<PAGE>
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
VIDEO UPDATE, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
__________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
__________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11
(Set forth the amount on which the filing fee is calculated and state how
it was determined.):
__________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
__________________________________________________________________________
(5) Total fee paid:
__________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
__________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
__________________________________________________________________________
(3) Filing Party:
__________________________________________________________________________
(4) Date Filed:
__________________________________________________________________________
<PAGE>
VIDEO UPDATE, INC.
3100 World Trade Center
30 East Seventh Street
St. Paul, Minnesota 55101
(651) 312-2222
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
----------------
September 27, 1999 -- 10:00 A.M.
To the Stockholders of Video Update, Inc.:
You Are Hereby Notified that a Special Meeting of Stockholders of Video
Update, Inc. (the "Company") will be held on September 27, 1999 at 10:00 A.M.,
at 3100 World Trade Center, 30 East Seventh Street, St. Paul, Minnesota 55101,
to consider and act upon the following matters:
1. To approve an amendment to the Company's Certificate of Incorporation to
effect a reverse split of the Company's Class A Common Stock, $.01 par
value per share (the "Common Stock"), pursuant to which each
shares of Common Stock then outstanding will be converted into one
share; and
2. To transact such other business as may properly come before the meeting
or any adjournment(s) or postponement(s) thereof.
The Board of Directors of the Company has fixed the close of business on
August 19, 1999 as the record date for the determination of stockholders
entitled to notice of and vote at the Special Meeting and any adjournment(s)
or postponement(s) thereof.
We hope that all stockholders will be able to attend the Special Meeting in
person. Whether or not you expect to attend, please be sure to sign, date and
promptly return the enclosed proxy card. For your convenience, a postage-paid
envelope addressed to American Stock Transfer & Trust Company, the Company's
transfer agent and registrar, has been enclosed.
By Order of the Board of Directors,
[LOGO APPEARS HERE]
Daniel C. Howard
Secretary
St. Paul, Minnesota
Dated: September , 1999
<PAGE>
VIDEO UPDATE, INC.
3100 World Trade Center
30 East Seventh Street
St. Paul, minnesota 55101
(651) 312-2222
----------------
PROXY STATEMENT
----------------
VOTING PROCEDURES AND GENERAL INFORMATION
This proxy statement and the accompanying proxy are first being mailed to
stockholders commencing on or about September , 1999. The accompanying proxy
is solicited by the Board of Directors of Video Update, Inc. (the "Company" or
"Video Update"), for use at the Special Meeting of Stockholders to be held on
September 27, 1999, and any adjournment(s) or postponements(s) thereof (the
"Special Meeting"). The cost of soliciting proxies will be borne by the
Company. Directors, officers and employees of the Company may assist in the
solicitation of proxies in person, by mail, telephone, facsimile, or other
electronic means without additional compensation.
When a proxy card is returned properly signed, the shares represented
thereby will be voted by the persons named as proxies in accordance with the
stockholder's directions. You are urged to specify your choices on the
enclosed proxy card. If a proxy card is signed and returned without specifying
choices, the shares will be voted "FOR' Proposal 1, to amend the Company's
Restated Certificate of Incorporation, and in the discretion of the persons
named as proxies in the manner they believe to be in the best interests of the
Company as to other matters that may properly come before the Special Meeting.
The Board of Directors knows of no other matter to be presented at the Special
Meeting. A stockholder giving a proxy may revoke it at any time before it is
voted at the Special Meeting by giving prior written notice to the Company's
Secretary, by oral notice to the Company's Secretary at the Special Meeting or
by submitting a later dated proxy.
The Board of Directors of the Company (sometimes referred to herein as the
"Board" or the "Board of Directors") has fixed August 19, 1999 as the record
date for the Special Meeting. Only stockholders of record on the record date
are entitled to notice of and to vote at the Special Meeting. On the record
date, there were 29,278,457 shares of the Company's Class A Common Stock, $.01
par value (the "Common Stock"), issued and outstanding and entitled to vote at
the meeting. The Common Stock has one vote per share on all matters upon which
stockholders may vote. The Company has no other voting securities.
