<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 29, 1997
REGISTRATION NO. 333-____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________________________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________________________________
DISCREET LOGIC INC.
(Exact Name of Registrant as specified in its charter)
QUEBEC 98-0150790
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
10 DUKE STREET
MONTREAL, QUEBEC
CANADA H3C 2L7
(514) 393-1616
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
_____________________
CT CORPORATION SYSTEM
2 OLIVER STREET
BOSTON, MASSACHUSETTS 02109
(617) 482-1868
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
_____________________
Copies to:
FRANCOIS PLAMONDON MARK J. MACENKA, ESQ.
DISCREET LOGIC INC. TESTA, HURWITZ & THIBEAULT, LLP
10 DUKE STREET HIGH STREET TOWER
MONTREAL, QUEBEC 125 HIGH STREET
CANADA H3C 2L7 BOSTON, MASSACHUSETTS 02110
(514) 393-1616 (617) 248-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after this registration statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being offered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(b) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
_____________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
Title of Shares Proposed Maximum Proposed Maximum Amount of Registration
to be Registered Amount to be Registered Offering Price Per Share Aggregate Offering Price Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares, without
par value per share.... 555,000 shares $23.81(1) $13,214,550.00 $4,004.40
====================================================================================================================================
(1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(c) and based upon the average high
and low price per share as reported on the Nasdaq National Market on August 27, 1997.
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PROSPECTUS
SUBJECT TO COMPLETION, DATED AUGUST 29, 1997
DISCREET LOGIC INC.
- --------------------------------------------------------------------------------
555,000 Shares
Common Shares
- --------------------------------------------------------------------------------
This Prospectus relates to the sale of up to an aggregate of 555,000 shares
(the "Shares") of Common Shares, without par value per share (the "Common
Shares"), of Discreet Logic Inc., a Quebec corporation ("Discreet" or the
"Company"), by certain shareholders of the Company (collectively, the "Selling
Stockholders"). The Selling Stockholders may sell the Shares at market prices
prevailing at the time of the sale or at prices otherwise negotiated. See "Plan
of Distribution." The Selling Stockholders and certain persons who purchase
shares from them including broker-dealers acting as principals who may resell
the Shares, may be deemed "underwriters," as that term is defined in the
Securities Act of 1933, as amended (the "Securities Act"). See "Plan of
Distribution."
The Company will not receive any of the proceeds from the sale of the
Shares. The Company is responsible for the expenses incurred in connection with
the registration of the Shares. The Selling Stockholders will pay or assume
brokerage commissions or other similar charges incurred in the sale of the
Shares. The Company has agreed to indemnify the Selling Stockholders against
certain liabilities, including liabilities under the Securities Act.
The Company's Common Shares are listed on the Nasdaq National Market under
the symbol "DSLGF." On August 27, 1997, the last reported sale price for the
Common Shares on the Nasdaq National Market was $23.94.
_____________________
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 8.
_____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
_____________________
The date of this Prospectus is , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information are available for inspection and copying at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following regional offices of the
Commission: Seven World Trade Center, 13th Floor, New York, New York 10048,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511 and 73 Tremont Street, Suite 600, Boston, Massachusetts 02108-3912. Copies
of such material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a World Wide Web site (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding the Company. The Common Shares of the Company are quoted on the Nasdaq
National Market and such material may also be inspected and copied at the
offices of the National Association of Security Dealers, Inc., 1735 K Street,
N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (including all amendments thereto, the "Registration Statement") under the
Securities Act, with respect to the Common Shares offered hereby. This
Prospectus does not contain all information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information regarding the Company and
the Common Shares offered hereby, reference is hereby made to the Registration
Statement and to the exhibits and schedules filed therewith. Statements
contained in this Prospectus regarding the contents of any agreement or other
document filed as an exhibit to the Registration Statement are not necessarily
complete, and in each instance reference is made to the copy of such document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. The Registration Statement,
including the exhibits and schedules thereto, may be inspected at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549 and copies of all or any part thereof may be
obtained from such office upon payment of the prescribed fees.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act are incorporated in this Prospectus by reference as of their
respective dates (Commission File No. 0-26100):
1. The Company's Annual Report on Form 10-K for the fiscal year ended July
31, 1996;
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
October 31, 1996;
3. The Company's Quarterly Report on Form 10-Q for the two
month period ended December 31, 1997;
4. The Company's Current Report on Form 8-K dated January 9, 1997;
5. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997;
6. The Company's Current Reports on Form 8-K dated June 12, 1997 and July
30, 1997; and
7. The description of the Company's Common Shares contained in the
Company's Registration Statement on Form 8-A filed pursuant to Section
12(g) of the Exchange Act on May 18, 1995.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering
made hereby, shall be deemed to be incorporated by reference in this Prospectus
from the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein or in any
prospectus supplement shall be deemed to be modified
<PAGE>
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which is also
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a Prospectus
is delivered, on the written or oral request of such person, a copy of any or
all of the documents described above (other than exhibits to such documents).
Requests for such copies should be directed to Giovanni Tagliamonti, Corporate
Controller, Discreet Logic Inc., 10 Duke Street, Montreal, Quebec, Canada H3C
2L7, telephone (514) 393-1616. Unless the context otherwise requires, references
in the Prospectus to the "Company," "Discreet" or "Discreet Logic," refer to
Discreet Logic Inc. and its subsidiaries.
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors."
TRADEMARKS
DISCREET LOGIC, DENIM, D-VISION, FIRE, FLAME, FLINT, FROST, ILLUMINAIRE,
INFERNO, OnLINE, SPARKS, STONE + WIRE, VAPOUR and WIRE are trademarks of the
Company. This Prospectus also includes trademarks and trade names of other
companies.
THE COMPANY
Discreet Logic Inc. develops, assembles, markets and supports non-linear,
digital systems and software for creating, editing and compositing imagery and
special effects for film and video. The Company's systems and software are
utilized by creative professionals for a variety of applications, including
feature films, television programs, commercials, music videos, interactive game
production and live broadcasting. Discreet Logic's systems have played key roles
in the creation of special visual effects for recent films such as Forrest Gump,
Independence Day, The Fifth Element, Batman & Robin, Contact and Air Force One;
television programs and special events such as ABC's "World News Tonight with
Peter Jennings" and the 1996 U.S. Presidential elections on ABC and CBS; music
videos by artists including U2, REM, Rolling Stones and The Beatles; and
commercials for clients such as Nike, Pepsi, AT&T and McDonald's.
The Company believes that creative professionals in the film and video
industries require systems and software that can integrate and simplify their
work, enabling them to devote more time to creative activities and less time to
technical tasks. Discreet Logic has traditionally offered turnkey systems
comprised of the Company's proprietary software utilizing workstations
manufactured by Silicon Graphics, Inc. (''SGI''), scaleable disk arrays and
other peripherals. Through two recent acquisitions, the Company now offers
editing software which runs on the Microsoft Windows NT operating system and
special effects software which runs on the Microsoft Windows NT and Apple
Macintosh operating systems. The Company's systems and software provide digital
solutions for creative professionals to input, create, manipulate, store and
output images in an integrated production environment. These systems can be
linked to enable users to collaborate and manage data more efficiently. In
addition, by utilizing general purpose workstation technology, the Company's
systems and software integrate more easily with third party software systems and
devices.
