PINNACLE SYSTEMS, INC.

                       1996 SUPPLEMENTAL STOCK OPTION PLAN

                          (As amended December 1, 1999)

         1. Purposes of the Plan. The purposes of this Supplemental Stock Option
Plan are:

         o     to attract and retain the best available  personnel for positions
               of substantial responsibility,
         o     to provide additional incentive to Employees and Consultants, and
         o     to promote the success of the Company's business.

            Options granted under the Plan will be Nonstatutory Stock Options.

         2. Definitions. As used herein, the following definitions shall apply:

            (a)  "Administrator"  means  the Board or any of its  Committees  as
shall be administering the Plan, in accordance with Section 4 of the Plan.

            (b)  "Applicable  Laws"  means  the  requirements  relating  to  the
administration  of stock option  plans under U. S. state  corporate  laws,  U.S.
federal and state  securities  laws,  the Code,  any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable  laws of
any foreign country or jurisdiction where Options are, or will be, granted under
the Plan.

            (c) "Board" means the Board of Directors of the Company.

            (d) "Code" means the Internal Revenue Code of 1986, as amended.

            (e)  "Committee"  means a committee  of  Directors  appointed by the
Board in accordance with Section 4 of the Plan.

            (f) "Common Stock" means the Common Stock of the Company.

            (g)   "Company"   means   Pinnacle   Systems,   Inc.,  a  California
corporation.

            (h) "Consultant" means any person,  including an advisor, engaged by
the Company or a Parent or Subsidiary to render services to such entity.

            (i) "Director" means a member of the Board.

            (j) "Disability" means total and permanent  disability as defined in
Section 22(e)(3) of the Code.


<PAGE>

            (k) "Employee" means any person, excluding Officers, employed by the
Company or any Parent or Subsidiary of the Company. A Service Provider shall not
cease to be an Employee in the case of (i) any leave of absence  approved by the
Company or (ii)  transfers  between  locations  of the  Company  or between  the
Company,  its Parent,  any  Subsidiary,  or any successor.  Neither service as a
Director nor payment of a director's  fee by the Company  shall be sufficient to
constitute "employment" by the Company.

            (l)  "Exchange  Act" means the  Securities  Exchange Act of 1934, as
amended.

            (m) "Fair Market Value" means,  as of any date,  the value of Common
Stock determined as follows:

                  (i) If the  Common  Stock is listed on any  established  stock
exchange or a national market system,  including  without  limitation the Nasdaq
National Market or The Nasdaq  SmallCap  Market of The Nasdaq Stock Market,  its
Fair  Market  Value  shall be the  closing  sales  price for such  stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of  determination,  as reported in
The  Wall  Street  Journal  or such  other  source  as the  Administrator  deems
reliable;

                  (ii) If the Common Stock is  regularly  quoted by a recognized
securities dealer but selling prices are not reported,  the Fair Market Value of
a Share of Common  Stock  shall be the mean  between  the high bid and low asked
prices for the Common  Stock on the last market  trading day prior to the day of
determination,  as reported in The Wall Street  Journal or such other  source as
the Administrator deems reliable;

                  (iii) In the absence of an  established  market for the Common
Stock,  the  Fair  Market  Value  shall  be  determined  in  good  faith  by the
Administrator.

            (n)  "Notice  of  Grant"  means  a  written  or  electronic   notice
evidencing  certain  terms and  conditions of an  individual  Option grant.  The
Notice of Grant is part of the Option Agreement.

            (o) "Officer" means a person who is an officer of the Company within
the  meaning  of Section 16 of the  Exchange  Act and the rules and  regulations
promulgated thereunder.

            (p) "Option" means a nonstatutory  stock option granted  pursuant to
the Plan,  that is not intended to qualify as an incentive  stock option  within
the  meaning  of  Section  422 of  the  Code  and  the  regulations  promulgated
thereunder.

            (q) "Option Agreement" means an agreement between the Company and an
Optionee  evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.

            (r) "Option  Exchange  Program" means a program whereby  outstanding
options are surrendered in exchange for options with a lower exercise price.


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<PAGE>

            (s) "Optioned Stock" means the Common Stock subject to an Option.

            (t)  "Optionee"  means the holder of an  outstanding  Option granted
under the Plan.