For all proposals considered at the Special Meeting, the holders of a
majority of the Common Stock issued and outstanding and entitled to vote and
present in person or represented by proxy, will constitute a quorum. Shares
represented by all proxies received, including proxies that withhold authority
and/or abstain from voting on a proposal, as well as "broker non-votes,"
discussed below, count toward establishing the presence of a quorum.
Assuming the presence of a quorum, the proposal to amend the Company's
Restated Certificate of Incorporation must be approved by affirmative vote of
two thirds of the shares of Common Stock issued and outstanding as of the
record date.
Shareholders who abstain from voting on the proposal to amend to the
Company's Restated Certificate of Incorporation, and shares held in "street
name" by brokers of nominees who indicate on their proxies that they do not
have discretionary authority to vote such shares as to such matter are
nonetheless considered outstanding shares and will have the same effect as a
vote against the amendment to the Company's Restated Certificate of
Incorporation.
<PAGE>
OWNERSHIP OF VIDEO UPDATE COMMON STOCK
The following table sets forth certain information as of , 1999, with
respect to the Company's Common Stock owned by (1) each director of the
Company, (2) each "named executive officer" as defined by Item 402 of
Regulation S-K, (3) all directors and executive officers of the Company as a
group, and (4) each person who is known by the Company to beneficially own
more than five percent of the Company's capital stock. Unless otherwise
indicated in the footnotes to the table, all stock is owned of record and
beneficially by the persons listed in the table.**
<TABLE>
<CAPTION>
Number of Shares Percentage of
Beneficially Shares
Name and Address Of Beneficial Owner(/1/) Owned(/2/) Outstanding(/2/)
- ----------------------------------------- ---------------- -------------
<S> <C> <C>
Daniel A. Potter, Chairman and Chief Executive Officer(/3/)... 1,526,120 5.2%
John M. Bedard, President and Director(/4/)................... 1,111,039 3.8%
Daniel C. Howard, Chief Operations Officer and Director(/5/).. 110,315 *
Dale E. Lauwagie, Chief Financial Officer(/6/)................ 25,000 *
Richard Bedard, Executive Vice President(/7/)................. 75,000 *
Michael G. Schifsky, Senior Vice President(/8/)............... 95,100 *
Paul M. Kelnberger, Director(/9/)............................. 6,750 *
Theodore J. Coburn, Director(/10/)............................ 117,250 *
Bernard Patriacca, Director(/11/)............................. 2,750 *
Wellington Management Company, LLP(/12/)...................... 2,560,800 8.8%
All Directors and Executive Officers as a group
(9 persons)(/2/)(/3/)(/4/)(/5/)(/6/)(/7/)(/8/)
(/9/)(/10/)(/11/)............................................ 3,069,324 10.5%
</TABLE>
- --------
* Less than one percent (1%) of the outstanding shares of Common Stock
** Does not include 1,048,000 shares beneficially owned by Farnam Street
Partners, L.P., representing 3.6% of the Company's Common Stock, as
reported in a Schedule 13G/A filed with the Commission on June 9, 1999.
(1) The address of Messrs. Potter, John Bedard, Howard, Lauwagie, Richard
Bedard, Schifsky, Coburn, Kelnberger and Patriacca is c/o Video Update,
Inc. 3100 World Trade Center, 30 East Seventh Street, St. Paul, Minnesota
55101. The address of Wellington Management Company, LLP is 75 State
Street, Boston, MA 02109.
(2) For the purposes of this table, shares of Common Stock which, to the
Company's knowledge, an individual or group has a right to acquire within
sixty (60) days upon the exercise of options or warrants, are deemed
outstanding for the purposes of computing the number and percentage of
shares beneficially owned by such individual or group. Such shares are not
deemed to be outstanding for the purpose of computing the percentage of
shares beneficially owned by any other individual or group shown in the
table. This table does not include an approximate aggregate amount of
32,580 shares of Common Stock held by the executive officers of the
Company through the Company's 401(k) plan.
