STOCK RESTRICTION AND
REGISTRATION RIGHTS AGREEMENT
THIS STOCK RESTRICTION AND REGISTRATION RIGHTS AGREEMENT (this
"Agreement") is made effective as of August 2, 1999 by and between PINNACLE
SYSTEMS, INC., a California corporation (the "Company"), and HEWLETT-PACKARD
COMPANY, a Delaware corporation ("HP").
RECITALS
A. Pursuant to the terms of the Asset Purchase Agreement dated
June 30, 1999 (the "Purchase Agreement"), by and between the
Company and HP, HP shall acquire from the Company Six Hundred
Seventy-Five Thousand One Hundred Seventy (675,170) fully paid
and nonassessable shares (the "Pinnacle Shares") of the
Company's Common Stock, no par value (the "Common Stock") as
partial payment of the Purchase Price (as such term is defined
in the Purchase Agreement) for the sale of certain assets and
the transfer of certain liabilities of HP to the Company.
B. The transactions contemplated by the Purchase Agreement are to
be consummated at the "Closing Date", as such term is defined
in the Purchase Agreement.
C. In connection with the Asset Purchase Agreement, the Company
has agreed to provide the registration rights set forth in
this Agreement with respect to one-half of the Pinnacle Shares
issued to HP at the Closing Date and one-half of any
additional shares of Common Stock issued to HP on a later date
in accordance with Section 3.1(c) of the Purchase Agreement
and HP has agreed to certain restrictions with respect to the
disposition of the remainder of such shares. NOW, THEREFORE,
in consideration of the representations, warranties, covenants
and conditions herein and in the Purchase Agreement, the
parties hereto hereby agree as follows:
SECTION 1
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement:
(a) The term "beneficially owned" refers to the meaning of
such terms as provided in Rule 13d-3 promulgated under the Exchange Act.
(b) The term "Company Public Sale Event" shall mean any sale
by the Company of Common Stock for its own account as contemplated by Section
3.2 pursuant to an effective Registration Statement filed by the Company, filed
on Form S-1 or any other form for the general
registration of securities with the Commission (other than a Registration
Statement filed by the Company on either Form S-4 or Form S-8 or any
registration in connection with a standby underwriting in connection with the
redemption of outstanding convertible securities).
(c) The term "Company Sale Notice" shall mean a Notice of
Offering pursuant to Subsection 3.1 from the Company to each Holder stating that
the Company proposes to effect a Company Public Sale Event.
(d) The term "Exchange Act" means the Securities Exchange Act
of 1934, as amended, or any similar federal statute and the rules and
regulations of the SEC thereunder, all as the same shall be in effect from time
to time.
(e) The term "person" shall mean any person, individual,
corporation, partnership, limited liability company, joint stock company,
unincorporated association, joint venture, trust or other nongovernmental entity
or any governmental agency, court, authority or other body (whether foreign,
federal, state, local or otherwise).
(f) The term "Holder" means HP and any transferee of
Registrable Securities pursuant to Section 3.9 of this Agreement, provided that
any such person shall cease to be a Holder on the Termination Date.
(g) The term "Preliminary Prospectus" shall mean each
preliminary prospectus included in a Registration Statement or in any amendment
thereto prior to the date on which such Registration Statement is declared
effective under the Securities Act, including any prospectus filed with the SEC
pursuant to Rule 424(a) under the Securities Act.
(h) The term "Prospectus" shall mean each prospectus included
in a Registration Statement (including, without limitation, a prospectus that
discloses information previously omitted from a prospectus filed as part of an
effective Registration Statement in accordance with Rule 430A), together with
any supplement thereto, and any material incorporated by reference into such
Prospectus, all as filed with, or transmitted for filing to, the SEC pursuant to
Rule 424(b) under the Securities Act.
(i) The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or ordering
by the SEC of the effectiveness of such registration statement.
(j) The term "Registration Expenses" shall have the meaning
contained in Section 3.2 hereof.
(k) The term "Registrable Securities" shall refer to 337,585
of the Pinnacle Shares, representing of the total number of shares issued on the
Closing Date in connection with Purchase Agreement, (ii) 1/2 of any shares of
Common Stock issued to HP pursuant to Section 3.1(c) of the Purchase Agreement,
and (iii) any Common Stock of the Company issued by the Company to HP in respect
of the shares identified in clause (i) or (ii) upon any stock split, stock
dividend,
-2-
recapitalization, or similar event; provided, that if, upon any stock dividend,
recapitalization or similar event, the Company issues securities which are not
immediately convertible into Common Stock, the term "Registrable Securities"
shall also include such securities.
(l) The term "Registration Statement" shall mean any
registration statement (including the Preliminary Prospectus, the Prospectus,
any amendments (including any post-effective amendments) thereof, any
supplements and all exhibits thereto and any documents incorporated therein by
reference pursuant to the rules and regulations of the SEC), filed by the
Company with the SEC under the Securities Act in connection with the SEC
provisions of Section 3.
