareholder approval at this Annual
Meeting) were available for future grant. The Plan authorizes the Board of
Directors to grant incentive and nonstatutory stock options to eligible
employees, directors and consultants of the Company.
The Plan is structured to allow the Board of Directors broad discretion
in creating equity incentives in order to assist the Company in attracting,
retaining and motivating the best available personnel for the successful conduct
of the Company's business. Since inception, the Company has provided stock
options as an incentive to its key employees and executives as means to promote
increased shareholder value. Management believes stock options are one of the
prime methods of attracting and retaining key personnel responsible for the
continued development and growth of the Company's business. In addition, stock
options are considered a competitive necessity in the high technology industry.
The Board of Directors recommends that shareholders vote "FOR" the
Amendment to the Plan.
Vote Required
The affirmative vote of a majority of the Votes Cast will be required
to approve the amendment to the Plan. For this purpose, the "Votes Cast" are
defined to be the shares of the Company's Common Stock represented and voting at
the Annual Meeting. In addition, the affirmative votes must constitute at least
a majority of the required quorum, which quorum is a majority of the shares
outstanding at the Record Date. Votes that are cast against the proposal will be
counted for purposes of determining both (i) the presence or absence of a quorum
and (ii) the total number of Votes Cast with respect to the proposal.
Abstentions will be counted for purposes of determining both (i) the
presence or absence of a quorum and (ii) the total number of Votes Cast with
respect to the proposal. Accordingly, abstentions will have the same effect as a
vote against the proposal. Broker non-votes, if any, will be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business, but will not be counted for purposes of determining the number of
Votes Cast with respect to this proposal.
Terms of the Plan
The essential terms of the Plan are summarized as follows:
Purpose
The purposes of the Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to employees, directors and consultants of the Company and to promote
the success of the Company's business.
6
<PAGE>
Administration
The Plan provides for administration by the Board of Directors of the
Company or by a Committee of the Board. The Board or the committee appointed to
administer the Plan are referred to in this description as the "Administrator."
The Administrator determines the terms of options granted, including the
exercise price, number of shares subject to the option and the exercisability
thereof. All questions of interpretation are determined by the Administrator and
its decisions are final and binding upon all participants. Members of the Board
receive no additional compensation for their services in connection with the
administration of the Plan.
Eligibility
The Plan provides that either incentive or nonstatutory stock options
may be granted to employees (including officers and employee directors) of the
Company or any of its designated subsidiaries. In addition, the Plan provides
that nonstatutory stock options may be granted to directors and consultants of
the Company or any of its designated subsidiaries. The Administrator selects the
optionees and determines the number of shares to be subject to each option. In
making such determination, the Administrator takes into account the duties and
responsibilities of the optionee, the value of the optionee's services, the
optionee's present and potential contribution to the success of the Company and
other relevant factors. The Plan provides a limit of $100,000 on the aggregate
fair market value of shares subject to all incentive options that are
exercisable for the first time in any one calendar year. The Plan provides that
a maximum of 400,000 shares (600,000 shares if in connection with initial
employment) may be granted to any one individual during any fiscal year of the
Company. The Plan does not provide for a minimum number of option shares that
may be granted to any one employee. There is a limit on the aggregate fair
market value of shares subject to all incentive options that are exercisable for
the first time in any one calendar year.
Terms of Options
Each option is evidenced by a stock option agreement between the
Company and the optionee to whom such option is granted and is subject to the
following additional terms and conditions:
(1) Exercise of the Option: The Administrator determines when options
granted under the Plan may be exercised. An option is exercised by giving
written notice of exercise to the Company, specifying the number of shares of
Common Stock to be purchased and tendering payment to the Company of the
purchase price. Payment for shares issued upon exercise of an option may consist
of cash, check, promissory note, delivery of already-owned shares of the
Company's Common Stock subject to certain conditions, pursuant to a cashless
exercise procedure under which the optionee provides irrevocable instructions to
a brokerage firm to sell the purchased shares and to remit to the Company, out
of the sale proceeds, an amount equal to the exercise price plus all applicable
withholding taxes, a reduction in the amount of any Company liability to the
individual, or such other consideration as determined by the Administrator and
as permitted by applicable laws.
Options may be exercised at any time on or following the date the
options are first exercisable. An Option may not be exercised for a fraction of
a share.
(2) Option Price: The option price of all incentive stock options and
nonstatutory stock options under the Plan may not be less than the fair market
value of the Common Stock on the date the option is granted. For purposes of the
Plan, fair market value is defined as the closing sale price per share of the
Common Stock on the date of grant as reported on the Nasdaq National Market. In
the case of an option granted to an optionee who at the time of grant owns stock
representing more than 10% of the voting power of all classes of stock of the
Company, the option price must be not less than 110% of the fair market value on
the date of grant. The closing sale price of the Company's Common Stock on
September 15, 1999 was $37.75.
(3) Termination of Employment or Consulting Relationship: The Plan
provides that if the optionee's employment or consulting relationship with the
Company is terminated for any reason, other than death, or disability, the
period of time during which an option may be exercised following such
7
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termination is such period as is determined by the Administrator may be
exercised only to the extent the options were exercisable on the date of
termination and in no event later than the expiration of the term of the option.
In the absence of a specified time in the option agreement, the option shall
remain exercisable for 90 days after the optionee's termination.