(3) Includes an aggregate of 200,000 shares of Common Stock issuable on
exercise of various stock options. Includes an aggregate of 36,947 shares
of Common Stock held in custodial accounts for Mr. Potter's children.
Excludes an aggregate of 100,000 shares of Common Stock issuable upon the
exercise of various stock options that have not yet vested. Does not
include 26,250 shares of Common Stock owned by Mr. Potter's father, in
which Mr. Potter disclaims beneficial ownership.
(4) Includes an aggregate of 110,000 shares of Common Stock issuable on
exercise of various stock options. Includes 39,515 shares of Common Stock
held by Mr. Bedard's mother, but subject to a voting trust of which Mr.
Bedard is a trustee. Excludes an aggregate of 55,000 shares of Common
Stock issuable upon the exercise of stock options that have not yet
vested.
(5) Includes an aggregate of 77,437 shares of Common Stock issuable upon the
exercise of various stock options. Excludes an aggregate of 16,063 shares
of Common Stock issuable upon the exercise of various stock options that
have not yet vested.
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<PAGE>
(6) Excludes an aggregate of 90,000 shares of Common Stock issuable upon the
exercise of stock options that have not vested.
(7) Includes an aggregate of 63,000 shares of Common Stock issuable upon the
exercise of various stock options that have vested. Excludes an aggregate
of 54,000 shares of Common Stock issuable upon the exercise of stock
options that have not vested.
(8) Includes an aggregate of 90,100 shares of Common Stock issuable upon the
exercise of various stock options that have vested. Excludes an aggregate
of 41,900 shares of Common Stock issuable upon the exercise of stock
options that have not vested.
(9) Includes an aggregate of 6,750 shares of Common Stock issuable upon the
exercise of various stock options that have vested. Excludes an aggregate
of 2,250 shares of Common Stock issuable upon the exercise of stock
options that have not vested.
(10) Includes an aggregate of 117,250 shares of Common Stock issuable upon the
exercise of various stock options and warrants that have vested. Excludes
an aggregate of 3,500 shares of Common Stock issuable upon the exercise
of stock options that have not vested.
(11) Includes an aggregate of 2,750 shares of Common Stock issuable upon the
exercise of various stock options that have vested. Excludes an aggregate
of 3,250 shares of Common Stock issuable upon the exercise of stock
options that have not vested.
(12) Includes 1,310,000 shares of Common Stock of which the beneficial owner
has shared voting power and 2,560,800 shares of Common Stock of which the
beneficial owner has shared dispositive power. The information with
respect to the beneficial owner has been taken from the beneficial
owner's Schedule 13G/A filed with the Commission on February 10, 1999.
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<PAGE>
PROPOSAL TO AMEND THE RESTATED CERTIFICATE OF INCORPORATION
(Proposal 1 On Proxy Card)
Approval of an Amendment to the Company's
Restated Certificate of Incorporation to
effect a One-for- Reverse Stock Split
The Board of Directors has adopted a resolution declaring the advisability
of, and submitting to the stockholders for approval, a proposal to amend the
Company's Restated Certificate of Incorporation (the "Proposed Amendment") to
effect a reverse split of the Company's Common Stock, pursuant to which each
shares of Common Stock will be automatically converted into one share
without any action on the part of the stockholder (the "Reverse Split"). The
text of the Proposed Amendment is set forth on Exhibit A to this Proxy
Statement.
Consummation of the Reverse Split will not change the number of shares of
Common Stock authorized by the Company's Restated Certificate of
Incorporation, which will remain at Sixty Million (60,000,000) shares. The
Reverse Split will be effective on the date that the Certificate of Amendment
to the Company's Restated Certificate of Incorporation is filed with the
Secretary of State of the State of Delaware (the "Effective Date").
Stockholders should note that if for any reason the Board of Directors deems
it advisable, the Proposed Amendment may be abandoned at any time before the
Effective Date, whether before or after the Special Meeting (even if such
proposal has been approved by the Stockholders).
