Execution Copy
SETTLEMENT AGREEMENT
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
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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
stock on the Nasdaq National Market does not, for any four (4) consecutive
trading days on which the registration statement filed pursuant to Article XIV
of the Stock Acquisition and Exchange Agreement is effective and the use of
which is not suspended during the period commencing on the date of this
Settlement Agreement and ending on May 31, 2001, equal or exceed $23.00 per
share (the "Target Price", which price shall be equitably adjusted in the event
of a stock dividend, stock split, combination, reclassification or other similar
event), then Pinnacle shall issue on or before June 15, 2001 to each of the
Stockholders additional shares of Pinnacle common stock (the "Additional
Shares"), the number of Additional Shares to be issued to each Stockholder to be
equal to the number obtained by dividing such Stockholder's Target Share Value
(as defined in Section 2.2 below) by the Average Closing Price (as defined in
Section 2.2 below). Any Additional Shares issued pursuant to this Settlement
Agreement will, when issued and delivered in accordance with this Settlement
Agreement, be duly authorized, validly issued, fully paid, and non-assessable
and free
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from any preemptive right created by statute, Pinnacle's Certificate of
Incorporation, or Pinnacle's Bylaws or pursuant to any agreement; provided,
however, that any Additional Shares to be issued under this Settlement Agreement
will be subject to restrictions on transfer under applicable federal and state
securities laws.
2.2. Definitions for Additional Share Calculations. For the
purposes of this Section 2, the following terms shall have the following
meanings:
(a) Average Closing Price. The "Average Closing Price"
shall be average of the last sales prices of Pinnacle common stock as reported
on the Nasdaq National Market for those trading days during the period
commencing May 1, 2001 and ending May 31, 2001, equitably adjusted in the event
of a stock dividend, stock split, combination, reclassification or other similar
event occurring during such period.
(b) Target Share Value. "Target Share Value" shall mean
the amount obtained by multiplying the number of shares of Pinnacle common stock
which were acquired by a Stockholder in the Acquisition (including the Escrow
Shares and equitably adjusted in the event of a stock dividend, stock split,
combination, reclassification or other similar event) by the difference between
(i) the Target Price and (ii) the Average Closing Price.
2.3. Termination of Obligation to Issue Additional Shares.
Notwithstanding any other provision of this Section 2 to the contrary, in the
event that the closing sales price of Pinnacle's common stock on the Nasdaq
National Market equals or exceeds the Target Price on any four (4) consecutive
trading days on which the registration statement filed pursuant to Article XIV
of the Stock Acquisition and Exchange Agreement is effective and the use of
which is not suspended during the period commencing on the date of this
Settlement Agreement and ending on May 31, 2001, then Pinnacle shall have no
obligation to issue any Additional Shares and Pinnacle's obligations under
Sections 2 and 4 hereof shall terminate.
3. Tax Treatment. The issuance of any Additional Shares pursuant to
this Settlement Agreement shall be accounted for and treated as an adjustment to
the consideration delivered to the Stockholders under the Stock Acquisition and
Exchange Agreement. The parties hereto acknowledge and agree that they continue
to believe that the Acquisition qualifies as a reorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code") and will
consistently treat it as such a reorganization for federal income tax purposes.
4. Registration of Additional Shares.
4.1. Registration. On or before June 29, 2001, Pinnacle shall
prepare for filing and file with the Securities and Exchange Commission (the
"SEC") a registration statement under the Securities Act of 1933, as amended
(the "Securities Act") on Form S-3 (or any successor short form registration
involving a similar amount of disclosure) for resale of all of any Additional
Shares issued to the Stockholders pursuant to this Settlement Agreement to be
made on a continuous basis pursuant to Rule 415 of the Securities Act (the
"Registration Statement"). Pinnacle will use reasonable efforts to cause such
Registration Statement to become effective and remain continuously effective
until July 31, 2002, except as such period may be extended pursuant to the
provisions of this Section 4.1. Pinnacle may, upon written notice to the
Stockholders, suspend the Stockholders' use of the Registration Statement for a
reasonable
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period not to exceed sixty (60) days if Pinnacle in its reasonable judgment
believes it may possess material nonpublic information the disclosure of which
at that point in time in its reasonable judgment would have a material adverse
effect on Pinnacle and its subsidiaries taken as a whole but such suspension
right shall not be exercised more than once, and Pinnacle shall increase the
time period during which it must keep such Registration Statement effective for
a period of time equal to the lesser of (i) that of such suspension period plus
any period for which the effectiveness of the Registration Statement shall be
extended pursuant to Section 4.7(b) or (ii) the period prior to which the
Additional Shares are eligible for sale pursuant to Rule 144(k).
