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 30, 2000
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 Monday, October 30, 2000, 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, 2001.
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 13, 2000 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
October 4, 2000
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>
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
Monday, October 30, 2000, 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, 2000, including all financial
statements, were first mailed on or about October 4, 2000 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 13, 2000
(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, 50,798,641 shares of the Company's Common Stock
were issued and outstanding and held of record by 412 shareholders. No shares of
the Company's Preferred Stock were outstanding.
The following table sets forth certain information regarding the
beneficial ownership of Common Stock of the Company as of September 13, 2000 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.
<TABLE>
<CAPTION>
Five Percent Shareholders, Directors Common Stock Percentage
and Certain Executive Officers Beneficially Owned (1) Owned (2)
---------------------------------------------------------------------------- ------------------------- ----------
<S> <C> <C> <C>
Entities affiliated with FMR Corp. (3)...................................... 6,749,915 13.3%
82 Devonshire Street
Boston, Massachusetts 02109
Mark L. Sanders............................................................. 704,757 1.4%
Ajay Chopra................................................................. 400,432 *
L. Gregory Ballard.......................................................... 16,000 *
George Blinn................................................................ 226,210 *
L. William Krause........................................................... 30,000 *
John Lewis.................................................................. 55,000 *
William Loesch.............................................................. 111,770 *
Glenn E. Penisten........................................................... 130,356 *
Charles J. Vaughan.......................................................... 172,140 *
<PAGE>
Robert Wilson............................................................... 109,508 *
All directors and executive officers as a group (15 persons)................ 2,440,587 4.6%
<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 13, 2000: Mark L. Sanders
612,421; Ajay Chopra 207,374; L. Gregory Ballard 16,000; George Blinn
219,708; L. William Krause 30,000; John Lewis 40,000; William Loesch
105,832; Glenn E. Penisten 40,000; Charles J. Vaughan 40,000; Robert Wilson
104,395; and 1,837,277 for all executive officers and directors as a group.
(2) Applicable percentage of ownership is based on 50,798,641 shares of Common
Stock outstanding as of September 13, 2000 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 13, 2000 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 June 9, 2000 filed
with the Securities and Exchange Commission by FMR Corp., relating to
accounts managed on a discretionary basis by FMR Corp., 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.
</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
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.
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<PAGE>
Deadline for Receipt of Shareholder Proposals for 2001 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 2001 Annual Meeting of Shareholders must be received by the Company no
later than June 6, 2001 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 2001 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 20, 2001. 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 2001
Annual Meeting.
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<PAGE>
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.
<TABLE>
The names of the nominees and certain information about them are set
forth below:
<CAPTION>
Director
Name Age Position Since
---- --- -------- -----
<S> <C> <C> <C>
Mark L. Sanders.............................. 57 President, Chief Executive Officer and Director 1990
Ajay Chopra.................................. 43 Chairman of the Board and Vice President, 1986
General Manager, Desktop Products
L. Gregory Ballard(1)........................ 46 Director 1998
L. William Krause (1)(2)..................... 58 Director 1999
John C. Lewis(2)............................. 64 Director 1995
Glenn E. Penisten(1)......................... 68 Director 1986
Charles J. Vaughan(2)........................ 62 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.
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<PAGE>
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 served as Chief Executive Officer and a director of
MyFamily.com, a leading website for connecting families on the internet, since
January 2000. Mr. Ballard was the President, Chief Executive Officer and a
director of 3dfx Interactive Inc. ("3dfx"), a developer of 3D mediaprocessors,
from December 1996 until November 1999. 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 global data networking company, 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 the Hewlett-Packard Company. Mr. Krause currently serves as a
director of Exodus Communications, Inc., Ramp Networks, Inc., and Sybase, Inc.
Mr. Lewis has served as a director of the Company since December 1995.
Mr. Lewis was Chairman of the Board of Amdahl Corporation, a developer of high
performance computer systems, from 1987 until March 2000. He 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
Cypress Semiconductor Corporation and Vitesse Semiconductor Corporation.