            (u) "Parent" means a "parent  corporation," whether now or hereafter
existing,  as defined in Section  424(e) of the Code. (v) "Plan" means this 1996
Supplemental Stock Option Plan.

            (w) "Service  Provider"  means an Employee or Consultant  who is not
also a Director or Officer.

            (x)  "Share"  means a share of the  Common  Stock,  as  adjusted  in
accordance with Section 12 of the Plan.

            (y) "Subsidiary"  means a "subsidiary  corporation",  whether now or
hereafter existing, as defined in Section 424(f) of the Code.

         3. Stock Subject to the Plan.  Subject to the  provisions of Section 12
of the Plan,  the maximum  aggregate  number of Shares which may be optioned and
sold under the Plan is  4,800,000  Shares.  The Shares  may be  authorized,  but
unissued, or reacquired Common Stock.

         If an Option  expires  or becomes  unexercisable  without  having  been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased  Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated).

         4. Administration of the Plan.

            (a)  The  Plan  shall  be  administered  by (A) the  Board  or (B) a
Committee, which committee shall be constituted to satisfy Applicable Laws.

            (b) Powers of the  Administrator.  Subject to the  provisions of the
Plan, and in the case of a Committee,  subject to the specific duties  delegated
by the Board to such Committee,  the Administrator shall have the authority,  in
its discretion:

                  (i) to determine the Fair Market Value of the Common Stock;

                  (ii) to select the Service  Providers  to whom  Options may be
granted hereunder;

                  (iii) to  determine  whether  and to what  extent  Options are
granted hereunder;

                  (iv) to  determine  the number of shares of Common Stock to be
covered by each Option granted hereunder;


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<PAGE>

                  (v) to approve forms of agreement for use under the Plan;

                  (vi) to determine the terms and conditions,  not  inconsistent
with the  terms of the Plan,  of any award  granted  hereunder.  Such  terms and
conditions  include,  but are not limited to, the  exercise  price,  the time or
times  when  Options  may be  exercised  (which  may  be  based  on  performance
criteria),  any vesting acceleration or waiver of forfeiture  restrictions,  and
any restriction or limitation regarding any Option or the shares of Common Stock
relating thereto,  based in each case on such factors as the  Administrator,  in
its sole discretion, shall determine;

                  (vii) to reduce the  exercise  price of any Option to the then
current Fair Market  Value if the Fair Market Value of the Common Stock  covered
by such Option shall have declined since the date the Option was granted;

                  (viii) to institute an Option Exchange Program;

                  (ix) to  construe  and  interpret  the  terms  of the Plan and
awards granted pursuant to the Plan;

                  (x) to  prescribe,  amend and  rescind  rules and  regulations
relating to the Plan,  including  rules and  regulations  relating to  sub-plans
established  for the purpose of qualifying  for  preferred  tax treatment  under
foreign tax laws;

                  (xi) to modify or amend each Option  (subject to Section 14(b)
of  the   Plan),   including   the   discretionary   authority   to  extend  the
post-termination  exercisability  period of  Options  longer  than is  otherwise
provided for in the Plan;

                  (xii) to  authorize  any  person to  execute  on behalf of the
Company any  instrument  required to effect the grant of an Option or previously
granted by the Administrator;

                  (xiii) to determine the terms and  restrictions  applicable to
Options;

                  (xiv)  to  allow   Optionees   to  satisfy   withholding   tax
obligations  by  electing  to have the  Company  withhold  from the Shares to be
issued upon exercise of an Option or Stock  Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld  shall be  determined on the date that
the  amount of tax to be  withheld  is to be  determined.  All  elections  by an
Optionee to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may deem necessary or advisable; and

                  (xv) to make all  other  determinations  deemed  necessary  or
advisable for administering the Plan.

            (c)  Effect  of  Administrator's   Decision.   The   Administrator's
decisions,  determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.


                                      -4-
<PAGE>

         5. Eligibility.  Options may be granted to Service Providers other than
Officers  (except as set forth  herein)  and  Directors.  Officers  shall not be
eligible to receive Options under this Plan; provided, however, that Options may
be  granted  to an  Officer  not  previously  employed  by  the  Company,  as an
inducement  essential to the individual's  entering into an employment  contract
with the Company.