(m) The term "Restricted Securities" shall mean the securities
of the Company required to bear the legend set forth in Section 2.2 hereof.
(n) The term "Securities Act" means the Securities Act of
1933, as amended, or any similar federal statute and the rules and regulations
of the SEC thereunder, all as the same shall be in effect at the time.
(o) The term "SEC" means the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(p) The term "Termination Date" means shall mean the earlier
of the respective dates on which the Company has no further obligation under the
terms of this Agreement to file or keep effective the Shelf Registration
Statement under Subsection 3.1(b).
(q) The term "Unregistered Shares" shall mean all of the
shares of common stock issued to HP in connection with the Acquisition that are
not Registrable Securities.
1.2 Definitions Generally. Capitalized terms used herein but otherwise
not defined herein shall have the meanings ascribed to them in the Purchase
Agreement.
SECTION 2
RESTRICTIONS ON TRANSFERABILITY;
COMPLIANCE WITH SECURITIES ACT
2.1 Restrictions on Transferability. HP agrees that the Pinnacle Shares
shall not be sold, assigned, transferred or pledged unless (i) such sale,
transfer or other disposition is within the limitations of and in compliance
with Rule 144 promulgated by the SEC under the Securities Act and HP furnishes
Pinnacle with reasonable proof of compliance with such Rule, (ii) in the opinion
of counsel to the transferring shareholder, reasonably satisfactory to Pinnacle
and its counsel, some other exemption from registration under the Securities Act
is available with respect to any such proposed sale, transfer, or other
disposition of Pinnacle Shares, or (iii) the offer and sale of the Pinnacle
Shares is registered under the Securities Act or (iv) such sale, transfer or
other disposition is otherwise in compliance with the Securities Act and the
rules and regulations thereunder. HP will
-3-
cause any proposed purchaser, assignee, transferee, or pledgee of the Pinnacle
Shares held by HP to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Section 2.
2.2 Restrictive Legends.
(a) Each certificate representing the Pinnacle Shares,
including any new certificates issued upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless
otherwise permitted by the provisions of Section 2.3 below) be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT FOR DISTRIBUTION, AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). SUCH SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED (1) IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT THERETO UNDER THE ACT (2) UNLESS SOLD
PURSUANT TO RULE 144 OF THE ACT, (3) IN THE OPINION OF COUNSEL
TO THE TRANSFERRING SHAREHOLDER (WHICH SHALL BE REASONABLY
SATISFACTORY TO THE ISSUER) SOME OTHER EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE OR (4) UNLESS THE SALE
IS OTHERWISE EXEMPT FROM REGISTRATION UNDER THE ACT.
Each holder of a certificate evidencing the Restricted Securities as
set forth in this Section 2.2(a) consents to the Company making a notation on
its records and giving instructions to any transfer agent of the Common Stock in
order to implement the restrictions on transfer established in this Section 2.
(b) Each certificate representing the Unregistered Shares,
including any new certificates issued upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless
otherwise permitted by the provisions of Section 2.3 below) be stamped or
otherwise imprinted with an additional legend in the following form (in addition
to any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS OF THAT CERTAIN STOCK RESTRICTION AND REGISTRATION
RIGHTS AGREEMENT DATED AUGUST 2, 1999 AND MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED UNTIL AUGUST 2, 2001
EXCEPT IN ACCORDANCE WITH THE TERMS OF SUCH AGREEMENT.
Each holder of a certificate evidencing the Unregistered Shares as set
forth in this section 2.2(b) consents to the Company making a notation on its
records and giving instructions to
-4-
any transfer agent of the Company's Common Stock in order to implement the
restrictions on transfer established in this Section 2.
2.3 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 2.3. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities (other than a
transfer not involving a change in beneficial ownership), and, in the case of
Unregistered Shares, for a period of two years after the Closing Date, unless in
either case there is in effect a registration statement under the Securities Act
covering the proposed transfer, the holder thereof shall give written notice to
the Company of such holder's intention to effect such transfer, sale, assignment
or pledge. Each such notice shall describe the manner and circumstances of the
proposed transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied, at such holder's expense by evidence of satisfaction of Section 2.1
hereof, and, as applicable such documentation or opinions as necessary under
Section 2.1, whereupon the holder of such Restricted Securities shall be
entitled to transfer such Restricted Securities in accordance with the terms of
the notice delivered by the holder to the Company. Each certificate evidencing
the Restricted Securities transferred as above provided shall bear, except if
such transfer is made pursuant to Rule 144, the appropriate restrictive legend
set forth in Section 2.2 above, except that such certificate shall not bear such
restrictive legend if in the opinion of counsel for such holder and the Company
such legend is not required in order to establish compliance with any provision
of the Securities Act.