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,
-5-
<PAGE>
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, including Vice
President-Auditing and Chief Financial Officer of the International and Consumer
Products Sectors. GE is a diversified services, technology, and manufacturing
company.
Board Meetings and Committees
The Board of Directors of the Company held a total of four meetings
during fiscal 2000. 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 Charles J. Vaughan,
Chairperson, L. William Krause and John C. Lewis during fiscal 2000, is
responsible for overseeing actions taken by the Company's independent auditors
and reviewing the Company's internal financial controls. The Audit Committee met
four times during fiscal 2000.
The Compensation Committee, which consisted of Glenn Penisten,
Chairperson, L. Gregory Ballard and L. William Krause during fiscal 2000, met
once during fiscal 2000. 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.
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<PAGE>
PROPOSAL TWO
AMENDMENTS 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
2000. As of September 13, 2000, options to purchase an aggregate of 3,916,233
shares of the Company's Common Stock were outstanding under the Plan with a
weighted average exercise price of $8.16 per share, and 121,348 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. The Company 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
Amendments 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.
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<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 800,000 shares (1,200,000 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
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<PAGE>
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.
Outstanding options granted under the Plan may not be repriced. The closing sale
price of the Company's Common Stock on September 13, 2000 was $13.50.
(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
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
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<PAGE>
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.
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.
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<PAGE>
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 2000. Information regarding options
granted to non-employee Directors during fiscal 2000 is set forth under the
heading "Executive Compensation and Other Matters--Compensation of Directors."
During fiscal 2000, all current executive officers as a group and all other
employees as a group were granted options to purchase 1,150,000 shares and
5,019,209 shares, respectively, pursuant to the Plan and the Company's 1996
Supplemental Stock Option Plan.
-11-
<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, 2001, 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, 2001.
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<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
Summary Compensation 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, 2000.
<TABLE>
<CAPTION>
Long-term
Compensation
Awards
----------
Number of
Annual Compensation Securities
--------------------------- Underlying All
Name and Principal Position Fiscal Year Salary ($) Bonus Options Other
------------------------------------------ ----------- ---------- -------- ---------- ------
<S> <C> <C> <C> <C> <C>
Mark L. Sanders........................... 2000 $355,000 $66,000 200,000 $--
President, Chief Executive Officer and 1999 317,500 69,450 70,000 --
Director 1998 244,000 41,250 80,000 --
Ajay Chopra .............................. 2000 $200,500 $39,000 110,000
Chairman of the Board of Directors and 1999 187,500 41,724 24,000 $--
Vice President, General Manager, 1998 170,004 24,750 40,000 --
Desktop Products --
William Loesch............................ 2000 $192,500 $37,800 40,000 $--
Vice President, General Manager, 1999 184,500 41,724 20,000 --
Consumer Products 1998 170,000 24,750 40,000 --
Robert Wilson ............................ 2000 $194,670 $37,800 80,000 $--
Vice President, General Manager, 1999 184,500 41,724 20,000 --
Broadcast Products 1998 170,000 24,750 30,000 --
Georg Blinn (1)........................... 2000 $183,254 $51,870 110,000 $--
Vice President, General Manager, 1999 190,000 23,000 24,000 5,500
Pinnacle Systems GmbH 1998 139,000 -- 110,000 --
<FN>
---------------
(1) 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>
Option Grants in Last Fiscal Year
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, 2000 to the Named Executive Officers.
-13-
<PAGE>
<TABLE>
<CAPTION>
Percent of Potential Realizable
Total Value at Assumed Annual
Number of Options Rates of Stock Price
Securities Granted to Appreciation for Option
Underlying Employees Exercise Term (1)
Options in Fiscal Price Per Expiration -------------------------
Name Granted(2) Year Share(3)(4) Date 5% 10%
------------------------------------ ---------- ---------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mark L. Sanders..................... 200,000 3.22% $13.00 08/04/09 $1,635,126 $4,143,730
Ajay Chopra......................... 110,000 1.77% $13.00 08/04/09 899,319 2,279,052
William Loesch...................... 40,000 0.64% $13.00 08/04/09 327,025 828,746
Robert Wilson....................... 80,000 1.29% $13.00 08/04/09 654,050 1,657,492
Georg Blinn......................... 110,000 1.77% $13.00 08/04/09 899,319 2,279,052
<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 2000 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
The following table sets forth certain information regarding the
exercise of stock options during fiscal 2000 and the value of options held as of
June 30, 2000 by the Named Executive Officers.
