0001012870-01-502477.txt : 20011030 0001012870-01-502477.hdr.sgml : 20011030 ACCESSION NUMBER: 0001012870-01-502477 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20011026 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PINNACLE SYSTEMS INC CENTRAL INDEX KEY: 0000774695 STANDARD INDUSTRIAL CLASSIFICATION: PHOTOGRAPHIC EQUIPMENT & SUPPLIES [3861] IRS NUMBER: 943003809 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-72298 FILM NUMBER: 1767833 BUSINESS ADDRESS: STREET 1: 280 N BERNARDO AVE CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 BUSINESS PHONE: 6502371600 MAIL ADDRESS: STREET 1: 280 N BERNARDO AVE CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 S-3 1 ds3.txt FORM S-3 As filed with the Securities and Exchange Commission on October 26, 2001 Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________ FORM S-3 REGISTRATION STATEMENT Under The Securities Act of 1933 _____________________ PINNACLE SYSTEMS, INC. (Exact name of Registrant as specified in its charter) _____________________ California 94-3003809 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 280 North Bernardo Ave. Mountain View, California (650) 626-1600 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) _____________________ Arthur D. Chadwick Vice President, Finance and Administration Pinnacle Systems, Inc. 280 North Bernardo Avenue Mountain View, California 94043 (650) 526-1600 (Name, address, including zip code, and telephone number, including area code, of agent for service) _____________________ Copies to: Chris F. Fennell, Esq. Wilson Sonsini Goodrich & Rosati Professional Corporation 650 Page Mill Road Palo Alto, CA 94304 (650) 493-9300 _____________________ Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [_] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] _____________________ CALCULATION OF REGISTRATION FEE ================================================================================ Proposed Proposed Maximum Maximum Title of Each Class Amount Offering Aggregate of Securities to to be Price Offering be Registered(1) Registered Per Share(2) Price(2) -------------------------------------------------------------------------------- Common Stock no par value............. 1,200,000 shares $4.08 $4,896,000 ================================================================================ (1) Includes Preferred Share Purchase Rights, which, prior to the occurrence of certain events, will not be exercisable or evidenced separately from the common stock. (2) Estimated solely for the purpose of computing the amount of the registration fee. The estimate is made pursuant to Rule 457(c) of the Securities Act of 1933, as amended, based on the average of the high and low prices of our common stock on October 24, 2001. _____________________ The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a) may determine. ================================================================================ THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED AND IS DECLARED EFFECTIVE BY THE SECURITIES AND EXCHANGE COMMISSION. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE IN WHICH THE OFFER OR SALE IS NOT PERMITTED. PROSPECTUS (SUBJECT TO COMPLETION) Dated October 26, 2001 PINNACLE SYSTEMS, INC. 1,200,000 Shares COMMON STOCK ------------- These shares may be offered and sold from time to time by certain shareholders of Pinnacle Systems, Inc., a California corporation identified in this prospectus under the heading of "Selling Shareholder." The Selling Shareholder acquired the shares in connection with the acquisition by PS Miro Holdings Inc. & Co. KG, or Pinnacle KG, and Pinnacle Systems GmbH, or Pinnacle GmbH, of certain assets of Fast Multimedia Holdings Inc., or Fast Holdings, and Fast Multimedia AG, or Fast AG, pursuant to the Asset Purchase and Transfer Agreement, or the Asset Agreement, dated September 13, 2001 by and among us, Pinnacle KG, Pinnacle GmbH, Fast Holdings, Fast AG and certain other parties. The Selling Shareholder will receive all of the net proceeds from the sale of the shares and will pay all underwriting discounts and selling commissions, if any, applicable to the sale of the shares. We will not receive any of the proceeds from the sale of the shares. YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 3 OF THIS PROSPECTUS BEFORE PURCHASING ANY OF THE COMMON STOCK OFFERED HEREBY. Our common stock is traded on the Nasdaq National Market under the symbol "PCLE." On October 24, 2001, the last sale price of a share of our common stock was $4.20. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. ____________, 2001. TABLE OF CONTENTS Where to Find Additional Information About Us ............................. 1 Information Incorporated by Reference ..................................... 1 Forward Looking Information ............................................... 1 Prospectus Summary ........................................................ 2 Pinnacle Systems, Inc. .................................................... 2 Risk Factors .............................................................. 3 Use of Proceeds ........................................................... 12 Selling Shareholder ....................................................... 12 Plan of Distribution ...................................................... 13 Experts ................................................................... 14 Legal Matters ............................................................. 15
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. The Selling Shareholder is offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the shares. In this prospectus, "we," "us," and "our" refer to Pinnacle Systems, Inc. and its subsidiaries. -i- WHERE TO FIND ADDITIONAL INFORMATION ABOUT US We file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission, referred to as the SEC. You may read and copy any document we file at the SEC's public reference facilities in Room 1034, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public at the SEC's web site at http://www.sec.gov. INFORMATION INCORPORATED BY REFERENCE The SEC allows us to "incorporate by reference" the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this prospectus, and later information that we file with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below, and any future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, or the 1934 Act, until the Selling Shareholder sells all the shares. The documents we incorporate by reference are: (1) Our Annual Report on Form 10-K for the fiscal year ended June 30, 2001, filed September 26, 2001 pursuant to Section 13 of the 1934 Act; (2) The description of our common stock contained in our Registration Statement on Form 8-A filed with the Commission on September 9, 1994; and (3) The description of our Preferred Share Purchase Rights contained in our Registration Statement on Form 8-A as filed with the Commission on December 19, 1996, as amended May 19, 1998. You may request a copy of these filings, at no cost, by written or oral request to the following address: Chief Financial Officer, Pinnacle Systems, Inc., 280 North Bernardo Avenue, Mountain View, California 94043; telephone number (650) 526-1600. FORWARD LOOKING INFORMATION This prospectus, including the information incorporated by reference herein, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the "Securities Act", and Section 21E of the 1934 Act. Actual results could differ materially from those projected in the forward-looking statements as a result of the risk factors set forth below. Reference is made in particular to the discussion set forth under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Annual Report on Form 10-K for the fiscal year ended June 30, 2001, incorporated herein by reference. In connection with forward-looking statements that appear in these disclosures, prospective purchasers of the common stock offered hereby should carefully consider the factors set forth in this prospectus under "Risk Factors." PROSPECTUS SUMMARY You should read the following summary together with the more detailed information appearing elsewhere in this prospectus, especially "Risk Factors", and the audited condensed consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2001, filed September 26, 2001 and incorporated herein by reference. PINNACLE SYSTEMS, INC. We are a supplier of video authoring, storage, distribution and Internet streaming solutions for broadcasters, professionals, and consumers. Our products are used to create, store, and distribute video content for television programs, television commercials, pay-per-view, sports video, corporate communications and personal home movies. In addition, our products are increasingly being used to stream video over the Internet. We were incorporated in California in 1986. We maintain our executive offices at 280 North Bernardo Avenue, Mountain View, California 94043, and our telephone number is (650) 526-1600. -2- RISK FACTORS [X] There are various factors which may cause our net revenues and operating results to fluctuate. Our quarterly and annual operating results have varied significantly in the past and may continue to fluctuate because of a number of factors, many of which are outside our control. These factors include: . Increased competition and pricing pressure . Timing of significant orders from and shipments to major customers, including OEM's and our large broadcast accounts . Timing and market acceptance of new products . Success in developing, introducing and shipping new products . Dependence on distribution channels through which our products are sold . Accuracy of our and our resellers' forecasts of end-user demand . Accuracy of inventory forecasts . Ability to obtain sufficient supplies from our subcontractors . Timing and level of consumer product returns . Foreign currency fluctuations . Costs of integrating acquired operations . General domestic and international economic conditions We also experience significant fluctuations in orders and sales due to seasonal fluctuations, the timing of major trade shows and the sale of consumer products in anticipation of the holiday season. Sales usually slow down during the summer months of July and August, especially in Europe. Also, we attend a number of annual trade shows, which can influence the order pattern of products, including CEBIT in March, the NAB convention in April and the IBC convention in September. Our operating expense levels are based, in part, on our expectations of future revenue and, as a result, net income would be disproportionately affected by a shortfall in net sales. Due to these factors, we believe that quarter-to-quarter comparisons of our results of operations are not necessarily meaningful and should not be relied upon as indicators of future performance. [X] Deteriorating market conditions and continued economic uncertainty could materially adversely impact our revenues and growth rate. As a result of recent unfavorable economic conditions and reduced capital spending, individuals and companies have delayed or reduced expenditures, as we experienced during the fourth fiscal quarter of 2001. The revenue growth and profitability of our business depends primarily on the overall demand for our products. Softening demand for these products resulting from ongoing economic uncertainty may result in decreased revenues or earnings levels or growth rates. If the economic conditions in the United States worsen -3- or if a wider global economic slowdown occurs, demand for our products may weaken, and our business, operating results, financial condition and stock price may be materially adversely affected as a result. [X] Our revenues, particularly in the Broadcast Solutions Division, are increasingly becoming dependent on large broadcast system sales to a few significant customers. Our business and financial condition may be materially adversely affected if sales are delayed or not completed within a given quarter or if any of our significant customers terminate their relationship, or contracts, with us, modify their requirements which may delay installation and revenue recognition, or significantly reduce the amount of business they do with us. We expect sales of large broadcast systems to a few significant customers to continue to constitute a material portion of our net revenues. Our quarterly and annual revenues could fluctuate significantly if: . Sales to one or more of our significant customers are delayed or are not completed within a given quarter. . The contract terms preclude us from recognizing revenue during that quarter. . We are unable to provide any of our major customers with products in a timely manner and on competitive pricing terms. . Any of our major customers experience competitive, operational or financial difficulties. . Any of our major customers terminate their relationship with us or significantly reduce the amount of business they do with us. . Any of our major customers reduce their capital investments in our products in response to slowing economic growth. If we are unable to complete anticipated transactions within a given quarter, our revenues may fall below the expectations of market analysts, and our stock price could drop. [X] We incurred losses in fiscal 2001 and expect to continue to incur losses in fiscal 2002. In fiscal 2001, we recorded net losses of approximately $60.5 million. In light of the current economic downturn, we expect revenues in fiscal 2002 to be lower than revenues in fiscal 2001 and, as a result, we expect to incur net losses in fiscal 2002. [X] Quarter-end discounting, resulting from customers delaying negotiations until quarter-end in an effort to improve their ability to obtain more favorable pricing terms, may delay sales transactions. We recognize a substantial portion of our revenues in the last month or weeks of a given quarter, and our revenues in a given quarter depend substantially on orders booked during the last month or weeks of a quarter. Due to the prevalence of end-of-month sales activity, if certain sales cannot be closed during those last weeks, sales may be deferred until the following quarter. This may cause our quarterly revenues to fall below analysts' expectations. [X] We are dependent on contract manufacturers and single or limited source suppliers for our components. If these manufacturers and suppliers do not meet our demand either in volume or quality, our business and financial condition could be materially harmed. -4- We rely on subcontractors to manufacture our desktop and consumer products and the major subassemblies of our broadcast products. We and our manufacturing subcontractors are dependent upon single or limited source suppliers for a number of components and parts used in our products, including certain key integrated circuits. Our strategy to rely on subcontractors and single or limited source suppliers involves a number of significant risks, including: . Loss of control over the manufacturing process . Potential absence of adequate capacity . Potential delays in lead times . Unavailability of certain process technologies . Reduced control over delivery schedules, manufacturing yields, quality and cost . Unexpected increases in component costs If any significant subcontractor or single or limited source supplier becomes unable or unwilling to continue to manufacture these subassemblies or provide critical components in required volumes, we will have to identify and qualify acceptable replacements or redesign our products with different components. Additional sources may not be available and product redesign may not be feasible on a timely basis. This could materially harm our business. Any extended interruption in the supply of or increase in the cost of the products, subassemblies or components manufactured by third party subcontractors or suppliers could materially harm our business. [X] We must retain key employees to remain competitive. If certain of our key employees leave or are no longer able to perform services for us, this could materially and adversely affect our business. We may not be able to attract and retain a sufficient number of managerial personnel and technical employees to compete successfully. We believe that the efforts and abilities of our senior management and key technical personnel are very important to our continued success. Our success is dependent upon our ability to attract and retain qualified technical and managerial personnel. We may not be able to retain our key technical and managerial employees or attract, assimilate and retain such other highly qualified technical and managerial personnel as are required in the future. Also, employees may leave our employ and subsequently compete against us, or contractors may perform services for competitors of ours. If we are unable to retain key personnel, our business could be materially harmed. [X] We incurred negative cash flow in fiscal 2001 and expect to continue to incur negative cash flow in fiscal 2002, and our financial condition and results of operations may be adversely affected as a result. In the fiscal year ended June 30, 2001, we had negative cash flow from operations of approximately $22.0 million. In light of the recent economic downturn, our losses in the fourth quarter of fiscal 2001 and our projected losses for fiscal 2002, we believe that we will continue to incur negative cash flow in fiscal 2002. If we continue to incur negative cash flow, we may be at a competitive disadvantage due to several factors, including: . Insufficient working capital; . Insufficient capital for acquisitions; and . Limited access to additional capital. -5- If we are competitively disadvantaged due to these or other factors, our revenues may decrease, intensifying our cash flow deficiency, and our financial condition and results of operations may be adversely affected as a result. [X] If we experience difficulty in developing and installing our Vortex News systems, our financial position and results of operations could be harmed. In March 2000, we acquired all of the outstanding stock of Montage. The Montage product line includes Vortex News, a networked news solution for broadcasters. Since the Montage acquisition, we have invested significant resources and capital to further develop the Vortex News products, and to integrate those products into our existing products. We have received a limited number of significant orders for our Vortex News products from a few important customers, and have experienced delays in the installation of some of those systems. To date, we have not completed the installation nor assured the proper functioning of any large Vortex News installations. If we continue to experience delays and difficulty in installing our Vortex News systems or in adapting these systems to our customers' needs, or if our customers are dissatisfied with the functionality or performance of our Vortex News systems once they are installed, these systems may not obtain broad market acceptance or contribute meaningfully to our revenues or profitability. In addition, if we do not successfully install, market and sell these systems, we will consume significant resources without obtaining commensurate revenue, and our financial position and results of operations will be harmed. [X] Any failure to successfully integrate the businesses we have acquired could negatively impact us. In December 2000, we acquired DVD authoring technology from Minerva. In June 2000, we acquired Avid Sports, Inc. and Propel. In April 2000, we acquired Montage. In March 2000, we acquired DES and Puffin. In August 1999, we acquired the Video Communications Division of HP, and Truevision, Inc. We may in the near or long-term pursue additional acquisitions of complementary businesses, products or technologies. Integrating acquired operations is a complex, time-consuming and potentially expensive process. All acquisitions involve risks that could materially and adversely affect our business and operating results. These risks include: . Distracting management from the day-to-day operations of our business . Costs, delays and inefficiencies associated with integrating acquired operations, products and personnel . Potentially dilutive issuances of our equity securities . Incurring debt and amortization expenses related to goodwill and other intangible assets [X] Our stock price may be volatile. The trading price of our common stock has in the past and could in the future fluctuate significantly. These fluctuations have been or could be in response to numerous factors, including: . Quarterly variations in results of operations . Announcements of technological innovations or new products by us, our customers or competitors . Changes in securities analysts' recommendations . Announcements of acquisitions -6- . Changes in earnings estimates made by independent analysts . General fluctuations in the stock market Our revenues and results of operations may be below the expectations of public market securities analysts or investors. This could result in a sharp decline in the market price of our common stock. In July 2000, we announced that financial results for the fourth quarter of fiscal 2000, which ended June 30, 2000, would be lower than the then current analyst consensus estimates regarding our quarterly results. In the day following this announcement, our share price lost more than 59% of its value. Our shares continue to trade in a price range significantly lower than the range held by our shares before this announcement. With the advent of the Internet, new avenues have been created for the dissemination of information. We do not have control over the information that is distributed and discussed on electronic bulletin boards and investment chat rooms. The motives of the people or organizations that distribute such information may not be in our best interest or in the interest of our shareholders. This, in addition to other forms of investment information including newsletters and research publications, could result in a sharp decline in the market price of our common stock. In addition, stock markets have from time to time experienced extreme price and volume fluctuations. The market prices for high technology companies have been particularly affected by these market fluctuations and such effects have often been unrelated to the operating performance of such companies. These broad market fluctuations may cause a decline in the market price of our common stock. In the past, following periods of volatility in the market price of a company's stock, securities class action litigation has been brought against the issuing company. On July 18, 2000, a lawsuit entitled Jiminez v. Pinnacle Systems, Inc., et al., No. 00-CV-2596 was filed in the United States District Court for the Northern District of California against us and certain of our officers and directors. We are defending the case vigorously, and recently moved to dismiss the complaint. In a written order dated May 7, 2001, the court dismissed the complaint and allowed the plaintiffs to file an amended complaint. The plaintiffs filed a second consolidated amended complaint on June 22, 2001. Our motion to dismiss this complaint is scheduled to be heard on November 2, 2001. It is possible that additional similar litigation could be brought against us in the future. The securities class action lawsuit described above and any similar litigation which may be brought against us could result in substantial costs and will likely divert management's attention and resources. Any adverse determination in such litigation could also subject us to significant liabilities. [X] If our products do not keep pace with the technological developments in the rapidly changing video post-production equipment industry, our business may be materially adversely affected. The video post-production equipment industry is characterized by rapidly changing technology, evolving industry standards and frequent new product introductions. The introduction of products embodying new technologies or the emergence of new industry standards can render existing products obsolete or unmarketable. Delays in the introduction or shipment of new or enhanced products, our inability to timely develop and introduce such new products, the failure of such products to gain significant market acceptance or problems associated with new product transitions could materially harm our business, particularly on a quarterly basis. We are critically dependent on the successful introduction, market acceptance, manufacture and sale of new products that offer our customers additional features and enhanced performance at competitive prices. Once a new product is developed, we must rapidly commence volume production. This process requires accurate forecasting of customer requirements and attainment of acceptable manufacturing costs. The -7- introduction of new or enhanced products also requires us to manage the transition from older, displaced products in order to minimize disruption in customer ordering patterns, avoid excessive levels of older product inventories and ensure that adequate supplies of new products can be delivered to meet customer demand. In addition, as is typical with any new product introduction, quality and reliability problems may arise. Any such problems could result in reduced bookings, manufacturing rework costs, delays in collecting accounts receivable, additional service warranty costs and a limitation on market acceptance of the product. [X] If we do not compete effectively, our business will be harmed. The market for our products is highly competitive. We compete in the broadcast, professional and consumer video production markets. We anticipate increased competition in each of the broadcast, professional and consumer video production markets, particularly since the industry is undergoing a period of rapid technological change and consolidation. Competition for our broadcast, professional, and consumer video products is generally based on: . Product performance . Breadth of product line . Quality of service and support . Market presence . Price . Ability of competitors to develop new, higher performance, lower cost consumer video products Certain competitors in the broadcast, professional and consumer video markets have larger financial, technical, marketing, sales and customer support resources, greater name recognition and larger installed customer bases than we do. In addition, some competitors have established relationships with current and potential customers of ours and offer a wide variety of video equipment that can be bundled in certain large system sales. Our principal competitors in the broadcast market include: Accom, Inc. Avid Technology Chyron Corporation Grass Valley Group Leitch Technology Corporation Matsushita Electric Industrial Co. Ltd. Quantel Ltd. (a division of Carlton Communications Plc) SeaChange Corporation Sony Corporation Our principal competitors in the professional and consumer markets are: Adobe Systems, Inc. Apple Computer Avid Technology, Inc. Dazzle Multimedia (a division of SCM Microsystems, Inc.) -8- Hauppauge Digital, Inc. Matrox Electronics Systems, Ltd. Media 