Discreet Logic's systems and software are focused towards three markets:
special effects, editing and broadcast production. The Company's systems include
its FLAME, FLINT, INFERNO, FIRE, VAPOUR and FROST systems. The Company's FLAME
system is used to create, edit and composite special visual effects in an on-
line, real-time environment, providing instant feedback to the creative
professional. The Company's FLINT system contains virtually the same special
visual effects features as FLAME, but runs in a non-real-time environment. The
Company's INFERNO system is an on-line, real-time digital system providing all
of the features of FLAME with increased film resolution and color control. The
Company's FLAME, FLINT and INFERNO systems run on SGI platforms, are resolution
independent and allow users to work on uncompressed images from a variety of
media
-3-
<PAGE>
sources in the full range of resolutions necessary for film and video (including
HDTV). The Company's FIRE system runs on an SGI platform and is an uncompressed,
on-line, non-linear digital video editing system with limited special effects
capabilities. Commercial shipments of FIRE systems, including software and
hardware, began in October 1996. In the broadcast production market, the Company
offers VAPOUR, a computer-based, integrated graphics system, which is used to
create computer generated locales, also known as virtual sets, for news, sports
and entertainment programming, and FROST, a set of modeling, animation and
rendering tools for the creation and manipulation of 3D environments for
broadcast companies. The Company sells its systems and software worldwide
through a direct sales force as well as through distributors. The Company's
software-only products include its recently acquired ILLUMINAIRE product line
and OnLINE product. The Company's ILLUMINAIRE product line consists of Microsoft
Windows NT and Apple Macintosh based paint and compositing software for
producing effects, interactive content and graphics design. The Company's OnLINE
product is a non-linear video and digital media editing software product that
runs on the Microsoft Windows NT operating system.
Discreet Logic's strategy is to maintain and enhance its position as a
leading provider of digital systems by continuing to develop, integrate and
support complete systems that include applications, networking and
communications software, workstations, disk arrays and other peripherals. In
addition, Discreet is pursuing a strategy to develop a business model of selling
software across Apple Macintosh, Microsoft Windows NT and UNIX operating
systems, in addition to its existing fully integrated real-time turnkey systems
solutions. The Company seeks to further expand the range of creative
professionals served by the Company and, by leveraging its technology base,
customer relationships and existing reputation, extend its product line to
include other aspects of the content creation process. There can be no assurance
that the Company will be successful in pursuing its systems and software market
strategy, expanding its user base or extending its product line. See "Risk
Factors--Risks Associated with Product Development Introductions and
Announcements," "--Single Market for Company's Systems; Risks Associated with
Expansion into New Markets," "--Competition," "--Potential Risks Associated with
Acquisitions," "--Potential Distribution Channel Conflict," "--Limited
Protection of Proprietary Technology; Risk of Third Party Infringement Claims,"
and "--Reliance on Sole Source Providers."
The Company's principal executive offices are located at 10 Duke Street,
Montreal, Quebec, Canada H3C 2L7 and its telephone number at such address is
(514) 393-1616.
RECENT DEVELOPMENTS
The following Recent Developments section contains forward-looking
statements which involve risks and uncertainties. The Company's actual results
may differ materially from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed in "Risk Factors" and elsewhere in this Prospectus.
LITIGATION SETTLEMENT AGREEMENT-IN-PRINCIPLE
On May 29, 1996, June 13, 1996 and April 29, 1997 certain of the Company's
shareholders filed class action lawsuits alleging violations of federal
securities laws and other claims against the Company and certain of its officers
and directors. The three lawsuits were filed in the Superior Court of the State
of California, the United States District Court, District of Massachusetts and
the United States District Court, Northern District of California, respectively.
On August 12, 1997 the Company announced that it had reached an agreement-in-
principle to settle all three of the shareholder class action litigations. The
proposed $10.8 million settlement would require Discreet Logic to contribute
approximately $7.4 million from its own funds, with the remainder provided by
insurance. The settlement is subject to final determination (based on United
States/Canadian currency exchange rates) as to the contribution to be made by
Discreet Logic's insurance carrier, to the signing of a definitive agreement, to
adequate shareholder participation, and to final court approval of the proposed
settlement. There can be no assurance that the settlement will be consummated
and that the Company will not have to continue its defense of the lawsuits.
-4-
<PAGE>
RECENT FINANCIAL RESULTS
The following tables and information sets forth certain unaudited
financial data of the Company for the periods indicated.
STATEMENTS OF OPERATIONS DATA
(All amounts in thousands of U.S. dollars, except for share dates)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended Twelve Months Ended Eleven Months Ended
July 31, 1996 June 30, 1997 July 31, 1996 June 30, 1997
<S> <C> <C> <C> <C>
Total Revenues $ 19,052 $ 34,784 $ 83,997 $101,924
Net Loss $(24,600) $(10,947) $(44,141) $ (6,756)
Net Loss per common share $ (0.89) $ (0.39) $ (1.64) $ (0.24)
</TABLE>
Total revenues for the quarter ended June 30, 1997 were $34.8 million as
compared with revenues of $19.1 million for the quarter ended July 31, 1996. Net
income for the quarter ended June 30, 1997 was $5.4 million, or $0.18 per share,
on a fully diluted basis, excluding a $9.8 million write-off of purchased in
process research and development resulting from the acquisition of Denim
Software L.L.C. ("Denim") and excluding a $6.5 million charge related to the
tentative settlement of three class action securities lawsuits in which the
Company is named as a defendant. Net loss for the quarter ended June 30, 1997
including these charges was $10.9 million, or $0.39 per share. For the quarter
ended July 31, 1996, the Company reported a net loss of $11.2 million, or $0.40
per share, excluding a $15.0 million restructuring charge and related tax
effects.
Total revenues for the eleven month period ended June 30, 1997 were $101.9
million. For the twelve month period ended July 31, 1996, total revenues were
$84.0 million. Net income for the eleven month fiscal year ended June 30, 1997
was $9.5 million, or $0.32 per share, excluding the $9.8 million write-off of
purchased in process research and development resulting from the acquisition of
Denim and excluding the $6.5 million charge related to the tentative settlement
of three class action securities lawsuits in which the Company is named a
defendant. Net loss for the fiscal year ended June 30, 1997 including these
charges was $6.8 million, or $0.24 per share. For the twelve month period ended
July 31, 1996, the Company reported a net loss of $22.2 million, or $0.83 per
share, excluding an $8.5 million write-off of purchased research and development
resulting from an acquisition, and excluding a $15.0 million restructuring
charge and related tax effects.