<TABLE>
<CAPTION> Number of Securities Value of Unexercised
Underlying Unexercised In-the-money Options at
Shares Options at June 30, 2000 June 30, 2000(2)
Acquired on Value -------------------------- ---------------------------
Name Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---------------------------------- ----------- ----------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark L. Sanders................... 112,918 $2,028,239 513,255 441,251 $10,439,637 $6,162,251
Ajay Chopra....................... 40,000 979,706 153,999 180,001 2,753,045 2,226,144
William Loesch.................... 100,000 2,266,092 74,999 185,001 1,307,578 3,083,566
Robert Wilson..................... 73,376 1,432,140 60,437 152,187 1,040,331 2,009,785
Georg Blinn....................... 0 0 197,166 180,834 3,254,879 2,195,824
<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, 2000 of $22.484 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
DEM$325,000, is entitled to use of a company car and certain nominal
perquisites.
-14-
<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 2000, an option to purchase 5,000
shares of the Company's Common Stock at an exercise price of $14.13 per share
was granted to each of L. Gregory Ballard, L. William Krause, John C. Lewis,
Glenn E. Penisten and Charles J. Vaughan.
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, 2000.
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 2000 base salaries for the
Chief Executive Officer and other executive officers at the beginning of the
calendar year.
In January 2000, 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 fiscal 2000. 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
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<PAGE>
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.
During fiscal 2000, 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 2000 was $355,000. In addition, Mr.
Sanders was granted an option to purchase 200,000 shares of Common Stock at an
exercise price of $13.00, 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
$66,000. 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 2000, Mr. Sanders
received an option to purchase 200,000 shares of Common Stock and all executive
officers as a group received options to purchase 1,150,000 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
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<PAGE>
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
L. Gregory Ballard
L. William Krause
Glenn E. Penisten
-17-
<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 June 30, 1995 and ending on
June 30, 2000. 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 June 30, 2000 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]
-18-
<PAGE>
[The following descriptive data is supplied
in accordance with Rule 304(d) of Regulation S-T]
The information contained on the preceding 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
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<PAGE>
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 2000 all executive officers and directors of the Company complied
with all applicable filing requirements.
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: October 4, 2000
-20-
<PAGE>
APPENDIX A
PINNACLE SYSTEMS, INC.
1996 STOCK OPTION PLAN
(As amended July 2000)
1. Purposes of the Plan. The purposes of this Plan are:
o to attract and retain the best available personnel for positions of
substantial responsibility,
o to provide additional incentive to Employees, Directors and
Consultants, and
o 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.
(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.
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<PAGE>
(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 7,340,000 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.
4. Administration of the Plan.
(a) Procedure.
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<PAGE>
(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) Reserved;
(vii) Reserved;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
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<PAGE>
(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.
(d) Option Exchange Program. The Administrator shall have no
authority to institute an Option Exchange Program.
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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<PAGE>
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 800,000 Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 400,000 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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<PAGE>
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 remain exercisable for one (1) year
following Optionee's termination. If, on the date of termination,
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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 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.
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(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.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
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(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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<PAGE>
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].
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
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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.
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
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(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 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
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<PAGE>
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 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
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<PAGE>
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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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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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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APPENDIX B
--------------------------------------------------------------------------------
PROXY PINNACLE SYSTEMS, INC. PROXY
PROXY FOR 2000 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 October 4, 2000, 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 2000 Annual Meeting
of Shareholders of PINNACLE SYSTEMS, INC. to be held on October 30, 2000 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)
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<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
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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, 2001:
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
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Signature(s) ____________________________________ Dated _________________ , 2000
(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.)
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