4.2. Covenants of the Stockholders. The Stockholders covenant
and agree that the Stockholders shall provide to Pinnacle on a timely basis such
consents, representations and information and execute such documents as may
reasonably be required by Pinnacle or any underwriter in connection with such
registration.
4.3. Expenses. The expenses of registration and sale of
Additional Shares pursuant to Section 4.1 will be paid by Pinnacle. For purposes
of this Section 4.3, the term "expenses" shall include federal, state and other
registration and qualification fees, legal fees and expenses for Pinnacle's
counsel (but excluding the fees and expenses, if any, of counsel or other
advisors to the Stockholders), auditing and accounting expenses incurred by
Pinnacle in connection with the registration, printing and other related
expenses including salary and related overhead expenses of employees of Pinnacle
for time expended by such employees. The Stockholders shall be responsible for
the fees and expenses of their counsel and any other advisors and for any
brokers' commissions or underwriting discounts incurred in connection with sales
of Additional Shares under Section 4.1.
4.4. Exclusive Obligation to Register. Except as provided in
this Section 4, Pinnacle will have no obligation to register under the
Securities Act any Additional Shares received by the Stockholders pursuant to
this Settlement Agreement.
4.5. State Securities Laws. In connection with the registered
offering of any Additional Shares pursuant to this Settlement Agreement,
Pinnacle will take such action as may be necessary to qualify or register
Additional Shares to be sold under the securities or "blue-sky" laws of such
jurisdictions as may be reasonably requested by the Stockholders; provided,
however, that Pinnacle will not be obligated to qualify as a foreign corporation
to do business under the laws of any such jurisdiction in which it is not then
qualified or to file any general consent to service of process.
4.6. Indemnification and Contribution.
(a) To the extent permitted by law, Pinnacle will
indemnify and hold harmless each of the Stockholders, their respective officers
and directors, any underwriter (as defined in the Securities Act) and each
person, if any, who controls such Stockholders or such underwriter within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which any of them may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained or expressly
incorporated by reference in any registration statement filed pursuant to the
terms of this Settlement Agreement, including any preliminary prospectus or
final prospectus
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contained therein 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, and will reimburse each of the Stockholders and
their respective officers and directors and each such underwriter or controlling
person for any legal or other expenses reasonably incurred by any of them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 4.6(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of Pinnacle (which consent shall not be unreasonably withheld or
delayed) nor shall Pinnacle be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in connection with such registration statement, preliminary prospectus,
final prospectus or amendment or supplement thereto in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by the Stockholders or any person controlling the
Stockholders or by any such underwriter selected by the Stockholders, or any
person controlling such underwriter.
(b) To the extent permitted by law, each Stockholder
will, severally, indemnify and hold harmless Pinnacle, its directors, its
officers who have signed such registration statement, each person, if any, who
controls Pinnacle within the meaning of the Securities Act and any underwriter
(as defined in the Securities Act) against any losses, claims, damages or
liabilities to which Pinnacle or any such director, officer, controlling person,
or underwriter may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any untrue or alleged untrue statement
of any material fact contained or expressly incorporated by reference in any
registration statement filed pursuant to the terms of this Settlement Agreement,
including any preliminary prospectus or final prospectus contained therein or
any amendment or supplement thereto, or arise out of or 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, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in such registration
statement, preliminary prospectus, final prospectus, or amendments or
supplements thereto, in reliance upon and in conformity with written information
furnished by such Stockholders expressly for use in connection with such
registration; and such Stockholder will reimburse any legal or other expenses
reasonably incurred by Pinnacle or any such director, officer, controlling
person, or underwriter in connection with investigating or defending any such
loss, claim, damage, liability or action. It is agreed that the indemnity
agreement contained in this Section 4.6(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the indemnifying party (which
consent shall not be unreasonably withheld or delayed) and provided further that
no Stockholder will have any liability under this Section 4.6(b) in excess of
the product obtained by multiplying (i) the Average Closing Price by (ii) the
number of Additional Shares issued to such Stockholder pursuant to this
Agreement.