(4) Death: If an optionee should die while an employee or a consultant
of the Company (or during such period of time not exceeding three months, as
determined by the Administrator) following termination of the optionee's
employment or consultancy, options may be exercised at any time prior to the
expiration of the term of such option as set forth in the Notice of Grant but
only to the extent that the options were exercisable on the date of death or
termination of employment.
(5) Disability: If an optionee's employment is terminated due to a
disability, options may be exercised at any time within twelve months from the
date of such termination, but only to the extent that the options were
exercisable on the date of termination of employment and in no event later than
the expiration of the term of such option as set forth in the Notice of Grant.
In the absence of a specified time in the option agreement, the option shall
remain exercisable for one year following the optionee's termination.
(6) Termination of Options: The term of each option is fixed by the
Administrator and may not exceed ten years from the date of grant in the case of
incentive stock options. However, incentive stock options granted to an optionee
who, immediately before the grant of such option, owned more than 10% of the
total combined voting power of all classes of stock of the Company or a parent
or subsidiary corporation, may not have a term of more than five years. No
option may be exercised by any person after such expiration.
(7) Nontransferability of Options: Unless determined otherwise by the
Administrator, an option is nontransferable by the optionee, other than by will
or the laws of descent and distribution, and is exercisable only by the optionee
during his or her lifetime or, in the event of death, by a person who acquires
the right to exercise the option by bequest or inheritance or by reason of the
death of the optionee.
(8) Buyout Provision: The Administrator may at any time offer to buy
out, for a payment in cash or shares of Common Stock of the Company, any option
previously granted, based on such terms and conditions as the Administrator
shall establish and communicate to the optionee at the time that such offer is
made.
Adjustment Upon Changes in Capitalization
In the event any change, such as a stock split or dividend, is made in
the Company's capitalization which results in an increase or decrease in the
number of outstanding shares of Common Stock without receipt of consideration by
the Company, an appropriate adjustment shall be made in the option price and in
the number of shares subject to each option. In the event of a merger of the
Company with or into another corporation, all outstanding options may either be
assumed or an equivalent option may be substituted by the surviving entity or,
if such options are not assumed or substituted, such options shall become
exercisable as to all of the shares subject to the options, including shares as
to which would not otherwise be exercisable. In the event that options become
exercisable in lieu of assumption or substitution, the Administrator shall
notify optionees that all options shall be fully exercisable for a period of 15
days, after which such options shall terminate.
Amendment and Termination
The Board of Directors may amend the Plan at any time or from time to
time or may terminate it without approval of the shareholders. However, no
action by the Board of Directors or shareholders may alter or impair any option
previously granted under the Plan without the consent of the optionee. In any
event, the Plan will terminate in October 2006.
Tax Information
Options granted under the Plan may be either "incentive stock options,"
as defined in Section 422 of the Code, or nonstatutory options.
8
<PAGE>
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after grant of the
option and one year after exercising the option, any gain or loss will be
treated as long-term capital gain or loss. If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of sale or
exchange equal to the difference between the exercise price and the lower of (i)
the fair market value of the shares at the date of the option exercise or (ii)
the sale price of the shares. A different rule for measuring ordinary income
upon such a premature disposition may apply if the optionee is also an officer,
director, or 10% shareholder of the Company. Generally, the Company will be
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Any gain or loss recognized on such a premature disposition of the
shares in excess of the amount treated as ordinary income will be characterized
as long-term or short-term capital gain or loss, depending on the holding
period.
All other options that do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income at the time he is granted a nonstatutory option. However, upon its
exercise, the optionee will recognize ordinary income generally measured as the
excess of the then fair market value of the shares purchased over the purchase
price. Any taxable income recognized in connection with an option exercise by an
optionee who is also an employee of the Company will be subject to tax
withholding by the Company. Upon resale of such shares by the optionee, any
difference between the sales price and the optionee's purchase price, to the
extent not recognized as taxable income as described above, will be treated as
long-term or short-term capital gain or loss, depending on the holding period.
Generally, the Company will be entitled to a tax deduction in the same amount as
the ordinary income recognized by the optionee with respect to shares acquired
upon exercise of a nonstatutory option.
The foregoing is only a summary of the effect of federal income
taxation upon the optionee and the Company with respect to the grant and
exercise of options under the Plan, does not purport to be complete, and does
not discuss the tax consequences of the optionee's death or the income tax laws
of any municipality, state or foreign country in which an optionee may reside.
Participation in the Plan
The grant of options under the Plan to executive officers, including
the officers named in the Summary Compensation Table below, is subject to the
discretion of the Administrator. As of the date of this proxy statement, there
has been no determination by the Administrator with respect to future awards
under the Plan. Accordingly, future awards are not determinable. The table of
option grants under "Executive Compensation and Other Matters--Option Grants in
Last Fiscal Year" provides information with respect to the grant of options to
the Named Executive Officers during fiscal 1999. Information regarding options
granted to non-employee Directors during fiscal 1999 is set forth under the
heading "Executive Compensation and Other Matters--Compensation of Directors."
During fiscal 1999, all current executive officers as a group and all other
employees as a group were granted options to purchase 226,000 shares and
1,970,640 shares, respectively, pursuant to all the Plan and the Company's 1996
Supplemental Stock Option Plan.
9
<PAGE>
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG LLP, independent auditors, to
audit the consolidated financial statements of the Company for the fiscal year
ending June 30, 2000, and recommends that shareholders vote for ratification of
such appointment. Although action by shareholders is not required by law, the
Board of Directors has determined that it is desirable to request approval of
this selection by the shareholders. Notwithstanding the selection, the Board of
Directors, in its discretion, may direct the appointment of new independent
auditors at any time during the year, if the Board of Directors feels that such
a change would be in the best interest of the Company and its shareholders. In
the event of a negative vote on ratification, the Board of Directors will
reconsider its selection.