100, Inc. Sony Corporation These lists are not all-inclusive. The consumer market in which certain of our products compete is highly competitive. There are several established video companies that currently offer products or solutions that compete directly or indirectly with our consumer products by providing some or all of the same features and video editing capabilities. In addition, we expect that existing manufacturers and new market entrants will develop new, higher performance, lower cost consumer video products that may compete directly with our consumer products. We expect that potential competition in this market is likely to come from existing video editing companies, software application companies or new entrants into the market, many of which have the financial resources, marketing and technical ability to develop products for the consumer video market. Increased competition in any of these markets could result in price reductions, reduced margins and loss of market share. Any of these effects could materially harm our business. [X] We rely heavily on dealers and OEMs to market, sell and distribute our products. In turn, we depend heavily on the success of these resellers. If these resellers do not succeed in effectively distributing our products, our financial performance will be negatively affected. These resellers may not effectively promote or market our products or may experience financial difficulties and even close operations. Our dealers and retailers are not contractually obligated to sell our products. Therefore, they may, at any time: . Refuse to promote or pay for our products . Discontinue our products in favor of a competitor's product Also, with these distribution channels standing between us and the actual market, we may not be able to accurately gauge current demand for products and anticipate demand for newly introduced products. For example, dealers may place large initial orders for a new product just to keep their stores stocked with the newest products, not because there is a significant demand for them. With respect to consumer products offerings, we have expanded our distribution network to include several consumer channels, including large distributors of products to computer software and hardware retailers, which in turn sell products to end users. We also sell our consumer products directly to certain retailers. Rapid change and financial difficulties of distributors have characterized distribution channels for consumer retail products. These arrangements have exposed us to the following risks, some of which are out of our control: . We are obligated to provide price protection to such retailers and distributors and, while the agreements limit the conditions under which product can be returned to us, we may be faced with product returns or price protection obligations . The distributors or retailers may not continue to stock and sell our consumer products . Retailers and retail distributors often carry competing products [X] We may be adversely affected if we are sued by a third party or if we decide to sue a third party regarding intellectual property rights. -9- There has been substantial litigation regarding patent, trademark and other intellectual property rights involving technology companies. In the future, litigation may be necessary to enforce any patents issued to us, to protect our trade secrets, trademarks and other intellectual property rights owned by us, or to defend us against claimed infringement. We are also exposed to litigation arising from disputes in the ordinary course of business. This litigation may: . Divert management's attention away from the operation of our business . Result in the loss of our proprietary rights . Subject us to significant liabilities . Force us to seek licenses from third parties . Prevent us from manufacturing or selling products Any of these results could materially harm our business. In the course of business, we have in the past received communications asserting that our products infringe patents or other intellectual property rights of third parties. We investigated the factual basis of such communications and negotiated licenses where appropriate. It is likely that, in the course of our business, we will receive similar communications in the future. While it may be necessary or desirable in the future to obtain licenses relating to one or more of our products, or relating to current or future technologies, we may not be able to do so on commercially reasonable terms, or at all. These disputes may not be settled on commercially reasonable terms and may result in long and costly litigation. [X] Excess or obsolete inventory, and overdue or uncollectible accounts receivables, could weaken our cash flow, harm our financial condition and results of operations and cause our stock price to fall. The recent downturn in the United States economy has contributed to a reduced demand for some of our consumer products. As a result, we are experiencing increased exposure to excess and obsolete inventories and higher overdue and uncollectible accounts receivables. If we fail to properly manage these inventory and accounts receivables risks, our cash flow may be weakened, and our financial position and results of operations could be harmed as a result. This, in turn, may cause our stock price to fall. If the economic or market conditions in the United States continue or expand to foreign markets, our financial position may be further weakened. [X] We may be unable to protect our proprietary information and procedures effectively. We must protect our proprietary technology and operate without infringing the intellectual property rights of others. We rely on a combination of patent, copyright, trademark and trade secret laws and other intellectual property protection methods to protect our proprietary technology. In addition, we generally enter into confidentiality and nondisclosure agreements with our employees and OEM customers and limit access to, and distribution of, our proprietary technology. These steps may not adequately protect our proprietary information nor give us any competitive advantage. Others may independently develop substantially equivalent intellectual property or otherwise gain access to our trade secrets or intellectual property, or disclose such intellectual property or trade secrets. If we are unable to protect our intellectual property, our business could be materially harmed. [X] Because we sell products internationally, we are subject to additional risks. -10- Sales of our products outside of North America represented approximately 57% of net sales in the year ended June 30, 2001 and 55% of net sales in the year ended June 30, 2000. We expect that international sales will continue to represent a significant portion of our net sales. We make foreign currency denominated sales in many, primarily European, countries. This exposes us to risks associated with currency exchange fluctuations. In fiscal 2002 and beyond, we expect that a majority of our European sales will continue to be denominated in local foreign currency, including the Euro. We have developed natural hedges for some of this risk since most of the European operating expenses are also denominated in local currency. However, where we sell our products in local currencies, we may be competitively unable to change our prices to reflect exchange rate fluctuations. For example, in recent periods, our revenues have been adversely affected by the decline in value of the Yen and Euro and our component currencies relative to the U.S. dollar. In addition to foreign currency risks, international sales and operations may also be subject to the following risks: . Unexpected changes in regulatory requirements . Export license requirements . Restrictions on the export of critical technology . Political instability . Trade restrictions . Changes in tariffs . Difficulties in staffing and managing international operations . Potential insolvency of international dealers and difficulty in collecting accounts We are also subject to the risks of generally poor economic conditions in certain areas of the world, most notably Asia. These risks may harm our future international sales and, consequently, our business. [X] We rely on a continuous power supply to conduct our operations, and California's current energy crisis could disrupt our operations and increase our expenses. California is in the midst of an energy crisis that could disrupt our operations and increase our expenses. In the event of an acute power shortage, that is, when power reserves for the State of California fall below 1.5%, California has on some occasions implemented, and may in the future continue to implement, rolling blackouts throughout California. We currently do not have backup generators or alternate sources of power in the event of a blackout, and our current insurance does not provide coverage for and any damages we or our customers may suffer as a result of any interruption in our power supply. If blackouts interrupt our power supply, we would be temporarily unable to continue operations at our facilities. Any such interruption in our ability to continue operations at our facilities could damage our reputation, harm our ability to retain existing customers and to obtain new customers, and could result in lost revenue, any of which could substantially harm our business and results of operations. -11- USE OF PROCEEDS We will not receive any proceeds from the sale of the shares by the Selling Shareholder. All proceeds from the sale of our common stock will go to the Selling Shareholder who offers and sells its shares. SELLING SHAREHOLDER The following table sets forth information with respect to the number of shares of common stock owned by the Selling Shareholder named below and as adjusted to give effect to the sale of the shares offered hereby. The information in the table below is current as of the date of this prospectus unless indicated otherwise. The shares are being registered to permit public secondary trading of the shares, and the Selling Shareholder may offer the shares for resale from time to time. The shares being offered by the Selling Shareholder were acquired pursuant to the Asset Agreement. The shares were issued pursuant to an exemption from the registration requirements of the Securities Act. An asterisk (*) indicates beneficial ownership of less than one (1) percent of our outstanding common stock, excluding treasury stock, as of October 22, 2001. The shares offered by this prospectus may be offered from time to time by the Selling Shareholder named below:
Name of Selling Number of Shares Beneficially Owned Number of Shares Number of Shares Beneficially Owned Shareholder Prior to the Offering (1) Being Offered After the Offering ------------------ ----------------------------------- ---------------- ----------------------------------- Number Percent Number Percent ---------------- --------------- -------------- --------------- Fast Multimedia AG 1,200,000 * % 1,200,000 -- --%
(1) Based on 56,115,523 shares of common stock outstanding as of October 22, 2001, excluding treasury stock, and on the Selling Shareholder's beneficial ownership of our common stock as of October 22, 2001. Pursuant to the terms of the Registration Rights Agreement dated October 2, 2001 between us, Fast AG and Fast Holdings (the "Rights Agreement"), we undertook to register, on a registration statement of which this prospectus is a part, all of the shares issued to the Selling Shareholder within fifteen (15) days of the issuance of the shares. The Rights Agreement also includes certain indemnification and contribution arrangements between us, the Selling Shareholder and Fast Holdings. -12- PLAN OF DISTRIBUTION The shares may be sold from time to time by the Selling Shareholder or by pledgees, donees, transferees or other successors in interest. Such sales may be made in any one or more transactions (which may involve block transactions) on the Nasdaq National Market, or any exchange on which our common stock may then be listed, in the over-the-counter market or otherwise in negotiated transactions or a combination of such methods of sale, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. The Selling Shareholder may effect such transactions by selling shares to or through broker-dealers, and such broker-dealers may sell the shares as agent or may purchase such shares as principal and resell them for their own account pursuant to this prospectus. Such broker-dealers may receive compensation in the form of underwriting discounts, concessions or commissions from the Selling Shareholder and/or purchasers of the shares, for whom they may act as agent (which compensation may be in excess of customary commissions). The aggregate proceeds to the Selling Shareholder from the sale of the shares will be the purchase price of the common stock sold less the aggregate agents' commissions if any, and other expenses of issuance and distribution not borne by us. The Selling Shareholder and any dealers or agents that participate in the distribution of the shares may be deemed to be "underwriters" within the meaning of the Securities Act, and any profit on the sale of the shares by them and any commissions received by any such dealers or agents might be deemed to be underwriting discounts and commissions under the Securities Act. To the extent required, the specific shares of common stock to be sold, the name of the Selling Shareholder, purchase price, public offering price, the names of any such agent, dealer or underwriter, and any applicable commission or discount with respect to a particular offering will be set forth in an accompanying prospectus supplement. We have agreed to bear certain expenses of registration of the shares under the federal and state securities laws and of any offering and sale hereunder, not including certain expenses, such as commissions, underwriting discounts and fees of dealers or agents attributable to the sale of the shares, and fees and expenses of the Selling Shareholder's counsel and any other advisors attributable to the sale of the shares. The Rights Agreement provides that we will indemnify the Selling Shareholder against certain liabilities, including liabilities under the Securities Act. We may suspend the use of this prospectus for a discrete period of time, not exceeding 45 days, if our Board of Directors reasonably determines in good faith that a development has occurred or a condition exists as a result of which the registration statement of which this prospectus is a part contains or incorporates by reference a material misstatement or omission, the correction of which would require the premature disclosure of confidential information that would, in our Board of Directors' good faith determination, materially and adversely affect us. We may not exercise this delay right more than twice in any 12-month period. We are required to use our commercially reasonable best efforts to cause the registration statement of which this prospectus is a part to become and remain effective until the sooner to occur of (i) the date on which all shares included within the registration statement of which this prospectus is a part have been sold or (ii) the first anniversary of the date of the issuance of such shares. Any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under that Rule rather than pursuant to this prospectus. There can be no assurance that the Selling Shareholder will sell any or all of the shares of our common stock offered by it hereunder. -13- EXPERTS Our consolidated financial statements and schedule as of June 30, 2001 and 2000 and for each of the years in the three-year period ended June 30, 2001 have been incorporated by reference in this prospectus and in the registration statement in reliance upon the reports of KPMG LLP, independent certified public accountants, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. -14- LEGAL MATTERS The validity of the shares of common stock offered hereby has been passed upon for us by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California. -15- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the costs and expenses, payable by us in connection with the sale of common stock being registered. All amounts are estimates except the SEC registration fee and Nasdaq National Market listing fee. Amount to be Paid ----------------- SEC registration fee ............................. $ 1,224.00 Nasdaq National market listing fee ............... $ 2,000.00 Printing expenses ................................ $ 10,000.00 Legal fees and expenses .......................... $ 25,000.00 Accounting fees and expenses ..................... $ 10,000.00 Miscellaneous .................................... $ 76.00 ------------- Total ............................................ $ 48,300.00 ============= ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS As permitted by Section 204(a) of the California General Corporation Law, our Articles of Incorporation eliminate a director's personal liability for monetary damages to us and our shareholders arising from a breach or alleged breach of the director's fiduciary duty, except for liability arising under Sections 310 and 316 of the California General Corporation Law or liability for (i) acts or omissions that involve intentional misconduct or knowing and culpable violation of law, (ii) acts or omissions that a director believes to be contrary to the best interests of us or our shareholders or that involve the absence of good faith on the part of the director, (iii) any transaction from which a director derived an improper personal benefit, (iv) acts or omissions that show a reckless disregard for the director's duty to us or our shareholders in circumstances in which the director was aware, or should have been aware, in the ordinary course of performing a director's duties, of a risk of serious injury to us or our shareholders, (v) acts or omissions that constitute an unexcused pattern of inattention that amounts to an abdication of the director's duty to us or our shareholders, (vi) interested transactions between the corporation and a director in which a director has a material financial interest, and (vii) liability for improper distributions, loans or guarantees. This provision does not eliminate the directors' duty of care, and in appropriate circumstances equitable remedies such as an injunction or other forms of non-monetary relief would remain available under California law. Sections 204(a) and 317 of the California General Corporation Law authorize a corporation to indemnify its directors, officers, employees and other agents in terms sufficiently broad to permit indemnification (including reimbursement for expenses) under certain circumstances for liabilities arising under the Securities Act. Our Articles of Incorporation and Bylaws contain provisions covering indemnification to the maximum extent permitted by the California General Corporation Law of corporate directors, officers and other agents against certain liabilities and expenses incurred as a result of proceedings involving such persons in their capacities as directors, officers employees or agents, including proceedings under the Securities Act or the Securities Exchange Act of 1934. We have entered into Indemnification Agreements with our directors and executive officers. The Rights Agreement provides that we will indemnify the Selling Shareholder against certain liabilities, including liabilities under the Securities Act. II-1 On July 18, 2000, a lawsuit entitled Jiminez v. Pinnacle Systems, Inc., et al., No. 00-CV-2596 was filed in the United States District Court for the Northern District of California against us and certain officer and director defendants. The action is a putative class action and alleges that defendants violated the federal securities laws by making false and misleading statements concerning our business prospects during an alleged class period of April 18, 2000 through July 10, 2000. The complaint does not specify damages. Pinnacle is defending the case vigorously, and recently moved to dismiss the complaint. In a written order dated May 7, 2001, the court dismissed the complaint and allowed the plaintiffs to file an amended complaint. The plaintiffs filed a second consolidated amended complaint on June 22, 2001. Our motion to dismiss this complaint is scheduled to be heard on November 30, 2001. It is possible that the officer and director defendants named in this lawsuit may seek indemnification from us with respect to this claim. ITEM 16. EXHIBITS Exhibit No. Description ----------- ----------- 4.1 Asset Purchase and Transfer Agreement dated as of September 13, 2001 by and among Pinnacle Systems, Inc., Fast Multimedia Holdings Inc., Fast Multimedia AG, PS Miro Holdings Inc. & Co. KG, Pinnacle Systems GmbH and certain other parties. 4.2 Registration Rights Agreement dated October 2, 2001 by and among Pinnacle Systems, Inc., Fast Multimedia Holdings Inc. and Fast Multimedia AG. 5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation. 23.1 Consent of independent auditors. 23.2 Consent of Counsel (included in Exhibit 5.1). 24.1 Power of Attorney (included in the signature page to this Registration Statement). ITEM 17. UNDERTAKINGS We hereby undertake: 1. To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (a) To include any prospectus required by Section 10(a)(3) of the Securities Act; (b) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; (c) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs (a) and (b) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by us pursuant to Section 13 or Section 15(d) of the 1934 Act that are incorporated by reference in the Registration Statement. 2. That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 3. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-2 The undersigned hereby undertakes that, for the purpose of determining any liability under the Securities Act each filing of our annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act, (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the 1934 Act) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of us in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, we certify that we have reasonable grounds to believe that we meet all of the requirements for filing on Form S-3 and have duly caused this Registration Statement No. 333-______ to be signed on our behalf by the undersigned, thereunto duly authorized, in the City of Mountain View, State of California, on the 26th day of October, 2001. PINNACLE SYSTEMS, INC. By: /s/ Mark L. Sanders ------------------------------------ Mark L. Sanders President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each such person whose signature appears below constitutes and appoints, jointly and severally, Mark L. Sanders and Arthur D. Chadwick his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Registration Statement on Form S-3 (including post-effective amendments), to sign any registration statement for the same offering covered by this Registration Statement that is to be effective upon filing pursuant to Rule 426(b) promulgated under the Securities Act of 1933, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, thereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutions, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement No. 333-_____ has been signed by the following persons in the capacities and on the dates indicated:
Signature Title Date ------------------------------ -------------------------------------------- ------------------- /s/ Mark L. Sanders President, Chief Executive Officer and October 26, 2001 ------------------------------ Director Mark L. Sanders (Principal Executive Officer) /s/ Arthur D. Chadwick Vice President, Finance and Administration October 26, 2001 ------------------------------ and Chief Financial Officer Arthur D. Chadwick (Principal Financial and Accounting Officer) /s/ Ajay Chopra Chairman of the Board and October 26, 2001 ------------------------------ Co-President, Broadcast and Ajay Chopra Professional Solutions Division /s/ Glenn E. Penisten Director October 26, 2001 ------------------------------ Glenn E. Penisten /s/ Charles J. Vaughan Director October 26, 2001 ------------------------------ Charles J. Vaughan /s/ John C. Lewis Director October 26, 2001 ------------------------------ John C. Lewis
II-4 /s/ L. Gregory Ballard Director October 26, 2001 ------------------------------ L. Gregory Ballard /s/ L. William Krause Director October 26, 2001 ------------------------------ L. William Krause
II-5 EXHIBIT INDEX Exhibit No. Description ----------- ----------- 4.1 Asset Purchase and Transfer Agreement dated as of September 13, 2001 by and among Pinnacle Systems, Inc., Fast Multimedia Holdings Inc., Fast Multimedia AG, PS Miro Holdings Inc. & Co. KG, Pinnacle Systems GmbH and certain other parties. 4.2 Registration Rights Agreement dated October 2, 2001 by and among Pinnacle Systems, Inc., Fast Multimedia Holdings Inc. and Fast Multimedia AG. 5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation. 23.1 Consent of independent auditors. 23.2 Consent of Counsel (included in Exhibit 5.1). 24.1 Power of Attorney (included in the signature page to this Registration Statement). EX-4.1 3 dex41.txt ASSET PURCHASE AND TRANSFER AGREEMENT EXHIBIT 4.1 [LETTERHEAD OF LINKLATERS & ALLIANCE] -------------------------------------------------------------------------------- 13 September 2001 [LOGO OF PINNACLE] Pinnacle Systems Fast Multimedia Asset Purchase and Transfer Agreement Professional Video Editing Business LINKLATERS OPPENHOFF & RADLER Mainzer Landstrasse 16, D-60325 Frankfurt am Main Postfach 17 01 11, D-60075 Frankfurt am Main Telephone: (49-69) 7 10 03-0 Facsimile: (49-69) 7 10 03-333 Asset Purchase and Transfer Agreement between (1) Fast Multimedia Holding Inc., 101 Federal Street, Suite 1900, Boston, MA 02110, U.S.A., - hereinafter referred to as "FAST Inc." -, (2) Fast Multimedia AG, Rudesheimerstr. 11-13, D-80686 Munchen, Germany, - hereinafter referred to as "FAST Germany" -, and together with FAST Inc. jointly referred to as "Sellers" -, and, for the purposes of the covenants pursuant to Section 12 only, (3) Mrs. Steffi Koerner, (4) Mr. Matthias Zahn, on the one side and (5) PS Miro Holdings Inc. & Co. KG, c/o KPMG Deutsche Treuhand, Elektrastr. 6, 81925 Munchen, - hereinafter referred to as "Pinnacle KG" -, (6) Pinnacle Systems GmbH, Frankfurter Strasse 3c, 38112 Braunschweig, Germany, - hereinafter referred to as "Pinnacle Germany" and together with Pinnacle Inc. jointly referred to as "Purchasers" -, and, for the purposes of acting as guarantor for the Purchasers' obligations to pay the consideration pursuant to Section 7 and the Purchasers' Representations and Warranties pursuant to Sections 10 and 11 and with respect to its express obligations according to Sections 8 and 13, (7) Pinnacle Systems, Inc., 280 N. Bernardo Avenue, Mountain View, CA 94043, - hereinafter referred to as "Pinnacle Inc.". on the other side Any reference in this Agreement to "Parties" shall only refer to parties named under (1), (2), (5) and (6) above.