(c) If the indemnification provided for in Section
4.6(a) and (b) hereof is unavailable to a person entitled to indemnification
hereunder, then each person that would have been an indemnifying party hereunder
will, in lieu of indemnifying such indemnified party,
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contribute to the amount paid or payable by such indemnified person for which
indemnification is provided herein in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and such indemnified party,
respectively, in connection with the statements or omissions which resulted in
the loss, damages, etc. underlying such indemnification obligations. Relative
fault will be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied in writing by
the indemnifying party or such indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. Pinnacle and the Stockholders agree that it would
not be just and equitable if contribution pursuant to this Section 4.6(c) were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to above in this
Section 4.6(c). No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
(d) Promptly after receipt by a party indemnified under
this Section 4.6 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against any indemnifying
party under this Section 4.6, notify the indemnifying party in writing of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party desires, jointly with
any other indemnifying party similarly noticed, to assume the defense thereof
with counsel mutually satisfactory to the parties. The failure to notify any
indemnifying party promptly of the commencement of any such action, shall not
relieve such indemnifying party of any liability to the indemnified party under
this Section 4.6, except to the extent that such indemnifying party is actually
prejudiced thereby.
4.7. Miscellaneous Provisions Regarding Registration.
(a) Upon effecting any registration of Additional Shares
hereunder, Pinnacle will:
(i) prepare and file with the SEC such
amendments and supplements to the Registration Statement and the prospectus used
in connection therewith as may be necessary to keep the Registration Statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all of Additional Shares for the time period specified in
Section 4.1 hereof;
(ii) furnish to each of the Stockholders and to
any underwriter of Additional Shares such number of copies of the Registration
Statement, each amendment and supplement thereto (in each case including all
exhibits thereto), the prospectus included in such registration statement
(including each preliminary prospectus and summary prospectus) or filed under
Rule 424(b) under the Securities Act in accordance with Rule 430A thereunder, in
conformity with the requirements of the Securities Act, such documents
incorporated by reference in the Registration Statement or such prospectus, and
such other documents as the Stockholders or any underwriter of Additional Shares
may reasonably request in order to facilitate the disposition of Additional
Shares registered in such registration statement;
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(iii) promptly notify each of the Stockholders
at any time when a prospectus relating to a Registration Statement is required
to be delivered under the Securities Act, of the occurrence of any event as a
result of which the prospectus included in the Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and at the
request of any Stockholder prepare and furnish to such Stockholder a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Additional
Shares, such prospectus will not include an 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 not misleading in light of the circumstances then
existing;
(iv) provide a transfer agent for Pinnacle's
common stock no later than the effective date of the Registration Statement;
(v) cause Additional Shares to be listed on the
Nasdaq National Market;
(vi) enter into such customary agreements and
take all such other action in connection therewith as the Stockholders may
reasonably request in order to expedite or facilitate the disposition of such
Additional Shares; and
(vii) if such registration is in connection
with an underwritten offering of securities, furnish to the Stockholders a
signed counterpart, addressed to the Stockholders, of (i) any opinion of counsel
to Pinnacle being delivered to the underwriter in connection with such
underwritten offering dated the effective date of the registration statement,
and (ii) any "comfort" letter signed by the independent public accountants of
Pinnacle being delivered to the underwriter in connection with such underwritten
offering.
(b) Each Stockholder will, upon receipt of any notice
from Pinnacle of the occurrence of any event of the kind described in Section
4.7(a)(3) hereof, discontinue disposition of Additional Shares pursuant to the
Registration Statement until Stockholder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 4.7(a)(3) hereof,
which supplemented or amended prospectus shall be made available to the
Stockholders as soon as possible. The period of time during which Pinnacle is
obligated to maintain the effectiveness of the Registration Statement under
Section 4.1 above shall be extended by the number of days of any such
discontinuance.
4.8. Reports Under the Exchange Act. With a view toward making
available to the Stockholders the benefits of Rule 144 promulgated under the
Securities Act ("Rule 144") and any other rule or regulation of the SEC that may
at any time permit a Stockholder to sell securities of Pinnacle to the public
without registration, Pinnacle agrees to:
(a) make and keep public information available, within
the meaning of Rule 144, at all times;
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(b) file with the SEC in a timely manner all reports and
other documents required of Pinnacle under the Securities Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); and
(c) furnish to any Stockholder forthwith upon request a
written statement by Pinnacle that it has complied with the reporting
requirements of Rule 144, and of the Securities Act and the Exchange Act, a copy
of the most recent annual or quarterly report, and such other reports and
documents filed by Pinnacle with the SEC as may reasonably be requested in
availing any such holder to take advantage of any rule or regulation of the SEC
permitting the selling of any Additional Shares without registration.