KPMG LLP has audited the Company's financial statements annually since
1987. Representatives of KPMG LLP are expected to be present at the meeting with
the opportunity to make a statement if they desire to do so and are expected to
be available to respond to appropriate questions.
The Board Recommends a Vote "For" the Ratification of the Appointment
of KPMG LLP as Independent Auditors of the Company for the Fiscal Year Ending
June 30, 2000.
10
<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
Summary Compensation Table
<TABLE>
The following Summary Compensation Table sets forth certain information
regarding the compensation of the Chief Executive Officer of the Company and the
next four most highly compensated executive officers of the Company (the "Named
Executive Officers") for services rendered in all capacities to the Company for
the fiscal year ended June 30, 1999.
<CAPTION>
Long-term
Compensation
Awards
-------------
Number of
Annual Compensation Securities
Fiscal ------------------------ Underlying All Other
Name and Principal Position Year Salary ($) Bonus Options Compensation
--------------------------- ---- ---------- ----- ------- ------------
<S> <C> <C> <C> <C> <C>
Mark L. Sanders ........................................ 1999 $317,500 $ 69,450 70,000 $ --
President, Chief 1998 244,000 41,250 80,000 --
Executive Officer and Director 1997 188,000 -- 90,000 --
Ajay Chopra(1) ......................................... 1999 187,500 41,724 24,000 --
Chairman of the Board of 1998 170,004 24,750 40,000 --
Directors and Vice 1997 152,504 -- 40,000 --
President, General Manager,
Desktop Products
William Loesch ......................................... 1999 184,500 41,724 20,000 --
Vice President, General 1998 170,000 24,750 40,000 --
Manager, Consumer Products 1997 132,507 -- 80,000 --
Robert Wilson (2) ...................................... 1999 184,500 41,724 20,000 --
Vice President, General 1998 170,000 24,750 30,000 --
Manager, Broadcast Products 1997 32,206 -- 90,000 --
Georg Blinn (3) ........................................ 1999 190,000 23,000 24,000 $ 5,500
Vice President, General 1998 139,000 -- 110,000 --
Manager, Pinnacle Systems GmbH
<FN>
- ------------
(1) Mr. Chopra became Vice President, General Manager, Desktop Products in
April 1997. Prior to then, in 1996, he was Chief Technical Officer.
(2) Mr. Wilson joined the Company in April 1997.
(3) Mr. Blinn joined the Company in August 1997. Amount under "All Other
Compensation" represents reimbursement for a rental apartment in
Braunschweig, Germany for a portion of the fiscal year.
</FN>
</TABLE>
11
<PAGE>
Option Grants in Last Fiscal Year
<TABLE>
The following table provides information concerning each grant of
options to purchase the Company's Common Stock made during the fiscal year ended
June 30, 1999 to the Named Executive Officers.
<CAPTION>
Potential Realizable
Value at Assumed
Number of Percent of Total Annual Rates of Stock
Securities Options Price Appreciation
Underlying Granted to Exercise For Option Term(1)
Options Employees in Price Per Expiration -----------------------------
Name Granted(2) Fiscal Year Share(3)(4) Date 5% 10%
---- ---------- ----------- ----------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mark L. Sanders ............. 70,000 3.55% $ 14.00 12/16/08 $ 616,317 $1,561,868
Ajay Chopra ................. 24,000 1.22% $ 14.00 12/16/08 211,309 535,497
William Loesch .............. 20,000 1.02% $ 14.00 12/16/08 176,091 446,248
Robert Wilson ............... 20,000 1.02% $ 14.00 12/16/08 176,091 446,248
Georg Blinn ................. 24,000 1.22% $ 14.00 12/16/08 211,309 535,497
<FN>
- ------------
(1) Potential realizable value is based on the assumption that the Common Stock
of the Company appreciates at the annual rate shown (compounded annually)
from the date of grant until the expiration of the 10 year option term.
These numbers are calculated based on the requirements promulgated by the
Commission and do not reflect the Company's estimate of future stock price
growth.
(2) The options shown granted in fiscal 1999 become exercisable as to 25% of
the option shares on the first anniversary of the date of grant and as to
1/48th of the option shares each month thereafter, with full vesting
occurring on the fourth anniversary of the date of grant.
(3) Options were granted at an exercise price equal to the fair market value of
the Company's Common Stock, as determined by reference to the closing price
reported on the Nasdaq National Market on the date of grant.
(4) Exercise price and tax withholding obligations may be paid in cash,
promissory note, by delivery of already owned shares subject to certain
conditions, or pursuant to a cashless exercise procedure under which the
optionee provides irrevocable instructions to a brokerage firm to sell the
purchased shares and to remit to the Company, out of the sale proceeds, an
amount equal to the exercise price plus all applicable withholding taxes.
</FN>
</TABLE>
Aggregated Option Exercises in Last Fiscal Year And Fiscal Year-End Option
Values
<TABLE>
The following table sets forth certain information regarding the
exercise of stock options during fiscal 1999 and the value of options held as of
June 30, 1999 by the Named Executive Officers.