-5-
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands of U.S. Dollars, except for share data)
<TABLE>
<CAPTION>
(audited)
ASSETS July 31, June 30,
1996 1997
--------- ---------
Current Assets:
<S> <C> <C>
Cash and cash equivalents................................... $ 21,658 $ 31,668
Accounts receivable (less reserves for doubtful accounts)... 16,074 26,893
Inventory
Resale................................................... 11,556 10,867
Demonstration............................................ 4,274 3,054
Income taxes receivable..................................... 3,191 448
Other current assets........................................ 3,640 3,889
-------- --------
60,393 76,819
Property and equipment less accumulated depreciation and
amortization.................................................. 10,037 7,728
Deferred income taxes............................................ 4,722 3,489
Other assets..................................................... 1,140 2,660
Assets held for resale........................................... 3,856 5,248
-------- --------
$ 80,148 $ 95,944
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses....................... $ 28,950 $ 44,086
Deferred revenue............................................ 4,770 8,103
Income taxes payable........................................ -- 4,734
Customer deposits........................................... 2,618 1,359
Due to related parties...................................... 25 --
-------- --------
36,363 58,282
Deferred income taxes............................................ 1,442 713
-------- --------
Shareholders' equity:
Preferred shares no par value
Authorized-unlimited number of shares
Issued and outstanding-none
Common shares no par value
Issued and outstanding 27,699, 426 shares at
July 31, 1996 and 28,117,415 at June 30, 1997.......... 78,923 80,402
Accumulated deficit......................................... (35,883) (42,639)
Cumulative translation adjustment........................... (697) (814)
Total shareholders' equity............................... 42,343 36,949
-------- --------
$ 80,148 $ 95,944
======== ========
</TABLE>
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<PAGE>
RECENT ACQUISITIONS
Denim Software, L.L.C.. Acquisition. On June 12, 1997, the Company, through
its wholly-owned subsidiary 3380491 Canada Inc. ("Acquisition Sub"), acquired
substantially all of the assets and assumed certain liabilities of Denim
Software L.L.C., a Delaware limited liability company ("Denim"), pursuant to the
terms of an Asset Purchase Agreement dated as of June 12, 1997 among Acquisition
Sub, Denim, Sam Khulusi, Frank Khulusi, Westco Denim Investments Group, Ltd., a
California limited partnership, and Frank Khulusi Family Limited Partnership, a
California limited partnership. The purchased assets consisted primarily of
Denim software products, including ILLUMINAIRE Paint, ILLUMINAIRE Composition
and ILLUMINAIRE Studio, and related know-how and goodwill. The aggregate
purchase price for the assets was comprised of (i) approximately $9,126,000 in
cash, (ii) the assumption of certain enumerated liabilities in an amount equal
to no more than approximately $2,209,000 in the aggregate, and (iii) the
assumption of certain on-going obligations under certain existing contracts of
Denim. The approximately $9,126,000 cash consideration and approximately
$655,000 with respect to certain assumed liabilities were paid at closing. The
cash used by the Company to fund the acquisition was derived primarily from cash
flow from operations. The transaction was accounted for as a purchase. The
Company incurred a one-time charge of $9,800,000, or $0.35 per share, for in-
process research and development, purchased and expensed in its fourth fiscal
quarter ended June 30, 1997. The terms of the transaction and the consideration
received by Denim were the result of arms-length negotiations between the
representatives of Discreet and Denim. Denim develops Apple Macintosh and
Microsoft Windows NT - based paint and compositing software for producing
effects, interactive content and graphics design.
D-Vision Systems, Inc. Acquisition. On July 15, 1997, the Company acquired
all of the outstanding shares of capital stock of D-Vision Systems, Inc. ("D-
Vision"), an Illinois corporation, pursuant to a Stock Purchase Agreement dated
as of July 10, 1997 among the Company, D-Vision, the former stockholders of D-
Vision (the "Selling Stockholders") and certain other individuals (the "D-Vision
Acquisition"). As a result of the D-Vision Acquisition, the Company acquired the
D-Vision OnLINE and PRO software products for non-linear video and digital media
editing solutions including related know-how and goodwill. The purchase price
was paid in a combination of 555,000 newly issued Discreet Common Shares and
approximately $10,750,000 in cash. In addition, approximately $4,000,000 of the
cash consideration is being held in escrow until September 30, 1999, subject to
(i) earlier release from escrow of up to $1,900,000 on September 30, 1998 and
(ii) the resolution of any indemnification claims made by the Company pursuant
to the Stock Purchase Agreement. The D-Vision Acquisition was accounted for as a
purchase. A substantial portion of the purchase price, net liabilities of D-
Vision and transaction costs was allocated to purchased in-process research and
development for which the Company expects to incur a one-time charge against
earnings in the range of $20,000,000 to $21,000,000, or $0.70 to $0.73 per
share, in the quarter ending September 30, 1997. The terms of the transaction
and the consideration received by the D-Vision stockholders were the result of
arms-length negotiations between the representatives of Discreet and D-Vision.
D-Vision develops Microsoft Windows NT - based non-linear editing solutions.
Each Selling Stockholder represented to the Company, in connection with the
D-Vision Acquisition, that such Selling Stockholder was acquiring the Shares
from the Company without any present intention of effecting a distribution of
those Shares. In recognition of the fact, however, that investors may want to be
able to sell their shares when they consider appropriate, pursuant to a
Registration Rights Agreement between the Company and the Selling Stockholders,
the Company agreed to file with the Commission a registration statement on Form
S-3 (of which this Prospectus is a part) to permit the public sale of the Shares
by the Selling Stockholders from time to time and to use its best efforts to
keep the registration statement effective until the earlier of the sale of the
Shares pursuant to the registration statement or ninety (90) days after the
effective date of the registration statement (subject to extension for any
period of time that sales of Shares pursuant to the registration statement may
be suspended by the Company). The Company will prepare and file such amendments
and supplements to the registration statement as may be necessary to keep it
effective until the earlier of the sale of all Shares pursuant to the
registration statement or until ninety (90) days after the effective date of the
registration statement (subject to extension for any period of time that sales
of Shares pursuant to the registration statement may be suspended by the
Company).
-7-
<PAGE>
The acquisition of the ILLUMINAIRE products and D-Vision is part of
Discreet's new multi-platform software initiative which includes the formation
of two new product development groups: the Discreet Logic Systems Group and the
Discreet Logic Software Group. The new product organization is part of
Discreet's strategy to develop a comprehensive business model of selling
software across Apple Macintosh, Microsoft Windows NT and UNIX operating
systems, in addition to its existing fully integrated real-time turnkey systems
solutions. See "Risk Factors--Potential Risks Associated with Acquisitions."
RISK FACTORS
An investment in the shares of Common Stock offered hereby
involves a high degree of risk. This Prospectus contains certain forward-looking
statements which involve risks and uncertainties. The Company's actual results
may differ materially from the results discussed in these forward-looking
statements as a result of certain of the risk factors set forth below and
elsewhere in this Prospectus. In addition to the other information contained in
this Prospectus, the following factors should be carefully considered by
prospective investors when evaluating an investment in the Company's securities.
Risks Associated with Product Development Introductions and Announcements.
--------------------------------------------------------------------------
The markets for the Company's systems and software are characterized
byevolving industry standards, changing technologies and frequent new product
introductions. The Company's future success will depend in part upon its ability
to enhance its existing systems and software and to develop and introduce new
products and features which meet changing customer requirements and emerging
industry standards on a timely basis. In addition, in connection with the
Company's recent acquisitions, the Company must integrate the D-Vision OnLINE
product and the Denim ILLUMINAIRE products into its product line and operations.