SECTION 3
REGISTRATION RIGHTS
3.1 Shelf Registration.
(a) Form S-3 Registration. As promptly as practicable and in
any event within 5 days after the issuance of the Pinnacle Shares in connection
with the Closing under the Purchase Agreement, the Company shall file a
registration statement on Form S-3 under the Securities Act covering the resale
of the Registrable Securities by the Holders thereof. Within 5 days after the
issuance of any shares of Common Stock to HP pursuant to Section 3.1(c) of the
Purchase Agreement, Pinnacle shall amend such Form S-3 to cover of such
additional shares of Common Stock as necessary so that all of the Registrable
Securities are covered by such Form S-3. Nothing herein shall be deemed to
provide any registration rights with respect to the Unregistered Shares.
(b) Obligations of the Company. In connection with any
registration of Registrable Securities pursuant to this Section 3.1, the Company
shall use its best efforts to cause such registration statement to become
effective as soon as practicable thereafter and to remain effective until the
earlier of (A) the second anniversary of the date of issuance of the Pinnacle
Shares, (B) the sale of all of such shares of Registrable Securities so
registered or (C) ninety days after the date as all of the Registrable
Securities can be sold by Holders within a three-month period without compliance
with the volume requirements of the Securities Act pursuant to Rule 144
thereunder.
-5-
3.2 Company Sale Events.
(a) Determination. Subject to Section 3.5(b) the Company may
at any time effect a Company Public Sale Event pursuant to a Registration
Statement filed by the Company if the Company gives each Holder a Company Sale
Notice, provided that such Company Sale Notice is given not less than 21 days
prior to the initial filing of the related Registration Statement. The
obligation of the Company to give to each Holder a Company Sale Notice and to
permit piggyback registration rights to Holders with respect to Registrable
Securities in connection with Company Sale Events in accordance with this
Section 3.2 shall terminate in accordance with Section 3.11.
(b) Notice. The Company Sale Notice shall offer the Holders
the opportunity to participate in such offering and include the number of shares
of Registrable Securities which represents the best estimate of the lead
managing underwriter (or, if not known or applicable, the Company) that will be
available for sale by the Holders in the proposed offering.
(c) Piggyback Rights of Holders. (A) If the Company shall have
delivered a Company Sale Notice, Holders shall be entitled to participate on the
same terms and conditions as the Company in the Company Public Sale Event to
which such Company Sale Notice relates and to offer and sell shares of
Registrable Securities therein only to the extent provided in this Section
3.2(a). Each Holder desiring to participate in such offering shall notify the
Company no later than ten (10) days following receipt of a Company Sale Notice
of the aggregate number of shares of Registrable Securities that such Holder
then desires to sell in the offering. (B) Each Holder desiring to participate in
a Company Public Sale Event may include shares of Registrable Securities in any
Registration Statement relating to a Company Public Sale Event to the extent
that the inclusion of such shares shall not reduce the number of shares of
Common Stock to be offered and sold by the Company to be included therein. If
the lead managing underwriter selected by the Company for a Company Public Sale
Event advises the Company in writing that the total number of shares of Common
Stock to be sold by the Company together with the shares of Registrable
Securities which such Holders intend to include in such offering would be
reasonably likely to adversely affect the price or distribution of the Common
Stock offered in such Company Public Sale Event or the timing thereof, then
there shall be included in the offering only that number of shares of
Registrable Securities, if any, that such lead managing underwriter reasonably
and in good faith believes will not jeopardize the marketing of the offering;
provided that if the lead managing underwriter determines that such factors
require a limitation on the number of shares of Registrable Securities to be
offered and sold as aforesaid and so notifies the Company in writing, the number
of shares of Registrable Securities to be offered and sold by Holders desiring
to participate in the Company Public Sale Event, shall be allocated among those
Holders desiring to participate in such Company Public Sale Event on a pro rata
basis based on their holdings of Registrable Securities. If any Holder does not
request inclusion of the maximum number of shares of Registrable Securities
allocated to it pursuant to the above-described procedure, the remaining portion
of its allocation shall be reallocated among those requesting Holders whose
allocation did not satisfy their requests pro rata on the basis of the number of
shares of Registrable Securities held by such Holders, and this procedure shall
be repeated until all of the shares of Registrable Securities which may be
included in the underwriting have been so allocated.
-6-
(d) Discretion of the Company. In connection with any Company
Public Sale Event, subject to the provisions of this Agreement, the Company, in
its sole discretion, shall determine whether (a) to proceed with, withdraw from
or terminate such Company Public Sale Event, (b) to enter into a purchase
agreement or underwriting agreement for such Company Public Sale Event, and (c)
to take such actions as may be necessary to close the sale of Common Stock
contemplated by such offering, including, without limitation, waiving any
conditions to closing such sale which have not been fulfilled.