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at June 30, 1999 at June 30, 1999(2)
Acquired on Value ----------------------------- ----------------------------
Name Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark L. Sanders .............. 30,208 $ 151,562 251,711 182,001 $7,779,541 $4,307,110
Ajay Chopra .................. 80,000 1,588,013 65,374 66,626 1,686,945 1,550,895
William Loesch ............... 60,000 950,852 57,374 102,626 1,514,225 2,617,395
Robert Wilson ................ 12,000 217,538 37,844 65,156 986,301 1,545,511
Georg Blinn .................. -- -- 74,583 59,417 1,626,138 1,261,112
<FN>
- ------------
(1) Market value of the Company's Common Stock at the exercise date minus the
exercise price.
(2) Market value of the Company's Common Stock on June 30, 1999 of $33.625
minus the exercise price.
</FN>
</TABLE>
Employment Contracts and Change in Control Arrangements
In connection with the Company's acquisition of miro computer products
AG in September 1997, the Company entered into an employment agreement with
Georg Blinn, who joined the company as Vice President, General Manager, Pinnacle
Systems GmbH. Pursuant to the agreement, Mr. Blinn receives a salary of
DM325,000, is entitled to use of a company car and certain nominal perquisites.
12
<PAGE>
The Company currently has no other employment contracts with any of the
Named Executive Officers, and the Company has no other compensatory plan or
arrangement with such Named Executive Officers where the amounts to be paid
exceed $100,000 and which are activated upon resignation, termination or
retirement of any such Named Executive Officer upon a change in control of the
Company.
Compensation of Directors
Non-employee members of the Company's Board of Directors receive a
quarterly retainer of $5,000. The Company's 1994 Director Option Plan provides
that options may be granted to non-employee directors of the Company who do not
represent shareholders holding more than 1% of the Company's outstanding Common
Stock pursuant to an automatic nondiscretionary grant mechanism. Pursuant to the
1994 Director Option Plan, during fiscal 1999, an option to purchase 2,500
shares of the Company's Common Stock at an exercise price of $14.75 per share
was granted to each of L. Gregory Ballard, John C. Lewis, Nyal D. McMullin,
Glenn E. Penisten and Charles J. Vaughan. In connection with his appointment to
the Board of Directors in July 1999 and pursuant to the automatic grant
mechanism under the 1994 Director Option Plan, Mr. Krause was granted an option
to purchase 10,000 shares of the Company's Common Stock at an exercise price of
$29.50 per share.
Report of the Compensation Committee of the Board of Directors on Executive
Compensation
The Compensation Committee (the "Committee") of the Board of Directors
reviews and approves the Company's executive compensation policies. The
following is the report of the Committee describing the compensation policies
and rationales applicable to the Company's executive officers with respect to
the compensation paid to such executive officers for the fiscal year ended June
30, 1999.
Compensation Philosophy
The Company's philosophy in setting its compensation policies for
executive officers is to maximize shareholder value over time. The primary goal
of the Company's executive compensation program is therefore to closely align
the interests of the executive officers with those of the Company's
shareholders. To achieve this goal, the Company attempts to (i) offer
compensation opportunities that attract and retain executives whose abilities
are critical to the long-term success of the Company, motivate such individuals
to perform at their highest level and reward outstanding achievement, (ii)
maintain a portion of the executive's total compensation at risk, tied to
achievement of financial, organizational and management performance goals, and
(iii) encourage executives to manage from the perspective of owners with an
equity stake in the Company. The Company currently uses two integrated
components--Cash Compensation, including bonuses, and Stock Options--to meet
these goals.
Cash Compensation
The cash compensation component of the total compensation is designed
to compensate executives competitively within the industry and the marketplace
and comprises two segments, base salary and bonuses.
The Committee reviewed and approved calendar 1999 base salaries for the
Chief Executive Officer and other executive officers at the beginning of the
calendar year.
In January 1999, the Board of Directors established an incentive
compensation plan for executive officers of the Company based upon the Company's
achievement of revenue and net income targets for the third and fourth quarters
of fiscal 1999. Base salaries and the bonus levels were established by the
Committee based upon competitive compensation data, an executive's job
responsibilities, level of experience, individual performance and contribution
to the business. Executive officer salaries have been targeted at or above the
average rates paid by competitors to enable the Company to attract, motivate,
reward and retain highly skilled executives. In order to evaluate the Company's
competitive posture in the industry, the Committee reviewed and analyzed the
compensation packages, including base salary levels, offered by other high
technology companies. No specific formula was applied to determine the weight of
each factor.
13
<PAGE>
During fiscal 1999, the compensation of Mark L. Sanders, the Company's
President and Chief Executive Officer, consisted of base salary, bonus and stock
options. Mr. Sanders base salary for fiscal 1999 was $317,500. In addition, Mr.
Sanders was granted an option to purchase 70,000 shares of Common Stock at an
exercise price of $14.00, which was the fair market value of the Company's
Common Stock at the date of grant. Mr. Sanders also received a cash bonus of
$69,450. The Committee reviews the Chief Executive Officer's salary at the
beginning of the calendar year using the same criteria and policies as are
employed for the other executive officers.