There can be no assurance that the Company will be able to successfully
integrate these newly acquired products into its current product line in a
timely manner, if at all. The Company has from time to time experienced delays
in introducing new products and product enhancements and there can be no
assurance that the Company will not experience difficulties that could delay or
prevent the successful development, introduction and marketing of new products
or product enhancements. In addition, there can be no assurance that such new
products or product enhancements will meet the requirements of the marketplace
and achieve market acceptance. Any such failure could have a material adverse
effect on the Company's business and results of operations. Furthermore,
products such as those offered by the Company may contain undetected or
unresolved software errors when they are first introduced or as new or enhanced
versions are released. The Company has in the past discovered software errors in
certain of its new products and product enhancements. There can be no assurance
that, despite significant testing by the Company, software errors will not be
found in new products and product enhancements after commencement of commercial
shipments, resulting in delays in or loss of market acceptance. In addition,
from time to time the Company or others may announce products, features or
technologies which have the potential to shorten the life cycle of or replace
the Company's then existing products. Such announcements could cause customers
to defer the decision to buy or determine not to buy the Company's products or
cause the Company's distributors to seek to return products to the Company, any
of which would have a material adverse effect on the Company's business and
results of operations. In addition, product announcements by SGI and others in
the past have caused customers to defer the decision to buy or determine not to
buy the Company's products. See "Dependence on Single Workstation Vendor." In
addition, there can be no assurance that products or technologies developed by
others will not render the Company's products or technologies non-competitive or
obsolete
Single Market for the Company's Systems; Risks Associated with
--------------------------------------------------------------
Expansion into New Markets. To date, the Company's products have been
--------------------------
purchased primarily by creative professionals for use in production and post-
production in the film and video industries. In order for the Company to achieve
sustained growth, the market for the Company's systems and software must
continue to develop and the Company must expand this market to include
additional applications within the film and video industries and develop new
products for use in related markets. The Company recently announced its multi-
platform software initiative to develop and market software across Apple
Macintosh, Microsoft Windows NT and UNIX operating systems, in addition to its
existing real-time turnkey systems solutions, targeted at two new market
segments: institutional customers and prosumers
-8-
<PAGE>
(professional consumers). While the Company believes that the market recognition
which it has achieved through sales of FLAME, FLINT, INFERNO and FIRE systems to
creative professionals will facilitate its marketing efforts in new markets,
there can be no assurance that the Company will be able to successfully develop
and market systems and software for other markets, or, if it does so, that such
systems and software will be accepted at a rate, and in levels, sufficient to
maintain growth. Further, the distribution channels, technical requirements and
levels and bases of competition in other markets are different than those in the
Company's current market and there can be no assurance that the Company will be
able to compete favorably in those markets.
Competition. The market in which the Company competes is characterized by
-----------
intense competition. In the real-time segment of the special effects market, the
Company's FLAME system competes with Quantel Limited's ("Quantel") Henry. In
certain applications in the non-real-time segment of the market the Company's
FLINT system competes with Avid Technology, Inc.'s ("Avid") Illusion. The
Company's INFERNO system competes with Quantel's Domino and Eastman Kodak
Company's ("Kodak") Cineon. The Company's FIRE system competes with Quantel's
Editbox and Sony Corporation's ("Sony") range of proprietary editing equipment.
In addition, the Company expects that the products gained from the Denim and D-
Vision acquisitions will compete with Adobe Systems Incorporated's ("Adobe")
special effects products and Avid's and Media 100 Inc.'s range of editing
products. Many of the Company's current and prospective competitors, including
Quantel, Kodak, Sony, Adobe and Avid, have significantly greater financial,
technical, manufacturing and marketing resources than the Company. Moreover,
these companies may introduce additional products that are competitive with
those of the Company, and there can be no assurance that the Company's products
would compete effectively with such products. In addition, as personal computers
become more powerful, software suppliers may be able to introduce products for
personal computers that would be competitive with the Company's products in
terms of price and performance for professional users.
The Company believes that its ability to compete depends on elements both
within and outside its control, including the success and timing of new product
development and introduction by the Company and its competitors, product
performance and price, distribution and customer support. There can be no
assurance that the Company will be able to compete successfully with respect to
these factors. Although the Company believes that it has certain technological
and other advantages over its competitors, maintaining such advantages will
require continued investment by the Company in research and development, sales
and marketing and customer service and support. There can be no assurance that
the Company will have sufficient resources to make such investments or that the
Company will be able to make the technological advances necessary to maintain
such competitive advantages. In addition, as the Company enters new markets,
distribution channels, technical requirements and levels and bases of
competition may be different than those in the Company's current markets and
there can be no assurance that the Company will be able to compete favorably.
Furthermore, competitive pressures or other factors, including the Company's
entry into new markets, may result in significant price erosion that could have
a material adverse effect on the Company's business and results of operations.
Potential Risks Associated with Acquisitions. On June 12, 1997, the
--------------------------------------------
Company acquired substantially all of the assets of Denim for (i) approximately
$9,126,000 in cash, (ii) the assumption of certain liabilities in an amount
equal to no more than approximately $2,209,000 in the aggregate and (iii) the
assumption of certain ongoing obligations under certain existing contracts of
Denim. On July 15, 1997, the Company acquired all of the outstanding capital
stock of D-Vision for a purchase price of 555,000 newly issued Discreet Common
Shares and approximately $10,750,000 in cash.
There can be no assurance that the products and technologies acquired from
these companies will be successful or will achieve market acceptance. In
addition, with the acquisition of these two companies, the Company has for the
first time entered the market with special effects software that runs on the
Apple Macintosh and Microsoft Windows NT operating systems and editing software
that runs on the Microsoft Windows NT operating system. In this market, the
Company expects to confront competitors that have substantially greater
financial, technical and marketing resources than the Company. Furthermore, the
Company anticipates that products developed for these markets will initially be
sold primarily through the Company's current distribution channels. No assurance
can be given that the Company can successfully develop an effective distribution
channel in
-9-
<PAGE>
such markets. Finally, there can be no assurance that the Company will not incur
disruptions and unexpected expenses in integrating the operations of Denim and
D-Vision with those of the Company.
In the normal course of business, the Company evaluates potential
acquisitions of businesses, products and technologies that would complement or
expand the Company's business. There can be no assurance that the Company will
be able to successfully negotiate, finance or integrate any such acquired
businesses, products or technologies. Furthermore, the integration of an
acquired business may cause a diversion of management time and resources. There
can be no assurance that a given acquisition, when consummated, will not
materially adversely affect the Company.
Fluctuations in Quarterly Operating Results. The Company believes that its
-------------------------------------------
operating results could vary significantly from quarter to quarter. A limited
number of system sales may account for a substantial percentage of the Company's
quarterly revenue because of the high average sales price of such systems and
the timing of purchase orders. Historically, the Company has generally
experienced greater revenue during the period following the completion of the
annual conference of the National Association of Broadcasters ("NAB"), which is
typically held in April. The Company's expense levels are based, in part, on its
expectations of future revenue. Therefore, if revenue levels are below
expectations, particularly following NAB, the Company's operating results are
likely to be adversely affected, as was the case for the three month periods
ended April 30, 1996 and July 31, 1996. In addition, the timing of revenue is
influenced by a number of other factors, including the timing of individual
orders and shipments, other industry trade shows, competition, seasonal customer
buying patterns, changes in customer buying patterns in response to platform
changes and changes in product development, and sales and marketing
expenditures. Because the Company's operating expenses are based on anticipated
revenue levels and a high percentage of the Company's expenses are relatively
fixed in the short term, variations in the timing of recognition of revenue
could cause significant fluctuations in operating results from quarter to
quarter and may result in unanticipated quarterly earnings shortfalls or losses.
There can be no assurance that the Company will be successful in maintaining or
improving its profitability or avoiding losses in any future period. The Company
believes that quarter-to-quarter comparisons of its financial results are not
necessarily meaningful and should not be relied upon as an indication of future
performance.