1 Definitions ..................................................... 1 2 Purchase and Sale of Assets ..................................... 5 3 Transfer of Assets .............................................. 7 4 Transfer of Agreements .......................................... 8 5 Obligations and Liabilities ..................................... 10 6 Employees of the Business ....................................... 11 7 Purchase Price .................................................. 12 8 Registration Rights ............................................. 13 9 Representations and Warranties of the Sellers ................... 14 10 Representations and Warranties of the Purchasers, Guarantee of Pinnacle, Inc. ..................................... 20 11 Performance and Liability ....................................... 22 12 Covenants ....................................................... 23 13 Compliance with the Securities Laws ............................. 24 14 Closing Date Deliveries ......................................... 25 15 Arrangements concerning the Relationship of the Parties until and after the Closing Date ................................ 26 16 Miscellaneous ................................................... 27
PREAMBLE (A) The Sellers are engaged in the business of developing, manufacturing and selling computer software and hardware for professional video editing as well as the rendering of services related thereto (the "Business"). FAST Germany is a wholly-owned subsidiary of FAST Inc. (B) The Purchasers design, manufacture, market and support a wide range of high-quality digital solutions that enable businesses and consumers to create, store, distribute and view video programs. (C) The Sellers are interested in selling and the Purchasers are interested in acquiring the Business and all of the assets, contracts and personnel related thereto, except as specifically excluded from the purchase hereafter, and certain liabilities specifically listed herein, on the terms and conditions set forth in this Agreement (the "Acquisition"). 1 Definitions "Acquired Assets" shall mean the Tangible Assets, Intangible Assets, the Assigned Agreements and the Employment Contracts. "Affiliate" shall mean a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, another Person; for these purposes control shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management of a Person, whether by ownership of voting rights, by contract or otherwise. "Adjustment Amount" shall mean a number of shares determined by subtracting a sum B (the "Sum B") from a sum A (the "Sum A") where (A) Sum A shall mean the sum of 1,200,000 plus the Second Stock Issuance Amount plus the Third Stock Issuance Amount and where (B) Sum B shall mean the sum determined by dividing: (1) the product obtained by multiplying (i) (euro) 14,500,000 minus any amount for penalties, liabilities, reimbursement or indemnification due to the Purchasers by the Sellers arising under this Agreement prior to 15 February 2002 times (ii) the Weighted Average Exchange Rate by (2) the Floor Price. In the event that Sum A is equal to or less than Sum B, the Adjustment Amount shall be zero. "Adjusted Second Stock Issuance Amount" shall mean the Second Stock Issuance Amount minus the Adjustment Amount. "Average Exchange Rate" for a specified period of time means the average of the exchange rates of the European Central Bank for exchanging Euro to U.S. dollars, as reported at the end of each Trading Day during such period (represented as a ratio of U.S. dollars to Euro). -1- "Average Share Price" for a specified period of time shall mean the average of the last sale prices of a single share of common stock of Pinnacle, Inc., as reported by the Nasdaq National Market for each Trading Day during such period. "Cash Equivalents" shall mean all liquid securities and other instruments readily marketable. "Closing Date" shall mean October 1, 2001, the date on which the sale and transfer of the Business will become effective. "Employee" shall mean any current employee of any of the Sellers involved in the Business. "Employment Agreement" means each agreement, contract or understanding between the Sellers or any Affiliate of the Sellers and any Employee relating, directly or indirectly, to such Employee's terms and condition of employment. "First Issuance Euro Amount" shall mean a number of Euro determined by dividing (A) the product of (1) 1,200,000 times (2) the Average Share Price for the 20 Trading Day period commencing September 30, 2001 by (B) the Average Exchange Rate over the 30 Trading Day period commencing September 30, 2001. "Floor Price" shall mean the Average Share Price for the 20 Trading Day period ending on 12 September 2001. "Generally Accepted Financial Reporting Principles" shall have the meaning set forth in Section 9.8 of this Agreement. "Initial Payment Amount" shall mean the amount of (euro) 1,500,000 (One Million Five Hundred Thousand Euro). "Indemnification" shall mean the indemnification and holding harmless of an indemnified Party by the indemnifying Party from and against Losses. The Indemnification shall be reduced in each case by the Losses insofar (i) the indemnified party fails to inform the indemnifying Party of the assertion of any claims, suits, actions, proceedings, judgements or any demands of third parties ("Claim") which are likely to have an impact on the Indemnification, (ii) the indemnified Party has not taken all reasonable and necessary action in the defense of such Claim taking into account the future commercial interests of the indemnified Party, (iii) the indemnified Party has not granted the indemnifying Party the opportunity to provide comments and to participate on the defense of any Claim, and (iv) the indemnified party has made admission to the claimant or settlements without the prior written approval of the indemnifying Party, such approval not to be unreasonably withheld. "Inventory Deficiency" shall have the meaning as defined in Section 2.1. "Inventory Surplus" shall have the meaning as defined in Section 2.1. "Key Employees" shall mean the Employees listed in Exhibit 15.2a "Liability" shall mean any liability or obligation (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, whether incurred or consequential and whether due or to become due), including any liability for Taxes. -2- "Lien" shall mean any mortgage, pledge, lien, security interest, charge, claim, equity, encumbrance, restriction on transfer, options or other rights of third parties, capital lease), transfer for the purpose of subjection to the payment of any indebtedness, or restriction on the creation of any of the foregoing, whether relating to any property or right or the income or profits therefrom, except for customary reservations of title by suppliers pending payment, statutory liens (including but not limited to landlord liens) or such other Liens as are customary in the business field of the Business. "Losses" shall mean any and all costs, claims, judgements, assessments, deficiencies, penalties and interest, damages, losses, liabilities and expenses (including reasonable attorneys' fees and disbursements), together with any such reasonable costs or expenses to investigate the same or enforce the provisions arising out hereof. "Material Adverse Effect" shall mean (i) a material adverse effect or change on the business, assets (including intangible assets), condition (financial or otherwise), results of operations or prospects of a party or to the ability of a Party to consummate the transactions contemplated by this Agreement and (ii), additionally, with respect to any Seller shall mean any circumstance, change in, or effect on such Seller and (iii) that in each case is materially adverse to the Business taken as a whole. "Most Recent Accounts" shall mean the audited consolidated accounts of each of the Sellers dated December 31, 2000 and the unaudited consolidated accounts of each of the Sellers as of and for the six months ended 30 June 2001, as set forth on Exhibit 9.8 hereto. "Ordinary Course of Business" shall mean the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency). "Person" shall mean an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organisation, or a governmental entity (or any department, agency or political subdivision thereof). "Products" shall mean all current products and services of the Business, any subsequent versions of such Products currently being developed by the Sellers or any of their Subsidiaries in the Business, any products currently being developed by the Sellers or any of their Subsidiaries which are designed to supersede, replace or function as a component of such Products, and any upgrades, enhancements, improvements and modifications to the foregoing, in each case as currently being developed by the Sellers. "Related Agreements" shall mean all such ancillary agreements required in this Agreement to be executed and delivered in connection with the transactions contemplated hereby, including but not limited to the Registration Rights Agreement. "Remaining Payment Amount" shall mean the sum of (euro) 14,500,0000 (Fourteen Million Five Hundred Thousand Euro) minus the First Issuance Euro Amount and minus any amount for penalties, liabilities, reimbursement or indemnification due to the Purchasers by the Sellers arising under this Agreement prior to 15 February 2002. "R&D Employees" shall mean the persons as listed in Exhibit 15.2b. "Second Payment Amount" shall mean the amount of (euro) 1,000,000 (One Million Euro) minus any Inventory Deficiency plus any Inventory Surplus. "Second Stock Issuance Amount" shall mean the number of shares of common stock of Pinnacle, Inc, rounded to the nearest whole share (and as appropriately adjusted to reflect -3- any stock splits, stock dividends or the like occurring after the date of this Agreement and prior to the issuance of such shares), determined by dividing: (A) the product obtained by multiplying (1) the Remaining Payment Amount minus (euro) 4,750,000 (Four Million Seven Hundred Fifty Thousand Euro) times (2) the Average Exchange Rate over the 30 Trading Days ending on the second Trading Day prior to 1 February 2002, by (B) the Average Share Price for the 20 Trading Day period ending on the second Trading Day prior to 1 February 2002. "Sellers Knowledge" shall mean what would, at the Signing Date, be in the actual knowledge of Mr. Matthias Zahn, Mr. Reiner Bielmeier, Mr. Alain Polgar and Mr. Jorg Adelstein had they acted as a prudent business men. "Signing Date" shall mean the date that this Agreement has been notarized. "Subsidiary" or "Subsidiaries" shall mean any corporation or corporations with respect to which a specified Person (or a Subsidiary thereof) owns a majority of the common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors. "Tax" or collectively "Taxes" shall mean (i) any and all German, United States federal, state and local and other non-United States taxes, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts; (ii) any liability for the payment of any amounts of the type described in clause (i) as a result of being a member of an affiliated, consolidated, combined or unitary group for any period; and (iii) any liability for the payment of any amounts of the type described in clause (i) or (ii) as a result of any express or implied obligation to indemnify any other Person or as a result or any obligations under any agreements or arrangements with any other Person with respect to such amounts and including any liability for taxes of a predecessor entity. "Third Stock Issuance Amount" shall mean the number of shares of common stock of Pinnacle, Inc, rounded to the nearest whole share (and as appropriately adjusted to reflect any stock splits, stock dividends or the like occurring after the date of this Agreement and prior to the issuance of such shares), determined by dividing: (A) the product obtained by multiplying (1) (euro) 4,750,000 (Four Million Seven Hundred Fifty Thousand Euro) times (2) the Average Exchange Rate over the 30 Trading Days ending on the second Trading Day prior to 1 February 2002, by (B) the Average Share Price for the 20 Trading Day period ending on the second Trading Day prior to 1 February 2002. "Trading Day" shall mean (A) with respect to exchange rates, a day on which exchange rates of the European Central Bank for exchanging Euro to U.S. dollars are reported and (B) with respect to stock prices, shall mean a day on which sale prices for such stock are reported by the Nasdaq National Market. -4- "Transferred Employee" shall mean any Employee being employed in the Business in Germany at 30 September 2001, 24:00h, and transferred to the Purchaser pursuant to Section 6 of this Agreement. "Weighted Average Exchange Rate" shall mean the exchange rate determined by taking the simple average of the Average Exchange Rate over the 30 Trading Day period commencing September 30, 2001 and the Average Exchange Rate over the 30 Trading Days ending on the second Trading Day prior to 1 February 2002. 2 Purchase and Sale of Assets 2.1 Purchase and Sale of Tangible Assets. On the terms and subject to the conditions set forth in this Agreement, the Sellers hereby sell to Pinnacle Germany, and Pinnacle Germany hereby purchases from the Sellers, effective as of the Closing Date, all right, title and interest in and to all of the tangible assets used or existing in the Business on 30 September 2001, 24:00h, free and clear of all Liens, except as specifically excluded from the sale and purchase pursuant to Section 2.2 of this Agreement (the "Tangible Assets"). The Tangible Assets include, but are not limited to, the following assets in the Business, wherever located: (a) all movable fixed assets in existence on 30 September 2001, 24:00h, including all machinery and equipment, tools, fixtures, fittings, EDV-hardware, office equipment, small value items, and all tangible embodiments or records related to any Intangible Assets, including documentation, source code listings and all files related to intellectual property applications or registrations, including, but not limited to, the assets set forth on the Updated Exhibit 2.1a (as defined below) (the "Movable Fixed Assets"); and (b) all inventory in existence on the 30 September 2001, 24:00h, including, but not limited to, the inventory set forth on the Updated Exhibit 2.1b (as defined below) (the "Inventory"). The Exhibits 2.1a (the "Original Exhibit 2.1a") and 2.1b (the "Original Exhibit 2.1b") attached to this Agreement reflect the status as of June 30, 2001 and August 31, 2001 respectively. The Parties agree to mutually update Exhibit 2.1a (the "Updated Exhibit 2.1a") and 2.1b (the "Updated Exhibit 2.1b") as per 30 September 2001, 24:00h, to reflect all Tangible Assets and Inventory in existence on 30 September 2001, 24:00h. If the aggregate value of the Inventory as set forth in the Updated Exhibit 2.1b is less than 90% of the aggregate value of the Inventory as set forth in the Original Exhibit 2.1b, Sellers will reimburse Purchasers any amount by which the aggregate value of the Inventory is less than 90% of the aggregate value of the Inventory set forth on the Original Exhibit 2.1b (the "Inventory Deficiency") and in the event that the aggregate value of the Inventory as set forth in the Updated Exhibit 2.1b exceeds 110% of the aggregate value of the Inventory as set forth in the Original Exhibit 2.1b the Purchasers shall in addition to the Purchase Price pay to the Sellers any amount by which the aggregate value of the Inventory exceeds 110% of the aggregate value of the Inventory set forth on the Original Exhibit 2.1b (the "Inventory Surplus"). For the purposes of valuing the Inventory pursuant to this Section 2.1, the Parties hereby agree that the Inventory will be mutually valued by the Parties in accordance with accounting principles used -5- in arriving at the Original Exhibit 2.1b and, insofar as the Original Exhibit 2.1b does not provide any guidance, in accordance with Generally Accepted Financial Reporting Principles. Any disputes between the Sellers and the Purchasers as to the valuation which cannot be settled directly between them shall be settled, upon request of either Party, by an independent auditor acting as expert arbitrator. If the Parties cannot mutually agree on such expert arbitrator within one (1) week after either Party has requested its appointment, the expert arbitrator shall be appointed by the Institute of Chartered Accountants in Dusseldorf. To the extent permissible by law ((S)319 German Civil Code) the findings of such expert arbitrator shall be finally binding on the Parties. 2.2 Excluded Tangible Assets The following tangible assets, properties and rights of the Sellers shall be specifically excluded from the Tangible Assets to be sold and purchased hereunder, to the extent in existence on the 30 September 2001, 24:00h, (the "Excluded Tangible Assets"): (a) All cash held by the Sellers, in hand, in the Sellers' bank account(s) and all cash credited to any of Sellers' bank accounts and all Cash Equivalents held by or on behalf of the Sellers. (b) Sellers' accounts receivable arising from customer contracts for products and services delivered or rendered prior to the Closing Date. (c) All moveable fixed assets located in the Sellers' offices in France, the United Kingdom and the United States, including but not limited to EDV hardware, office equipment and small value items as well as the shareholdings in the Subsidiaries in France and the United Kingdom and, for the avoidance of doubt, the shareholdings of FAST Inc. in FAST Germany. 2.3 Purchase and Sale of Intangible Assets. On the terms and subject to the conditions set forth in this Agreement, the Sellers hereby sell to Pinnacle KG, and Pinnacle KG hereby purchases from the Sellers, all right, title and interest in and to all of the intangible assets used or existing in the Business on 30 September 2001, 24:00h, (the "Intangible Assets"), including but not limited to, the intangible assets set forth on Exhibit 2.3a hereto, free and clear of all Liens, except for those intangible assets expressly set forth on Exhibit 2.3b. The Intangible Assets include, but are not limited to, the following assets, if any as used by the Sellers in the Business: (a) all intellectual property rights, copyrights, patents, petty patents, design patents, trademarks (and goodwill appurtenant thereto) and respective applications; (b) transferable public and private concessions, permissions, authorizations and licenses; (c) software; (d) proprietary information or trade secrets of the Business, including without limitation available lists of suppliers, dealers, customers, price lists, catalogues, sales literature, inventions, business and trade secrets, know- -6- how, engineering, manufacturing, test and quality control data relating to past, present and planned products. Exhibit 2.3a reflects the status of the Intangible Assets as of August 31, 2001. The Parties agree to mutually update Exhibit 2.3a as of the 30 September 2001, 24:00h, to reflect all Intangible Assets in existence as of 30 September 2001, 24:00h. 2.4 FAST Brand. For the avoidance of doubt, the Intangible Assets shall not include the rights and title to the name and logo type "FAST", to the extent such rights and titles are held by Sellers, in the form as set out in Exhibit 2.4 hereto (the "FAST Brand"). The Sellers hereby grant to Pinnacle Inc. and its Affiliates for use in the Business, a royalty-free, non-exclusive license, transferable only upon prior consent of the Sellers which shall not unreasonably be withheld, in respect of the FAST Brand for a period of twelve (12) months as of the Closing Date. Sellers shall not during such period of time grant to any third party any further licenses to use the FAST Brand. 2.5 It is understood by the Parties, that the intangible assets related to the U.S., in particular customer relationships, the trademark "Blue" and support agreements are sold by FAST Inc. to Pinnacle KG. All other Intangible Assets are solely sold to Pinnacle KG by FAST Germany. 3 Transfer of Assets On the terms and subject to the conditions set forth herein, effective upon the Closing, the Sellers hereby transfer to the Purchasers the Tangible Assets and the Intangible Assets as follows. 3.1 Transfer of Tangible Assets. Effective as of the Closing Date, the Sellers hereby transfer to Pinnacle Germany, the Tangible Assets, and Pinnacle Germany hereby accepts the transfer of the Tangible Assets. 