(e) Market-Standoff Agreement. In connection with a Company
Public Sale Event, securities in connection with an effective registration
statement under the Securities Act, each Holder agrees, upon the request of the
Company or the underwriters managing any underwritten offering of the Company's
securities, not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any securities of the Company (other than
those included in the registration) without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time after
the effectiveness of the registration statement as specified by such
underwriters, not to exceed one hundred eighty (180) days; provided that all
officers, directors and 5% stockholders of the Company are bound by and have
entered into similar agreements. Each Holder agrees that the Company may
instruct its transfer agent to place stop-transfer notations in its records to
enforce the provisions of this Section 3.2(e).
3.3 Agreements Concerning Offerings. Subject to the terms and
conditions hereof, in connection with any Registration Statement, the Company
will:
(a) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus (the "Prospectus")
used in connection therewith as may be necessary to make and to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all securities
proposed to be registered in such registration statement.
(b) Furnish to the participating Holders or the underwriters
such number of copies of any Prospectus (including any preliminary Prospectus
and any amended or supplemented Prospectus), in conformity with the requirements
of the Securities Act, as the Holders may reasonably request in order to effect
the offering and sale of the shares of Registrable Securities to be offered and
sold, but only while the Company shall be required under the provisions hereof
to cause the registration statement to remain current.
(c) Provide to any Holder requesting to include Registrable
Securities in such Registration Statement and any managing underwriter(s)
participating in any distribution thereof and to any attorney, accountant or
other agent retained by such Holder or managing underwriter(s), reasonable
access to appropriate officers and directors of the Company, its independent
auditors and counsel to ask questions and to obtain information (including any
financial and other records and pertinent corporate documents) reasonably
requested by any such Holder, managing underwriter(s), attorney, accountant or
other agent in connection with such Registration Statement or any amendment
thereto, provided, however, that (i) in connection with any such access or
request, any
-7-
such requesting persons shall cooperate to the extent reasonably practicable to
minimize any disruption to the operation by the Company of its business and (ii)
any records, information or documents shall be kept confidential by such
requesting persons, unless (i) such records, information or documents are in the
public domain or otherwise publicly available or (ii) disclosure of such
records, information or documents is required by court or administrative order
or by applicable law (including, without limitation, the Securities Act).
(d) Use its best efforts to register or qualify the shares of
Registrable Securities covered by such registration statement under the
securities or Blue Sky laws of such states as the participating Holders shall
reasonably request, maintain any such registration or qualification current
until the earlier of (A) the second anniversary of the date of this Agreement,
(B) the sale of all the shares of Registrable Securities so registered or (C)
such time as all of the Registrable Securities can be sold by Holders within a
three-month period without compliance with the registration requirements of the
Securities Act pursuant to Rule 144 thereunder; provided, however, that the
Company shall not be required to take any action that would subject it to the
general jurisdiction of the courts of any jurisdiction in which it is not so
subject or to qualify as a foreign corporation in any jurisdiction where the
Company is not so qualified.
(e) Take all such other action either necessary or desirable
to permit the shares of Registrable Securities held by the Holders to be
registered and disposed of in accordance with the method of disposition
described herein.
(f) Enter into and perform its obligations under an
underwriting agreement, in usual and customary form, with the managing
underwriter of such offering. Each participating Holder participating in such
underwriting shall also enter into and perform its obligations under any such
agreement.
(g) Cause all Registrable Securities registered pursuant to
this Section 3.13(g) to be listed on The Nasdaq National Market or such other
exchange as the Company's Common Stock is then listed or quoted.
(h) Provide for or designate a transfer agent and registrar
(which may be the same entity) for the Registrable Securities covered by the
Registration Statement from and after the effective date of such Registration
Statement.
(i) Cooperate with the selling Holders of Registrable
Securities and any managing underwriters to facilitate the timely issuance and
delivery to any underwriters to which any Holder may sell Registrable Securities
in such offering certificates evidencing shares of the Registrable Securities
not bearing any restrictive legends and in such denominations and registered in
such names as the managing underwriters may request.
(j) The Company will keep the Holders informed of the
Company's best estimate of the earliest date on which such Registration
Statement or any post-effective amendment thereto will become effective and will
notify each Holder, Holders' Counsel and the managing underwriter(s), if any,
participating in the distribution pursuant to such Registration Statement
-8-
promptly (i) when such Registration Statement or any post-effective amendment to
such Registration Statement is filed or becomes effective, (ii) of any request
by the Commission for an amendment or any supplement to such Registration
Statement or any related Prospectus, or any other information request by any
other governmental agency directly relating to the offering, and promptly
deliver to each Holder participating in the offering and the managing
underwriter(s), if any, copies of all correspondence between the Commission or
any such governmental agency or self-regulatory body and all written memoranda
relating to discussions with the Commission or its staff with respect to the
Registration Statement or proposed sale of shares, to the extent not covered by
attorney-client privilege or constituting attorney work product, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of
such Registration Statement or of any order preventing or suspending the use of
any related Prospectus or the initiation or threat of any proceeding for that
purpose, (iv) of the suspension of the qualification of any shares of Common
Stock included in such Registration Statement for sale in any jurisdiction or
the initiation or threat of a proceeding for that purpose, (v) of any
determination by the Company that an event has occurred (the nature and pendency
of which need not be disclosed during a "black-out period" pursuant to Section
3.5(a)) which makes untrue any statement of a material fact made in such
Registration Statement or any related Prospectus or which requires the making of
a change in such Registration Statement or any related Prospectus in order that
the same will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (vi) of the completion of the distribution contemplated by
such Registration Statement if it relates to a Company Sale Event.