Dependence on Single Workstation Vendor. The Company's FLAME, FLINT,
---------------------------------------
INFERNO, FIRE, VAPOUR and FROST systems currently include workstations
manufactured by SGI. There are significant risks associated with this reliance
on SGI and the Company may be impacted by the timing of the development and
release of products by SGI, as was the case during fiscal 1996. In addition,
there may be unforeseen difficulties associated with adapting the Company's
products to future SGI products. The Company is an authorized master value added
reseller ("VAR") of workstations manufactured by SGI. The Company's agreement
with SGI is subject to annual renewal in May of each year and termination by SGI
for cause. The agreement with SGI has been extended through October 1997 and the
Company has no reason to believe that SGI will not renew such agreement. In
addition, although the Company has no reason to believe that it will be unable
to obtain sufficient quantities of SGI workstations on a timely basis or that
its status as a master VAR will be changed, there can be no assurance that the
Company will continue to be able to procure such workstations in sufficient
quantities or on a timely basis or that SGI will continue to recognize the
Company as a master VAR. The success of the Company also depends, in part, on
the continued market acceptance of SGI workstations, in general, and by the
professional film and video industries, in particular. Although the Company
intends to continue to evaluate new hardware platforms and may adapt its
products as technological advances and market demands dictate, and although the
Company has now entered the market for special effects and editing software, the
Company believes that it will continue to derive substantially all of its
revenue for the foreseeable future from the sale and maintenance of systems
designed to include SGI workstations. As a result, financial, market and other
developments adversely affecting SGI or the sales of workstations, the
introduction or acquisition by SGI of products which are competitive with those
of the Company, or the unanticipated timing or pricing of SGI products that
could cause customers to defer the decision to buy or determine not to buy the
Company's then available products or systems, could have an adverse effect upon
the Company's business and results of operations, as was the case for the three
month period ended January 31, 1996. As a master VAR, the Company also obtains
certain advance access to SGI technology in order to develop compatible systems
and to modify and improve existing products. If the Company were unable to
obtain such advance access, it could have an adverse impact on the Company's
business and results of operations.
-10-
<PAGE>
International Revenues. For fiscal 1994, 1995 and 1996, and the eleven
----------------------
months ended June 30, 1997 revenues from customers outside North America were
approximately $4,048,000, $29,033,000, $47,711,000 and $52,235,000,
respectively, representing approximately 26%, 45%, 57% and 51%, respectively, of
the Company's total revenues. During fiscal 1995, 1996 and the eleven months
ended June 30, 1997, the Company expanded its direct sales force and
distribution channels in Europe and the Pacific Rim at a greater rate than in
North America which resulted in revenues from customers outside North America
increasing at a significantly higher rate than revenues from customers inside
North America. The Company expects that revenues from customers outside North
America will continue to account for a substantial portion of its revenues.
International sales are subject to a number of risks, including the following:
agreements may be difficult to enforce and receivables difficult to collect
through a foreign country's legal system; foreign customers may have longer
payment cycles; foreign countries could impose additional withholding taxes or
otherwise tax the Company's foreign income, impose tariffs or adopt other
restrictions on foreign trade; fluctuations in exchange rates could affect
product demand; and the protection of intellectual property in foreign countries
may be more difficult to enforce. There can be no assurance that these factors
will not have a material adverse effect on the Company's future international
sales and, consequently, on the Company's business and results of operations. In
addition, fluctuations in exchange rates may render the Company's products less
competitive relative to local product offerings, or could result in foreign
exchange losses, depending upon the currency in which the Company sells its
products. To date, the Company has not engaged in exchange rate hedging
activities to minimize the risks of such fluctuations. The Company may seek to
implement hedging techniques in the future with respect to its foreign currency
transactions. There can be no assurance, however, that the Company will be
successful in such hedging activities.
Limited Protection of Proprietary Technology; Risk of Third Party
-----------------------------------------------------------------
Infringement Claims. The Company's success is dependent upon its
-------------------
proprietary technology. Although the Company has one patent and has 74 patent
applications on its technology, it relies principally on unregistered copyrights
and trade secrets to protect its intellectual property. The Company generally
seeks to enter into confidentiality agreements with its employees and license
agreements with its distributors and to limit access to and distribution of its
systems, software, documentation and other proprietary information. Until fiscal
1996, substantially all of the Company's systems were sold without written
license agreements. There can be no assurance that the Company will not be
involved in litigation with respect thereto or that the outcome of any such
litigation might not be more unfavorable to the Company as a result of such
omissions. Any such litigation could have a material adverse effect on the
Company's business and results of operations. The Company uses both software and
hardware keys with respect to its systems and software but otherwise does not
copy-protect its systems and software. It may be possible for unauthorized third
parties to copy the Company's products or to reverse engineer or obtain and use
information that the Company regards as proprietary. There can be no assurance
that the Company's competitors will not independently develop technologies that
are substantially equivalent or superior to the Company's technologies. In
addition, the laws of certain countries in which the Company's products are or
may be distributed do not protect the Company's products and intellectual
property rights to the same extent as the laws of Canada or the United States.
As the number of software products in the industry increases and the
functionality of these products further overlaps, the Company believes that
software products generally may increasingly become the subject of claims that
such software products infringe the rights of others.
Significant and protracted litigation may be necessary to protect the
Company's intellectual property rights, to determine the scope of the
proprietary rights of others or to defend against claims of infringement. The
Company attempts to ensure that its systems, software and processes do not
infringe any existing proprietary rights of others and is not currently involved
in any litigation with respect to intellectual property rights; however, there
can be no assurance that third-party claims alleging infringements will not be
asserted against the Company in the future. For example, the Company recently
received a letter from Avid stating its belief that certain of the Company's
recently acquired D-Vision products utilize inventions claimed in a patent on a
media editing system. To the Company's knowledge, Avid has not initiated any
suit, action, or other proceeding alleging any infringement by the Company of
such patent. If infringement is alleged by Avid, or any other holder of
protected intellectual property rights, the Company could be required to
discontinue the use of certain software code or processes, to cease the
manufacture, use and sale of infringing products, to incur significant
litigation costs and expenses and to develop non-infringing technology or to
obtain licenses to use the allegedly infringed technology. There can be no
assurance that the Company would be able to develop alternative technologies or
to obtain such licenses or, if a license were
-11-
<PAGE>
obtainable, that the terms would be commercially reasonable or acceptable to the
Company. Moreover, there may be pending or issued patents that extend to the
Company's products, which, together with the growing use of patents to protect
technology, increase the risk that third parties may assert infringement claims
against the Company in the future. There can be no assurance that a court to
which any infringement claims are submitted would not find that the Company's
products infringe any third party's intellectual property rights. Further, such
litigation, regardless of its outcome, could result in substantial costs to and
diversion of efforts by the Company. Litigation may also be necessary to enforce
the Company's intellectual property rights. Any infringement claim or other
litigation against or by the Company could have a material adverse effect on the
Company's business and results of operations.
Potential Distribution Channel Conflict. The Company currently markets its
---------------------------------------
systems and software through its direct sales organization and through
distributors. The Company further expects to increase its indirect channel as a
result of the Denim and D-Vision acquisitions. This marketing strategy may
result in distribution channel conflicts as the Company's direct sales efforts
may compete with those of its indirect channels.
Reliance on Sole Source Suppliers. The Company is dependent on SGI as the
---------------------------------
Company's sole source for video input/output ("I/O") cards used in the Company's
systems. The Company is also dependent on a single workstation vendor. See "Risk
Factors--Dependance on Single Workstation Vendor." The Company also purchases
electronic tablets manufactured by Wacom Technology Corporation ("Wacom") and
believes that while alternative suppliers are available, there can be no
assurance that alternative electronic tablets would be functionally equivalent
or be available on a timely basis or on similar terms. The Company generally
purchases sole source or other components pursuant to purchase orders placed
from time to time in the ordinary course of business and has no written
agreements or guaranteed supply arrangements with its sole source suppliers. The
Company has experienced quality control problems and supply shortages for sole
source components in the past and there can be no assurance that the Company
will not experience significant quality control problems or supply shortages for
these components in the future. The Company does not maintain an extensive
inventory of these components, and an interruption in supply could have a
material adverse effect on the Company's business and results of operations.
