PROSPECTUS Filed Pursuant to 424(b)(3)
386,586 Shares
PINNACLE SYSTEMS, INC.
COMMON STOCK
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These shares may be offered and sold from time to time by
Hewlett-Packard Company, the selling shareholder. See "Selling Shareholder." The
selling shareholder acquired the shares in connection with the acquisition by
Pinnacle Systems, Inc. of certain assets from such selling shareholder.
The selling shareholder will receive all of the net proceeds from the
sale of the shares and will pay all underwriting discounts and selling
commissions, if any, applicable to the sale of the shares. The Company will not
receive any of the proceeds from the sale of the shares.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 4 OF
THIS PROSPECTUS BEFORE PURCHASING ANY OF THE COMMON STOCK OFFERED HEREBY.
Pinnacle's common stock is traded on the Nasdaq National Market under
the symbol "PCLE." On August 24, 1999, the closing sale price of a share of
Pinnacle's Common Stock was $33.00.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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August 25, 1999
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TABLE OF CONTENTS
Page
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Available Information........................................................ 2
Information Incorporated by Reference........................................ 2
Forward Looking Information.................................................. 3
The Company.................................................................. 4
Risk Factors................................................................. 4
Use of Proceeds.............................................................. 13
Selling Shareholder.......................................................... 13
Plan of Distribution......................................................... 13
Experts...................................................................... 14
Legal Matters................................................................ 14
You should rely only on the information contained in this prospectus.
We have not authorized anyone to provide you with information different from
that contained in this prospectus. The selling stockholder is offering to sell,
and seeking offers to buy, shares of PCLE common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale of the shares.
In this prospectus, "Pinnacle," "we," "us," and "our" refer to Pinnacle
Systems, Inc. and its subsidiaries.
AVAILABLE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission referred to as the
SEC. You may read and copy any document we file at the SEC's public reference
facilities in Room 1034, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the SEC's regional offices at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite
1300, New York, New York 10048. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public at the SEC's web site at http://www.sec.gov.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be a part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below, and any future filings made
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934, as amended, until the selling stockholders sell all the shares.
This prospectus is part of a Registration Statement we filed with the SEC
(Registration No. 333-84739). The documents we incorporate by reference are:
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1. our Annual Report on Form 10-K for the fiscal year ended June
30, 1998;
2. our Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998;
3. our Quarterly Report on Form 10-Q for the quarter ended
December 31, 1998;
4. our Quarterly Report on Form 10-Q for the quarter ended March
31, 1999;
5. our Current Report on Form 8-K as filed with the SEC on March
26, 1999;
6. Our Current Report on Form 8-K as filed with the SEC on August
13, 1999;
7. the description of the Company's Common Stock contained in its
Registration Statement on Form 8-A as filed with the SEC on
September 9, 1994; and
8. the description of the Company's Preferred Share Purchase
Rights contained in its Registration Statement on Form 8-A as
filed with the SEC on December 19, 1996, as amended May 19,
1998.
You may request a copy of these filings, at no cost, by written or oral
request to the following address: Chief Financial Officer, Pinnacle Systems,
Inc., 280 North Bernardo Avenue, Mountain View, California 94043; telephone
number (650) 526-1600.
FORWARD LOOKING INFORMATION
This Prospectus, including the information incorporated by reference
herein, contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E
of the Securities Exchange Act of 1934. Actual results could differ materially
from those projected in the forward-looking statements as a result of the risk
factors set forth below. Reference is made in particular to the discussion set
forth under "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Annual Report on Form 10-K for the fiscal year
ended June 30, 1998, incorporated herein by reference. In connection with
forward-looking statements which appear in these disclosures, prospective
purchasers of the Common Stock offered hereby should carefully consider the
factors set forth in this Prospectus under "Risk Factors."
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THE COMPANY
We design, manufacture, market and support video post-production tools
for high quality real time video processing. The Company's products combine
computer based and specialized video processing technologies which perform a
variety of video post-production functions such as the addition of special
effects, graphics and titles to multiple streams of live or previously recorded
video material. The Company's products address needs in the broadcast, desktop
or professional and consumer video post-production markets.
The Company was incorporated in California in 1986. The Company
maintains its executive offices at 280 North Bernardo Avenue, Mountain View,
California 94043, and its telephone number is (650) 526-1600.
RISK FACTORS
We have grown rapidly and expect to continue to grow rapidly. If we
fail to effectively manage this growth, our financial results could suffer.