(k) In the event of the issuance of any stop order suspending
the effectiveness of such Registration Statement or of any order suspending or
preventing the use of any related Prospectus or suspending the qualification of
any shares of Common Stock included in such Registration Statement for sale in
any jurisdiction, the Company will obtain its withdrawal at the earliest
possible time.
3.4 Expenses.
(a) All expenses, other than discounts and commissions,
incurred in connection with any registration pursuant to Sections 3.1 and 3.2
shall be borne by the Company. The costs and expenses of any such registration
shall include, without limitation, the reasonable fees and expenses of the
Company's counsel and its accountants, the reasonable fees and expenses of one
counsel for the Holders and all other costs and expenses of the Company incident
to the preparation, printing and filing under the Securities Act of the
registration statement and all amendments and supplements thereto and the cost
of furnishing copies of each preliminary prospectus, each final prospectus and
each amendment or supplement thereto to underwriters, dealers and other
purchasers of the securities so registered, the costs and expenses incurred in
connection with the qualification of such securities so registered under the
"blue sky" laws of various jurisdictions, the fees and expenses of the Company's
transfer agent and all other costs and expenses of complying with the provisions
of this Section 3 with respect to such registration (collectively, "Registration
Expenses").
-9-
(b) Excluding the Registration Expenses, the participating
Holders shall pay all other expenses incurred on their behalf with respect to
any registration pursuant to Sections 3.1 and 3.2 including any counsel for the
participating Holders (other than counsel as provided in Section 3.4(a)) and all
underwriting discounts and selling commissions with respect to the Registrable
Securities sold by them pursuant to such registration statement.
3.5 Blackout Periods.
(a) Black-Out Periods for Holders. No Holder shall offer to
sell or sell any shares of Registrable Securities pursuant to the Shelf
Registration Statement, and the Company shall not be required to supplement or
amend any Registration Statement or otherwise facilitate the sale of Registrable
Securities pursuant thereto, during the 30-day period (or such lesser number of
days until the Company makes its next required filing under the Exchange Act)
immediately following the receipt by each Holder of a certificate of an
authorized officer of the Company to the effect that the Board of Directors of
the Company has determined in good faith that such offer, sale, supplement or
amendment is likely to require the disclosure of confidential information that
would materially and adversely affect the Company. The Company may not exercise
this postponement right more than once in any twelve (12) month period. Any
period described in Section 3.5(a) during which Holders are not able to sell
shares of Registrable Securities pursuant to the Shelf Registration Statement is
herein referred to as a "black-out" period. The Company shall notify each Holder
of the expiration or earlier termination of any "black-out" period (the nature
and pendency of which need not be disclosed during such "black-out" period).
(b) The period during which the Company is required pursuant
to Subsection 3.1 to keep the Shelf Registration Statement continuously
effective shall be extended by a number of days equal to the number of days, if
any, of any "black-out" period applicable to Holders pursuant to this Section
3.5 occurring during such period, plus a number of days equal to the number of
days during such period, if any, of any period during which the Holders are
unable to sell any shares of Registrable Securities pursuant to the Shelf
Registration Statement as a result of the happening of any event of the nature
described in Sections 3.7(b)(ii), 3.7(b)(iii) or 3.7(b)(v).
3.6 Black-Out Period for the Company. Except for offers to sell and
sales of Common Stock pursuant to a Registration Statement on Form S-8 or on
Form S-4, standby underwritings in connection with the redemption of outstanding
convertible securities, the conversion of outstanding convertible securities or
in connection with the acquisition by the Company of another company or
business, the Company shall not publicly offer to sell or sell any shares of
capital stock of the Company during the 60-day period immediately following the
initial sale of shares by any Holder in an underwritten public offering of
shares in connection with a Company Sale Event.