4.9. Transfer of Registration Rights. The registration rights
of any Stockholder (and of any permitted transferee of any Stockholder or other
permitted transferee) under this Settlement Agreement may be transferred (i) to
any transferee who acquires at least 25% of Additional Shares acquired by any
Stockholder directly or indirectly from such Stockholder other than pursuant to
a sale which is registered under the Securities Act or which is exempt from such
registration requirements pursuant to Rule 144 or (ii) to any Related Person (as
defined below) of such Stockholder; provided that in either case the transferee
executes an instrument agreeing to be bound by the terms and conditions of
Section 4 of this Settlement Agreement. Prompt notice shall be given to Pinnacle
with respect to any such transfer stating the name and address of any permitted
transferee. For purposes of this Section 4.9, "Related Person" shall mean (a) in
relation to any individual, (1) any spouse, parent or issue of such individual
or any spouse of any such issue, (2) any trust for the benefit of any one or
more of such individual, any spouse, parent or issue of such individual, and any
spouse of any such issue, and (3) any legal representative of any of such
individual, any spouse, parent or issue of such individual and any spouse of any
such issue; (b) in relation to any trust, any settlor or any beneficiary
thereof; (c) in relation to the estate of any individual, (1) any legal
representative of such estate, (2) any legatee or heir of such individual or (3)
any trust for the benefit of any one or more of such legatees and heirs; and (d)
in relation to any other Stockholder, any Stockholder Affiliate (as defined
below) of such Stockholder. For purposes of this Section 4.9, the word "issue"
shall also include issue by adoption; and the word "spouse" shall not include a
spouse from whom an individual is legally separated or in the process of
obtaining a separation or divorce. For purposes of this Section 4.9,
"Stockholder Affiliate" shall mean with respect to any person, any person or
entity that directly or indirectly controls, is controlled by, or is under
common control with, such person.
5. Release of Claims. In consideration of the undertaking and
agreements of Pinnacle set forth in this Settlement Agreement, each of the
Stockholders, on his, her or its own behalf and on behalf of his, her or its,
agents, affiliates, heirs, successors, assigns and legal representatives, hereby
release and forever discharge Pinnacle and their affiliates and their respective
officers, directors, employees, agents, attorneys, successors, assigns and legal
representatives (each being referred to individually as a "Releasee" and
collectively as the "Releasees") from any and all claims, demands, suits,
proceedings, or causes of action, including, without limitation, any claim for
breach of the Stock Acquisition and Exchange Agreement and any claim for
violation of federal or state securities laws, arising out of or relating to any
statement made or adopted by Pinnacle or any of its officers, directors,
employees or agents regarding expectations with respect to Pinnacle's net sales
or earnings for the fourth
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quarter of its fiscal year ended June 30, 2000 or Pinnacle's failure to disclose
at any time prior to July 11, 2000 that its net sales and earnings for the
fourth quarter of its fiscal year ended June 30, 2000 would be below prior
expectations; provided, however, that nothing contained in this Section 5 shall
operate to release Pinnacle from or otherwise affect, any of Pinnacle's
obligations under this Settlement Agreement.
6. General Provisions.
6.1. Amendment, Waiver and Consent. No waiver of any provision
of this Settlement Agreement, nor any consent granted hereunder, shall in any
event be effective, unless the same shall be in writing and signed by the party
granting such waiver or consent and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No amendment to this Settlement Agreement shall be effective unless in
writing and signed by Pinnacle and the Stockholders.
6.2. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or by commercial messenger or courier service, or mailed by
registered or certified mail (return receipt requested) or sent via facsimile
(with acknowledgement of complete transmission) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice), provided, however, that notices sent by mail will not be deemed given
until received:
(a) If to Pinnacle:
Pinnacle Systems, Inc.
280 N. Bernardo Avenue
Mountain View, CA 94093
Attention: President and Chief Executive Officer
Telephone No: (650) 526-1600
Facsimile No: (650) 526-1601
With a copy to:
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, MA 02111
Attention: Paul J. Hartnett, Jr., Esq.