We have in the past experienced rapid growth and anticipate that we may
grow at a rapid pace in the future. For example, net sales in fiscal 1998 were
$105.3 million compared to $37.5 million in fiscal 1997 and net sales in the
nine-month period ended March 31, 1999 increased 51.4% over the same period last
year. As a result of recent acquisitions, we have increased the number of
employees, including the addition of approximately 235 employees in connection
with the Hewlett-Packard, Inc., Truevision, Inc. and miro Computer Products AG
acquisitions, and many are now geographically dispersed. This growth places
increasing demands on our management, financial and other resources. We have
built these resources and systems to account for such growth, but continued
and/or accelerated growth may require us to increase our investment in such
systems, or to reorganize our management team. Such changes, should they occur,
could cause an interruption or diversion of focus from our core business
activities and have an adverse effect on financial results.
Any failure to successfully integrate the businesses we have acquired
could negatively impact us.
In August 1999, we closed the transaction with Hewlett-Packard Inc.,
and in March 1999, we completed the acquisitions of Truevision, Inc and
Shoreline Studios, Inc. We may in the near- or long-term pursue acquisitions of
complementary businesses, products or technologies. Integrating acquired
operations is a complex, time-consuming and expensive process. All acquisitions
involve risks that could materially and adversely affect our business and
operating results. These risks include:
- Distracting management from the day-to-day operations of our
business
- Costs, delays and inefficiencies associated with integrating
acquired operations, products and personnel
- The potential to result in dilutive issuance of our equity
securities
- The incurrence of debt and amortization expenses related to
goodwill and other intangible assets
There are various factors which may cause our net revenues and
operating results to fluctuate.
Our quarterly and annual operating results have varied significantly in
the past and may continue to fluctuate because of a number of factors, many of
which are outside our control. These factors include:
- Timing of significant orders from and shipments to major OEM
customers
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- Timing and market acceptance of new products
- Success in developing, introducing and shipping new products
- Dependence on distribution channels through which our products
are sold
- Increased competition and pricing pressure
- Accuracy of our and our resellers' forecasts of end user
demand
- Accuracy of inventory forecasts
- Ability to obtain sufficient supplies from our subcontractors
- Timing and level of consumer product returns
- Foreign currency fluctuations
- Costs of integrating acquired operations
- General domestic and international economic conditions, such
as the recent economic downturn in Asia and Latin America.
We also experience significant fluctuations in orders and sales due to
seasonal fluctuations, the timing of major trade shows and the sale of consumer
products in anticipation of the holiday season. Sales usually slow down during
the summer months of July and August, especially in Europe. Also, we attend a
number of annual trade shows which can influence the order pattern of products,
including CEBIT in March, the NAB convention held in April, the IBC convention
held in September and the COMDEX exhibition held in November. Our operating
expense levels are based, in part, on our expectations of future revenue and, as
a result, net income would be disproportionately affected by a shortfall in net
sales. Due to these factors, we believe that quarter-to-quarter comparisons of
our results of operations are not necessarily meaningful and should not be
relied upon as indicators of future performance.
Our stock price may be volatile.
The trading price of our common stock has in the past and could in the
future fluctuate significantly. The fluctuations have been or could be in
response to numerous factors including:
- Quarterly variations in results of operations
- Announcements of technological innovations or new products by
us, our customers or competitors
- Changes in securities analysts' recommendations
- Announcements of acquisitions
- Earnings estimates for us
- General fluctuations in the stock market
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Our revenues and results of operations may be below the expectations of
public market securities analysts or investors. This could result in a sharp
decline in the market price of our common stock.
In addition, stock markets have from time to time experienced extreme
price and volume fluctuations. The market prices for high technology companies
have been particularly affected by these market fluctuations and such effects
have often been unrelated to the operating performance of such companies. These
broad market fluctuations may cause a decline in the market price of our common
stock.
In the past, following periods of volatility in the market price of a
company's stock, securities class action litigation has been brought against the
issuing company. Although no such litigation has been brought against us, it is
possible that similar litigation could be brought against us. Such litigation
could result in substantial costs and would likely divert management's attention
and resources. Any adverse determination in such litigation could also subject
us to significant liabilities.
We may fail to sell products in the consumer market.