3.2 Delivery of Tangible Assets. On the Closing Date the Sellers shall grant possession to Pinnacle Germany by way of delivery at the relevant Sellers' premises or such other locations at which Sellers' hold the Tangible Assets ("ex works"). For the avoidance of doubt the Sellers shall not be required to deliver the Tangible Assets to the offices of Pinnacle Germany, such delivery, if any, being the responsibility of Pinnacle Germany. To the extent that any Tangible Assets are in direct possession of a third party, the Sellers hereby assign to Pinnacle Germany, effective as of the Closing Date, all of their rights and claims against such third party for the delivery of such Tangible Assets (Abtretung des Herausgabeanspruchs), and Pinnacle Germany hereby accepts such assignment. At the request of Pinnacle Germany, the Sellers shall notify the third party of the assignment. To the extent that on the Closing Date Pinnacle does not gain possession of individual Tangible Assets because their delivery is not possible or expedient for factual reasons, the granting of possession shall be substituted by the agreement that these tangible assets shall, on the costs and at the risk of the Purchasers, be held by the Sellers for the benefit of the Purchasers as from the Closing Date (Besitzkonstitut). 3.3 Assignment of Intangible Assets. Effective as of the Closing Date, the Sellers hereby assign to Pinnacle KG the Intangible Assets and Pinnacle KG hereby accepts assignment of the Intangible Assets. The Parties undertake to give any declarations and sign any further documents reasonably necessary in order to effect -7- the transfer to and the registration for the benefit of Pinnacle KG. To the extent that a transfer of Intangible Assets is not legally possible, the Sellers shall grant to Pinnacle KG an exclusive, irrevocable, transferable royalty-free and perpetual right to use the respective Intangible Assets. Any registration fees owed to trademark and patent offices and comparable agencies shall be borne by Pinnacle KG and each Party shall bear its own costs connected therewith. 4 Transfer of Agreements 4.1 Transfer. Effective as of the Closing Date, the Sellers hereby sell to Pinnacle Germany, and Pinnacle Germany hereby purchases, all agreements, contracts, commitments and instruments of the Sellers pertaining to the Business, existing as of 30 September 2001, 24:00h, as set forth on Exhibit 4.1 and all pending customer orders received in the Ordinary Course of Business, except as specifically excluded pursuant to Section 4.2 of this Agreement (the "Transferred Agreements"). Pinnacle Germany, effective as of the Closing Date, shall assume from the Sellers all rights and obligations under the Transferred Contracts by way of assumption of contract with the effect of discharging the Sellers (Vertragsubernahme mit befreiender Wirkung) with respect to all rights and obligations arising on and after the Closing Date. The Transferred Agreements include all existing agreements and all pending contract offers made by or to either of the Sellers related to the Business at 30 September 2001, 24:00h. The Transferred Agreements include, but are not limited to, the following agreements, contracts, commitments and instruments, in each case if pertaining to the Business or the Acquired Assets: (a) all agreements of the Sellers with suppliers or customers; (b) all agreements of the Sellers with distributors, agents and advisers; (c) all license and co-operation agreements of the Sellers; (d) all lease, leasing and rental agreements of the Sellers and all agreements with public utilities; (e) all insurance agreements however, the Parties hereby agree that Sellers shall, if legally possible, and in co-operation with the Purchasers terminate such insurance agreements on or before September 30, 2001 effective as of December 31, 2001; the Parties are further in agreement that insurance of the Business and the Acquired Assets for all periods on and after the Closing Date shall be in the sole responsibility of the Purchasers; and (f) all other agreements pertaining to the Business. Exhibit 4.1 is a list of the Transferred Agreements dated as of August 31, 2001. The Parties agree to mutually update Exhibit 4.1 as of 30 September 2001, 24:00h, to reflect all pertinent changes as to the Transferred Agreements as of 30 September 2001, 24:00h. 4.2 Excluded Agreements. The following agreements of the Sellers shall be specifically excluded from the Transferred Agreements: (a) all employment contracts with any current or former employee of the Sellers who is not transferred to the Purchasers pursuant to Section 6, or any of the Sellers' directors (Organe); -8- (b) all contracts covering or relating solely to assets and/or obligations and liabilities which have been specifically excluded from the sale and purchase; (c) office lease agreements in France, UK and USA and all other agreements relating to Sellers offices in France, UK and USA, including but not limited to all service agreements, telecommunications agreements and office equipment lease agreements; and (d) all other agreements listed in Exhibit 4.2 hereto, including the agreement of the Sellers with its supplier, BMK, Augsburg ("BMK"), it being understood that Pinnacle Germany undertakes to purchase from FAST Germany on a separate basis, at cost prices of FAST Germany (Einstandskosten), such current products or raw materials in marketable quality and quantity of BMK relating to the Acquired Assets, at request of FAST Germany up to an aggregate amount of DEM 500,000 plus Value Added Tax, in respect of which FAST Germany is bound vis-a-vis BMK by existing purchase obligations. FAST Germany and Pinnacle Germany shall mutually and in good faith agree upon the details of the purchase, including time and further terms and conditions of delivery. 4.3 Third Party Consents. The Parties shall use their best efforts to obtain the consents of the other parties to the Transferred Agreements to the transfer and to cause to be executed and delivered to the Purchasers all documents of transfer necessary to effect the transfer of such Transferred Agreements. In the event that, for any reason, one or more third parties refuse to consent to the assignment of such Transferred Agreement to any of the Purchasers, the rights and obligations under the applicable Transferred Agreement shall be transferred in the internal relationship between the Sellers and Pinnacle Germany, with the consequence that Pinnacle Germany, to the extent that this is legally permissible, shall act as Sellers' agent in performing the contract and accepting performance of the contract by the other contractual party in the name of the respective Seller but internally on the risk and for the account of Pinnacle Germany. The Sellers shall, on request of Pinnacle Germany (the "Purchasers' Instructions"), make any declaration to the extent legally permissible, including the termination of such Transferred Agreement, that is requested by Pinnacle Germany, provided however that the Purchasers shall provide Indemnification to the Sellers for all Losses based upon or resulting from the Transferred Agreements and the Purchasers' Instructions for all periods from and after the Closing Date. 4.4 Breach/Non-Performance of Transferred Agreements Prior to Closing. If, following the transfer of the Business, the other party to the Transferred Agreements terminates any of the Transferred Agreements with the Sellers for cogent reason and/or asserts a claim for breach of contract, in each case only if based upon or resulting from the non-performance or the default of the Sellers under the Transferred Agreements prior to the Closing Date, the Sellers shall provide Indemnification to the Purchasers from and against any and all Losses. 4.5 Allocation of Benefits and Responsibility Under Transferred Agreements Prior to and After the Closing Date. Any rights, including trade receivables, and any obligations and liabilities, including trade payables under the Transferred Agreements, irrespective of whether the transfer takes effect in the relation to the -9- other contractual party or only in the internal relation between the Sellers and Pinnacle Germany, shall be attributable to the Sellers to the extent such right (a "Seller Allocable Right") or such obligation or liability (a "Seller Allocable Obligation") relates to the period of time prior to Closing Date and shall be attributable to Pinnacle Germany to the extent such right (a "Purchaser Allocable Right") or such obligation or liability (a "Purchaser Allocable Obligation") relates to the period of time on and after the Closing Date. The Sellers shall provide Pinnacle Germany with Indemnification for Losses incurred by Pinnacle Germany and arising out of, based upon or resulting from the Seller Allocable Obligations. Pinnacle Germany shall provide the Sellers with Indemnification for Losses incurred by the Sellers and arising out of, based upon or resulting from the Purchaser Allocable Obligations. Both the Sellers and Pinnacle Germany will forward amounts received from the other contractual party accordingly if such amounts are attributable to the relevant other Party. 4.6 Warranty Services. The Purchasers shall without undue delay inform Sellers as to any warranty claims made against the Purchasers relating to Products sold before the Closing Date ("Defective Products"), and, on request of Sellers, render all services reasonably necessary and expectable to fulfill such warranty claims of Sellers' customers relating to Defective Products, provided however that the Sellers shall pay to the Purchasers an amount equal to the Purchasers' costs for any such services plus a mark-up of 10%. 5 Obligations and Liabilities 5.1 Purchasers' Assumed Liabilities. The Purchasers shall assume the following liabilities or obligations of the Business: (a) Obligations and liabilities arising from the Transferred Agreements, to the extent such obligations and liabilities relate to the period on and after the Closing Date as further specified in Section 4.5, for the avoidance of doubt including, but not limited to payment obligations incurred by the Sellers before the Closing Date relating to services to be rendered, or products to be delivered, by suppliers to the Purchasers on and after the Closing Date; and (b) Obligations and liabilities under the Employment Contracts (as defined in Section 6.1 of this Agreement) that are being transferred by virtue of law or pursuant to Section 6 of this Agreement, to the extent that such obligations and liabilities relate to the period on and after the Closing Date. 5.2 Liabilities Not Assumed. The Purchasers shall not assume any Liabilities or obligations (i) of the Sellers or (ii) attached or related to the Acquired Assets for all periods prior to the Closing Date, other than those specifically enumerated in this Agreement, including without limitation any Liability or obligation with respect to Taxes concerning the period prior to the Closing Date. 5.3 Sellers' Indemnification for Purchasers' Assumed Liabilities. The Sellers shall provide the Purchasers with Indemnification for Losses incurred by the Purchasers arising from or related to all obligations and liabilities of (i) the Sellers, or (ii) relating to the Acquired Assets for all periods prior to the Closing Date, that the Purchasers have not assumed pursuant to this Agreement. -10- 6 Employees of the Business 6.1 (S)613a BGB. The Parties are aware that Pinnacle Germany, by operation of law, pursuant to (S)613a German Civil Code, will, as of the Closing Date, assume all rights and obligations arising from all employment contracts (the "Employment Contracts") of the employees employed in the Business in Germany who do not exercise their statutory right to object to the transfer (the "Transferred Employees"). Without limiting the possibility of Pinnacle Germany to agree upon new terms and conditions of the employment with the Transferred Employees in separate agreements with the Transferred Employees after the Closing Date, Pinnacle Germany hereby also undertakes vis-a-vis the Sellers to assume the Transferred Employees and the Sellers' obligations under the Employment Contracts; the provisions of Sec. 4.5 shall apply mutatis mutandis. A list of all Employment Contracts setting forth the position, commencement of the employment, salary, other remuneration, age and, as the case may be, to the extent known by the Sellers at the date hereof, special dismissal protection (disability, etc.) of all Employees of the Business as of August 31, 2001 is attached as Exhibit 6.1. In case any Employee objects to his employment relationship being transferred to Purchaser, such Employee and all liabilities and obligations in connection with his employment and a termination of his employment shall remain with the Sellers. 6.2 Information of Employees. As soon as practicable following the execution of this Agreement, the Parties shall inform and consult with the Employees in Germany regarding the transfer of the Business by the Sellers to the Purchasers and the assumption by Pinnacle Germany of the Employment Contracts. 6.3 Overtime and Vacation Claims. The aggregate amount of claims for overtime accrued and vacation as of August 31, 2001 have been calculated as set forth in Exhibit 6.3. The Parties agree to mutually update Exhibit 6.3 as of 30 September 2001, 24:00h, to reflect the aggregate amount of claims for overtime accrued and vacation as of 30 September 2001, 24:00h. With the exception of claims for overtime accrued and vacation not taken before the Closing Date the Sellers shall remain liable and provide Purchasers with Indemnification for Losses arising from or related to Transferred Employees relating to periods before the Closing Date, in particular but not limited to claims for a prorated portion for the beginning of the year until the Closing Date of any year-end bonus and similar payments for the year 2001 to be paid to Transferred Employees, provided however that such year-end bonus and similar payments for the year 2001, to the extent to be finally determined or otherwise to be resolved on by Purchasers on a discretionary basis, have been mutually agreed upon in writing by the Sellers. Purchasers shall bear the remaining prorated portion of any year-end bonus and similar payments for the year 2001 to be paid to Transferred Employees. 6.4 Reimbursement of Severance Payments. (a) Should the Purchasers decide to restructure the Business and, therefore, discontinue the employment of employees, the Sellers shall indemnify the Purchasers against reasonable severance payments to up to 21 employees whose employment is discontinued, provided that (i) either notice of termination or written notice offering a severance payment is served on the employee before December 1, 2001 and (ii) the severance payment is made prior to January 15, 2002. If less than 71 employees transfer to the Purchasers, the -11- number of employees to whom the indemnity applies shall be reduced accordingly. The indemnity shall not cover any other costs in connection with the restructuring (e.g. lawyer fees, litigation fees). (b) If the indemnification is not paid within 30 days after a justified claim under this Section 6.4 is made, the Sellers shall owe a penalty (Vertragsstrafe) in the amount of 50% of the indemnity in addition to the indemnification. 6.5 Special Bonus. The Sellers intend to enter in agreements with certain Employees, pursuant to which such Employees will receive from the Sellers special bonus payments. Any obligations in respect of such bonus payments shall to the extent legally possible not be transferred to the Purchasers. In the event that pursuant to (S)613a German Civil Code such transfer applies by operation of law, the Sellers shall provide Indemnification with regard to Losses incurred by the Purchasers as to the transfer of such bonus obligations. For the avoidance of doubt, the Sellers shall neither in relation to the Purchasers nor to the Employees be obliged to grant any such special bonus. 7 Purchase Price 7.1 Purchase Price. The aggregate consideration (hereinafter referred to as "Purchase Price") to be paid by the Purchasers to the Sellers for the sale and transfer of the Business shall be an amount of (euro) 17,000,000 (Seventeen Million Euro), adjusted by any Inventory Deficiency or any Inventory Surplus, as the case may be, payable as hereinafter provided. 7.2 Method of Payment of Purchase Price. The Purchase Price shall be due and payable by the Purchasers to the Sellers as follows: (a) An aggregate initial payment of the Initial Payment Amount in cash (the "Initial Payment") within 1 business day after the Signing Date to be paid by Pinnacle Germany. Sellers shall grant to the Purchasers sufficient collateral for the Initial Payment by assigning for security purposes all accounts receivable, title to Fixed Assets and Inventory up to the amount of the outstanding Initial Payment to Purchasers in a separate document as attached hereto as Exhibit 7.2. (b) An aggregate second payment of the Second Payment Amount in cash (the "Second Payment") on October 5, 2001 to be paid by Pinnacle Germany provided that Sellers and Purchasers have agreed on an Inventory Deficiency or Inventory Surplus, as the case may be; it being understood that if the Parties fail to reach agreement on the amount of a Inventory Deficiency or a Inventory Surplus, as the case may be, the Second Payment Amount shall be paid to the Sellers, to the extent not disputed. (c) The issuance by Pinnacle, Inc. on behalf of Pinnacle KG of 1,200,000 (One Million Two Hundred Thousand) shares of Pinnacle, Inc. common stock on October 1, 2001 (the "First Stock Issuance"), payable in accordance with Section 7.3 of this Agreement. (d) The issuance by Pinnacle, Inc. on behalf of Pinnacle KG of a number of shares of Pinnacle, Inc. common stock equal to the sum of the Adjusted Second Stock Issuance Amount (the "Second Stock Issuance") and the -12- Third Stock Issuance Amount (the "Third Stock Issuance") on 15 February 2002, payable in accordance with Section 7.3 of this Agreement. The shares of Pinnacle, Inc. common stock issuable pursuant to the First Stock Issuance, the Second Stock Issuance and the Third Stock Issuance are sometimes referred to herein as the "Pinnacle Shares". 7.3 Payment Procedure. The Initial Payment and the Second Payment shall be paid by the Purchasers by money transfer into the account No. 27 22 860 of FAST Multimedia AG with HypoVereinsbank (Bank Reference Number 700 202 70), and shall be payable in Euro. The First Stock Issuance and the Second Stock Issuance shall be made in the name of FAST Multimedia AG and delivered to its deposit account to be notified to the Purchasers in writing at least 5 business days prior to the date on which the respective payment becomes payable. The Third Stock Issuance shall be made in the name of FAST Multimedia Inc. and delivered to its deposit account to be notified to the Purchasers in writing at least 5 business days prior to the date on which the payment becomes payable. 7.4 Value Added Tax. The Parties understand that the sale and purchase of the Tangible Assets by Pinnacle Germany is subject to Value Added Tax at the rate of 16% on that portion of the Purchase Price that is allocated to the Tangible Assets, however the parties understood that the sale and purchase of the Intangible Assets by Pinnacle KG is not subject to any Value Added Tax. Pinnacle Germany will pay the Value Added Tax on the Purchase Price allocated to the Tangible Assets and any further Value Added Tax, if any. Any Value Added Tax shall be due and payable as soon as Pinnacle Germany has received from FAST Germany an respective invoice which conforms to the provisions of sec. 14 German Value Added Tax Act. 7.5 Purchase Price Allocation. The Purchase Price shall be paid as set forth in Section 7.2. In respect of the Acquired Assets received, the Purchase Price shall be allocated as follows: (a) Pinnacle Germany shall bear in consideration for the sale and transfer of the Inventory, the Movable Fixed Assets and the Transferred Agreements an amount equal to the value of the Inventory as per 30 September 2001, 24:00h, plus the value of the Moveable Fixed Assets as per 30 September 2001, 24:00h, less the aggregate amount of claims for overtime accrued and vacation calculated according to Section 6.3 as per 30 September 2001, 24:00h, if any; (b) Pinnacle KG shall bear in consideration for the sale and transfer of the Intangible Assets any remaining amount. 