         6.  Limitation.  Neither the Plan nor any Option  shall  confer upon an
Optionee any right with respect to continuing the Optionee's  relationship  as a
Service Provider with the Company,  nor shall they interfere in any way with the
Optionee's  right or the Company's  right to terminate such  relationship at any
time, with or without cause.

         7. Term of Plan.  The Plan shall become  effective upon its adoption by
the  Board.  It shall  continue  in effect  for ten (10)  years,  unless  sooner
terminated under Section 14 of the Plan.

         8.  Term of  Option.  The term of each  Option  shall be  stated in the
Option Agreement.

         9. Option Exercise Price and Consideration.

            (a) Exercise  Price.  The per share exercise price for the Shares to
be  issued  pursuant  to  exercise  of an  Option  shall  be  determined  by the
Administrator.

            (b)  Waiting  Period and  Exercise  Dates.  At the time an Option is
granted,  the Administrator  shall fix the period within which the Option may be
exercised and shall determine any conditions  which must be satisfied before the
Option may be exercised.

            (c) Form of  Consideration.  The  Administrator  shall determine the
acceptable form of consideration for exercising an Option,  including the method
of payment. Such consideration may consist entirely of:

                  (i) cash;

                  (ii) check;

                  (iii) promissory note;

                  (iv)  other  Shares  which (A) in the case of Shares  acquired
upon  exercise of an option,  have been owned by the  Optionee for more than six
months on the date of surrender, and (B) have a Fair Market Value on the date of
surrender  equal to the aggregate  exercise price of the Shares as to which said
Option shall be exercised;

                  (v)  consideration  received by the  Company  under a cashless
exercise program implemented by the Company in connection with the Plan;

                  (vi) a reduction in the amount of any Company liability to the
Optionee,  including any liability attributable to the Optionee's  participation
in any Company-sponsored deferred compensation program or arrangement;


                                      -5-
<PAGE>
                  (vii) such other  consideration  and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws; or

                  (viii) any combination of the foregoing methods of payment.

         10. Exercise of Option.

            (a)  Procedure  for Exercise;  Rights as a  Shareholder.  Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the  Administrator and set
forth in the Option Agreement.  An Option may not be exercised for a fraction of
a Share.

                  An Option shall be deemed exercised when the Company receives:
(i) written or  electronic  notice of exercise  (in  accordance  with the Option
Agreement)  from the person  entitled  to  exercise  the  Option,  and (ii) full
payment  for the Shares  with  respect to which the  Option is  exercised.  Full
payment may consist of any consideration and method of payment authorized by the
Administrator  and permitted by the Option Agreement and the Plan. Shares issued
upon  exercise of an Option  shall be issued in the name of the  Optionee or, if
requested  by the  Optionee,  in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate  entry on the books
of the Company or of a duly authorized transfer agent of the Company),  no right
to vote or receive  dividends or any other rights as a  shareholder  shall exist
with respect to the Optioned Stock,  notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares  promptly  after the
Option is exercised.  No  adjustment  will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued,  except as
provided in Section 13 of the Plan.

                  Exercising  an Option in any manner shall  decrease the number
of Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.

            (b)  Termination  of  Relationship  as a  Service  Provider.  If  an
Optionee ceases to be a Service  Provider,  other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option, but only within such
period of time as is specified in the Option  Agreement,  and only to the extent
that the Option is vested on the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Option Agreement).
In the absence of a specified  time in the Option  Agreement,  the Option  shall
remain  exercisable for three (3) months  following the Optionee's  termination.
If, on the date of  termination,  the  Optionee  is not  vested as to his or her
entire Option,  the Shares  covered by the unvested  portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise his or
her Option  within the time  specified  by the  Administrator,  the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

            (c)  Disability of Optionee.  If an Optionee  ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her  Option  within  such  period  of  time  as is  specified  in the  Option
Agreement, to the extent the Option is vested on the date of


                                      -6-
<PAGE>

termination  (but in no  event  later  than the  expiration  of the term of such
Option as set forth in the Option Agreement). In the absence of a specified time
in the Option  Agreement,  the Option shall remain  exercisable  for twelve (12)
months following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after  termination,
the  Optionee  does not  exercise  his or her Option  within the time  specified
herein, the Option shall terminate,  and the Shares covered by such Option shall
revert to the Plan.