We entered the consumer market with the purchase of the VideoDirector
product line from Gold Disk in June 1996. We began shipping our first internally
developed consumer product, the VideoDirector Studio 200, in March 1997 and
began shipping a successor product, the Studio 400 in June 1998. In addition,
with the Miro Acquisition in August 1997, we acquired Miro's consumer products
and European sales organization. We aim to continue to expend resources to
develop, market and sell products into the consumer market. In this endeavor, we
need to continue to develop and maintain the following capabilities:
- Marketing and selling products through the consumer
distribution channels.
- Establish relationships with distributors and retailers
- A fully developed infrastructure to support electronic retail
stores and telephone and Internet orders.
Additionally, factors beyond our control could hurt consumer product
sales and consequently our financial condition. These factors include:
- Potential compatibility problems with other manufacturers'
electronic components
- The risk of obsolete inventory and inventory returns
- The growth of the consumer video market is difficult to
predict
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If our products do not keep pace with the technological developments in
the rapidly changing video post-production equipment industry, then we may be
adversely affected.
The video post-production equipment industry is characterized by
rapidly changing technology, evolving industry standards and frequent new
product introductions. The introduction of products embodying new technologies
or the emergence of new industry standards can render existing products obsolete
or unmarketable. Delays in the introduction or shipment of new or enhanced
products, our inability to timely develop and introduce such new products, the
failure of such products to gain significant market acceptance or problems
associated with new product transitions could materially harm our business,
particularly on a quarterly basis.
We are critically dependent on the successful introduction, market
acceptance, manufacture and sale of new products that offer our customers
additional features and enhanced performance at competitive prices. Once a new
product is developed, we must rapidly commence volume production. This process
requires accurate forecasting of customer requirements and attainment of
acceptable manufacturing costs. The introduction of new or enhanced products
also requires us to manage the transition from older, displaced products in
order to minimize disruption in customer ordering patterns, avoid excessive
levels of older product inventories and ensure that adequate supplies of new
products can be delivered to meet customer demand. For example, the introduction
of DVExtreme, Lightning and Studio 400 has resulted in a significant decline in
sales of Prizm, Flashfile and Studio 200 and a write down of inventory. In
addition, as is typical with any new product introduction, quality and
reliability problems may arise. Any such problems could result in reduced
bookings, manufacturing rework costs, delays in collecting accounts receivable,
additional service warranty costs and a limitation on market acceptance of the
product.
If we do not effectively compete, our business will be harmed.
The market for our products is highly competitive. We compete in the
broadcast, desktop and consumer video production markets. We anticipate
increased competition in each of the broadcast, desktop and consumer video
production markets, particularly since the industry is undergoing a period of
technological change and consolidation. Competition for our broadcast, consumer
and video products is generally based on:
- Product performance
- Breadth of product line
- Quality of service and support
- Market presence
- Price
- Ability of competitors to develop new, higher performance,
lower cost consumer video products
Certain competitors in the broadcast, consumer and video market have
larger financial, technical, marketing, sales and customer support resources,
greater name recognition and larger installed customer bases than we do. In
addition, some competitors have established relationships with current and
potential customers of ours and offer a wide variety of video equipment that can
be bundled in certain large system sales.
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Principal competitors in the broadcast market include:
Chyron Corporation
Matsushita Electric Industrial Co. Ltd.
Quantel Ltd. (a division of Carlton Communications Plc)
Accom, Inc.
Sony Corporation
Tektronix
SeaChange
Principal competitors in the desktop and consumer markets are:
Quantel Ltd. (a division of Carlton Communications Plc)
Accom, Inc.
Sony Corporation
Avid Technology, Inc.
Digitel Processing Systems, Inc.
Fast Multimedia
Iomega Corp.
Matrox Electronics Systems, Ltd.
Hauppauge
Media 100, Inc.
Adobe Systems, Inc.
These lists are not all-inclusive.
The consumer market in which certain of our products compete is an
emerging market and the sources of competition are not yet well defined. There
are several established video companies that are currently offering products or
solutions that compete directly or indirectly with our consumer products by
providing some or all of the same features and video editing capabilities. In
addition, we expect that existing manufacturers and new market entrants will
develop new, higher performance, lower cost consumer video products that may
compete directly with our consumer products. We expect that potential
competition in this market is likely to come from existing video editing
companies, software application companies, or new entrants into the market, many
of which have the financial resources, marketing and technical ability to
develop products for the consumer video market. Increased competition in any of
these markets could result in price reductions, reduced margins and loss of
market share. Any of these effects could materially harm our business.
