Settlement Agreement (2000)Full Document 

Start of Preview
         THIS SETTLEMENT  AGREEMENT is made and entered into as of this ____ day
of September,  2000 by and among Pinnacle Systems Inc., a California corporation
("Pinnacle") and, those former stockholders of Avid Sports, Inc. ("Avid Sports")
listed on Schedule A hereto (each of such former  stockholders being referred to
individually as a "Stockholder" and collectively as the "Stockholders").

         WHEREAS,  Pinnacle  and the  Stockholders  are parties to that  certain
Stock  Acquisition and Exchange  Agreement dated as of June 29, 2000 (the "Stock
Acquisition  and Exchange  Agreement") by and among Pinnacle,  Avid Sports,  the
stockholders of Avid Sports,  David Grandin as the stockholders'  representative
(the "Stockholders' Representative") and XstreamSports,  Inc. (formerly known as
Brendan Corp ("XstreamSports")), pursuant to which Pinnacle acquired on June 30,
2000 all of the issued and outstanding  capital stock of Avid Sports in exchange
for shares of Pinnacle's common stock (the "Acquisition");

         WHEREAS,  on July 11, 2000,  prior to the opening of trading,  Pinnacle
announced  that its net sales and earnings for the fourth  quarter of its fiscal
year ended June 30, 2000 would be below its prior expectations for the quarter;

         WHEREAS, on July 11, 2000, the closing sales price of Pinnacle's common
stock on the Nasdaq National Market fell to $9.1875, which represented a decline
of $13.4375, from the closing sales price of Pinnacle's common stock on July 10,
2000 of $22.635.

         WHEREAS,  Pinnacle  acknowledges  that the sharp  decline in the market
price of Pinnacle's  common stock has had a significant  and adverse impact upon
the consideration which the Stockholders expected to receive in the Acquisition;

         WHEREAS,   Pinnacle   intended  that  the  Stockholders   receive  fair
consideration in connection with the Acquisition and is prepared, subject to the
terms and  conditions  hereinafter  set  forth,  to  release  certain  shares of
Pinnacle common stock held by the Stockholders from escrow and, if necessary, to
issue to the  Stockholders  additional  shares of its  common  stock in order to
ensure that the Stockholders  receive fair  consideration in connection with the
Acquisition;

         WHEREAS,  in light of Pinnacle's  undertaking  and agreement to release
from escrow  certain shares of Pinnacle  common stock owned by the  Stockholders
and, if necessary,  to issue to the Stockholders  additional  shares of Pinnacle
common  stock,  the  Stockholders  are  prepared to resolve and release  certain
claims which they may have against Pinnacle;

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration,  the receipt and
sufficiency of which are hereby acknowledged,  the parties hereto,  intending to
be legally bound, do hereby agree as follows:

         1. Release of Shares from Escrow.  As of the date hereof,  State Street
Bank and Trust Company (the "Escrow  Agent") holds in escrow  188,862  shares of
Pinnacle common stock (the "Escrow  Shares")  pursuant to the Stock  Acquisition
and Exchange Agreement and an




Escrow  Agreement  dated  as of  June  30,  2000  by  and  among  Pinnacle,  the
Stockholders'  Representative  and the Escrow  Agent (the  "Escrow  Agreement").
Pinnacle  hereby  agrees  to  give  the  Escrow  Agent  and  the   Stockholders'
Representative  written notice not later than September 30, 2000 authorizing the
Escrow Agent to immediately  release to the  Stockholders  that number of Escrow
Shares set forth opposite such  Stockholder's name on Schedule A annexed hereto.
Each  Stockholder  acknowledges and agrees that the Escrow Shares so released to
such  Stockholder  pursuant to this Section 1 shall remain subject to claims for
indemnification which may be made by the Buyer's Indemnified Parties (as defined
in the Stock Acquisition and Exchange Agreement) pursuant to, and subject to the
limitations  set forth in,  Article XIII of the Stock  Acquisition  and Exchange
Agreement,  provided,  however,  that  any  claim  for  indemnification  by  the
Stockholders which is made by any of the Buyer's Indemnified Parties pursuant to
Article XIII, other than an Article V Claim (as defined in the Stock Acquisition
and Exchange Agreement),  is made  proportionately  against the Escrow Shares of
all of the  Stockholders.  Pinnacle  acknowledges  and agrees  that (i) that any
claim  for  indemnification  by the  Stockholders  which  is  made by any of the
Buyer's  Indemnified  Parties pursuant to Article XIII of the Stock  Acquisition
and  Exchange  Agreement,   other  than  an  Article  V  Claim,  shall  be  made
proportionately against the Escrow Shares,  including those released pursuant to
this  Section 1 and (ii) the value of any  Escrow  Shares to be  surrendered  to
Pinnacle   by  any   Stockholder   in  order  to  satisfy  any  such  claim  for
indemnification  shall be deemed to be  $22.51875,  as  originally  set forth in
Section 3(g) of the Escrow Agreement. Pinnacle also acknowledges and agrees that
one of the purposes of releasing the Escrow Shares to the Stockholders  pursuant
to this Section 1 is to permit the Stockholders greater flexibility and possible
liquidity with respect to their investments.  Accordingly, Pinnacle acknowledges
and agrees that,  notwithstanding the fact that the Escrow Shares are subject to
claims for indemnification by the Buyer's Indemnified Parties, a Stockholder may
elect to sell or otherwise  transfer any Escrow Shares released pursuant to this
Section 1, free of any  restrictions  other than those imposed under  applicable
federal and state  securities laws, and satisfy any such  indemnification  claim
either by surrender to Pinnacle of other shares of Pinnacle  common stock valued
on the same basis as the Escrow  Shares  ($22.51875  per share) or by payment to
Pinnacle of an equivalent amount in cash.

         2. Issuance of Additional Shares.

                  2.1. Conditions to Issuance;  Calculation of Additional Shares
to be Issued.  In the event that the closing  sales price of  Pinnacle's  common

End of Preview