            (d) Death of Optionee. If an Optionee dies while a Service Provider,
the Option may be  exercised  within such period of time as is  specified in the
Option  Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant),  by the  Optionee's  estate or by a
person who acquires the right to exercise the Option by bequest or  inheritance,
but only to the extent  that the  Option is vested on the date of death.  In the
absence of a specified  time in the Option  Agreement,  the Option  shall remain
exercisable for twelve (12) months following the Optionee's termination.  If, at
the time of death,  the  Optionee is not vested as to his or her entire  Option,
the Shares  covered by the  unvested  portion  of the Option  shall  immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee's estate or, if none, by the person(s)  entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution.  If the
Option is not so exercised  within the time specified  herein,  the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

            (e) Buyout  Provisions.  The  Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option  previously  granted based on
such terms and conditions as the  Administrator  shall establish and communicate
to the Optionee at the time that such offer is made.

         11.  Non-Transferability of Options. Unless determined otherwise by the
Administrator,  an  Option  may not be sold,  pledged,  assigned,  hypothecated,
transferred,  or disposed of in any manner  other than by will or by the laws of
descent  or  distribution  and may be  exercised,  during  the  lifetime  of the
Optionee,   only  by  the  Optionee.   If  the  Administrator  makes  an  Option
transferable,  such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.

         12. Adjustments Upon Changes in Capitalization,  Dissolution, Merger or
Asset Sale.

            (a) Changes in Capitalization. Subject to any required action by the
shareholders  of the Company,  the number of shares of Common  Stock  covered by
each  outstanding  Option,  and the number of shares of Common  Stock which have
been  authorized for issuance under the Plan but as to which no Options have yet
been  granted  or which  have been  returned  to the Plan upon  cancellation  or
expiration of an Option,  as well as the price per share of Common Stock covered
by each such  outstanding  Option,  shall be  proportionately  adjusted  for any
increase or decrease in the number of issued  shares of Common  Stock  resulting
from a  stock  split,  reverse  stock  split,  stock  dividend,  combination  or
reclassification  of the Common Stock,  or any other increase or decrease in the
number  of  issued  shares  of  Common  Stock   effected   without   receipt  of
consideration  by  the  Company;  provided,  however,  that  conversion  of  any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of  consideration."  Such adjustment shall be made


                                      -7-
<PAGE>

by the Board,  whose  determination in that respect shall be final,  binding and
conclusive.  Except as expressly  provided herein, no issuance by the Company of
shares of stock of any class, or securities  convertible into shares of stock of
any class,  shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.

            (b)  Dissolution  or  Liquidation.  In the  event  of  the  proposed
dissolution or liquidation of the Company,  the Administrator  shall notify each
Optionee as soon as  practicable  prior to the  effective  date of such proposed
transaction.  The Administrator in its discretion may provide for an Optionee to
have the right to exercise  his or her Option  until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the  Option  would not  otherwise  be  exercisable.  In  addition,  the
Administrator  may provide that any Company  repurchase option applicable to any
Shares  purchased  upon exercise of an Option shall lapse as to all such Shares,
provided the proposed  dissolution or liquidation takes place at the time and in
the manner contemplated.  To the extent it has not been previously exercised, an
Option will terminate  immediately  prior to the  consummation  of such proposed
action.

            (c) Merger or Asset  Sale.  In the event of a merger of the  Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent option
or right  substituted by the successor  corporation or a Parent or Subsidiary of
the successor  corporation.  In the event that the successor corporation refuses
to assume or  substitute  for the Option,  the Optionee  shall fully vest in and
have the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an Option
becomes fully vested and  exercisable in lieu of assumption or  substitution  in
the event of a merger or sale of  assets,  the  Administrator  shall  notify the
Optionee in writing or electronically  that the Option shall be fully vested and
exercisable for a period of fifteen (15) days from the date of such notice,  and
the Option shall terminate upon the expiration of such period.  For the purposes
of this  paragraph,  the Option shall be  considered  assumed if,  following the
merger or sale of assets,  the option or right  confers the right to purchase or
receive,  for each Share of Optioned Stock,  immediately  prior to the merger or
sale of assets,  the consideration  (whether stock, cash, or other securities or
property)  received  in the merger or sale of assets by holders of Common  Stock
for each Share held on the  effective  date of the  transaction  (and if holders
were offered a choice of consideration,  the type of consideration chosen by the
holders of a majority of the outstanding  Shares);  provided,  however,  that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor  corporation or its Parent,  the Administrator  may, with
the consent of the successor  corporation,  provide for the  consideration to be
received upon the exercise of the Option, for each Share of Optioned Stock to be
solely  common stock of the  successor  corporation  or its Parent equal in fair
market value to the per share consideration  received by holders of Common Stock
in the merger or sale of assets.