We are dependent on contract manufacturers and single or limited source
suppliers for our components. If these manufacturers and suppliers do not meet
our demand either in volume or quality, then we could be materially harmed.
We rely on subcontractors to manufacture our consumer products and the
major subassemblies of our broadcast and desktop products. We and our
manufacturing subcontractors are dependent upon single or limited source
suppliers for a number of components and parts used in our products, including
certain key integrated circuits. Our strategy to rely on subcontractors and
single or limited source suppliers involves a number of significant risks,
including:
- Loss of control over the manufacturing process
- Potential absence of adequate capacity
- Potential delays in lead times
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- Unavailability of certain process technologies
- Reduced control over delivery schedules, manufacturing yields,
quality and costs
- Unexpected increases in component costs
If any significant subcontractor or single or limited source suppliers
becomes unable or unwilling to continue to manufacture these subassemblies or
provide critical components in required volumes, we will have to identify and
qualify acceptable replacements or redesign our products with different
components. Additional sources may not be available and product redesign may not
be feasible on a timely basis. This could materially harm our business. Any
extended interruption in the supply of or increase in the cost of the products,
subassemblies or components manufactured by third party subcontractors or
suppliers could materially harm our business.
We rely heavily on dealers and OEMs to market, sell, and distribute our
products. In turn, we depend heavily on the success of these resellers. If these
resellers do not succeed in effectively distributing our products, then our
financial performance will be negatively affected.
These resellers may:
- Not effectively promote or market our products
- Experience financial difficulties and even close operations
Our dealers and retailers are not contractually obligated to sell our
products. Therefore, they may, at any time:
- Refuse to promote or pay for our products
- Discontinue our products in favor of a competitor's product
Also, with these distribution channels standing between them and the
actual market, we may not be able to accurately gauge current demand for
products and anticipate demand for newly introduced products. For example,
dealers may place large initial orders for a new product just to keep their
stores stocked with the newest products and not because there is a significant
demand for them.
As to consumer products offerings, we have expanded our distribution
network to include several consumer channels, including large distributors of
products to computer software and hardware retailers, which in turn sell
products to end users. We also sell our consumer products directly to certain
retailers. Rapid change and financial difficulties of distributors have
characterized distribution channels for consumer retail products. These
arrangements have exposed us to the following risks, some of which are out of
our control:
- We are obligated to provide price protection to such retailers
and distributors and, while the agreements limit the
conditions under which product can be returned to us, we may
be faced with product returns or price protection obligations.
- The distributors or retailers may not continue to stock and
sell our consumer products.
- Retailers and retail distributors often carry competing
products.
Any of the foregoing events could materially harm our business.
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If certain of our key employees leave or are no longer able to perform
services for us, it could have a material adverse effect on our business.
We believe that the efforts and abilities of our senior management and
key technical personnel are very important to our continued success. Only one of
our senior management or key technical personnel is bound by an employment
agreement and none are the subject of key man life insurance.
We may not be able to attract and retain a sufficient number of
managerial personnel and technical employees to compete successfully.
Our success is dependent upon our ability to attract and retain
qualified technical and managerial personnel. There are not enough engineers,
technical support, software services and managers available to meet the current
demands of the computer industry. We may not be able to retain our key technical
and managerial employees or attract, assimilate and retain such other highly
qualified technical and managerial personnel as required in the future. Also,
employees may leave our employ and subsequently compete against us, or
contractors may perform services for competitors of ours. If we are unable to
retain key personnel, our business could be materially harmed.
We may be unable to protect our proprietary information and procedures
effectively.
We must protect our proprietary technology and operate without
infringing the intellectual property rights of others. We rely on a combination
of patent, copyright, trademark and trade secret laws and other intellectual
property protection methods to protect our proprietary technology. In addition,
we generally enter into confidentiality and nondisclosure agreements with our
employees and OEM customers and limit access to and distribution of our
proprietary technology. These steps may not protect our proprietary information
nor give us any competitive advantage. Others may independently develop
substantially equivalent intellectual property or otherwise gain access to our
trade secrets or intellectual property, or disclose such intellectual property
or trade secrets. If we are unable to protect our intellectual property, our
business could be materially harmed.
We may be adversely affected if we are sued by a third party or if we
decide to sue a third party for infringement.