3.7 Indemnification and Contribution.
(a) To the extent permitted by law, the Company agrees to
indemnify and hold harmless each Holder and each person, if any, who controls
such Holder within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, and each of their respective officers, directors and
employees against any losses, claims, damages or liabilities, or actions in
-10-
respect thereof to which such Holder or persons may become subject under the
Securities Act, or otherwise (collectively, "Losses"), insofar as such Losses
arise out of, or are based upon, any untrue statement or alleged untrue
statement of any material fact contained in Registration Statement, any related
Preliminary Prospectus or any related Prospectus, or any amendment or supplement
thereto, or arise out of, or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse such Holder or persons
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Losses; provided, however, that the Company
shall not be so liable to the extent that any such Losses arise out of, or are
based upon, an untrue statement or alleged untrue statement of a material fact
or an omission or alleged omission to state a material fact in said Registration
Statement in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of such Holder specifically for use
therein. Notwithstanding the foregoing, the Company shall not be liable in any
such instance to the extent that any such Losses arise out of, or are based
upon, an untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus if (i) after the Company had made
available sufficient number of copies of the Prospectus, such Holder failed to
send or deliver a copy of the Prospectus with or prior to the delivery of
written confirmation of the sale of Registrable Securities to the person
asserting such Losses or who purchased the Registrable Securities the purchase
of which is the basis of the action if, in either instance, such delivery by
such Holder is required by the Securities Act and (ii) the Prospectus would have
corrected such untrue statement or alleged untrue statement or alleged omission;
and the Company shall not be liable in any such instance to the extent that any
such Losses arise out of, or are based upon, an untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact in the Prospectus, if such untrue statement or alleged untrue
statement, omission or alleged omission is corrected in an amendment or
supplement to the Prospectus and if, having previously been furnished by or on
behalf of the Company with copies of the Prospectus as so amended or
supplemented, such Holder thereafter fails to deliver such Prospectus as so
amended or supplemented, prior to or concurrently with the sale of Registrable
Securities if such delivery by such Holder is required by the Securities Act.
This indemnity agreement will be in addition to any liability which the Company
may otherwise have and shall remain in full force and effect regardless of any
investigation made by or on behalf of such Holder or any such Person and shall
survive the Termination Date and the transfer of Registrable Securities by such
Holder as otherwise permitted hereby.
(b) To the extent permitted by law, each Holder severally
agrees to indemnify and hold harmless the Company, each other Holder and each
person, if any, who controls the Company or such other Holder within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act, and their
respective officers, directors and employees, against any Losses to which the
Company, such other Holder or such persons may become subject under the
Securities Act, or otherwise, insofar as such Losses arise out of, or are based
upon, any untrue statement or alleged untrue statement of any material fact
contained in such Registration Statement, any related Preliminary Prospectus or
any related Prospectus, or any amendment or supplement thereto, or arise out of,
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Company, such other Holder or such
persons for any legal or other expenses reasonably incurred by
-11-
them in connection with investigating or defending any such Losses, in each
instance to the extent, but only to the extent, that any such Losses arise out
of, or are based upon, an untrue statement or alleged untrue statement of a
material fact or an omission or alleged omission to state a material fact in
said Registration Statement, said Preliminary Prospectus or said Prospectus, or
any said amendment or supplement thereto in reliance upon, and in conformity
with, written information furnished to the Company by or on behalf of such
Holder specifically for use therein; provided, however, that the liability of
each Holder under this Section 3.7(b) shall be limited to an amount equal to the
proceeds of the sale of shares of Registrable Securities by such Holder in the
offering which gave rise to the liability (net of underwriting commissions paid
or incurred by such Holder in connection with the registration, if any, and
sale). This indemnity agreement will be in addition to any liability which
Holder may otherwise have and shall remain in full force and effect regardless
of any investigation made by or on behalf of the Company or any such person and
shall survive the Termination Date and the transfer of Registrable Securities by
such Holder as otherwise permitted hereby.
(c) Promptly after any person entitled to indemnification
under this Section 3.8 receives notice of any claim or the commencement of any
action, the indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party pursuant to the indemnification provisions of
this Section 3.7, notify the indemnifying party in writing of the claim or the
commencement of such action; provided, however, that the failure or delay to so
notify the indemnifying party shall not relieve it from any liability which it
may have to the indemnified party hereunder unless and to the extent such
failure or delay has prejudiced the rights of the indemnifying party and shall
not, in any event, relieve it from any liability which it may have to the
indemnified party other than pursuant to the indemnification provisions of this
Section 3.7. If any such claim or action shall be brought against an indemnified
party, and it has notified the indemnifying party thereof in accordance with the
terms hereof, the indemnifying party shall be entitled to participate in the
defense of such claim, or, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party, upon written notice to
the indemnified party of such assumption. After notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
claim or action, (i) the indemnifying party shall not be liable to the
indemnified party pursuant to the indemnification provisions hereof for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, (ii) the indemnifying party shall not be liable for the costs and
expenses of any settlement of such claim or action unless such settlement was
effected with the consent of the indemnifying party (which consent shall not be
unreasonably withheld or delayed) and (iii) the indemnified party shall be
obligated to cooperate with the indemnifying party in the investigation of such
claim or action; provided, however, that any indemnified party hereunder shall
have the right to employ separate counsel and to participate in the defense of
such claim assumed by the indemnifying party, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (a) the
employment of such counsel has been specifically authorized in writing by the
indemnifying party, (b) the indemnifying party shall have failed to assume the
defense of such claim from the person entitled to indemnification hereunder and
failed to employ counsel within a reasonable period following such assumption,
or (c) in the reasonable judgment of the indemnified party, based upon
-12-
advice of its counsel, a material conflict of interest may exist between such
indemnified party and the indemnifying party with respect to such claims or
there may be one or more material legal defenses available to it which are
different from or additional to those available to the indemnifying party (in
which case, if the indemnified party notifies the indemnifying party in writing
that the indemnified party elects to employ separate counsel at the expense of
the indemnifying party, the indemnifying party shall not have the right to
assume the defense of such claim on behalf of the indemnified party).