Stock Options
The Committee provides the Company's executive officers with long-term
incentive compensation through grants of stock options under the Company's 1987
Stock Option Plan until April 1997, and since then, the Company's 1996 Stock
Option Plan. The Board believes that stock options provide the Company's
executive officers with the opportunity to purchase and maintain an equity
interest in the Company and to share in the appreciation of the value of the
Company's Common Stock. The Board believes that stock options directly motivate
an executive to maximize long-term shareholder value. The options also utilize
vesting periods that encourage key executives to continue in the employ of the
Company. All options granted to executive officers to date have been granted at
the fair market value of the Company's Common Stock on the date of grant. The
Board considers the grant of each option subjectively, considering factors such
as the individual performance of the executive officer and the anticipated
contribution of the executive officer to the attainment of the Company's
long-term strategic performance goals. Long-term incentives granted in prior
years are also taken into consideration. During fiscal 1999, Mr. Sanders
received an option to purchase 70,000 shares of Common Stock and all executive
officers as a group received options to purchase 226,000 shares of Common Stock.
Incentives for executive officers reflect the Committee's belief that a
portion of the compensation of each executive officer should be contingent upon
the performance of the Company, as well as the individual contribution of each
executive officer. To carry out this philosophy, the Company has granted to
certain executive officers stock options that have accelerated vesting
provisions if certain quarterly and annual sales and profitability objectives
are met. The executive officers, including Mr. Sanders, must successfully
achieve these performance targets which were submitted by management to the
Committee for its evaluation and approval at in conjunction with the stock
option grant. The Committee evaluates the completion of the goals and
acceleration of the stock option vesting if the goals have been met. The
Committee believes that the stock option acceleration provision provides an
excellent link between the Company's earnings performance and the incentives
paid to executives.
Section 162(m)
The Board has considered the potential future effects of Section 162(m)
of the Internal Revenue Code on the compensation paid to the Company's executive
officers. Section 162(m) disallows a tax deduction for any publicly-held
corporation for individual compensation exceeding $1.0 million in any taxable
year for any of the executive officers named in the proxy statement, unless
compensation is performance-based. The Company has adopted a policy that, where
reasonably practicable, the Company will seek to qualify the variable
compensation paid to its executive officers for an exemption from the
deductibility limitations of Section 162(m). The 1996 Stock Option Plan,
includes a limit on the number of shares which may be granted to any one
employer during the fiscal year. Such limit is intended to preserve the
company's ability to deduct the compensation expense relating to stock options
granted under such plan.
In approving the amount and form of compensation for the Company's
executive officers, the Committee will continue to consider all elements of the
cost to the Company of providing such compensation, including the potential
impact of Section 162(m).
Respectfully submitted by:
COMPENSATION COMMITTEE
Nyal D. McMullin
Glenn E. Penisten
14
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual percentage change
in the cumulative return to the shareholders of the Company's Common Stock with
the cumulative return of The Hambrecht & Quist Technology Index, The Nasdaq
Stock Market (U.S.) Index for the period commencing November 8, 1994 (the date
of the Company's initial public offering) and ending on June 30, 1999. Returns
for the indices are weighted based on market capitalization at the beginning of
each fiscal year.
The graph assumes that $100 was invested on November 8, 1994 in the
Company's Common Stock and in the Hambrecht & Quist Technology and the NASDAQ
Stock Market (U.S.) and that all dividends were reinvested. No dividends have
been declared or paid on the Company's Common Stock. Shareholder returns over
the indicated period should not be considered indicative of future shareholder
returns.
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
<TABLE>
Comparison of Five Year Cumulative Toatal Return Among Pinnacle Systems, Inc.,
The Hambrecht & Quist Technology Index, The Nasdaq Stock Market (U.S.) Index
<CAPTION>
11/8/94 6/1/95 6/1/96 6/1/97 6/1/98 6/1/99
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Pinnacle Systems, Inc. 100.00 225.00 207.50 170.63 323.75 672.50
Hambrecht & Quist Technology 100.00 122.40 157.13 191.12 251.64 359.92
NASDAQ Stock Market (U.S.) 100.00 143.13 167.28 218.46 276.73 447.89
</TABLE>
The information contained on the preceeding pages under the captions
"Report of the Compensation Committee of the Board of Directors on Executive
Compensation" and "Performance Graph" shall not be deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission, nor
shall such information be incorporated by reference into any future filing under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, except to the extent that the Company specifically incorporates it
by reference into such filing.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Commission and the National Association of
Securities Dealers, Inc. Executive officers, directors and greater than ten
percent shareholders are required by Commission regulation to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on its
review of the copies of such forms received by it, or written representations
from certain reporting persons, the Company believes that, during fiscal 1999
all executive officers and directors of the Company complied with all applicable
filing requirements except that Patrick Burns, the Company's Vice President,
Broadcast and Professional Sales, American and Japan, filed a Form 4 late.
15
<PAGE>
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting.
If any other matters properly come before the meeting, it is the intention of
the persons named in the enclosed form of Proxy to vote the shares they
represent as the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: September 24, 1999
16
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
PROXY PINNACLE SYSTEMS, INC. PROXY
PROXY FOR 1999 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of PINNACLE SYSTEMS, INC., a California
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated September 24, 1999, and hereby
appoints Mark L. Sanders and Arthur D. Chadwick, and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1999 Annual Meeting
of Shareholders of PINNACLE SYSTEMS, INC. to be held on October 26, 1999 at 1:00
p.m., local time, at 280 North Bernardo Avenue, Mountain View, California 94043
and at any adjournment or adjournments thereof, and to vote all shares of Common
Stock which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth on the reverse side.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE AMENDMENT OF THE
1996 STOCK OPTION PLAN AND FOR THE APPOINTMENT OF KPMG LLP, OR AS SAID PROXIES
DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING,
INCLUDING, AMONG OTHER THINGS, CONSIDERATION OF ANY MOTION MADE FOR ADJOURNMENT
OF THE MEETING.