There has been substantial litigation regarding patent, trademark and
other intellectual property rights involving technology companies. In the
future, litigation may be necessary to enforce any patents issued to us, to
protect our trade secrets, trademarks and other intellectual property rights
owned by us, or to defend us against claimed infringement. This litigation may
- Divert management's attention away from the operation of our
business
- Result in the loss of our proprietary rights
- Subject us to significant liabilities
- Force us to seek licenses from third parties
- Prevent us from manufacturing or selling products.
Any of these results could materially harm our business.
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In the course of business, we have in the past received communications
asserting that our products infringe patents or other intellectual property
rights of third parties. We investigated the factual basis of such
communications and negotiated licenses where appropriate. It is likely that in
the course of our business, we will receive similar communications in the
future. While it may be necessary or desirable in the future to obtain licenses
relating to one or more of our products, or relating to current or future
technologies, we may not be able to do so on commercially reasonable terms or at
all. These disputes may not be settled on commercially reasonable terms and may
result in long and costly litigation.
Because we sell products internationally, we are subject to additional
risks.
Sales of our products outside of North America represented
approximately 64% of net sales in the nine month period ended March 31, 1999
compared to 57.6%, 39.7% and 38.7% of net sales in the fiscal years that ended
June 30, 1998, 1997 and 1996 respectively. We expect that international sales
will continue to represent a significant portion of our net sales, particularly
in light of our increased European sales as a result of the Miro Acquisition and
the addition of the Miro European sales channel. We make foreign currency
denominated sales in many, primarily European, countries. This exposes us to
risks associated with currency exchange fluctuations. Although the dollar amount
of such foreign currency denominated sales was nominal during fiscal 1997, it
increased substantially during fiscal 1998 and 1999, especially for sales of
consumer and desktop products into Europe. In fiscal 1999 and beyond, we expect
that a majority of our European sales will be denominated in local foreign
currency including the Euro. The Company has developed natural hedges for some
of this risk in that most of the European selling expenses are also denominated
in local currency. In addition to foreign currency risks, international sales
and operations may also be subject to the following risks:
- Unexpected changes in regulatory requirements
- Export license requirements
- Restrictions on the export of critical technology
- Generally longer receivable collection periods and difficulty
in collecting accounts receivable
- Political instability
- Trade restrictions
- Changes in tariffs
- Difficulties in staffing and managing international operations
- Potential insolvency of international dealers
We are also subject to the risks of generally poor economic conditions
in certain areas of the world, most notably Asia. These risks may harm our
future international sales and, consequently, our business.
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Computer software, components and systems used by or designed by us or
used by third parties with whom we regularly deal may not be able to process
date/time information between the twentieth and twenty-first century. This
inability could cause the disruption or failure of such computer systems. Our
business could be interrupted materially as a result of such disruption or
failure.
Like many other companies, we are potentially susceptible to the year
2000 problem, i.e., computer systems will not correctly recognize and process
date information beyond the year 1999. In addition, moving from 1999 to 2000 may
cause problems since some systems' programming assigns special meaning to
certain dates, such as 9/9/99, and the year 2000 is a leap year.
We are conducting a program to confront these potential problems. This
program involves assessing all areas that may be affected by or responsible for
a year 2000 problem and initiating changes wherever necessary. Some of the
activities include:
- Assessing all major categories of systems used by us,
including manufacturing, sales and financial systems
- Working with key suppliers of products and services to
determine that their operations and products are year 2000
capable, or to monitor their progress toward year 2000
capability
- Discussing contingency planning to address potential problem
areas with internal systems and with suppliers and other third
parties
- Implementing a program to assess the capability of our
products to handle the year 2000
It is expected that assessment, remediation and contingency planning
activities will be ongoing throughout 1999 with the goal of appropriately
resolving all material internal systems and third party issues. Further, we have
contingency plans, but if these planning activities fail, our business could be
materially harmed. It is uncertain to what extent we will be affected by the
year 2000 problem, and if third parties or suppliers have year 2000 problems,
our business may be materially harmed.
To assist customers in evaluating their year 2000 issues, we have
assessed the capability of our current and discontinued products. Products have
been assigned to one of the four following categories: "Year 2000 Compliant,"
"Year 2000 Compliant with minor issues" "Year 2000 non-compliant," "No
evaluation done--will not test." "Year 2000 Compliant" means that when used
properly and in conformity with the product information provided by us, and when
used with "Year 2000 Compliant" computer systems, the product will accurately
store, display, process, provide, and/or receive data from, into, and between
the twentieth and twenty-first centuries, including leap year calculations,
provided that all other technology used in combination with our product properly
exchanges date data with our product. Based on our
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tests, we believe that all current products shipping, which run under Microsoft
Windows NT or Windows 95, will be "Year 2000 compliant." Final results of our
complete product testing will be published by fall 1999.