Notwithstanding the foregoing, the Holders (together with their respective
controlling persons and officers, directors and employees) shall have the right
to employ at the expense of the Company only one separate counsel to represent
such Holders (and their respective controlling persons and officers, directors
and employees) who may be subject to liability arising out of any one action (or
separate but substantially similar actions in the same jurisdiction arising out
of the same general allegations or circumstances) in respect of which indemnity
may be sought by such Holders against the Company pursuant to the
indemnification provisions of this Section 3.7. If such defense is not assumed
by the indemnifying party, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such consent will not
be unreasonably withheld or delayed). No indemnifying party will consent to
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation. All fees and expenses to be paid by the indemnifying party hereunder
shall be paid a commercially reasonable time after they are billed to the
indemnified party, subject to receipt of a written undertaking from the
indemnified party to repay such fees and expenses if indemnity is not ultimately
determined to be available to such indemnified party under this Section 3.7.
(d) In order to provide for just and equitable contribution
between the Company and such Holders in circumstances in which the
indemnification provisions of this Section 3.7 are for any reason insufficient
or inadequate to hold the indemnified party harmless, the Company and such
Holders shall contribute to the aggregate Losses (including any investigation,
legal and other fees and expenses reasonably incurred in connection with, and
any amount paid in settlement of, any action, suit or proceeding or any claims
asserted, but after deducting any contribution actually received from persons
other than the Company and such Holders) to which the Company and one or more of
its directors or its officers who sign such Registration Statement or such
Holders or any controlling person of any of them, or their respective officers,
directors or employees may become subject, under the Securities Act, under any
other statute, at common law or otherwise, insofar as such Losses or actions in
respect thereof arise out of, or are based upon, any untrue statement or alleged
untrue statement of any material fact contained in such Registration Statement
or arise out of, or are based upon, the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading. Such contributions shall be in such amounts
that the portion of such Losses for which each such Holder shall be responsible
under this Section 3.7(d) shall be limited to the portion of such Losses which
are directly attributable to an untrue statement of a material fact or an
omission to state a material fact in said Registration Statement in reliance
upon, and in conformity with, written information furnished to the Company by or
on behalf of any such Holder specifically for use therein, and the Company shall
be responsible for the balance of such Losses; provided, however, that the
liability of each such Holder to make such contribution shall be limited to an
amount equal to the proceeds of the sale of shares of
-13-
Registrable Securities by such Holder in the offering which gives rise to the
liability (net of underwriting commissions and disbursements) paid or incurred
in connection with the registration, if any, and sale). As among themselves,
such Holders agree to contribute to amounts payable by other such Holders in
such manner as shall, to the extent permitted by law, give effect to the
provisions in Section 3.7(b). The Company and such Holders agree that it would
not be just and equitable if their respective obligations to contribute pursuant
to this Section were to be determined by pro rata allocation (other than as set
forth above) of the aggregate Losses by reference to the proceeds realized by
such Holders in a sale pursuant to said Registration Statement or said
Prospectus or by any other method of allocation which does not take account of
the considerations set forth in this Section 3.7(d). No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution under this Section from any
person who was not guilty of such fraudulent misrepresentation.
3.8 Information by Holder. The Holders whose securities are included in
any registration effected pursuant to this Section 3 shall furnish in writing to
the Company such information regarding such persons and the distribution
proposed by such persons as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Section 3. The Company's obligations under this Section 3
are conditioned upon compliance by such persons with the provisions of this
Section 3.8.