(Continued, and to be signed on the other side)
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
<PAGE>
- --------------------------------------------------------------------------------
[X] Please mark
your votes
as this
1. Elections of Directors:
INSTRUCTION: To withhold WITHHOLD
authority to vote for any FOR FOR ALL
individual nominee, write [ ] [ ]
that nominee(s) name(s) on
the line below.
L. Gregory Ballard, Ajay Chopra, L. William Krause, John Lewis,
Glenn E. Penisten, Mark L. Sanders, Charles J. Vaughan
_________________________________________
2. Proposal to approve an amendment to the 1996 FOR AGAINST ABSTAIN
Stock Option Plan to increase the number of
shares of Common Stock reserved for issuance [ ] [ ] [ ]
thereunder by 800,000 shares:
3. Proposal to ratify appointment of KPMG LLP as
independent auditors of Pinnacle Systems, Inc. [ ] [ ] [ ]
for the fiscal year ending June 30, 2000:
and, in their discretion, upon such other
matter or matters which may properly come
before the meeting or any adjournment or
adjournments thereof.
Both of such attorneys or substitutes (if both are present and acting at said
meeting or any adjournment(s) thereof, or, if only one shall be present and
acting, then that one) shall have and may exercise all of the powers of said
attorneys-in-fact hereunder.
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW
__________________________________________________ [ ]
__________________________________________________
Signature(s) ____________________________________ Dated _______________, 1999
(This Proxy should be marked, dated and signed by the shareholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If Shares are held
by joint tenants or as community property, both should sign.)
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
<PAGE>
APPENDIX B
PINNACLE SYSTEMS, INC.
1996 STOCK OPTION PLAN
(As amended July 1999)
1. Purposes of the Plan. The purposes of this Plan are:
* to attract and retain the best available personnel for positions
of substantial responsibility,
* to provide additional incentive to Employees, Directors and
Consultants, and
* to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options
or Nonstatutory Stock Options, as determined by the Administrator at the time
of grant.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its
Committees as shall be administering the Plan, in accordance with Section 4 of
the Plan.
(b) "Applicable Laws" means the requirements relating to
the administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are, or will be, granted under
the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means a committee of Directors appointed by
the Board in accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means PINNACLE SYSTEMS, INC.
(h) "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services to such
entity.
(i) "Director" means a member of the Board.
<PAGE>
(j) "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(m) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
(iii) In the absence of an established market for
the Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not
intended to qualify as an Incentive Stock Option.
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(p) "Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option grant. The
Notice of Grant is part of the Option Agreement.
(q) "Officer" means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the
Plan.
(s) "Option Agreement" means an Agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(t) "Option Exchange Program" means a program whereby
outstanding options are surrendered in exchange for options with a lower
exercise price.
(u) "Optioned Stock" means the Common Stock subject to an
Option.
(v) "Optionee" means the holder of an outstanding Option
granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1996 Stock Option Plan.
(y) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or
any successor to Rule 16b-3, as in effect when discretion is being exercised
with respect to the Plan.
(z) "Service Provider" means an Employee, Director or
Consultant.
(aa) "Share" means a share of the Common Stock, as adjusted
in accordance with Section 12 of the Plan.
(bb) "Subsidiary" means a "subsidiary corporation", whether
now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 3,270,000 Shares. The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
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4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may
be administered by different Committees with respect to different groups of
Service Providers.
(ii) Section 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options granted hereunder
as "performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to
qualify transactions hereunder as exempt under Rule 16b-3, the transactions
contemplated hereunder shall be structured to satisfy the requirements for
exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided
above, the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions
of the Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom
Options may be granted hereunder;
(iii) to determine the number of shares of Common
Stock to be covered by each Option granted hereunder;
(iv) to approve forms of Agreement for use under
the Plan;
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option
to the then current Fair Market Value if the Fair Market Value of the Common
Stock covered by such Option shall have declined since the date the Option was
granted;
(vii) to institute an Option Exchange Program;
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(viii) to construe and interpret the terms of the
Plan and awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(x) to modify or amend each Option (subject to
Section 14(c) of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options longer than is otherwise
provided for in the Plan;
(xi) to allow Optionees to satisfy withholding
tax obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by an Optionee to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on
behalf of the Company any instrument required to effect the grant of an Option
previously granted by the Administrator;
(xiii) to make all other determinations deemed
necessary or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.
5. Eligibility. Nonstatutory Stock Options may be granted to Service
Providers. Incentive Stock Options may be granted only to Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option shall confer upon an
Optionee any right with respect to continuing the Optionee's relationship as a
Service Provider with the Company, nor shall
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they interfere in any way with the Optionee's right or the Company's right to
terminate such relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of
Options:
(i) No Service Provider shall be granted, in any
fiscal year of the Company, Options to purchase more than 400,000 Shares.
(ii) In connection with his or her initial
service, a Service Provider may be granted Options to purchase up to an
additional 200,000 Shares which shall not be counted against the limits set
forth in subsection 6(c)(i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 12.
(iv) If an Option is canceled in the same fiscal
year of the Company in which it was granted (other than in connection with a
transaction described in Section 12), the canceled Option will be counted
against the limits set forth in subsections (i) and (ii) above. For this
purpose, if the exercise price of an Option is reduced, the transaction will be
treated as a cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 18 of the Plan, the Plan shall
become effective upon its adoption by the Board. It shall continue in effect for
a term of ten (10) years unless terminated earlier under Section 14 of the Plan.
