Exhibit (a)(3)
                      [PINNACLE SYSTEMS, INC. LETTERHEAD]

FROM:    Mark L. Sanders, President and Chief Executive Officer
SUBJECT: OFFER TO EXCHANGE STOCK OPTIONS
DATE:    November 16, 2001

        IMPORTANT NEWS -- Please read immediately and take action before
              9:00 p.m. PACIFIC STANDARD TIME on DECEMBER 17, 2001!

     The Board of Directors of Pinnacle Systems, Inc. ("Pinnacle," also
referenced herein as "us," "we" and "our") has adopted resolutions offering to
all eligible employees who hold stock options under the Pinnacle Systems, Inc.
1996 Stock Option Plan, as amended, (the "1996 Plan") and the Pinnacle Systems,
Inc. 1996 Supplemental Stock Option Plan, as amended (the "1996 Supplemental
Plan") the opportunity to exchange their outstanding stock options for options
exercisable at the fair market value of our common stock on June 19, 2002.
Pinnacle is making the offer upon the terms and conditions described in (i) the
Offer to Exchange Certain Outstanding Options for New Options; (ii) this
Memorandum; (iii) the Election Form; and (iv) the Notice to Withdraw from the
Offer. Please read these documents carefully before you make any decisions
regarding the offer. This offer expires at 9:00 p.m. Pacific Standard Time on
December 17, 2001.

     If you elect to participate in this exchange, your existing unexercised
stock option (the "Old Option") will be cancelled and a promise to issue a new
option (the "New Option") will be issued. The New Option will be for the same
number of shares as your Old Option, less any exercised shares. The New Option
will be granted under the terms of our 1996 Plan or the 1996 Supplemental Plan,
depending on the plan pursuant to which your Old Options were granted. This
offer may be accepted or rejected as to each grant or none of your grants. There
must be strict adherence to the following rules:

THE NEW OPTION

1.   All Old Options cancelled pursuant to this program will be exchanged for
     New Options.

2.   Each New Option will have a per share exercise price equal to the fair
     market value of Pinnacle's common stock on the day we grant the New Option,
     expected to be June 19, 2002, which value is defined as the closing price
     of Pinnacle's common stock on the Nasdaq National Market on the date of
     grant of the New Option. This price may be higher, or lower, or the same as
     the exercise price of the Old Option.

     THE EXERCISE PRICE OF THE NEW OPTIONS COULD BE HIGHER THAN THE EXERCISE
     PRICE OF THE OLD OPTIONS, RESULTING IN A LOSS OF SOME STOCK OPTION BENEFIT.

3.   The vesting start date for each New Option will be the date that the New
     Options are granted. The New Options will, subject to your continued
     employment with Pinnacle on the date the New Options are granted, vest
     according to the following schedule:



     .    1/3 of the shares subject to the New Option will vest immediately on
          the date that the New Option is granted; and

     .    the remainder of the shares subject to the New Option will vest
          monthly over the twenty-four (24) months following the date that the
          New Options are granted (at least six (6) months and one (1) day from
          the Cancellation Date.)

You will not receive any vesting credit for any time prior to the date that the
New Options are granted, even if the Old Options that you tender for exchange
are vested, in whole or in part, on the Cancellation Date or would have vested,
in whole or in part, during the six (6) month and one (1) day period following
the Cancellation Date. As a result, you will not be able to purchase common
stock pursuant to your New Options as early as you would have been able to
purchase common stock under your Old Options, had you not tendered your Old
Options for exchange. For example:

     .    An employee cancels an option to purchase 3,600 shares that is 1/2
          vested at the time of cancellation.

     .    The New Option grant is made six (6) months and one (1) day after the
          cancellation.

     .    The New Option will be 1/3rd vested at the time of grant, so the
          employee is vested as to 1,200 of the shares subject to the New Option
          (which is 1/3rd of 3,600).

     .    The New Option will vest as to an additional 100 shares (which is
          1/24th of the 2,400 remaining shares) subject to the New Option for
          each of the following 24 months, at which time the New Option will be
          100% vested.

4.   If your employment with us terminates voluntarily OR involuntarily prior to
     June 19, 2002, you will not receive a New Option.