         13.  Date of Grant.  The date of grant of an Option  shall be,  for all
purposes,  the date on which the Administrator makes the determination  granting
such Option,  or such other later date as is  determined  by the  Administrator.
Notice  of the  determination  shall  be  provided  to each  Optionee  within  a
reasonable time after the date of such grant.


                                      -8-
<PAGE>

         14. Amendment and Termination of the Plan.

            (a)  Amendment  and  Termination.  The Board may at any time  amend,
alter, suspend or terminate the Plan.

            (b) Effect of Amendment or  Termination.  No amendment,  alteration,
suspension or  termination  of the Plan shall impair the rights of any Optionee,
unless mutually  agreed  otherwise  between the Optionee and the  Administrator,
which  agreement  must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers  granted to it hereunder  with respect to options  granted  under the
Plan prior to the date of such termination.

         15. Conditions Upon Issuance of Shares.

            (a) Legal  Compliance.  Shares  shall not be issued  pursuant to the
exercise of an Option  unless the  exercise of such Option and the  issuance and
delivery of such Shares shall comply with  Applicable  Laws and shall be further
subject  to the  approval  of  counsel  for the  Company  with  respect  to such
compliance.

            (b) Investment Representations. As a condition to the exercise of an
Option the Company may require the person  exercising  such Option to  represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company,  such a representation  is
required.

         16.  Inability  to Obtain  Authority.  The  inability of the Company to
obtain authority from any regulatory body having  jurisdiction,  which authority
is deemed by the  Company's  counsel to be necessary to the lawful  issuance and
sale of any Shares  hereunder,  shall  relieve the Company of any  liability  in
respect of the failure to issue or sell such  Shares as to which such  requisite
authority shall not have been obtained.

         17. Reservation of Shares.  The Company,  during the term of this Plan,
will at all times reserve and keep  available  such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.


                                      -9-
<PAGE>

                       1996 SUPPLEMENTAL STOCK OPTION PLAN

                             STOCK OPTION AGREEMENT

         Unless  otherwise  defined herein,  the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.

I.       NOTICE OF STOCK OPTION GRANT

         [Optionee's Name and Address]

         You have  been  granted  an  option  to  purchase  Common  Stock of the
Company,  subject  to the  terms  and  conditions  of the Plan  and this  Option
Agreement, as follows:

         Grant Number                      _____________________________________

         Date of Grant                     _____________________________________

         Vesting Commencement Date         _____________________________________

         Exercise Price per Share          $____________________________________

         Total Number of Shares Granted    _____________________________________

         Total Exercise Price              $____________________________________

         Type of Option:                   Nonstatutory Stock Option

         Term/Expiration Date:             _____________________________________

         Vesting Schedule:

         Subject to the  Optionee  continuing  to be a Service  Provider on such
dates,  this Option shall vest and become  exercisable  in  accordance  with the
following schedule:

         25% of the Shares  subject to the Option shall vest twelve months after
the Vesting  Commencement  Date,  and 1/48th of the Shares subject to the Option
shall vest upon the last day of each month thereafter,  beginning with the first
full quarter after the one year anniversary of the Vesting Commencement Date.


<PAGE>

         Termination Period:

         This Option may be exercised for three (3) months after Optionee ceases
to be a Service  Provider.  Upon the death or Disability  of the Optionee,  this
Option may be exercised  for such longer  period as provided in the Plan.  In no
event  shall this Option be  exercised  later than the  Term/Expiration  Date as
provided above.

II.      AGREEMENT

         1. Grant of Option. The Plan Administrator of the Company hereby grants
to the  Optionee  named  in the  Notice  of  Grant  attached  as  Part I of this
Agreement  (the  "Optionee")  an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the  "Exercise  Price"),  subject to the terms and
conditions of the Plan,  which is incorporated  herein by reference.  Subject to
Section  14(b) of the Plan,  in the event of a  conflict  between  the terms and
conditions of the Plan and the terms and  conditions  of this Option  Agreement,
the terms and conditions of the Plan shall prevail.