Telephone No: (617) 856-8200
Facsimile No: (617) 856-8201
(b) If to any Stockholder, to address of such
Stockholder set forth on the signature pages hereto
With a copy to:
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Bingham, Dana LLP
150 Federal Street
Boston, MA 02110
Attention: Julio E. Vega, Esq.
Telephone No: (617) 951-8000
Facsimile No: (617) 951-8736
6.3. Publicity and Disclosures. No public release or any
public disclosure, either written or oral, of the transactions contemplated by
this Settlement Agreement shall be made without the prior knowledge and written
consent of both Pinnacle and the Stockholders, provided, however, that,
notwithstanding the foregoing, any party shall be free to make such public
announcements and disclosure regarding this Settlement Agreement, in such form
and at such times, as such party reasonably believes are necessary in order to
comply with applicable federal and state securities laws, without prior consent
of any other party.
6.4. Counterparts and Effectiveness. This Settlement Agreement
may be executed simultaneously in two or more counterparts, each of which when
executed and delivered shall be deemed an original, but all of which together
shall constitute one and the same Settlement Agreement, and all signatures need
not appear on any one counterpart. This Settlement Agreement shall only be
effective when executed and delivered by all of the parties hereto.
6.5. Parties in Interest. This Settlement Agreement, together
with the schedules hereto, which schedules are incorporated herein by their
reference, shall be binding and inure to the benefit of the parties named herein
and their respective heirs, legal representatives, successors and assigns. This
Settlement Agreement is not assignable by any party hereto except to the extent
otherwise provided in Section 4.9 hereof.
6.6. Entire Agreement. This Settlement Agreement, including
the schedules attached hereto, constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes all other
representations, warranties, agreements and understandings among the parties
with respect to the subject matter hereof.
6.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal, substantive laws of the Commonwealth
of Massachusetts (other than any conflict of laws rule which might result in the
application of the laws of any other jurisdiction).
6.8. Arbitration. Any claim or dispute arising out of or
related to this Settlement Agreement, or the interpretation, making,
performance, breach or termination thereof, shall be finally settled by binding
arbitration in Boston, Massachusetts in accordance with the then current
Commercial Arbitration Rules of the American Arbitration Association and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. The arbitrator(s) shall have the authority to
grant any equitable and legal remedies that would be available in any judicial
proceeding instituted to resolve a dispute. Such arbitration shall be conducted
by a single arbitrator chosen by mutual agreement of Pinnacle and those
Stockholders who then hold a majority of the sum of (i) those shares of Pinnacle
common stock which were issued by Pinnacle in connection with the Acquisition
and which are then still
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held by the Stockholders and (ii) any Additional Shares which have been issued
by Pinnacle pursuant to this Settlement Agreement and which are then still held
by the Stockholders. Failing such agreement, the arbitration shall be conducted
by three independent arbitrators, none of whom shall have any competitive
interests with Pinnacle, Avid Sports, the Stockholders or XstreamSports.
Pinnacle shall choose one such arbitrator. The second arbitrator shall be chosen
by those Stockholders who then hold a majority of the sum of (i) those shares of
Pinnacle common stock which were issued in connection with the Acquisition and
which are then still held by the Stockholders and (ii) any Additional Shares
which have been issued by Pinnacle pursuant to this Settlement Agreement and
which are then still held by the Stockholders. Such two arbitrators shall
mutually select a third arbitrator. Any decision of two such arbitrators shall
be binding on all of the parties to this Settlement Agreement. The parties to
the arbitration may apply to a court of competent jurisdiction for a temporary
restraining order, preliminary injunction or other interim or conservatory
relief, as necessary, without breach of this arbitration provision and without
abridgement of the powers of the arbitrator(s). Each party shall pay his, her or
its own costs and expenses (including counsel fees) of any such arbitration,
except that the arbitrator(s) can compel one party to pay all or a portion of
another party's reasonable costs and expenses, including without limitation AAA
administrative fees, arbitrator fees, attorney's fees, expert fees, witness
fees, travel expenses and out of pocket expenses.
6.9. Headings. The section and other headings contained in
this Settlement Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Settlement Agreement.
6.10. Rules of Construction. The parties hereto agree that
they have been represented by counsel during the negotiation and execution of
this Settlement Agreement and, therefor, waive the application of any law,
regulation, holding or rule of construction providing that ambiguities in an
agreement or other document will be construed against the party responsible for
drafting such agreement or document.