Because of the Company's reliance on these suppliers, the Company may also be
subject to increases in component costs which could adversely affect the
Company's business and results of operations.
The Company's OnLINE product requires, and can only be used with, a Targa
videographic card manufactured by Truevision, Inc., which distributors
customarily purchase and resell to end users as part of a turn-key system. The
Company believes that while alternative suppliers are available, it would take a
significant amount of time to integrate any such replacement cards with the
Company's OnLINE product. There can be no assurance that alternative cards would
be functionally equivalent or be available to distributors or users on a timely
basis or at a similar price. An interruption in the supply or an increase in
price of these cards to OnLINE software users could have a material adverse
effect on the Company's business and results of operations.
Management of Changing Business. Since inception, the Company has
-------------------------------
experienced substantial changes in its operations which have placed significant
demands on the Company's management and administrative, operational and
financial resources. In addition, the Company's ability to manage growth will
require it to continue to implement and improve its operational, financial and
management information systems, and to motivate and effectively manage an
increasing number of employees. If the Company's management is unable to manage
growth effectively, the quality of the Company's products, its ability to retain
key personnel and its results of operations could be materially adversely
affected.
Dependence on Key Personnel. The Company's success to date has depended
---------------------------
to a significant extent upon a number of key management and employees. The loss
of the services of one or more of these key employees could have a material
adverse effect on the Company's business and results of operations. The Company
believes that its future success will also depend in large part upon its ability
to attract and retain highly skilled technical, management and sales and
marketing personnel. Moreover, because the development, marketing and
distribution of the Company's systems and software requires knowledge of film
and video production and post-production, key technical personnel must be
proficient in a number of disciplines. Competition for such technical personnel
is intense, and the failure of the Company to hire and retain talented technical
personnel or the loss of one or more key employees could have an adverse effect
on the Company's business and results of operations.
-12-
<PAGE>
Because of the relative shortage of skilled professionals who possess
knowledge of film and video production and post-production, the Company recruits
a significant percentage of its personnel from other industry participants. From
time to time, the Company receives notification from other industry participants
demanding that the Company refrain from recruiting such participants' employees.
Although the Company cannot predict what action these participants may take, it
believes that any action taken by these participants with regard to these
employees would not have a material adverse effect on the Company's business and
results of operations.
Control by Officers and Directors. The Company's officers and directors,
---------------------------------
in the aggregate, owned beneficially approximately 42.6% of the Common Shares
outstanding as of August 29, 1997. As a result, these shareholders, acting
together, would effectively be able to control most matters requiring approval
by the shareholders of the Company, including the election of a majority of the
directors or the approval of significant corporate matters, including change of
control transactions. The Company's charter provides for the issuance of
Preferred Shares, the terms of which may be fixed by the Board of Directors.
These factors could have the effect of delaying, deferring, dissuading or
preventing a change of control of the Company
Volatility of Stock Price. The market price of the Common Shares
-------------------------
could be subject to significant fluctuations in response to quarter-to-quarter
variations in the Company's operating results, announcements of technological
innovations or new products by the Company, its competitors or its suppliers and
other events or factors. In addition, the stock market in recent years has
experienced extreme price and volume fluctuations that have particularly
affected the market prices of many technology companies and that often have been
unrelated or disproportionate to the operational performance of these companies.
These fluctuations, as well as general economic and market conditions, may
materially and adversely affect the market price of the Common Shares.
Litigation. On May 29, 1996, a lawsuit entitled Sandra Esner and
----------
Jerry Krim, On Behalf of Themselves and All Others Similar Situated, vs.
[. ..]Discreet Logic Inc., et al., case No. 978584, was filed in the Superior
Court of the State of California, City and County of San Francisco. Named as
defendants are the Company, certain of the Company's former and existing
directors, officers, and affiliates, and certain underwriters and financial
analysts. The plaintiffs purport to represent a class of all persons who
purchased the Company's common stock between September 13, 1995, and May 1,
1996. The complaint alleges violations of California law through material
misrepresentations and omissions, among other things. The Company believes the
allegations in the complaint are without merit and has defended the lawsuit
vigorously.
On June 13, 1996, a lawsuit entitled Bruce Friedberg, On Behalf of Himself
and All Others Similarly Situated, vs. Discreet Logic Inc., et al., civ. No. 96-
11232-EFH, was filed in the United States District Court, District of
Massachusetts. Named as defendants are the Company and certain of the Company's
former and existing directors and officers. The plaintiff purports to represent
a class of all persons who purchased the Company's common stock between November
14, 1995 and February 13, 1996. On October 11, 1996, the plaintiff filed an
amended complaint which asserts substantially the same factual allegations as
the first complaint and proposes the identical class period. The complaint
alleges violations of United States Federal Securities law through material
misrepresentations and omissions. The Company believes the allegations in the
amended complaint are without merit and has defended the lawsuit vigorously.
On April 29, 1997, a lawsuit entitled Anton Paparella, Sandra Esner and
Geoffrey L. Sherwood, On Behalf of Themselves and All Others Similarly Situated
vs. Discreet Logic Inc., et al., case No. C-97-1570, was filed in the United
States District Court, Northern District of California. Named as defendants are
the Company and certain of the Company's former and existing officers, directors
and affiliates, and certain underwriters. The complaint asserts, in all material
respects, the same factual allegations and proposes the same class period as the
above-described California state court complaint filed in May 1996, except
asserts claims under federal securities law instead of state law. The Company
believes the allegations in the California federal complaint are without merit
and has defended the lawsuit vigorously.
On August 12, 1997 the Company announced that it had reached an agreement-
in-principle to settle all three of the above shareholder class action
litigations. The proposed $10.8 million settlement would require
-13-
<PAGE>
Discreet Logic to contribute approximately $7.4 million from its own funds, with
the remainder provided by insurance. The settlement is subject to final
determination (based on U.S./Canadian currency exchange rates) as to the
contribution to be made by Discreet Logic's insurance carrier, to the signing of
a definitive agreement, to adequate shareholder participation and to final court
approval of the proposed settlement. There can be no assurance that the
settlement will be consummated and that the Company will not have to continue
its defense of the lawsuits. Should the proposed settlement not be consummated
or finally approved for any reason, the Company intends to defend the lawsuits
vigorously.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholders.
-14-
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Shares as of September __, 1997 and the number of Shares which
may be offered for the account of the Selling Stockholders or their pledgees,
donees, transferees, or other successors in interest from time to time. See
"Plan of Distribution."
<TABLE>
<CAPTION>
Shares Shares Shares
Beneficially To Be Sold Beneficially
Owned Prior In The Owned After
Selling Stockholder To The Offering Offering (1) The Offering (2)
------------------- --------------- ------------ ----------------
========================================================================================
<S> <C> <C> <C>
Geocapital III, L.P. 158,177 158,177 *
Paul Reilly 105,927 105,927 *
Platinum Venture Partners I, L.P. 85,222 85,222 *
Kenneth A. Steel 73,747 73,747 *
Presidents Forum/D-Vision L.L.C. 48,112 48,112 *
Robert F. Steel 31,726 31,726 *
Bruce A. Rady 17,856 17,856 *
Sunbeam Ventures Ltd. 14,579 14,579 *
Michael J. Radi, Trustee for 4,604 4,604 *
Michael J. Radi Revocable Living
Trust under Trust dated 2/12/91
Harvey L. Poppel 4,572 4,572 *
Todd Belfer 2,430 2,430 *
Bernard Ludwig 2,430 2,430 *
Bradley Shaw 2,430 2,430 *
Richard J. Radi 1,973 1,973 *
Michael Brown 1,215 1,215 *
_______
TOTAL 555,000
</TABLE>
- ---------------------
*See Footnote 2 below
(1) Assumes that all of the Shares owned by each Selling Stockholder and
offered under this Prospectus are sold during the distribution
period.