5.   All other rules of the 1996 Plan or the 1996 Supplemental Plan, as
     applicable, will apply.

ELIGIBLE GRANTS AND OPTION CANCELLATION RULES

1.   Option grants held by eligible employees are eligible for consideration for
     the New Option if (a) if they were issued under the 1996 Plan or the 1996
     Supplemental Plan, AND (b) your election for exchange is received by 9:00
     p.m. Pacific Standard Time on December 17, 2001 or, if we have extended the
     offer, by the new expiration date and time of the offer. Employees are
     eligible to participate in this option exchange if they live or work in the
     United States, France, Germany, Japan or the United Kingdom; however,
     directors and officers are not eligible and may not participate in the
     exchange offer.



2.   Any of your outstanding, unexercised eligible options may be tendered for
     exchange and cancelled pursuant to the offer. If you elect to tender any
     options within a stock option grant for exchange, the option grant must be
     tendered in its entirety and the entire grant will be cancelled.

3.   If you decide to tender an option, all options issued to you since May 16,
     2001 (within the prior six months of the commencement of the offer) must
     also be cancelled. All cancelled grants will be replaced with a promise to
     issue a New Option at least six months and one day from the date the Old
     Options are cancelled (a "Promise to Grant Stock Option(s)"). We expect to
     grant New Options on June 19, 2002, unless we have to change the grant date
     because the offer was extended beyond its original expiration date.

4.   Individuals canceling an Old Option pursuant to this program will not be
     eligible for additional stock option grants until after June 19, 2002. In
     lieu thereof, we may issue additional Promises To Grant Stock Option(s).

5.   Once your Old Options are cancelled, you will not be able to exercise your
     Old Options, even if your employment terminates (for any reason) and you do
     not receive a New Option.

6.   All New Options will be the same type of options as your Old Options, to
     the extent allowed by law.

7.   All rights to cancelled grants will be irrevocably forfeited.

     THIS OFFER IS NOT A GUARANTY OF EMPLOYMENT FOR ANY PERIOD. UNLESS OTHERWISE
EXPRESSLY PROVIDED IN YOUR EMPLOYMENT AGREEMENT, YOUR EMPLOYMENT WITH PINNACLE
REMAINS "AT WILL" AND MAY BE TERMINATED AT ANY TIME BY EITHER YOU OR PINNACLE,
WITH OR WITHOUT CAUSE OR NOTICE.

     All eligible option holders who wish to participate in this option exchange
must complete a Pinnacle Offer to Exchange Options Election Form ("Election
Form") and hand deliver or fax a signed copy to Melanie Sherk at (650) 930-1606
by December 17, 2001, no later than 9:00 p.m. Pacific Standard Time. You are
required to make your election to "accept" the exchange agreement and identify
the option grant(s) being cancelled if you wish to participate.

     Pinnacle intends send via e-mail or regular mail a confirmation of receipt
to you within two (2) business days of receiving your Election Form. For those
who require receipt of confirmation by regular mail (and who indicate this
requirement on the Election Form), Pinnacle will send via regular mail
confirmation of receipt within two (2) business days of receiving your Election
Form. This will merely be a confirmation that we have received your Election
Form; any Old Options that you tender will not be cancelled until December 18,
2001, which is the first business day following the expiration of the Offer to
Exchange (as defined below). If you have not received such a confirmation of
receipt, it is your responsibility to ensure that your Election Form has been
received by us.



     IF YOUR ELECTION IS RECEIVED AFTER 9:00 P.M. PACIFIC STANDARD TIME ON
DECEMBER 17, 2001, IT WILL NOT BE ACCEPTED AND YOU WILL BE CONSIDERED TO HAVE
DECLINED TO ACCEPT THE EXCHANGE OFFER.

     Attached to this Memorandum is a more detailed document, entitled the Offer
to Exchange Certain Outstanding Options for New Options (generally referred to
as the "Offer to Exchange"), explaining the exchange program in greater detail.
The information contained in (i) the Offer to Exchange; (ii) this Memorandum;
(iii) the Election Form; and (iv) the Notice to Withdraw from the Offer;
together constitute the entire offer and we strongly urge you to read these
documents carefully and to consult your own advisors before deciding whether to
participate or not.