8 Registration Rights. Pinnacle, Inc. undertakes to register for resale on Form S-3 under the Securities Act of 1933, as amended, (the "Securities Act") the Pinnacle Shares in accordance with the Registration Rights Agreement attached as Exhibit 8 hereto. -13- 9 Representations and Warranties of the Sellers In concluding this Agreement, the Purchasers rely on the correctness of the representations and warranties made by the Sellers hereinafter. The Seller represent expressly and warrant as a guaranteed quality of the Business and the Acquired Assets (with the legal consequences as conclusively set forth in Section 11) that the following representations and warranties are correct, unless expressly otherwise provided hereunder on the Signing Date and the Closing Date, subject to such exceptions as are specifically set forth in the disclosure exhibits (referencing the appropriate section and paragraph numbers, if appropriate) supplied by the Sellers to the Buyers (the "Schedules") as of the Signing Date or, to the extent representations and warranties are given to the Sellers' Knowledge as of the Closing Date. 9.1 Organization and Authority. The Sellers are companies duly incorporated, validly existing and in good standing under the laws of their respective jurisdiction and have the corporate power to own their respective properties and to carry on their respective businesses as now being conducted. Each of the Sellers has all requisite power and authority to enter into this Agreement and any Related Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby. 9.2 Execution and Delivery. This Agreement and any Related Agreements to which any Seller is a party have been duly executed and delivered by such Seller and, assuming the due authorization, execution and delivery by the other Parties hereto and thereto, constitute the valid and binding obligation of such Seller enforceable in accordance with their respective terms, subject to the laws of general application relating to bankruptcy, insolvency and the relief of debtors and to rules of law governing specific performance, injunctive relief or other equitable remedies. 9.3 Compliance with Corporate Requirements. The execution and delivery of this Agreement and any Related Agreements to which it is a party by any of the Sellers do not, and, the consummation of the transactions contemplated hereby and thereby will not, conflict with, or result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation, modification or acceleration of any obligation or loss of any benefit under (i) any provision of the charter documents or Bylaws (or their equivalent) of any such Seller, or (iii) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to any such Seller or its properties or assets. 9.4 Required Consents. Each of the Sellers has obtained or will obtain prior to the Closing Date, all necessary corporate consents and taken all necessary corporate action, if any, required on the Sellers side for the consummation of the transactions contemplated by this Agreement, including the approval of FAST Germany's shareholders' meeting pursuant to (S)179a German Stock Corporation Code. Except as set forth in Exhibit 9.4, no consent, waiver, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other U.S. or German federal, state, county, local or other foreign governmental authority, instrumentality, agency or commission ("Governmental Entity") or any third party, for the avoidance of doubt other than the consents of the other Parties to the Transferred Agreements pursuant to Section 5, is required by or with respect to any of the Sellers in connection with the execution and delivery of -14- this Agreement and any Related Agreements to which any of the Sellers is a party or the consummation of the transactions contemplated hereby and thereby. 9.5 Correct Information. The information contained in the Exhibits of this Agreement, unless such Exhibits relate to circumstances of the Purchasers, for which the Sellers accept no responsibility, is complete and correct. 9.6 Title to Assets. On the Closing Date the Sellers have good and valid title to, or a valid and subsisting leasehold or license interest in the Acquired Assets free and clear of all Liens. On the Closing Date the Sellers have full right and capacity to sell and transfer good and valid title to the Acquired Assets except for those tangible assets which are still subject to customary reservations of title by suppliers pending payment. Except for such customary reservations of title the Purchasers will receive on the Closing Date good and valid title, to the Acquired Assets free and clear of all Liens. The use of the Tangible Assets and of the Intangible Assets by the Sellers and the sale and transfer of the Tangible Assets and of the Intangible Assets from the Sellers to the Purchasers to the Sellers' Knowledge does not infringe any third party rights. 9.7 Sufficiency of Acquired Assets. By the acquisition of the Business pursuant to this Agreement, the Purchasers are put into the position to continue the Business of the Sellers in the current form except to the extent that (i) any other party to any Transferred Agreement may refuse to agree to the transfer of such Transferred Agreement, (ii) any Employee may refuse to his transfer to the Purchasers pursuant to Section 6 and (S)613a German Civil Code, (iii) the Acquired Assets do not comprise the shares in the Subsidiaries of the Sellers active in the Business in France and the UK nor any of their Employees or assets, other than intangible assets, (iv) any changes of the Business may take place until the Closing Date due to grounds of a change of general economics or in the business fields in which the Sellers and the Business are active or (v) any other changes of the Business beyond Sellers' control may apply, including but not limited to a potential adverse impact resulting from the disclosure of the transactions contemplated by this Agreement on the business relations with third parties, including customers and suppliers of the Business, namely the business relationship with Matrox Inc., Canada. The Acquired Assets comprise all of the material assets of the Sellers used by them in the operation of the Business in the ordinary course as currently conducted. 9.8 Financial Statements. The Sellers have submitted to the Purchasers the Most Recent Accounts, statements of operations and statements of cash flows of the Business as of and for the year ended 31 December 2000 and as of and for the six months ended June 30, 2001 (together the "Financial Statements"), which are attached as Exhibit 9.8. June 30, 2001 is referred to herein as the "Most Recent Balance Sheet Date." The Financial Statements have been prepared in accordance with accounting, valuation and depreciation principles generally accepted in the respective Seller's jurisdiction ("Generally Accepted Financial Reporting Principles") all applied consistent with historical practice, except for changes in the accounting, valuation and depreciation principles, in particular regarding the inventory and reserves related to the inventory, as applied to the interim balance sheet as per June 30, 2001. The Financial Statements are, with the aforementioned exceptions, complete and correct and present fairly the financial condition, operating results and cash flows of the Business as of the dates and for the periods indicated -15- therein. The Parties are in agreement that, for the purposes of the representation and warranties contained in this Section 9.8 only such balance sheet items shall be represented and warranted to the Purchasers that relate to the Business and the Acquired Assets as being transferred to the Purchasers by this Agreement. 9.9 Liabilities. No Seller is a guarantor or otherwise liable for any Liability of any other person or entity for any matter which relates to or affects or will affect the Business or Acquired Assets. To the Sellers' Knowledge, there is no Liability, and, to the Sellers' Knowledge no threatened action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand, which could give rise to any Liability that would reasonably be expected to have a Material Adverse Effect. 9.10 Ordinary Course of Business. Since the Most Recent Balance Sheet Date until the date hereof, the Business has been conducted within the Ordinary Course of Business. Since that time no extraordinary business event or legal arrangement has occurred or been entered into and there has also not been any event which by itself or together with other events has a Material Adverse Effect on the Acquired Assets or the Business. 9.11 Restrictions on Business Activities. Except as specifically contemplated by this Agreement or its Exhibits, there is no agreement (non-compete or otherwise) or commitment or any judgment, injunction, order, decree or other action by any Government Entity binding upon the Business or the Acquired Assets which has or reasonably could be expected to have the effect of prohibiting or impairing any business practice of the Sellers with respect to the Business, any acquisition or disposition of property (tangible or intangible) by such Seller relating to the Business or the conduct of the Business by such Seller. Except as specifically contemplated by this Agreement, none of the Sellers has entered into any agreement under which the Business is restricted from providing services to customers or potential customers or any class of customers of the Business, in any geographic area, during any period of time or in any segment of the market. 9.12 Condition of Assets. All Movable Fixed Assets have been well maintained and are in good and serviceable condition, normal wear and tear excepted. All Inventories on the Closing Date will by quantity and quality be usable or saleable in the ordinary course of business. All of the Inventory reflected on the Financial Statements and the Sellers' books and records on the date hereof were purchased, acquired or produced in the ordinary and regular course of business. 9.13 Agreements. The pending customer orders transferred to the Purchasers according to Section 4.1 have been received by the Purchasers in the Ordinary Course of Business and do not provide for any terms or conditions, in particular to the calculation and payment conditions which deviate from the practice of the Sellers in the past. The conditions are fair and reasonable. To Sellers' Knowledge there is no reason to believe that such pending customer orders would lead to any losses outside of the Business, provided that such pending customer orders will be handled by the Purchasers diligently and in accordance with the practice as applied in the past. 9.14 Government Approvals. The Sellers have obtained all material approvals, permits, licenses, grants or other authorizations of any Government Entity ("Permits") required for the operation of the Business and for Sellers to hold the Acquired -16- Assets. All such Permits and any other Permits held by any Seller in connection with the operation of the Business or the holding of any of the Acquired Assets are listed in Exhibit 9.14 and are in full force and effect and no revocation, limitation or amendment of any of such Permits is pending or to the Sellers' Knowledge has been threatened. The Business is in all material aspects carried out in compliance with the listed Permits. 9.15 Litigation. There is at the date hereof, no action, suit or proceeding of any nature by or before any Government Entity pending or, to the Sellers' Knowledge, threatened against any of the Sellers, involving the Business or the Acquired Assets, or any of its officers or directors to the extent affecting the Business or the Acquired Assets, nor, to the Sellers' Knowledge, is there any reasonable basis therefor which could give rise to any Liability relating to the Acquired Assets or prevent or materially delay the transactions contemplated by this Agreement. There is no investigation pending or, to the Sellers' Knowledge, threatened against any of the Sellers properties or any of its officers or directors by or before any Governmental Entity which could prevent or materially delay the transactions contemplated by this Agreement. No Governmental Entity has at any time challenged or questioned the legal right of any of the Sellers to manufacture, offer or sell any of the Products or related services, or to conduct the Business, in the present manner or style thereof. 9.16 Transferred Agreements. The Transferred Agreements are to the Sellers' Knowledge valid and enforceable against the Parties thereto and neither the respective Seller nor, to the Sellers' Knowledge, any respective other party thereto has materially breached, or is in default under, any Transferred Agreements. 9.17 Compliance with Regulations. To Sellers' Knowledge, the Business is in all material respects in compliance with all material applicable laws (including rules, regulations, codes, plans, injunctions, orders, decrees, rulings and charges thereunder), including without limitation occupational health and safety regulations. 9.18 Intangible Assets. The Intangible Assets constitute all the know-how and intellectual property necessary or otherwise used by Sellers for the conduct of the Business as it is conducted on the Closing Date. The use or other exploitation of the Intangible Assets in the manner used by Seller in connection with the Business, to the Sellers' Knowledge, does not and will not violate any rights of any third parties. The fees, if any, necessary for upholding the Intangible Assets have been duly paid. The Intangible Assets, to the Sellers' Knowledge, are not subject to invalidity, cancellation or total or partial nullification, and to Sellers' Knowledge, no facts exist that would reasonably be thought to constitute a basis for the foregoing. The Sellers are the sole and exclusive owners of the Intangible Assets unless otherwise indicated in Exhibit 9.18 hereto, and have, unless otherwise indicated in the Exhibit 9.18, the right to transfer the Intangible Assets as contemplated by this Agreement free from any Lien. To the Seller's knowledge, none of the Intangible Assets is infringed by third parties. 9.19 Business Knowledge. The Sellers own all manufacturing, processing and marketing know-how for the Sellers' entire previous and present Products, and hold, to the extent that such manufacturing, processing and marketing know-how has been reduced to writing, all documents pertaining thereto (which documents will be delivered as described in Section 2 of this Agreement). -17- 9.20 Protection of Confidential Information. The Sellers have imposed to the Employees such obligations as to the treatment of confidential information and trade secrets as set forth in the relevant Employment Contracts. Sellers have not licensed software, or provided any significant parts of software, included in the Intangible Assets to any third party in source code format. 9.21 Interested Party Transactions. Except as listed in Exhibit 9.21, no Managing Director, Supervisory Board member, Director or majority shareholder of any Seller (nor any ancestor, sibling, descendant or spouse of any of such persons, or any trust, partnership or corporation in which any of such persons has an interest), has, directly or indirectly, (i) an interest in any entity which furnished or sold, or furnishes or sells, services or products relating to the Business that the Sellers furnish or sell, or propose to furnish or sell, or (ii) any interest in any entity that purchases from or sells or furnishes to, the Sellers, any goods or services relating to the Business or (iii) a beneficial interest in any Assigned Agreement; provided, that ownership of no more than one percent (1%) of the outstanding voting stock of a publicly traded corporation shall not be deemed an "interest in any entity" for purposes of this Section 9.21. 9.22 Employee Matters. (a) There are no obligations, agreements or commitments in relation to the Transferred Employees other than those (i) reflected in the Employment Contracts referred to in 6.1, or (ii) agreed upon among the Sellers and the Transferred Employees between the date hereof and the Closing Date with the prior written consent of the Purchasers, or (iii) generally imposed by mandatory law, and there are no other obligations, agreements or commitments with regard to any Employees that will transfer to the Purchasers as a result of the transactions contemplated by this Agreement. The information regarding the Transferred Employees contained in Exhibit 6.1 is true and correct. (b) The Sellers (i) are in compliance in all material respects with all applicable foreign, federal, state and local laws, rules and regulations respecting employment, employment practices, terms and conditions of employment and wages and hours, in each case, with respect to Employees, (ii) have withheld and reported all amounts required by law or by contract to be withheld and reported with respect to wages, salaries and other payments to Employees, (iii) are not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing, and (iv) are not liable for any payment to any trust or other fund governed by or maintained by or on behalf of any governmental entity, with respect to unemployment compensation benefits, social security or other benefits or obligations for Employees (other than routine payments to be made in the Ordinary Course of Business and consistent with past practice). There are no pending or, to the Sellers' Knowledge, threatened or reasonably anticipated claims or actions against the Sellers under any worker's compensation policy, long-term disability policy, or similar policy. (c) At the Signing Date, no work stoppage or labor strike against any member of the Sellers is pending, or to the Sellers Knowledge threatened or reasonably anticipated. There are no actions, suits, claims, labor disputes or grievances pending, or, to the Sellers' Knowledge, threatened or reasonably anticipated -18- relating to any labor, safety or discrimination matters involving any Employee, including, without limitation, charges of unfair labor practices or discrimination complaints, which, if adversely determined, would, individually or in the aggregate, result in any material Liability to the Purchasers. Neither Sellers nor any of Subsidiaries have engaged in any unfair labor practices. The Sellers are not bound by any collective bargaining agreement (Betriebsvereinbarungen), other than those set out in Exhibit 9.22, or union contract with respect to Employees and no collective bargaining agreement is being negotiated by the Sellers, in each case relating to the Transferred Employees that would result in any material Liability of the Purchasers on or after the Closing Date. (d) To the Sellers' Knowledge, no Employee is obligated under any contract or subject to any judgment, decree or order of any court or administrative agency that would interfere with such Employee's efforts to promote the interests of the Business or that would interfere with the Business. To the Sellers' Knowledge, neither the execution nor delivery of this Agreement, nor the carrying on of the Business as presently conducted or proposed to be conducted nor any activity of the Employees in connection with the carrying on of the Business as presently conducted or currently proposed to be conducted, will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract or Employment Agreement under which any Employees are now bound. 9.23 Warranties; Indemnities. Except for general conditions of sale used by the Sellers in the Ordinary Course of Business, no warranty or indemnity has been given by the Sellers. There are no warranty and indemnity claims in excess of $25,000 made against the Sellers in existence at the Signing Date relating to the Products and to Sellers' Knowledge there are no such indemnity claims threatened, except for indemnity claims with respect to infringement of intellectual property rights. The Sellers agree to indemnify the Purchasers from any Losses arising from any infringement of any intellectual property right, copyright, patent, petty patent, design patent or trademark of any third party caused by the Sellers prior to the Closing Date to the extent claims have been served in writing within one (1) year after the Closing Date, except for any indemnities related to the MPEG-LA Consortium and/or the DV Consortium. 