8. Term of Option. The term of each Option shall be stated in the
Option Agreement. In the case of an Incentive Stock Option, the term shall be
ten (10) years from the date of grant or such shorter term as may be provided in
the Option Agreement. Moreover, in the case of an Incentive Stock Option granted
to an Optionee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time
the Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
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(B) granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option,
the per Share exercise price shall be determined by the Administrator, but shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may
be granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) Waiting Period and Exercise Dates. At the time an
Option is granted, the Administrator shall fix the period within which the
Option may be exercised and shall determine any conditions which must be
satisfied before the Option may be exercised.
(c) Form of Consideration. The Administrator shall
determine the acceptable form of consideration for exercising an Option,
including the method of payment. In the case of an Incentive Stock Option, the
Administrator shall determine the acceptable form of consideration at the time
of grant. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (B) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
(v) consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the
Plan;
(vi) a reduction in the amount of any Company
liability to the Optionee, including any liability attributable to the
Optionee's participation in any Company-sponsored deferred compensation program
or arrangement;
(vii) any combination of the foregoing methods of
payment; or
(viii) such other consideration and method of
payment for the issuance of Shares to the extent permitted by Applicable Laws.
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10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the Administrator
and set forth in the Option Agreement. Unless the Administrator provides
otherwise, vesting of Options granted hereunder shall be tolled during any
unpaid leave of absence. An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 12 of the Plan.
Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Relationship as a Service Provider. If
an Optionee ceases to be a Service Provider, other than upon the Optionee's
death or Disability, the Optionee may exercise his or her Option within such
period of time as is specified in the Option Agreement to the extent that the
Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Option Agreement). In
the absence of a specified time in the Option Agreement, the Option shall remain
exercisable for ninety (90) days following the Optionee's termination. If, on
the date of termination, the Optionee is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option shall revert to
the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability or the Optionee
suffers a Disability within ninety (90) days of ceasing to be a Service
Provider, the Optionee may exercise his or her Option within such period of time
as is specified in the Option Agreement to the extent the Option is vested on
the date of termination (but in no event later than the expiration of the term
of such Option as set forth in the Option Agreement). In the absence of a
specified time in the Option Agreement, the Option shall
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remain exercisable for one (1) year following Optionee's termination. If, on the
date of termination, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall revert to the
Plan. If, after termination, the Optionee does not exercise his or her Option
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service
Provider or within ninety (90) days of ceasing to be a Service Provider, the
Option may be exercised until the expiration of the term of such Option as set
forth in the Notice of Grant, by the Optionee's estate or by a person who
acquires the right to exercise the Option by bequest or inheritance, but only to
the extent that the Option is vested on the date Optionee ceased to be a Service
Provider. If, at the time Optionee ceased to be a Service Provider, the Optionee
is not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall immediately revert to the Plan. The Option may be
exercised by the executor or administrator of the Optionee's estate or, if none,
by the person(s) entitled to exercise the Option under the Optionee's will or
the laws of descent or distribution. If the Option is not so exercised within
the time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time
offer to buy out for a payment in cash or Shares, an Option previously granted
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
11. Non-Transferability of Options. Unless determined otherwise by the
Administrator, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.
12. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of shares of Common Stock
covered by each outstanding Option, and the number of shares of Common Stock
which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities
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convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Administrator shall
notify each Optionee as soon as practicable prior to the effective date of such
proposed transaction. The Administrator in its discretion may provide for an
Optionee to have the right to exercise his or her Option until ten (10) days
prior to such transaction as to all of the Optioned Stock covered thereby,
including Shares as to which the Option would not otherwise be exercisable. To
the extent it has not been previously exercised, an Option will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option shall be assumed or an
equivalent option or right substituted by the successor corporation or a Parent
or Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option, the Optionee shall
fully vest in and have the right to exercise the Option as to all of the
Optioned Stock, including Shares as to which it would not otherwise be vested or
exercisable. If an Option becomes fully vested and exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option shall be fully vested and exercisable for a period of fifteen (15) days
from the date of such notice, and the Option shall terminate upon the expiration
of such period. For the purposes of this paragraph, the Option shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets is not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option, for each Share of Optioned Stock subject to the Option,
to be solely common stock of the successor corporation or its Parent equal in
fair market value to the per share consideration received by holders of Common
Stock in the merger or sale of assets.
13. Date of Grant. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or terminate the Plan.
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(b) Shareholder Approval. The Company shall obtain
shareholder approval of any Plan amendment to the extent necessary and desirable
to comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which Agreement must be in writing and signed by the Optionee and
the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to options
granted under the Plan prior to the date of such termination.
15. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares shall comply with Applicable Laws and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
(b) Investment Representations. As a condition to the
exercise of an Option, the Company may require the person exercising such Option
to represent and warrant at the time of any such exercise that the Shares are
being purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
16. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
17. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
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PINNACLE SYSTEMS, INC.
1996 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the 1996 Stock
Option Plan (the "Plan") shall have the same defined meanings in this Option
Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted ________________________
Total Exercise Price $________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
Vesting Schedule:
This Option may be exercised, in whole or in part, in accordance with
the following schedule:
[25% of the Shares subject to the Option shall vest twelve months after
the Vesting Commencement Date, and 1/48 of the Shares subject to the Option
shall vest each month thereafter, subject to the Optionee continuing to be a
Service Provider on such dates].