6.11. Expenses. Pinnacle will bear all costs and expenses,
including reasonable legal fees and expenses of Bingham Dana LLP, counsel to the
Stockholders, the Stockholders' Representative or XstreamSports incurred in
connection with the negotiation, execution and delivery of this Settlement
Agreement, provided that the aggregate of such costs and expenses do not exceed
$10,000.
6.12. Tax Consequences. Each of the Stockholders represents
and warrants to Pinnacle and Avid Sports that such Stockholder has consulted
with and relied upon the advice of such Stockholder's own counsel and tax
advisors concerning the federal, state, local and foreign tax consequences of
the transactions contemplated by this Agreement upon (i) the tax treatment of
the Acquisition and (ii) such Stockholder's individual tax position generally.
Each of the Stockholders acknowledges and agrees that neither Pinnacle nor Avid
Sports shall have any liability or obligation to any of them arising out of or
relating to the tax consequences of the transactions contemplated by this
Settlement Agreement upon (i) the tax treatment of the Acquisition or (ii) the
tax position of any Stockholder.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Settlement
Agreement to be duly executed as an instrument under seal all as of the date
first written above.
PINNACLE SYSTEMS, INC.
By:____________________________________________
Name:
Title
STOCKHOLDER
Name:__________________________________________
Signature:_____________________________________
Address:_______________________________________
_______________________________________________
_______________________________________________
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<PAGE>
Schedule A
----------
Distribution of Escrow Shares
-----------------------------
Name and Address
of Stockholder No. of Escrow Shares
---------------- --------------------
Aeder, Karl 1,625
4 Beech Road
Westford, MA 01886
Avid Technology 46,430
Metro Tech Park
One Park West
Tewksbury, MA 01876
Barkley, John 26,929
4 Paradise Lane
Hudson, NH 03051
Bienvenu, Mark 1,253
9222 Appleford Circle, Apt. 110
Owings Mills, MD 21117
Carpenter, Jeffrey 929
42 Trailridge
Melissa, TX 75454
Clark, Mark 155
37 Sunset Road
Somerville, MA 02144
Colony Investments 346
Vali Hi 4 Stacey Estates Road
Warwick, WK02 Bermuda
Connell, Michael 155
30 Barry Drive
Tewksbury, MA 01876
Dapkus, Karen 2,105
111 Lille Road
Nashua, NH 03062
Eccker, Randy 1,857
1659 South 152 Street
Omaha, NE 68144
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<PAGE>
Fay, Eugene 929
44 Manzanita Avenue
San Francisco, CA 94118
Grandin, David 31,882
8 Crestwood Lane
Nashua, NH 03062
Intel Corporation 20,751
2200 Mission College Blvd.
Santa Clara, CA 95052-81199
Keshian, Daniel 2,322
45 Shannon Lane
No. Andover, MA 01845
Lamaa, Fady 774
14 Starwood Crossing
Andover, MA 01810
Maira, Ravi 93
26 College Hill Road
Somerville, MA 02144
Menon, Krishna 3,869
27 Hemlock Drive
Northboro, MA 01532
Moniz, Michael 1,393
18104 Antieam Court
Tampa, FL 33647
Morrison, William 155
49 Rice Road
Wayland, MA 01778
Murphy, David 1,547
14-5 Deer Path Street
Maynard, MA 01754
O'Brien, Jennifer 155
8 Lois Street
Methuen, MA 01844
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<PAGE>
Quinn, Steven 478
30 Sewall Road
Portsmouth, NH 03801
Racicot, Andrew 516
105 High Street
Jefferson, MA 01522
Rhinehart, Craig 1,671
1618 Fremont Lane
Vienna, VA 22182
Sauer, David 8
One Francis Street
Woburn, MA 01801
Simmons, Robert 26,310
96 StageCoach Road
No. Andover, MA 01845
Thomas, Alton 929
137 Peppers Rd, SE
Rome, GA 30161
Thompson, Raymond 1,547
137 Green Street
Bolton, MA 01740
Vint, Frederick 167
1401 NW 146th Street
Edmond, OK 73013
Walsh, John, Jr. 3,095
17 Old Farm Way
Chelmsford, MA 01824
Williams Communications 6,917
One Williams Place, 26th Floor
Tulsa, OK 74172
Wilson, David 1,547
9 Bradley Road
Andover, MA 01810
Xifaras, George 23
5 Launching Road
Andover, MA 01810
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