9.24 Taxes. The Sellers, to the extent such Taxes could affect Purchasers ownership in the Acquired Assets or the operations of the Business, have duly filed by the due date all tax returns and other reports required under the applicable laws to be filed with tax and other authorities, paid all due taxes, tax prepayments, social security charges and other public dues, retained all taxes, social security charges and other charges to be retained and paid them by the due date to the respective recipient and paid all related delay charges and penalties, if any. 9.25 Insurance. The Sellers carry adequate insurance against all risks that a conscientious businessman usually covers. The insurance contracts are in full force and effect and all premiums due until the Closing Date have been paid and Sellers are otherwise in material compliance with the terms of such policies and bonds (or other policies and bonds providing substantially similar insurance coverage). Since -19- the Most Recent Balance Sheet Date, no material insurable events of damage or damages have arisen at the Seller which were not covered by insurance. There is no claim by the Sellers pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds. To the Sellers' Knowledge no termination of, or material premium increase with respect to, any of such policies has been threatened. 9.26 No Illegal Payments, Etc. To the Sellers' Knowledge, none of the Sellers nor any of their respective officers, employees, agents or Affiliates has: (a) directly or indirectly given or agreed to give any illegal gift, contribution, payment or similar benefit to any supplier, customer, governmental official or employee or other person who was or is in a position to help or hinder the Business (or assist in connection with any actual transaction) or made or agreed to make any illegal contribution, or reimbursed any illegal political gift or contribution made by any other Person, to any candidate for federal, state, local or foreign public office (i) which may subject the Sellers to any damage or penalty in any civil, criminal or governmental litigation or proceeding or (ii) the noncontinuation of which has had or might have, individually or in the aggregate, an adverse impact on the Business, or (b) established or maintained any unrecorded fund or asset or made any false entries on any books or records for any purpose. 9.27 Material Adverse Effect. To Sellers' Knowledge, there are no particular circumstances that could in the future materially adversely affect the Business. To Sellers' Knowledge there are no facts or circumstances which could result in any restriction, impediment or cessation of the manufacture and/or marketing of any material product presently manufactured and/or marketed by the Seller in the Business, except for changes in the business relationship with Matrox Inc., Canada, which may occur as a result of the transactions contemplated by this Agreement or its disclosure or such facts and circumstances that are not particularly relating to the Business relations, but may affect the economic situation or the business field in which the Business is active in general. 10 Representations and Warranties of the Purchasers, Guarantee of Pinnacle, Inc. In concluding this Agreement, the Sellers rely on the correctness of the representations and warranties made by the Purchasers and Pinnacle Inc. hereinafter. The Purchasers and Pinnacle, Inc. represent expressly and warrant as a guaranteed quality (with the legal consequences as conclusively set forth in Section 11 that the following representations and warranties are correct, unless otherwise provided hereunder on the date hereof and the Closing Date and all dates after the Closing Date until full payment of any outstanding amounts under the Purchase Price pursuant to Section 7: 10.1 Organization and Authority. The Purchasers and Pinnacle Inc. are companies duly incorporated, validly existing and in good standing under the laws of their respective jurisdiction and have the corporate power to own their respective properties and to carry on their respective businesses as now being conducted. Each of the Purchasers has all requisite power and authority to enter into this Agreement and any Related Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby. -20- 10.2 Execution and Delivery. This Agreement and any Related Agreements to which any Purchaser or Pinnacle Inc. is a party have been duly executed and delivered by such Purchaser and, assuming the due authorization, execution and delivery by the other Parties hereto and thereto, constitute the valid and binding obligation of such Purchaser or Pinnacle Inc. enforceable in accordance with their respective terms, subject to the laws of general application relating to bankruptcy, insolvency and the relief of debtors and to rules of law governing specific performance, injunctive relief or other equitable remedies. 10.3 Compliance with Corporate Requirements. The execution and delivery of this Agreement and any Related Agreements to which it is a party by any of the Purchasers or Pinnacle Inc. do not, and, the consummation of the transactions contemplated hereby and thereby will not, conflict with, or result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation, modification or acceleration of any obligation or loss of any benefit under (i) any provision of the charter documents or Bylaws (or their equivalent) of any such Seller, or (ii) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to any such Purchaser or its properties or assets. 10.4 Required Consents. Each of the Purchasers and Pinnacle Inc. has obtained all necessary corporate consents and taken all necessary corporate action, if any, required on the Sellers side for the consummation of the transactions contemplated by this Agreement. Except as set forth in Section 14 no consent, waiver, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other U.S. or German federal, state, county, local or other foreign governmental authority, instrumentality, agency or commission ("Governmental Entity") or any third party, is required by or with respect to any of the Purchasers in connection with the execution and delivery of this Agreement and any Related Agreements to which any of the Purchasers or Pinnacle Inc. is a party or the consummation of the transactions contemplated hereby and thereby. 10.5 Correct Information. The information contained in the Exhibits of this Agreement, relating to circumstances of the Purchasers and Pinnacle Inc., is complete and correct. 10.6 Pinnacle Shares. The Pinnacle Shares are duly authorized and have been reserved for issuance in accordance with this Agreement. When issued in accordance with this Agreement, the Pinnacle Shares will be duly issued and outstanding, fully paid and nonassessable. 10.7 Required Filings. Pinnacle Inc, is a public reporting issuer under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and has made all required filings thereunder by the required filing date and in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). None of such filings, including the financial statements contained therein, or the filings made by Pinnacle Inc. under the Securities Act of 1933, as amended, contained a material misstatement or omitted to state a material fact. The Form S-3 to be filed by Pinnacle Inc. in accordance with this Agreement and the Registration Rights Agreement attached hereto will not contain a material misstatement or omit to state any material fact. -21- 10.8 Absence of Material Adverse Effect. Since 30 June 2001, there has not been any circumstance, change in or effect upon Pinnacle Inc. which has or could reasonably be expected to have a Material Adverse Effect. Pinnacle Inc. has no present plans or intention to make any pre-announcement with respect to its financial results for the present fiscal quarter or any announcement to the effect that it expects its financial results for future fiscal quarters to be less than consensus street estimates. Pinnacle, Inc. hereby further undertakes to act as an absolute guarantor (selbstschuldnerischer Burge) for the obligations and liabilities of Pinnacle Germany and Pinnacle KG under Sections 7, 10 and 11 of this Agreement. 11 Performance and Liability 11.1 Breach of Warranties. In case of violation of any of the representations or warranties by a Party (the "Warranting Party") which have an adverse effect on, and cause damages to, (i) the Business or the Acquired Assets in the case of Sellers' representations and warranties, or (ii) the Sellers in the case of Purchasers representations and warranties, the Warranting Party shall be jointly and severally liable to put the other Parties (the "Damaged Party") in the position they would be in had the representation or warranty not been violated. In case the Warranting Party is unable to cure the defect or violation, the Damaged Party shall be compensated by an amount in cash which corresponds to the damage within the sense of Section 249 Sentence 2 German Civil Code. 11.2 Other Claims and Remedies. The Parties shall not have any other claims or remedies than the claims and remedies defined in Section 11.1 in case of a breach of any representation and warranty, and no further statements, representations and warranties or guarantees are made, or deemed to be made, by either Party, other than those expressly and conclusively set forth in Sections 9 and 10; provided, that this Section 11 shall not limit Purchasers' remedies for indemnification provided for in Sections 4.5 and 5 of this Agreement, or claims and remedies of either Party as may apply under mandatory law for willful or fraudulent breaches of representations or warranties by the other Party and, for the avoidance of doubt, the right of any party to this Agreement to rescind this Agreement pursuant to (S)326 German Civil Code in the event of a default of another party with its obligations under this Agreement. Any other claims or rights of the Purchasers in respect of the Business and the Acquired Assets, circumstances (financial, legal or otherwise), results and or its operations, whether by statute or contract or any other legal basis, shall to the extent legally possible, i.e. except for claims based upon willful misconduct (Vorsatz oder Arglist), be excluded and waived. Without limiting the foregoing exclusion and waiver, the Purchasers shall, in particular, not have the right to rescind this Agreement (Recht auf Wandelung/Rucktritt), to reduce the purchase price (Recht auf Minderung), to claim damages for incorrect assurances (Schadensersatz wegen unrichtiger Zusicherung), to avoid the Agreement or to request damages because of lack of essentiality (Fehlen einer wesentlichen oder zugesicherten oder garantierten Eigenschaft) or in the event of culpa in contrahendo, or to rescind or amend this Agreement for frustration of contract (Wegfall der Geschaftsgrundlage) or for any other reason whatsoever. 11.3 Limitation of Claims. The period of limitation for all claims of the Purchasers pursuant to Section 11.1 and 15.1 of this Agreement shall run until, and any claims -22- shall be time barred (verjahrt), two (2) years from the Closing Date. This period of limitation shall not apply to other remedies available to the Purchasers or the Sellers, including without limitation remedies for breaches of covenants and for indemnification provided by this Agreement. All such claims as well as any other claims of either Party under or in relation to this Agreement, whether by law, contract or otherwise, shall be time barred (verjahren) three (3) years after the relevant Party becomes aware of the relevant claim. 11.4 Due Diligence. No Party shall be liable to the other Party for any claims, if the other Party or its advisors had knowledge of such breach within the sense of Section 460 German Civil Code. The Sellers and the Purchasers have jointly evaluated the Inventory as reflected in the accounts as of August 31, 2001. 11.5 De minimis threshold. Purchasers shall have claims based upon a breach of any representation or warranty as set out in Section 9 only if the individual claim exceeds an amount of (euro) 25,000 or the aggregate of all claims exceeds an amount of (euro) 100,000 at which point Purchasers shall be entitled to be compensated for all claims of breaches of representations and warranties contained in Section 9 of this Agreement. 11.6 Cap on Claims. All claims of the Purchasers under or in connection with Section 9, except for any willful or fraudulent (Vorsatz oder Arglist) breaches of the representations and warranties contained in Section 9 of this Agreement, shall be limited to an aggregate amount of (euro) 3,500,000. 12 Covenants 12.1 Confidentiality. For a period commencing on the Signing Date and ending five (5) years later, the Sellers (and their successors and assigns), Mr. Matthias Zahn and Mrs. Steffi Korner, for the avoidance of doubt individually and not jointly and severally, shall keep confidential all matters related to the Business, in particular all business and trade secrets, and not disclose such matters and secrets, directly or indirectly, to any third party nor to cause such disclosure by third parties nor to abet or justify such disclosure nor to use such matters or secrets for themselves. 12.2 Non-Solicitation. For a period commencing on the Closing Date and ending thirty (30) months later, the Sellers, Mr. Matthias Zahn and Mrs. Steffi Korner, for the avoidance of doubt individually and not jointly and severally, shall not (nor shall it permit any of its Subsidiaries or Affiliates) directly or indirectly, without the prior written consent of the Purchasers, cause or influence any Transferred Employees to work in any way whatsoever for any of the Sellers (whether as an employee, agent, consultant, advisor, independent contractor, proprietor, partner, officer, director or otherwise), for an enterprise in which any one of them holds an interest or for a competitor, or to terminate an existing relationship with the Purchasers (or its consolidated Subsidiaries). 12.3 Non-Competition. (a) For a period commencing on the Closing Date and ending two (2) years later, the Sellers (acting jointly - gesamtschuldnerisch - with respect to one other) and Mr. Matthias Zahn (acting individually - "einzelschuldnerisch") and Mrs. Steffi Korner (acting individually - "einzelschuldnerisch") shall not (nor shall they permit any of their Subsidiaries or Affiliates) directly or indirectly, without the -23- prior written consent of the Purchasers (i) manufacture, distribute or render any products or services which are of the same kind as, or competitive with, products or services manufactured, distributed or rendered by the Business in any part of the world where the Business was conducted (a "Competing Business"); (ii) assist third parties in any way whatsoever, directly or indirectly, in the manufacture, distribution or rendering of such products or services of a Competing Business; (iii) hold in any way whatsoever, directly or indirectly, an interest in a company or other entity that constitutes a Competing Business other than an interest of less than 5% in a publicly quoted company; or (iv) participate in the financing, operation, management or control of a Competing Business. For the Avoidance of doubt, the activities of Mr. Matthias Zahn, Mrs. Steffi Koerner, and TV-Server AG in the field of technologies and services for interactive television shall not be restricted by the foregoing non-competition obligation. (b) In the event that the provisions of this Section 12.3 are deemed to exceed the time, geographic or scope limitations permitted by applicable law, then such provisions shall be amended to the maximum time, geographic or scope limitations, as the case may be, permitted by applicable law. (c) For the purposes of this Section 12, the Sellers, Mr. Matthias Zahn and Mrs. Steffi Korner, acknowledge that (i) the goodwill associated with the Business and customer relationships prior to the Acquisition is an integral component of the value of the Business to the Purchasers and is reflected in the Purchase Price for the Acquisition to be received by the Sellers and (ii) the Transferred Agreements are necessary to preserve the value of the Business, including the goodwill and customer relationships, for the Purchasers following the Acquisition. The Sellers also acknowledge that the limitations of time, geographic scope and scope of activity agreed to in this Agreement are reasonable because, among other things, (x) the Sellers and their subsidiaries and the Purchasers are engaged in a highly competitive industry (y) management of the Sellers and their subsidiaries have unique access to, and will continue to have access to, the trade secrets and know-how of the Sellers and their Subsidiaries, including without limitation, the plans and strategy (and in particular, the competitive strategy) of the Sellers and its Subsidiaries and (z) the Sellers are receiving significant consideration in connection with the Acquisition. 13 Compliance with the Securities Laws 13.1 Securities Act Exemption. Each of the Sellers has been advised that the Pinnacle Shares issued to the Sellers pursuant to this Agreement will be issued as securities to the Sellers in a private placement exempt from the registration requirements of Section 5 of the Securities Act, as set forth in Section 4(2) thereof, and may not be offered or sold except pursuant to an exemption or pursuant to an effective registration statement under the Securities Act. 13.2 Legends. Pinnacle, Inc. will give stop transfer instructions to its transfer agent with respect to Pinnacle Shares received by the Sellers pursuant to this Agreement and -24- there will be placed on each certificate representing such Pinnacle Shares, or any substitutions therefor, legends stating in substance: THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION STATEMENT THEREOF, OR EXEMPTION THEREUNDER, UNDER SUCH ACT OR IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT. The legend set forth above shall be removed (by delivery of a substitute certificate without such legend) and Pinnacle, Inc. agrees to so instruct its transfer agent at such time as a registration statement on Form S-3 covering such Pinnacle Shares is effective, or at the request of the Sellers when one or more of the conditions set forth in clauses (w), (x), (y) and (z) of Subsection 12.3 hereof shall have occurred. 13.3 Representations Regarding Securities Laws Matters. The Sellers agree not to sell, transfer or otherwise dispose of any Pinnacle Shares issued to the Sellers pursuant to this Agreement unless such sale, transfer or other disposition is made (w) in conformity with the requirements of Rule 144 promulgated under the Securities Act; or (x) pursuant to a resale registration statement on Form S-3 filed by Pinnacle, Inc. with the Securities and Exchange Commission (the "SEC") which is then in effect; or (y) upon delivery to Pinnacle, Inc. of a written opinion of counsel, reasonably acceptable to Pinnacle, Inc. in form and substance, that such sale, transfer or other disposition is otherwise exempt from registration under the Securities Act; or (z) an authorized representative of the SEC shall have rendered written advice to the Sellers wishing to effect such sale, transfer or disposition (sought by the Sellers or counsel thereto, with a copy thereof and of all other related communications delivered to Pinnacle, Inc.) to the effect that the SEC would take no action or that the staff of the SEC would not recommend that the SEC take action, with respect to the proposed sale, transfer or other disposition, if consummated. The Sellers acknowledge and understand that Pinnacle, Inc. is relying on the written representations made by the Sellers in the Investment Representation Statements in the form attached hereto as Exhibit 13.3 executed by each of the Sellers. 