         2. Exercise of Option.

            (a) Right to Exercise. This Option is exercisable during its term in
accordance  with the  Vesting  Schedule  set out in the  Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.

            (b) Method of Exercise. This Option is exercisable by delivery of an
exercise  notice,  in the form  attached as Exhibit A (the  "Exercise  Notice"),
which shall state the election to exercise  the Option,  the number of Shares in
respect of which the Option is being  exercised (the  "Exercised  Shares"),  and
such other  representations  and  agreements  as may be  required by the Company
pursuant to the provisions of the Plan.  The Exercise  Notice shall be completed
by the Optionee  and  delivered  to the  Secretary of the Company.  The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised  Shares.  This Option shall be deemed to be exercised  upon receipt by
the Company of such fully executed Exercise Notice accompanied by such aggregate
Exercise Price.

            No Shares  shall be issued  pursuant to the  exercise of this Option
unless such issuance and exercise  complies with Applicable Laws.  Assuming such
compliance,  for income tax purposes the  Exercised  Shares shall be  considered
transferred  to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.

         3. Method of Payment.  Payment of the aggregate Exercise Price shall be
by any of the  following,  or a  combination  thereof,  at the  election  of the
Optionee:

            (a) cash; or

            (b) check; or

            (c) promissory note; or


                                      -2-
<PAGE>

            (d) consideration  received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or

            (e)  surrender  of other  Shares  which  (i) in the  case of  Shares
acquired  upon  exercise of an option,  have been owned by the Optionee for more
than six (6) months on the date of surrender,  and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate  Exercise Price of the Exercised
Shares; or

            (f) a  reduction  in the  amount  of any  Company  liability  to the
Optionee,  including any liability attributable to the Optionee's  participation
in any Company-sponsored deferred compensation program or arrangement; or

            (g) such other  consideration and method of payment for the issuance
of Shares to the extent permitted by Applicable Laws.

         4. Non-Transferability of Option. This Option may not be transferred in
any manner  otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of the Plan and this  Option  Agreement  shall be  binding  upon the  executors,
administrators, heirs, successors and assigns of the Optionee.

         5. Term of Option.  This Option may be  exercised  only within the term
set out in the Notice of Grant,  and may be  exercised  during such term only in
accordance with the Plan and the terms of this Option Agreement.

         6. Tax Consequences.  Some of the federal tax consequences  relating to
this Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE,  AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE  OPTIONEE  SHOULD  CONSULT A TAX ADVISER  BEFORE  EXERCISING  THIS OPTION OR
DISPOSING OF THE SHARES.

            (a)  Exercising the Option.  The Optionee may incur regular  federal
income tax  liability  upon  exercise of an NSO. The Optionee will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess,  if any, of the Fair Market Value of the Exercised  Shares on the
date of exercise  over their  aggregate  Exercise  Price.  If the Optionee is an
Employee or a former Employee, the Company will be required to withhold from his
or her  compensation  or collect from Optionee and pay to the applicable  taxing
authorities an amount in cash equal to a percentage of this compensation  income
at the time of  exercise,  and may  refuse to honor the  exercise  and refuse to
deliver  Shares if such  withholding  amounts are not  delivered  at the time of
exercise.

            (b)  Disposition of Shares.  If the Optionee holds NSO Shares for at
least one year,  any gain realized on  disposition of the Shares will be treated
as long-term capital gain for federal income tax purposes.


                                      -3-
<PAGE>

         7. Entire Agreement;  Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with  respect to the subject  matter  hereof and  supersede in their
entirety all prior  undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof,  and may not be modified  adversely to the
Optionee's  interest  except by means of a writing  signed  by the  Company  and
Optionee.  This agreement is governed by the internal  substantive laws, but not
the choice of law rules, of California.