3.9 Transfer of Registration Rights. The rights to cause the Company to
register securities granted by the Company under Sections 3.1 and 3.2 may be
assigned by HP to the transferee or assignee of not less than 20% of Registrable
Securities (as adjusted for stock splits and the like) and provided that the
Company is given written notice of any such transfer within thirty (30) days of
the date of said transfer, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
rights are being assigned and provided further that the transferee or assignee
of such rights is not deemed by the Board of Directors of the Company, in its
reasonable judgment, to be a competitor of the Company and provided further that
the transferee or assignee of such rights assumes in writing in a form
reasonably acceptable to the Company the obligations of any Holder under this
Agreement. If the stock certificates of a transferring Holder bear a restrictive
legend, the stock certificates of its transferee to whom the rights hereunder
are being transferred shall, subject to the terms of this Agreement, also bear
such a restrictive legend. Except with respect to transfers pursuant to this
Section 3.9, a transferee of Registrable Securities shall neither assume any
liabilities or obligations nor enjoy any rights hereunder and shall not be bound
by any of the terms hereof Each Holder hereby agrees that any transfer of shares
of Registrable Securities by such Holder shall be made (i) in compliance with
the registration requirements of the Securities Act or (ii) in a transaction
exempt from the registration requirements of the Securities Act. The Company may
request, as a condition to the transfer of any Registrable Securities, that the
transferring Holder provide the Company with an opinion of securities counsel
reasonably satisfactory to it with regard to compliance with the terms of this
Agreement.
3.10 Termination of Registration Rights. The registration rights
granted pursuant to this Section 3 shall terminate as to any Holder on the
Termination Date.
-14-
3.11 Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of a majority of the outstanding Registrable Securities, enter
into any agreement with any holder or prospective holder of any securities of
the Company which would allow such holder or prospective holder to include such
securities in any registration filed under Sections 3.1 or 3.2 hereof, unless
under the terms of such agreement, such holder or prospective holder may include
such securities in any such registration only to the extent that the inclusion
of his securities will not reduce the amount of the Registrable Securities of
the Holders which is included.
SECTION 4
UNREGISTERED SHARES
4.1 Lock-Up. HP irrevocably agrees that it will not, directly or
indirectly, sell, lend, offer, contract to sell, transfer the economic risk of
ownership in, make any short sale, pledge or otherwise dispose of the
Unregistered Shares without the prior written consent of Pinnacle until August
2, 2001.
SECTION 5
EXCHANGE ACT REPORTING
5.1 Exchange Act Reporting. At any time until the sale of all of the
Registrable Shares and the Unregistered Shares, the Company agrees to:
(a) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act or the
Exchange Act; and
(b) furnish to any Holder, forthwith upon request (A) a
written statement by the Company that it has complied with the current public
information and reporting requirements of Rule 144 and the Exchange Act, (B) a
copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (C) such other information as
may be reasonably requested in connection with any Holder availing itself of any
rule or regulation of the SEC which permits the selling of any such securities
without registration or pursuant to such rule or regulation.
5.2 Form 144. If any Holder is required to file a Form 144 with respect
to any sale of shares of Registrable or Restricted Securities, such Holder shall
promptly deliver to the Company a copy of such completed Form 144 filed with the
SEC.
-15-
SECTION 6
MISCELLANEOUS
6.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of California as applied to contracts entered into solely
between residents of, and to be performed entirely within, such state.
6.2 Successors and Assigns. Except for transfers permitted by Section
2.1 and 3.10, neither party may, directly or indirectly, in whole or in part,
neither by operation of law or otherwise, assign or transfer this Agreement or
delegate any of its obligations under this Agreement without the other party's
written consent. Any attempted assignment, transfer or delegation without such
prior written consent will be void. Notwithstanding the foregoing, HP, or its
permitted successive assignees or transferees, may assign or transfer this
Agreement or delegate any rights or obligations hereunder without consent: (1)
to any entity controlled by, or under common control with, HP, or its permitted
successive assignees or transferees; or (2) in connection with a merger,
reorganization, transfer, sale of assets or product lines, or change of control
or ownership of HP, or its permitted successive assignees or transferees.
Without limiting the foregoing, this Agreement will be binding upon and inure to
the benefit of the parties and their permitted successors and assigns.
6.3 Entire Agreement; Amendment. This Agreement contains the entire
understanding and agreement between the parties with regard to the subject
matter hereof and thereof and supersedes all prior agreements and understandings
among the parties relating to the subject matter hereof. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
6.4 Notices and Dates. All notices or other communications required or
permitted under this Agreement shall be made in the manner provided in Section
12.4 of the Purchase Agreement. In the event that any date provided for in this
Agreement falls on a Saturday, Sunday or legal holiday, such date shall be
deemed extended to the next business day.
6.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become a binding agreement when one or more counterparts have been signed
by each party and delivered to the other party.
6.6 Severability. If any provision of this Agreement or portion thereof
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
-16-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the date aforesaid.
"COMPANY" PINNACLE SYSTEMS, INC.,
a California corporation
By: /S/Xxxxxx X. Xxxxxxxx
-------------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
----------------------------------------------
Title: Vice President, Finance and Administration
----------------------------------------------
"HP" HEWLETT-PACKARD COMPANY,
a Delaware corporation
By: /S/Xxx Xxxxx
-------------------------------------------------
Name: Xxx Xxxxx
----------------------------------------------
Title: Vice President, Communications Solutions Group
----------------------------------------------
-17-