14 Closing Date Deliveries 14.1 Sellers' Deliveries On the Closing Date, the Sellers shall deliver, or cause to be delivered, to the Purchasers, the following: (a) such instruments of sale, transfer, conveyance and assignment as the Purchasers and their counsel may reasonably request to give effect to the transfer of the Acquired Assets as contemplated by this Agreement; (b) approvals, consents, waivers and authorizations as set forth in Exhibit 9.4; (c) all other documents, certificates, instruments or writings required to be delivered by the Sellers on the Closing Date in order to consummate the transactions contemplated by this Agreement; -25- 14.2 Purchasers' Deliveries On the Closing Date, the Purchasers and Pinnacle, Inc. shall deliver, or cause to be delivered, to the Sellers, (without in any way affecting the effectiveness of this Agreement upon signing) the following: (a) internal approval by the Board of Directors of each of Pinnacle, Inc., Pinnacle KG and Pinnacle Germany; (b) all other documents, certificates, instruments or writings required to be delivered by the Purchasers on the Closing Date in order to consummate the transactions contemplated by this Agreement; (c) reassignment of any receivables assigned to Purchasers pursuant to the Global Assignment Agreement as reflected in Section 7.2a. 15 Arrangements concerning the Relationship of the Parties until and after the Closing Date 15.1 Conduct of the Business until Closing Date. Between the date hereof and the Closing Date, except as otherwise agreed to in advance and in writing by Purchasers, Sellers covenant and agree with Purchasers as follows: (a) Sellers shall operate the Business diligently and in good faith and only in the ordinary course, in the manner as heretofore conducted and consistent with Sellers' past management and business practices. (b) Sellers shall use reasonable efforts to (i) maintain, preserve, renew and keep in full force and effect the existence, rights and franchises of the Business; (ii) maintain the Acquired Assets in good working order; (iii) not allow the disposal or lapse of any Intangible Assets; (iv) preserve for Purchasers Sellers' present relationships with its suppliers, distributors, vendors, manufacturers, customers, communities and others having business relations with Sellers' in the Business; and (v) not allow any event or occurrence within Sellers' control which might, individually or in the aggregate, have a Material Adverse Effect on Seller. (c) Sellers shall not terminate, amend or otherwise modify any Transferred Agreement. (d) Sellers shall not create any indebtedness that would constitute an liability or obligation to be assumed by the Purchasers. (e) Sellers will not act or omit to act, or consent to any act or omission to act by another party, which will cause a breach or violation of, or default under, any Transferred Agreements or other commitments or other obligations adversely affecting the Acquired Assets or the Business. 15.2 Termination of Agreement. The Purchasers may terminate this Agreement by giving written notice to the Sellers at any time prior to and at the date of consummation of this agreement at the Closing Date if there has been any event which by itself or together with other events has a Material Adverse Effect on the Business. For the purposes of this Section 15.2 only, if (i) at least two of the Key Employees listed in Exhibit 15.2a or (ii) at least 6 of the R&D Employees listed in Exhibit 15.2b object to be transferred to Purchasers or do not agree to be -26- transferred to Pinnacle Germany according to (S)613a BGB prior to Closing Date or Jorg Adelstein does not agree to continue to work for the Business, this shall be deemed to have a Material Adverse Effect on the Business. The Sellers may terminate this Agreement by giving written notice to the Purchasers (i) at any time prior to the date on which the Purchase Price has been paid in full, in the event of insolvency proceedings of the Purchasers or Pinnacle, Inc., or in the event of a default pursuant to (S)326 German Civil Code, or, (ii) at any time prior to the Closing Date, if any other event which by itself or together with other events has a Material Adverse Effect on Pinnacle, Inc. has occurred. 15.3 Sellers' Further Deliveries. Any time, and from time to time after the Closing Date, at the reasonable request of the Purchasers and without further consideration, the Sellers will execute and deliver such other instruments of sale, transfer, conveyance, assignment and confirmation and take such action as the Purchasers may reasonably determine is necessary to transfer, convey and assign to Purchasers and to confirm Purchasers' title to or interest in the Acquired Assets, to put Purchasers in actual possession and in operating control thereof, to assist Purchasers in exercising all rights in respect thereto and to ensure the transition of the Business from the Sellers to the Purchasers in an orderly and smooth fashion. 15.4 Purchasers' Further Deliveries. Any time, and from time to time after the Closing Date, at the reasonable request of the Sellers and without further consideration, the Purchasers will execute and deliver such other instruments of assumption and confirmation and take such action as Sellers may reasonably determine is necessary to ensure the transition of the Business from the Sellers to the Purchasers in an orderly and smooth fashion. 15.5 Publicity. No announcement of any kind to the media or any other indefinite group of persons shall be made before the Closing Date in respect of the subject matter of this Agreement except as specifically agreed between the Sellers and the Purchasers or if such announcement is required by law or administrative or judicial order. 15.6 Notice of Acquisition. Upon the request of the Purchasers, the Sellers will join the Purchasers in sending out on or after the Closing Date a notice in a mutually approved form to all suppliers, agents, distributors, clients and customers advising them of the transfer of the Business. 15.7 Employee Matters. Until the Closing Date, Sellers shall not (without the prior written consent of Purchasers) modify or terminate any Employment Agreement or enter into any new employment agreement. 16 Miscellaneous 16.1 Notice. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt, or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one (1) business day after the business day of facsimile transmission, if delivered by facsimile transmission with receipt of transmission confirmation and with a copy by first class mail, postage prepaid, and shall be addressed to the intended recipient as set forth below: -27- If to Pinnacle, Inc.: Pinnacle Systems, Inc. 280 North Bernardo Avenue Mountain View, CA 94043 U.S.A. Attention: Chief Financial Officer Telephone: (650) 560-1600 Facsimile: (650) 526-1601 With a copy to: Wilson Sonsini Goodrich & Rosati Professional Corporation 650 Page Mill Road Palo Alto, CA 94304-1050 U.S.A. Attention: Chris F. Fennell, Esq. Telephone: (650) 493-9300 Facsimile: (650) 845-5000 And a copy to: Linklaters Oppenhoff & Radler Mainzer Landstrasse 16, D-60325 Frankfurt am Main Postfach 17 01 11 D-60075 Frankfurt am Main Attention: Ulli Janssen Telephone: (49-69) 7-10-03-0 Facsimile: (49-69) 7-10-03-333 If to Pinnacle Germany: Pinnacle Systems GmbH Frankfurter Strasse 3c, 38112 Braunschweig, Germany With a copy to: Wilson Sonsini Goodrich & Rosati Professional Corporation 650 Page Mill Road Palo Alto, CA 94304-1050 U.S.A. Attention: Chris F. Fennell, Esq. Telephone: (650) 493-9300 Facsimile: (650) 845-5000 -28- And a copy to: Linklaters Oppenhoff & Radler Mainzer Landstrasse 16, D-60325 Frankfurt am Main Postfach 17 01 11 D-60075 Frankfurt am Main Attention: Ulli Janssen Telephone: (49-69) 7-10-03-0 Facsimile: (49-69) 7-10-03-333 If to Fast, Inc.: Fast Multimedia Holding Inc. 101 Federal Street, Suite 1900 Boston, MA 02110 U.S.A. With a copy to: SJ Berwin Knopf Tulloch Steininger Maria-Theresia-Str. 5 81675 Munchen Attention: Thomas Pauls and Dr. Christoph Brenner Telephone: (0049-89-89081-0) Facsimile: (0049-89-89081-100) If to FAST Germany: Fast Multimedia AG Rudesheimerstr. 11-13, D-80686 Munchen, Germany With a copy to: SJ Berwin Knopf Tulloch Steininger Maria-Theresia-Str. 5 81675 Munchen Attention: Thomas Pauls and Dr. Christoph Brenner Telephone: (0049-89-89081-0) Facsimile: (0049-89-89081-100) 16.2 Notary Fees. The Notary fees connected with the notarial recording of this Agreement shall be borne by the Purchasers. Apart therefrom, each Party shall bear its own costs and the costs of its advisers and auditors. 16.3 Amendment. Changes and amendments to this Agreement as well as declarations to be made hereunder shall be valid only if made in writing unless a notarial deed is legally required. This shall also apply to any change of this provision. -29- 16.4 Severability. If a provision of this Agreement should be or become invalid or not contain a necessary regulation, the validity of the other provisions of this Agreement shall not be affected thereby. The invalid provisions shall be deemed to be replaced and the gap be filled by a legally valid arrangement which corresponds as closely as possible to the intentions of the Parties or what would have been the intentions of the Parties according to the aim and purpose of this Agreement if they had recognised the gap. 16.5 Headings and Exhibits. The Exhibits to this Agreement shall form an integral part of this Agreement. The headings in this Agreement shall only serve the purpose of easier orientation and are of no consequence for the contents and interpretation of this Agreement. Statements in one provision of, or Exhibit to, this Agreement shall be deemed to have been made also for the purposes of all other provisions of, and Exhibits to, this Agreement. 16.6 Further Assurances. The Parties agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other Party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement. 16.7 Governing Law. This Agreement shall be governed by German law. 16.8 Jurisdiction. The Courts of Frankfurt am Main shall have exclusive jurisdiction for all disputes arising out of or in connection with this Agreement, including disputes about its validity. 16.9 Entire Agreement. This Agreement, the schedules and exhibits hereto, and the documents and instruments and other agreements among the Parties hereto referenced herein constitute the entire agreement among the Parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof. 16.10 Assignment. No 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 prior written consent. Any attempted assignment, transfer or delegation without such prior written consent will be void. Notwithstanding the foregoing, a Party, 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, such Party, 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 such Party or its permitted successive assignees or transferees subject however to the assignor or transferor acting as guarantor for all obligations of the assignee or transferee vis-a-vis the other contractual parties. Without limiting the foregoing, this Agreement will be binding upon and inure to the benefit of the Parties and their permitted successors and assigns. 16.11 No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any person or entity other than the Parties hereto and their respective successors and permitted assigns. -30- 16.12 Extension; Waiver. Purchasers on the one hand and Sellers on the other hand may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations of the other Parties hereto, (ii) waive any inaccuracies in the representations and warranties made to such Parties contained herein or in any document delivered pursuant hereto, and (iii) waive compliance with any of the agreements or conditions for the benefit of such Parties contained herein. Any agreement on the part of a Party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such Party. 16.13 The Notary shall send certified copies of this deed to the Persons listed in section 16.1 above. 16.14 This agreement shall be executed in the English language only. 16.15 Nach Uberzeugung des beurkundenden Notars und nach Bestatigung aller unterzeichneten Urkundsbeteiligten sind diese der englischen Sprache hinreichend kundig. 16.16 All Exhibits are well known to all parties. The Exhibits 7.2 is attached to this agreement for the purpose of prove and evidence. Reference is made to the Exhibits 8, 13.3 - they form an integral part of this Agreement ((S)9 Abs. 1 Satz 2 BeurkG). Reference is also made to the Exhibits 2.1a, 2.1b, 2.3a, 2.3b, 2.4, 4.1, 4.2, 6.1, 6.3, 9.4, 9.8, 9.14, 9.18, 9.21, 9.22, 15.2a and 15.2b - they also form an integral part of this Agreement ((S)14 Abs. 1 BeurkG) and are signed on each page by the parties. The parties waive in reading this documents. [Remainder of this page intentionally left blank] -31- PURCHASERS PS MIRO HOLDINGS INC. & CO. KG, a partnership under the laws of Germany By: PS MIRO HOLDINGS INC. As General Partner of PS Miro Holdings Inc. & Co. KG By: /s/ Arthur D. Chadwick --------------------------------------------- Name: Arthur D. Chadwick ------------------------------------------- Title: Vice President, Finance and Administration ------------------------------------------ and Chief Financial Officer ------------------------------------------ PINNACLE SYSTEMS GMBH, a German corporation By: /s/ Arthur D. Chadwick ---------------------------------------------- Name: Arthur D. Chadwick ------------------------------------------- Title: General Manager ------------------------------------------ For the purposes of acting as guarantor for the Purchasers' obligations to pay the consideration pursuant to Section 7 and the Purchasers' Representations and Warranties pursuant to Sections 10 and 11 and with respect to its express obligations according to Sections 8 and 13: PINNACLE SYSTEMS, INC., a California corporation By: /s/ Arthur D. Chadwick --------------------------------------------- Name: Arthur D. Chadwick ------------------------------------------- Title: Vice President, Finance and Administration ------------------------------------------ and Chief Financial Officer ------------------------------------------ -32- "SELLERS" FAST MULTIMEDIA HOLDINGS, INC., a Delaware corporation By: /s/ Matthias Zahn --------------------------------------------- Name: Matthias Zahn ------------------------------------------- Title: Chief Executive Officer ------------------------------------------ FAST MULTIMEDIA AG, a German corporation By: /s/ Reiner Bielmeier ---------------------------------------------- Name: Reiner Bielmeier ------------------------------------------- Title: Chief Executive Officer ------------------------------------------ For the purposes of Section 12 only: MATTHIAS ZAHN In his personal capacity /s/ Matthias Zahn ------------------------------------------------- STEFFI KOERNER In her personal capacity By Power of Attorney to Matthias Zahn /s/ Matthias Zahn ------------------------------------------------- -33- EX-4.2 4 dex42.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.2 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made effective as of --------- October 2, 2001, between PINNACLE SYSTEMS, INC., a California corporation ("Pinnacle") and FAST MULTIMEDIA HOLDINGS INC., a Delaware corporation ("Fast -------- ---- Inc.") and FAST MULTIMEDIA AG, a German corporation ("Fast Germany" and together ---- ------------ with Fast Inc., the "Sellers") pursuant to the Asset Purchase Agreement dated as of September 13, 2001 among Pinnacle, PS Miro KG ("Pinnacle KG"), Pinnacle ----------- Systems GmbH ("Pinnacle GmbH") and the Sellers, (the "Acquisition Agreement"). ------------- --------------------- RECITALS -------- A. Pursuant to the terms of the Acquisition Agreement, Pinnacle KG and Pinnacle GmbH shall cause Pinnacle issue to the Sellers shares of common stock of Pinnacle, no par value (the "Pinnacle Shares"), in connection with the --------------- acquisition by Pinnacle KG and Pinnacle GmbH of certain assets of Sellers. B. Section 8 of the Acquisition Agreement provides for the execution and delivery of this Agreement concurrent with the closing of the asset purchases under the Agreement. NOW, THEREFORE, in consideration of the representations, warranties, covenants and conditions herein and in the Acquisition Agreement, the parties hereto hereby agree as follows: SECTION 1 DEFINITIONS 1.1 Certain Definitions. As used in this Agreement: ------------------- (a) 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. (b) The term "Form S-3" shall mean such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC which similarly permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the commission. (c) The term "person" shall mean any person, individual, corporation, partnership, trust or other non-governmental entity or any governmental agency, court, authority or other body (whether foreign, federal, state, local or otherwise). (d) The term "Holder" means (i) a Seller holding Registrable Securities or (ii) a transferee of Registrable Securities from a Holder to which transferee registration rights granted under this Agreement are assigned pursuant to Section 2.8 of this Agreement. (e) The term "First Issuance Shares" means the Pinnacle Shares issued to Fast Germany pursuant to Section 7.2(c) of the Acquisition Agreement. (f) The term "Second Issuance Shares" means the Pinnacle Shares issued to Fast Germany pursuant to Section 7.2(d) of the Acquisition Agreement. (g) The term "Third Issuance Shares" means the Pinnacle Shares issued to Fast Inc. pursuant to Section 7.2(d) of the Acquisition Agreement. (h) 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. (i) The term "Registrable Securities" means the First Issuance Shares, the Second Issuance Shares and the Third Issuance Shares and shall include all Pinnacle Shares received by any Holder in respect thereof pursuant to a stock split, stock dividend or other recapitalization of Pinnacle or pursuant to any merger, consolidation or reorganization involving Pinnacle; provided, however, -------- ------- Registrable Securities shall not include Pinnacle Shares that have been registered under the Securities Act and disposed of pursuant to the registration statement used to effect such registration or that can be sold (together with all other Pinnacle Shares held by the holder thereof and issued pursuant to the Acquisition Agreement) in any consecutive ninety (90) day period without registration in accordance with Rule 144 of the Securities Act. (j) 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 Pinnacle with the SEC under the Securities Act in connection with the provisions of Section 2 of this Agreement. (k) 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. (l) The term "SEC" means the United States Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. 1.2 Acquisition Agreement. Capitalized terms not otherwise defined herein --------------------- have the meanings given to them in the Acquisition Agreement. - 2 - SECTION 2 REGISTRATION RIGHTS 2.1 Shelf Registration. ------------------ (i) Initial Registration. Pinnacle shall use its commercially -------------------- reasonable best efforts to file within fifteen (15) days of the issuance of the First Issuance Shares (subject to the delay provisions of Section 2.4) a Registration Statement on Form S-3 registering the resale of the First Issuance Shares on a delayed or continuous basis pursuant to Rule 415 under the Securities Act (or any similar rule that may be adopted by the SEC) in ordinary course brokerage or dealer transactions. The offering made pursuant to such registration shall not be underwritten, and the Registration Statement shall not include any securities other than the Registrable Securities. As soon as practicable after filing, Pinnacle shall use its commercially reasonable best efforts to cause such Registration Statement to be declared effective, at its expense, by the SEC and to keep such Registration Statement effective until the sooner to occur of (A) the date on which all First Issuance Shares included within such Registration Statement have been sold or (B) the first anniversary of the date of the issuance of the First Issuance Shares. (ii) Subsequent Registration. Pinnacle shall use its commercially ----------------------- reasonable best efforts to file within three (3) days of the issuance of the Second Issuance Sharesand Third Issuance Shares (subject to the delay provisions of Section 2.4) a Registration Statement on Form S-3 registering the resale of the Second Issuance Shares and the Third Issuance Shares on a delayed or continuous basis pursuant to Rule 415 under the Securities Act (or any similar rule that may be adopted by the SEC) in ordinary course brokerage or dealer transactions. The offering made pursuant to such registration shall not be underwritten, and the Registration Statement shall not include any securities other than the Registrable Securities. Pinnacle shall use its commercially reasonable best efforts to cause such Registration Statement to be declared effective by the SEC on February 15, 2002 or as soon as practicable thereafter and to keep such Registration Statement effective until the sooner to occur of (A) the date on which all Second Issuance Shares and Third Issuance Shares included within such Registration Statement have been sold or (B) the first anniversary of the date of issuance of the Second Issuance Shares. 2.2 Information by Holder(s). The Holder(s) whose securities are included ------------------------ in any registration effected pursuant to this Section 2 shall furnish in writing to Pinnacle such information regarding such persons and the distribution proposed by such persons as Pinnacle may request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Section 2. Pinnacle's obligations under this Section 2 are conditioned upon compliance by such persons with the provisions of this Section 2.2. 