(2) Because the Selling Stockholders or their transferees, distributees,
pledgees, donees or other successors in interest may sell all or any
part of their shares pursuant to this Prospectus, no estimate can be
given as to
-15-
<PAGE>
the number of Shares that will be held by each Selling
Stockholder upon termination of this offering. However, prior to the
offering each Selling Stockholder held less than one percent (1%) of
Discreet's outstanding Common Shares, based on the number of Common
Shares outstanding as of September 1, 1997.
PLAN OF DISTRIBUTION
The Shares offered hereby may be sold from time to time by the Selling
Stockholders acting as principals for their own account. The Company is
responsible for the expenses incurred in connection with the registration of the
Shares. The Company will receive none of the proceeds from this offering. The
Selling Stockholders will pay or assume brokerage commissions or other charges
and expenses incurred in the sale of the Shares. In addition, Discreet has
agreed to indemnify the Selling Stockholders against certain liabilities,
including liabilities under the Securities Act, and, in the event that any
offering is made by the Selling Stockholders through underwriters, to agree to
indemnify such underwriters for such liabilities.
The distribution of the Shares by the Selling Stockholders is not currently
subject to any underwriting agreement. The Shares covered by this Prospectus may
be sold by the Selling Stockholders or by their pledgees, donees, transferees,
or other successors in interest from time to time. Such sales may be made at
fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, or at negotiated
prices. Such sales may be effected in the over-the-counter market, on the
National Association of Securities Dealers Automated Quotation System, on the
Nasdaq National Market, or on any exchange on which the Shares may then be
listed. The Shares may be sold by one or more of the following: (a) one or more
block trades in which a broker or dealer so engaged will attempt to sell all or
a portion of the Shares held by the Selling Stockholders as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
(d) in negotiated transactions; and (e) through other means. The Selling
Stockholders may effect such transactions by selling Shares to or through
broker-dealers, and such broker-dealers will receive compensation in negotiated
amounts in the form of discounts, concessions, commissions or fees from the
Selling Stockholders and/or the purchasers of the Shares for whom such broker-
dealers may act as agent or to whom they sell as principal, or both (which
compensation to a particular broker-dealer might be in excess of customary
commissions). Such brokers or dealers or the participating brokers or dealers
and the Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act, in connection with such sales, and any
commissions received by such broker-dealers may be deemed to be underwriting
compensation.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Shares offered hereby may not simultaneously
engage in market making activities with respect to the Shares for a period of
time prior to the commencement of such distribution. In addition, and without
limiting the foregoing, each Selling Stockholder will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including, without limitation, Rule 10b-5 and Regulation M, which provisions may
limit the timing of purchases and sales of the Shares by the Selling
Stockholder.
Any securities covered by this Prospectus which qualify for sale pursuant
to Rule 144 under the Securities Act, may be sold under Rule 144 rather than
pursuant to this Prospectus.
The Selling Stockholders are not restricted as to the price or prices at
which they may sell their Shares. Sales of such Shares at less than the market
prices may depress the market price of the Company's Common Stock. During the
effective time of this Prospectus, the Selling Stockholders have agreed to
restrictions on resale during (i) the period beginning with the Company's
initial determination to conduct a primary, secondary or combined primary and
secondary public offering pursuant to which the Selling Stockholders have a
right to be included until no more than one hundred eighty (180) days from the
effective date of the registration statement relating to such public offering
(subject to any extension for any period of time that the sale of Shares
pursuant to the registration statement may be suspended by the Company); (ii)
the period beginning with notice from the Company that it is
-16-
<PAGE>
about to make a normal course disclosure containing material information until
five (5) business days thereafter, more or less; (iii) the period beginning with
notice from the Company that it is engaged in a material activity that would be
adversely affected by the continued distribution of Shares by the Selling
Stockholders until the earlier of ninety (90) days after such notice or the
termination of such material activity. The Selling Stockholders are not
restricted as to the number of Shares which may be sold at any one time, and it
is possible that a significant number of Shares could be sold at the same time.
The Company will use its best efforts to keep this registration statement
effective until the earlier of the sale of the Shares pursuant to the
registration statement or ninety (90) days after the effective date of the
registration statement (subject to any extension for any period of time that
sales of Shares pursuant to the registration statement may be suspended by the
Company).
Boston EquiServe, 150 Royall Street, Canton, Massachusetts 02021, is the
transfer agent for the Company's Common Shares.
LEGAL MATTERS
Certain legal matters with respect to the issuance of the Shares are being
passed upon for the Company by Stikeman, Elliott, 1155 Rene-Levesque Boulevard
West, Montreal, Quebec, Canada, H3B 3V2.
EXPERTS
The financial statements and schedules as of July 31, 1996 and 1995 and for
the three year period ended July 31, 1996 incorporated by reference in this
Prospectus and elsewhere in this Registration Statement have been audited by
Arthur Andersen & Cie, independent chartered accountants, as indicated in their
report dated September 13, 1996 with respect thereto, and are included herein in
reliance upon the authority of said Firm as experts in giving said report.
-17-
<PAGE>
================================================================================
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations not contained in this Prospectus and,
if given or made, such information or representations must not be relied upon as
having been authorized by the Company. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to sell, any securities other than
the registered securities to which it relates, or an offer to or solicitation of
any person in any jurisdiction where such an offer or solicitation would be
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create an implication that the information
contained herein is correct as of any time subsequent to the date hereof.
_____________________
TABLE OF CONTENTS
Page
----
Available Information................................................. 2
Information Incorporated by Reference................................. 2
Trademarks............................................................ 3
The Company........................................................... 3
Recent Developments................................................... 4
Risk Factors.......................................................... 8
Use of Proceeds....................................................... 14
Selling Stockholders.................................................. 15
Plan of Distribution.................................................. 16
Legal Matters......................................................... 17
Experts............................................................... 17
================================================================================
================================================================================
555,000 Shares
DISCREET LOGIC INC.
Common Shares
____________________
PROSPECTUS
____________________
, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses payable in connection with the sale of the Common Shares
offered hereby are as follows:
Registration fee........................... $ 4,004.40
NASDAQ/NMS Additional Listing Fee.......... $11,100.00
Legal fees and expenses.................... $20,000.00
Accounting fees and expenses............... $ 5,000.00
Total.................................. $40,104.40
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is subject to the Quebec Companies Act (the "QCA"). Section
123.87 of the QCA provides that a corporation shall assume the defense of any
officer, director, employee or agent of the corporation in any proceeding
brought against such person in connection with any act done by such person in
the exercise of his or her duties for the corporation, and shall pay damages, if
any, resulting from such act, unless such person has committed a grievous
offense or a personal offense separable from the exercise of his or her duties;
provided, however, that in a penal or criminal proceeding the corporation shall
assume the expenses of such person only if he or she had reasonable grounds to
believe that his or her conduct was in conformity with law, or if he or she is
freed or acquitted.