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Termination Period:
This Option may be exercised for _____ [days/months] after Optionee
ceases to be a Service Provider. Upon the death or Disability of the Optionee,
this Option may be exercised for such longer period as provided in the Plan. In
no event shall this Option be exercised later than the Term/Expiration Date as
provided above.
II. AGREEMENT
1. Grant of Option. The Plan Administrator of the Company hereby grants
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to
Section 14(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock
Option ("ISO"), this Option is intended to qualify as an Incentive Stock Option
under Section 422 of the Code. However, if this Option is intended to be an
Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code
Section 422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during
its term in accordance with the Vesting Schedule set out in the Notice of Grant
and the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by
delivery of an exercise notice, in the form attached as Exhibit A (the "Exercise
Notice"), which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised (the "Exercised
Shares"), and such other representations and agreements as may be required by
the Company pursuant to the provisions of the Plan. The Exercise Notice shall be
completed by the Optionee and delivered to the Company. The Exercise Notice
shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by such aggregate
Exercise Price.
No Shares shall be issued pursuant to the exercise of this
Option unless such issuance and exercise complies with Applicable Laws. Assuming
such compliance, for income tax purposes the Exercised Shares shall be
considered transferred to the Optionee on the date the Option is exercised with
respect to such Exercised Shares.
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3. Method of Payment. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash; or
(b) check; or
(c) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) in the case of
Shares acquired upon exercise of an option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (ii) have a Fair Market
Value on the date of surrender equal to the aggregate Exercise Price of the
Exercised Shares.
4. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal tax consequences relating to
this Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
(a) Exercising the Option.
(i) Nonstatutory Stock Option. The Optionee may
incur regular federal income tax liability upon exercise of a NSO. The Optionee
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the Fair Market Value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price. If
the Optionee is an Employee or a former Employee, the Company will be required
to withhold from his or her compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
(ii) Incentive Stock Option. If this Option
qualifies as an ISO, the Optionee will have no regular federal income tax
liability upon its exercise, although the excess, if
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any, of the Fair Market Value of the Exercised Shares on the date of exercise
over their aggregate Exercise Price will be treated as an adjustment to
alternative minimum taxable income for federal tax purposes and may subject the
Optionee to alternative minimum tax in the year of exercise. In the event that
the Optionee ceases to be an Employee but remains a Service Provider, any
Incentive Stock Option of the Optionee that remains unexercised shall cease to
qualify as an Incentive Stock Option and will be treated for tax purposes as a
Nonstatutory Stock Option on the date three (3) months and one (1) day following
such change of status.
(b) Disposition of Shares.
(i) NSO. If the Optionee holds NSO Shares for at
least one year, any gain realized on disposition of the Shares will be treated
as long-term capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at
least one year after exercise and two years after the grant date, any gain
realized on disposition of the Shares will be treated as long-term capital gain
for federal income tax purposes. If the Optionee disposes of ISO Shares within
one year after exercise or two years after the grant date, any gain realized on
such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the excess, if any, of the lesser of (A) the
difference between the Fair Market Value of the Shares acquired on the date of
exercise and the aggregate Exercise Price, or (B) the difference between the
sale price of such Shares and the aggregate Exercise Price. Any additional gain
will be taxed as capital gain, short-term or long-term depending on the period
that the ISO Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If
the Optionee sells or otherwise disposes of any of the Shares acquired pursuant
to an ISO on or before the later of (i) two years after the grant date, or (ii)
one year after the exercise date, the Optionee shall immediately notify the
Company in writing of such disposition. The Optionee agrees that he or she may
be subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
7. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire Agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This Agreement is governed by the internal substantive laws, but not
the choice of law rules, of [state].
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT
THROUGH THE ACT OF BEING HIRED, BEING
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<PAGE>
GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES
AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD,
FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT
ANY TIME, WITH OR WITHOUT CAUSE.
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: PINNACLE SYSTEMS, INC.
___________________________________ ___________________________________
Signature By
___________________________________ ___________________________________
Print Name Title
___________________________________ ___________________________________
Residence Address
___________________________________
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<PAGE>
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the
terms and conditions of the Plan and this Option Agreement. In consideration of
the Company's granting his or her spouse the right to purchase Shares as set
forth in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
___________________________________
Spouse of Optionee
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<PAGE>
EXHIBIT A
PINNACLE SYSTEMS, INC.
1996 STOCK OPTION PLAN
EXERCISE NOTICE
Pinnacle Systems, Inc.
280 N. Bernardo Avenue
Mountain View, CA 94043
Attention Secretary:
1. Exercise of Option. Effective as of today, ________________, _____,
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of Pinnacle Systems, Inc. (the "Company")
under and pursuant to the 1996 Stock Option Plan (the "Plan") and the Stock
Option Agreement dated, _____ (the "Option Agreement"). The purchase price for
the Shares shall be $, as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 12 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire Agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
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<PAGE>
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This Agreement is
governed by the internal substantive laws, but not the choice of law rules, of
[state].
Submitted by: Accepted by:
PURCHASER: PINNACLE SYSTEMS, INC.
___________________________________ ___________________________________
Signature By
___________________________________ ___________________________________
Print Name Title
___________________________________ ___________________________________
Date Received
Address: Address:
___________________________________ 280 N. Bernardo Avenue
___________________________________ Mountain View, CA 94043
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