2.3 Obligations of Pinnacle. In connection with any registration of ----------------------- Registrable Securities pursuant to this Section 2, Pinnacle shall: (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. - 3 - (b) Furnish to the participating Holders such number of copies of any Prospectus (including any preliminary Prospectus and any amended or supplemented Prospectus) 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 Pinnacle shall be required under the provisions hereof to cause a Registration Statement to remain current. In addition, during such period, Pinnacle shall provide the Holders, without charge, with one copy of any Registration Statement and any post-effective amendments thereto (including financial statements and schedules and the exhibits thereto). (c) 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. (d) Take all such other action either reasonably 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. (e) Cause all Registrable Securities registered pursuant to this Section 2 to be listed on The Nasdaq National Market or on any other exchange on which Pinnacle's Common Stock is then listed or quoted. (f) 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. (g) Pinnacle will keep the Holders informed of Pinnacle'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, (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 SEC 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 copies of all correspondence between the SEC or any such governmental agency or self-regulatory body and all written memoranda relating to discussions with the SEC 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 SEC 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, and (v) of any determination by Pinnacle that an event has occurred (the nature and pendency of which need not be disclosed during a "black-out period" pursuant to Section 2.4 of this Agreement) 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 - 4 - 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. (h) 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, Pinnacle will obtain its withdrawal at the earliest possible time. 2.4 Suspension of Prospectus. ------------------------ (a) Notwithstanding anything else in this Section 2, if, at any time during which a Prospectus is required to be delivered in connection with the sale of Registrable Securities, the Board of Directors of Pinnacle reasonably determines in good faith that a development has occurred or a condition exists as a result of which the Registration Statement or the Prospectus contains or incorporates by reference a material misstatement or omission, the correction of which would require the premature disclosure of confidential information that would, in the good faith determination of the Board of Directors, materially and adversely affect Pinnacle, Pinnacle will immediately notify the Holders thereof by telephone and in writing. Upon receipt of such notification, Holders will immediately suspend all offers and sales of any Registrable Securities pursuant to the Registration Statement for a period not to exceed 45 days with respect to each of the Registration Statements Pinnacle is obligated to file pursuant to the terms of this Agreement. Pinnacle may not exercise this delay right more than twice in any 12-month period with respect to each of the Registration Statements Pinnacle is obligated to file pursuant to the terms of this Agreement. In the event of the delivery of the notice described above by Pinnacle, Pinnacle shall use its best efforts to amend such Registration Statement and/or amend or supplement the related prospectus if necessary and to take all other actions necessary to allow the proposed sale to take place as promptly as possible, subject, however, to the right of Pinnacle set forth above in this Section 2.4(a) to delay further sales of Registrable Securities until the conditions or circumstances referred to in the notice have ceased to exist or have been disclosed. (b) In the event that conditions described in Section 2.4(a) arise prior to the filing or effectiveness of a Registration Statement required pursuant to this Agreement and such conditions would have entitled Pinnacle to suspend offers and sales under such Registration Statement had the conditions arisen after filing and effectiveness of such Registration Statement, Pinnacle may, upon giving of the notice required by Section 2.4(a), delay the filing of or cause a delay in the declaration of effectiveness of such Registration Statement. Any such delay caused by Pinnacle under this Section 2.4(b) shall be treated as a suspension of sales under such Registration Statement for purposes of applying the limitations on Pinnacle's exercise of the delay right provided in Section 2.4(a). - 5 - 2.5 Expenses. -------- (a) All costs and expenses, other than discounts and commissions, incurred in connection with any registration pursuant to Section 2 shall be borne by Pinnacle. The costs and expenses of any such registration shall include, without limitation, the reasonable fees and expenses of Pinnacle's counsel and its accountants, and all other costs and expenses of Pinnacle 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 brokers, 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, NASDAQ fees, the fees and expenses of Pinnacle's transfer agent and all other costs and expenses of complying with the provisions of this Section 2 with respect to such registration (collectively, "Registration Expenses"). (b) Excluding the Registration Expenses, the participating Holders shall pay all other fees and expenses incurred on their behalf with respect to any registration pursuant to this Section 2, including any counsel for the Holders and all selling commissions with respect to the Registrable Securities sold by them pursuant to such Registration Statement. 2.6 Indemnification. In the event of any offering registered pursuant to --------------- this Agreement: (a) Pinnacle will indemnify each Holder (excluding Holders who are then directors or officers of Pinnacle), each of their respective officers, directors, employees and agents, and each person controlling such person, with respect to which registration, qualification or compliance has been effected pursuant to this Section 2, against all claims, losses, damages, liabilities and expenses (or actions in respect thereof) arising out of or based on (i) any untrue statement (or alleged untrue statement) of a material fact contained in any preliminary or final prospectus, offering circular or other document (including any related Registration Statement, notification or the like) or any amendment or supplement thereto incident to any such registration, qualification or compliance, or (ii) any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violation by Pinnacle of any rule or regulation promulgated under the Securities Act or any state securities laws or rule or regulation promulgated thereunder applicable to Pinnacle and relating to action or inaction required of Pinnacle in connection with any such registration, qualification or compliance, and will reimburse each such person, each of its officers and directors, and each person controlling such person, for any legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability, expense or action, provided that Pinnacle will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission based upon and made in conformity with written information furnished to Pinnacle by an instrument duly executed by such person and stated to be specifically for use in the Registration Statement. (b) Each Holder will, if Registrable Securities held by or issuable to such person are included in the securities as to which such registration, qualification or compliance is being effected, indemnify Pinnacle, each of its directors, officers, employees and agents, each person - 6 - who controls Pinnacle within the meaning of the Securities Act and each other such Holder, each of its officers and directors and each person controlling such Holder, against all claims, losses, damages, liabilities and expenses (or actions in respect thereof) arising out of or based on (i) any untrue statement (or alleged untrue statement) of a material fact contained in any such Registration Statement, preliminary or final prospectus, offering circular or other document, or any amendment or supplement thereto, or (ii) any 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 Pinnacle, such Holders, such directors, officers, or persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability, expense or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such Registration Statement, preliminary or final prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to Pinnacle by an instrument duly executed by such Holder and stated to be specifically for use in the Registration Statement; provided, however, that the obligations of such Holders hereunder shall be limited to an amount equal to the gross proceeds before expenses and commissions to each such Holder of Registrable Securities sold as contemplated herein. (c) Each party entitled to indemnification under this Section 2.6 (the "Indemnified Party") shall give written notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has written notice of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at such party's expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement, except to the extent, but only to the extent, that the Indemnifying Party's ability to defend against such claim or litigation is materially impaired as a result of such failure to give notice. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to the Indemnified Party of a release from all liability in respect to such claim or litigation. If any such Indemnified Party shall have reasonably concluded that there may be one or more legal defenses available to such Indemnified Party which are different from or additional to those available to the Indemnifying Party, or that such claim or litigation involves or could have an effect upon matters beyond the scope of the indemnity agreement provided in this Section 2.6, the Indemnifying Party shall not have the right to assume the defense of such action on behalf of such Indemnified Party and such Indemnifying Party shall reimburse such Indemnified Party and any person controlling such Indemnified Party for that portion of the fees and expenses of any counsel retained by the Indemnified Party which are reasonably related to the matters covered by the indemnity agreement provided in this Section 2.6. (d) If the indemnification provided for in this Section 7 from the Indemnifying Party is unavailable to an Indemnified Party hereunder in respect of any losses, claims, damages, - 7 - liabilities or expenses referred to therein as a result of a judicial determination that such indemnification may not be enforced in such case notwithstanding this Agreement, the Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions which resulted in such losses, claims, damages, liabilities or expense, as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action; provided, however, that no person guilty of fraudulent misrepresentation -------- ------- (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation and no Holder will be required to contribute any amount in excess of the public offering price (less underwriting discounts and selling commissions) of all such Registrable Stock offered by it pursuant to such Registration Statement. (e) The obligations of Pinnacle and each Holder under this Section 2.6 shall survive the completion of any offering of Registrable Securities in a Registration Statement under this Agreement and otherwise. 2.7 Sale without Registration. The Holder of a certificate representing ------------------------- Registrable Securities required to bear the legend in substantially the form set forth in Section 12 of the Acquisition Agreement (or any similar legend) by acceptance thereof agrees to comply in all respects with the provisions of this Section 2.7. Prior to any proposed transfer of any Registrable Securities which shall not be registered under the Securities Act, the holder thereof shall give written notice to Pinnacle of such holder's intention to effect such transfer, accompanied by: (a) such information as is reasonably necessary in order to establish that such transfer may be made without registration under the Securities Act; and (b) except for transfers proposed to be made in accordance with SEC Rule 144 (as in effect at the date hereof and as amended from time to time thereafter) or to any constituent partner of any of the Shareholders, at the expense of the Holder or transferee, an unqualified written opinion of legal counsel, satisfactory in form and substance to Pinnacle, to the effect that such transfer may be made without registration under the Securities Act; provided that nothing contained in this Section 2.7 shall relieve Pinnacle from complying with any request for registration, qualification or compliance made pursuant to the other provisions of this Section 2. 2.8 Transfer of Registration Rights. The rights to cause Pinnacle to ------------------------------- register securities granted by Pinnacle under this Agreement may be assigned by the Shareholders only if: (i) Pinnacle is, prior to such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such registration rights are being assigned and a copy of a duly executed written instrument in form reasonably satisfactory to Pinnacle by which such transferee assumes all of the obligations and liabilities of its transferor - 8 - hereunder and agrees itself to be bound hereby and (ii) such assignment includes all of the Registrable Securities then held by the transferor; provided, -------- however, that such the requirement that all of a transferor's Registrable ------- Securities must be transferred in order to effect a transfer of registration rights hereunder shall not apply to (x) transfers by an entity Holder in a liquidity distribution to its equity holders or (y) transfers by a Holder to spouses and ancestors, lineal descendants, and siblings of such Holders or spouses who acquire Registrable Securities by right, will, or intestate succession, if all such transferees or assignees under (x) or (y) agree in writing to appoint a single representative as their attorney-in-fact for the purpose of receiving any notices and exercising their rights under this Agreement. 2.9 Rule 144. Pinnacle covenants that it shall file any reports required to -------- be filed by it under the Exchange Act, and that it shall take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell the Registrable Securities without registration under the Securities Act within the limitations of the exemptions provided by (a) Rule 144 under the Securities Act, as such rule may be amended from time to time, or (b) any similar rule or regulation adopted by the SEC. Pinnacle shall, upon the request of any Holder of Registrable Securities, deliver to such Holder a written statement as to whether it has complied with such requirements. 2.10 Termination of Registration Rights. The registration rights set forth ---------------------------------- in this Agreement shall terminate with respect to Pinnacle Shares issued pursuant to the Acquisition Agreement (and the right to transfer such Pinnacle Shares pursuant to the Registration Statement under which such Pinnacle Shares were registered shall terminate) immediately upon the earlier to occur of (a) the date on which such shares cease to be Registrable Securities and (b) the one year anniversary of the issuance of such shares pursuant to the Acquisition Agreement; provided that no such termination shall affect any liability of -------- Pinnacle for any prior breach of the registration rights of the Holders set forth herein. SECTION 3 MISCELLANEOUS 3.1 Governing Law. This Agreement shall be governed in all respects by the ------------- laws of the State of California. 3.2 [Reserved]. ---------- 3.3 Successors and Assigns. This Agreement shall be binding upon and shall ---------------------- inure to the benefit of the parties hereto and their respective successors and assigns. 3.4 Amendment of Registration Rights. This Agreement may be amended or -------------------------------- modified only by a writing signed by Pinnacle and holders of a majority of the Registrable Securities from time to time outstanding. - 9 - 3.5 Notices and Dates. All notices or other communications required or ----------------- permitted under this Agreement shall be made in the manner provided in Section 15.1 of the Acquisition 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. 3.6 Severability. If any provision of this Agreement or portion thereof is ------------ held by a court of competent jurisdiction to be invalid, illegal, 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. [Remainder of Page Intentionally Left Blank] - 10 - IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective authorized officers as of the date aforesaid. "PINNACLE" PINNACLE SYSTEMS, INC., a California corporation By: /s/ Arthur D. Chadwick ---------------------------------------------- Arthur D. Chadwick, Vice President, Finance and Chief Financial Officer "SELLERS" FAST MULTIMEDIA HOLDINGS, INC. By: /s/ Matthias Zahn ---------------------------------------------- Name: Matthias Zahn -------------------------------------------- Title: Chief Executive Officer ------------------------------------------- FAST MULTIMEDIA AG By: /s/ Reiner Bielmeier ---------------------------------------------- Name: Reiner Bielmeier -------------------------------------------- Title: Chief Executive Officer ------------------------------------------- - 11 - EX-5.1 5 dex51.txt OPINION OF WILSON SONSINI GOODRICH & ROSATI EXHIBIT 5.1 [LETTERHEAD OF WILSON SONSINI GOODRICH & ROSATI] October 25, 2001 Pinnacle Systems, Inc. 280 North Bernardo Avenue Mountain View, California 94043 RE: Registration Statement on Form S-3 Ladies and Gentlemen: We have examined the Registration Statement on Form S-3 to be filed by you with the SEC on or about October 26, 2001 (the "Registration Statement"), in connection with the registration under the Securities Act of 1933, as amended, of 1,200,000 shares of your Common Stock, no par value (the "Shares"), all of which are authorized and have been previously issued to the selling shareholder named therein in connection with the acquisition by PS Miro Holdings Inc. & Co. KG and Pinnacle Systems GmbH of certain assets of Fast Multimedia Holdings Inc. and Fast Multimedia AG (and the issuance of the Shares by Pinnacle Systems, Inc. in connection therewith) pursuant to the Asset Purchase and Transfer Agreement dated September 13, 2001 by and among Pinnacle Systems, Inc., PS Miro Holdings Inc. & Co. KG, Pinnacle Systems GmbH, Fast Multimedia Holdings Inc., Fast Multimedia AG and certain other parties. The Shares are to be offered by the selling shareholder for sale to the public as described in the Registration Statement. As your counsel in connection with this transaction, we have examined the proceedings taken and proposed to be taken in connection with the sale of the Shares. It is our opinion that, upon completion of the proceedings being taken or contemplated to be taken prior to the registration of the Shares, including such proceedings to be carried out in accordance with the securities laws of the various states, where required, the Shares, when sold in the manner referred to in the Registration Statement, will be legally and validly issued, fully paid and nonassessable. We consent to the use of this opinion as an exhibit to the Registration Statement, and further consent to the use of our name wherever appearing in the Registration Statement, including the Prospectus constituting a part thereof, and any amendment thereto. Very truly yours, /s/ WILSON SONSINI GOODRICH & ROSATI WILSON SONSINI GOODRICH & ROSATI Professional Corporation EX-23.1 6 dex231.txt CONSENT OF KPMG LLP EXHIBIT 23.1 Consent of Independent Auditors The Board of Directors Pinnacle Systems, Inc.: We consent to incorporation herein by reference of our report dated July 27, 2001 except as to Note 12, which is as of September 19, 2001, relating to the consolidated balance sheets of Pinnacle Systems, Inc. and subsidiaries as of June 30, 2001 and 2000, and the related consolidated statements of operations, comprehensive income (loss), shareholders' equity, and cash flows for each of the years in the three-year period ended June 30, 2001, and the related financial statement schedule, which report appears in the June 30, 2001, annual report on Form 10-K of Pinnacle Systems, Inc. We also consent to the reference to our firm under the heading "Experts" in the registration statement. /s/ KPMG LLP Mountain View, California October 25, 2001