The Company's By-laws provide that, except as otherwise provided in the
QCA, the Company shall indemnify every officer and director of the Company, and
every former officer and director and every person who acts or acted at the
Company's request as a director or officer of a body corporate of which the
Company is or was a shareholder or creditor, and his or her heirs and legal
representatives, against all costs, charges and expenses, including an amount
paid to settle an action or satisfy a judgment, reasonably incurred by him or
her in respect of any civil, criminal or administrative action or proceeding to
which he or she is made a party by reason of his or her being or having been a
director or officer of the Company or such body corporate, if he or she acted
honestly and in good faith with a view to the best interests of the Company,
and, in the case of a criminal or administrative action or proceeding that is
enforced by a monetary penalty, he or she had reasonable grounds for believing
that his or her conduct was lawful.
ITEM 16. EXHIBITS.
2.1 Stock Purchase Agreement, dated as of July 10, 1997, by and among
Discreet Logic Inc., D-Vision Systems, Inc. and certain selling
stockholders listed therein (filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K dated July 30, 1997 and incorporated herein
by reference).
2.2 Registration Rights Agreement dated as of July 15, 1997 by and among
Discreet Logic Inc. and the stockholders listed on the signature page
thereto (filed as Exhibit 2.2 to the Company's Current Report on Form
8-K dated July 30, 1997 and incorporated herein by reference).
2.3 Escrow Agreement dated as of July 15, 1997 among Discreet Logic Inc.,
State Street Bank and Trust
<PAGE>
Company as escrow agent and certain holders listed therein (filed as
Exhibit 2.3 to the Company's Current Report on Form 8-K dated July 30,
1997 and incorporated herein by reference).
4.1 Articles of Incorporation, as amended (filed as Exhibit 4.2 to the
Company's Registration Statement on Form S-8 (file No. 33-97400) (the
"Registration Statement on Form S-8") and incorporated herein by
reference).
4.2 By-laws (filed as Exhibit 4.3 to the Company's Registration Statement
on Form S-8 and incorporated herein by reference).
*5.1 Opinion of Stikeman, Elliott.
*23.1 Consent of Arthur Andersen & Cie.
*23.3 Consent of Stikeman, Elliott (included in its opinion filed as
Exhibit 5.1).
*24.1 Power of Attorney (included as part of signature page to this
Registration Statement).
_________
* Filed herewith
-2-
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
-3-
<PAGE>
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule
430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the
time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
-4-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Montreal, Quebec on August 29, 1997.
DISCREET LOGIC INC.
By: /s/ Richard Szalwinski
----------------------
Richard Szalwinski
Chairman of the Board of Directors,
President and Chief Executive Officer
By: /s/ Thomas Cantwell
-------------------
Thomas Cantwell
Authorized United States Representative
Each person whose signature appears on this Registration Statement shall
not be deemed to have conferred upon the agent for service any authority to
exercise the powers enumerated under Rule 478 of the Securities Act of 1933.
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Discreet Logic Inc., hereby
severally constitute and appoint Richard Szalwinski and Francois Plamondon, and
each of them singly, our true and lawful attorneys with full power to them, and
each of them singly, to sign for us and in our names in the capacities indicated
below, all pre-effective and post-effective amendments to this registration
statement, and generally to do all such things in our names and on our behalf in
such capacities to enable Discreet Logic Inc. to comply with the provisions of
the Securities Act of 1933 and all requirements of the Securities and Exchange
Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title(s) Date
- --------------------------- ------------------------------- ---------------
/s/ Richard Szalwinski Chairman of the Board of August 29, 1997
- --------------------------- Directors, President and Chief
Richard Szalwinski Executive Officer (Principal
Executive Officer)
/s/ Francois Plamondon Senior Vice President, Chief August 29, 1997
- --------------------------- Financial Officer, Treasurer
Francois Plamondon and Secretary (Principal
Financial Officer and
Accounting Officer)
/s/ Thomas Cantwell Director August 29, 1997
- ---------------------------
Thomas Cantwell
-5-
<PAGE>
/s/ Gary G. Tregaskis Director August 29, 1997
- ---------------------------
Gary G. Tregaskis
/s/ Brian P. Drummond Director August 29, 1997
- ---------------------------
Brian P. Drummond
/s/ Perry M. Simon Director August 29, 1997
- ---------------------------
Perry M. Simon
/s/ Pierre Desjardins Director August 29, 1997
- ---------------------------
Pierre Desjardins
-6-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page Number in
Exhibit sequentially
No. Document numbered copy
--- -------- -------------
<C> <S> <C>
2.1 Stock Purchase Agreement, dated as of July 10, 1997, by and among
Discreet Logic Inc., D-Vision Systems, Inc. and certain selling
stockholders listed therein (filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K dated July 30, 1997 and incorporated
herein by reference).
2.2 Registration Rights Agreement dated as of July 15, 1997 by and
among Discreet Logic Inc. and the stockholders listed on the
signature page thereto (filed as Exhibit 2.2 to the Company's
Current Report on Form 8-K dated July 30, 1997 and incorporated
herein by reference).
2.3 Escrow Agreement dated as of July 15, 1997 among Discreet Logic
Inc., State Street Bank and Trust Company as escrow agent and
certain holders listed therein (filed as Exhibit 2.4 to the
Company's Current Report on Form 8-K dated July 30, 1997 and
incorporated herein by reference).
4.1 Articles of Incorporation, as amended (filed as Exhibit 4.2 to the
Company's Registration Statement on Form S-8 (file No. 33-97400)
(the "Registration Statement on Form S-8") and incorporated herein
by reference).
4.2 By-laws (filed as Exhibit 4.3 to the Company's Registration
Statement on Form S-8 and incorporated herein by reference).
*5.1 Opinion of Stikeman, Elliott.
*23.1 Consent of Arthur Andersen & Cie.
*23.3 Consent of Stikeman, Elliott (included in its opinion filed as
Exhibit 5.1).
*24.1 Power of Attorney (included as part of signature page to this
Registration Statement).
</TABLE>
_________
* Filed herewith
<PAGE>
Exhibit 5.1
August 29, 1997
Discreet Logic Inc.
10 Duke Street
Montreal, Quebec
Canada H3C 2L7
Re: S-3 Registration Statement
--------------------------
Ladies and Gentlemen:
We are counsel to Discreet Logic Inc., a Quebec company (the "Company"),
and have represented the Company in connection with the preparation and filing
of the Company's Form S-3 Registration Statement (the "Registration Statement"),
covering the sale to the public of up to 555,000 of the Company's Common Shares
(the "Shares"), being sold by certain shareholders of the Company.
We have reviewed the corporate proceedings taken by the Board of Directors
of the Company with respect to the authorization and issuance of the Shares. We
have also examined and relied upon originals or copies, certified or otherwise
authenticated to our satisfaction, of all corporate records, documents,
agreements or other instruments of the Company and have made all investigations
of law and have discussed with the Company's officers all questions of fact that
we have deemed necessary or appropriate.
Based upon and subject to the foregoing, we are of the opinion that the
Shares have been validly issued, as fully paid and non-assessable shares.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm in the Prospectus
contained in the Registration Statement under the caption "Legal Matters."
Very truly yours,
/s/ Stikeman, Elliott
STIKEMAN, ELLIOTT, a general partnership
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-3 of our report dated
September 13, 1996 included in Discreet Logic Inc.'s Annual Report of Form 10-K
for the year ended July 31, 1996 and to all references to our Firm included in
this Registration Statement.
ARTHUR ANDERSEN & CIE
Montreal, Canada
August 29, 1997