         8. NO GUARANTEE OF CONTINUED SERVICE.  OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES  PURSUANT TO THE  VESTING  SCHEDULE  HEREOF IS EARNED
ONLY BY  CONTINUING  AS A SERVICE  PROVIDER AT THE WILL OF THE COMPANY  (AND NOT
THROUGH THE ACT OF BEING HIRED,  BEING  GRANTED AN OPTION OR  PURCHASING  SHARES
HEREUNDER).  OPTIONEE FURTHER  ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT,  THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT  CONSTITUTE  AN EXPRESS OR IMPLIED  PROMISE  OF  CONTINUED  ENGAGEMENT  AS A
SERVICE  PROVIDER FOR THE VESTING PERIOD,  FOR ANY PERIOD,  OR AT ALL, AND SHALL
NOT  INTERFERE  WITH  OPTIONEE'S  RIGHT  OR THE  COMPANY'S  RIGHT  TO  TERMINATE
OPTIONEE'S  RELATIONSHIP  AS A SERVICE  PROVIDER  AT ANY TIME,  WITH OR  WITHOUT
CAUSE.

         By your  signature and the  signature of the  Company's  representative
below,  you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement.  Optionee has
reviewed  the Plan and  this  Option  Agreement  in their  entirety,  has had an
opportunity  to obtain the  advice of counsel  prior to  executing  this  Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding,  conclusive and final all decisions
or  interpretations of the Administrator upon any questions relating to the Plan
and Option  Agreement.  Optionee  further  agrees to notify the Company upon any
change in the residence address indicated below.



OPTIONEE:                                 PINNACLE SYSTEMS, INC.


____________________________________      ______________________________________
Signature                                 By


____________________________________      ______________________________________
Print Name                                Title


____________________________________
Residence Address

____________________________________



                                      -4-
<PAGE>

                                    EXHIBIT A

                       1996 SUPPLEMENTAL STOCK OPTION PLAN

                                 EXERCISE NOTICE

Pinnacle Systems, Inc.
280 N. Bernardo Avenue
Mountain View, CA 94043
Attention: Secretary

         1. Exercise of Option. Effective as of today, ________________,  199__,
the undersigned  ("Purchaser") hereby elects to purchase  ______________  shares
(the  "Shares") of the Common Stock of Pinnacle  Systems,  Inc. (the  "Company")
under and pursuant to the 1996  Supplemental  Stock Option Plan (the "Plan") and
the Stock Option Agreement dated, 19___ (the "Option  Agreement").  The purchase
price for the Shares shall be $      , as required by the Option Agreement.

         2. Delivery of Payment.  Purchaser herewith delivers to the Company the
full purchase price for the Shares.

         3. Representations of Purchaser.  Purchaser acknowledges that Purchaser
has received,  read and understood the Plan and the Option  Agreement and agrees
to abide by and be bound by their terms and conditions.

         4. Rights as  Shareholder.  Until the  issuance  (as  evidenced  by the
appropriate  entry on the books of the Company or of a duly authorized  transfer
agent of the  Company) of the Shares,  no right to vote or receive  dividends or
any other  rights as a  shareholder  shall  exist with  respect to the  Optioned
Stock,  notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as  practicable  after exercise of the Option.
No  adjustment  will be made for a dividend  or other right for which the record
date is prior to the date of  issuance,  except as provided in Section 13 of the
Plan.

         5. Tax  Consultation.  Purchaser  understands that Purchaser may suffer
adverse tax  consequences as a result of Purchaser's  purchase or disposition of
the Shares.  Purchaser  represents  that  Purchaser has  consulted  with any tax
consultants  Purchaser  deems  advisable  in  connection  with the  purchase  or
disposition  of the Shares and that  Purchaser is not relying on the Company for
any tax advice.

         6. Entire  Agreement;  Governing Law. The Plan and Option Agreement are
incorporated  herein  by  reference.  This  Agreement,  the Plan and the  Option
Agreement  constitute  the entire  agreement  of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements  of the  Company and  Purchaser  with  respect to the subject  matter



<PAGE>

hereof, and may not be modified adversely to the Purchaser's  interest except by
means of a writing  signed by the  Company  and  Purchaser.  This  agreement  is
governed by the internal  substantive  laws, but not the choice of law rules, of
California.

Submitted by:                             Accepted by:

OPTIONEE:                                 PINNACLE SYSTEMS, INC.


____________________________________      ______________________________________
Signature                                 By


____________________________________      ______________________________________
Print Name                                Title


                                          ______________________________________
                                          Date Received

Address:                                  Address:
--------                                  --------

____________________________________      280 N. Bernardo Avenue
                                          Mountain View, CA  94043

____________________________________


                                      -2-