The cost which will be incurred by us regarding the implementation of
year 2000 compliant internal information systems, testing of current or older
products for year 2000 compliance, and answering and responding to customer
requests related to year 2000 issues, including both incremental spending and
redeployed resources, is currently not expected to exceed $500,000. The total
cost estimate does not include potential costs related to any customer or other
claims or the cost of internal software and hardware replaced in the normal
course of business. In some instances, the installation schedule of new software
and hardware in the normal course of business is being accelerated to also
afford a solution to year 2000 capability issues. The total cost estimate is
based on the current assessment of the projects and is subject to change. If
actual cost of year 2000 compliance materially exceeds our current estimate, our
business could be harmed.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the shares
by the selling shareholder.
SELLING SHAREHOLDER
Hewlett-Packard Company, the selling shareholder, acquired a total of
675,170 shares in connection with our acquisition of certain of the assets of
the selling shareholder pursuant to an Asset Purchase Agreement dated June 30,
1999. The 773,172 shares held by the selling shareholder represent approximately
3.3% of the outstanding common stock of Pinnacle of the as of August 2, 1999.
All 386,586 of the shares offered hereby are being sold by the selling
shareholder. Upon completion of this offering, the selling shareholder will own
approximately 386,586 of the outstanding shares of Common Stock of Pinnacle,
representing 1.6% of the outstanding common stock of Pinnacle as of August 2,
1999.
Pursuant to the terms of the Stock Restriction and Registration Rights
Agreement dated as of August 2, 1999 (the "Registration Rights Agreement"),
between Pinnacle and the selling shareholder, Pinnacle undertook to use
commercially reasonable efforts to register certain of the shares held by the
selling shareholder within five days of the date of issuance of shares in
connection with the closing of the acquisition. The Registration Rights
Agreement also includes certain indemnification arrangements with the selling
shareholder.
PLAN OF DISTRIBUTION
The shares may be sold from time to time by the selling shareholder or
by pledgees, donees, transferees or other successors in interest. Such sales may
be made in any one or more transactions (which may involve block transactions)
on the Nasdaq National Market, or any exchange on which the common stock of
Pinnacle may then be listed, in the over-the-counter market or otherwise in
negotiated transactions or a combination of such methods of sale, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. The selling shareholder may effect such
transactions by selling shares to or through broker-dealers, and such
broker-dealers may sell the shares as agent or may purchase such shares as
principal and resell them for their own account pursuant to this prospectus.
Such broker-dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the selling shareholder and/or
purchasers the shares, for whom they may act as agent (which compensation may be
in excess of customary commissions). In connection with such sales, the selling
shareholder and any participating brokers or dealers may be deemed to be
"underwriters" as defined in the Securities Act.
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The Registration Rights Agreement provides that we will indemnify the
selling shareholder against certain liabilities, including liabilities under the
Securities Act.
We may suspend the use of this prospectus for a discrete period of
time, not exceeding 30 days, if, in the good faith determination of our board of
directors, a development has occurred or condition exists as a result of which
the Registration Statement or this prospectus contains or incorporates by
reference a material misstatement or omission, the correction of which would
require the premature disclosure of confidential information that would, in the
good faith determination of the board of directors, materially and adversely
affect the Company. We may not exercise this delay right more than once in any
twelve-month period. We are obligated in the event of such suspension to use our
reasonable efforts to ensure that the use of the prospectus may be resumed as
soon as practicable. This offering will terminate on the earliest of (a) two
years from the date of issuance of the shares or (b) the date on which all
shares offered hereby have been sold by the selling shareholder or (c) such time
as all of the shares can be sold by the selling shareholder within a three-month
period without compliance with the registration requirements of the Securities
Act pursuant to Rule 144 thereunder.
Any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under that Rule rather
than pursuant to this Prospectus.
There can be no assurance that the selling shareholder will sell any or
all of the shares of Pinnacle common stock offered by it hereunder.
EXPERTS
The consolidated financial statements and schedule of the Company as of
June 30, 1998 and 1997 and for each of the years in the three-year period ended
June 30, 1998 have been incorporated by reference herein, in reliance upon the
reports of KPMG LLP, independent auditors, incorporated by reference and upon
the authority of said firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby has been
passed upon for Pinnacle by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California.
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