In lieu of issuing less than one whole share resulting from the Reverse
Split to holders of an odd number of shares, the Company will determine the
fair value of each outstanding share of Common Stock held on the Effective
Date of the Reverse Split (the "Fractional Share Purchase Price"). The Company
currently anticipates that the Fractional Share Purchase Price will be based
on the average daily closing bid price per share of the Common Stock as
reported by the primary trading market for the Company's Common Stock for the
ten (10) trading days immediately preceding the Effective Date. In the event
the Company determines that unusual trading activity would cause such amount
to be an inappropriate measure of the fair value of the Common Stock, the
Company may base the Fractional Share Purchase Price on the fair market value
of the Common Stock as reasonably determined in good faith by the Board of
Directors of the Company. Stockholders who hold an odd number of shares on the
Effective Date will be entitled to receive, in lieu of the less than one whole
share arising as a result of the Reverse Split, cash in the amount of the
relevant portion of the Fractional Share Purchase Price.
As soon as practical after the Effective Date, the Company will mail a
letter of transmittal to each holder of record of a stock certificate or
certificates which represent issued Common Stock outstanding on the Effective
Date. The letter of transmittal will contain instructions for the surrender of
such certificate or certificates to the Company's designated exchange agent in
exchange for certificates representing the number of whole shares of Common
Stock (plus the relevant portion of the Fractional Share Purchase Price, if
any) into which the shares of Common Stock have been converted as a result of
the Reverse Split. No cash payment will be made or new certificates issued to
a stockholder until he has surrendered his outstanding certificates together
with the letter of transmittal to the Company's exchange agent. See "Exchange
of Stock Certificates".
THE BOARD OF DIRECTORS BELIEVES THE ADOPTION OF THE PROPOSED AMENDMENT IS
IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE PROPOSED AMENDMENT.
Purpose of the Reverse Split
The Company's shares of Common Stock have been listed, and have traded on
the Nasdaq Stock Market ("Nasdaq") since July 27, 1994, when the Company
completed its initial public offering, and such shares are
4
<PAGE>
currently listed and traded on the division of Nasdaq known as the Nasdaq
National Market ("NNM"). The rules of the NNM require each listed company to
satisfy certain alternative conditions to maintain the continued listing of
securities on the NNM. Such conditions generally include alternative minimum
requirements relating to the listed company's financial condition, results of
operations and trading market for its securities. The Company no longer meets
one of the requirements for its continued listing on NNM because the minimum
bid price of the Company's shares of Common Stock does not equal or exceed
$5.00 per share. The closing price of the Company's Common Stock on September
, 1999 was $ per share.
The Company believes that if the Reverse Split is approved by the
stockholders at the Special Meeting, and the Reverse Split is effectuated, the
Company's shares of Common Stock will have a minimum bid price in excess of
$5.00 per share, and will therefore satisfy the minimum bid price requirement.
The Company believes that it can satisfy all other applicable requirements
under an alternative for continued listing requiring the following: (i) a
market capitalization of $50 million or a total asset and total revenue
requirement of $50 million, (ii) a public float of at least 1.1 million
shares, (iii) a market value of the public float of at least $15 million, (iv)
at least 400 shareholders (being round lot holders of 100 shares or more), (v)
at least four market makers and (vi) compliance with certain corporate
governance requirements.
If the Reverse Split is not approved by the stockholders at the Special
Meeting, then it is likely the Company will not meet the NNM continued listing
criteria. In such event, the Company intends to pursue listing on the Nasdaq
SmallCap Market or on the American Stock Exchange ("AMEX"). No assurance can
be given that the Company will meet the listing criteria for the Nasdaq
SmallCap Market or AMEX. If not approved for listing on the Nasdaq SmallCap
Market or on AMEX, quotes for the shares of Common Stock will likely be
maintained by the National Quotation Bureau, Inc. or the NASD Electronic
Bulletin Board. The delisting of the Company's Common Stock from NNM could
adversely affect the liquidity of the Company's Common Stock and the ability
of the Company to raise capital. In addition, the Board of Directors further
believes that low trading prices of the Company's Common Stock may have an
adverse impact upon the efficient operation of the trading market in the
securities.
Stockholders should note that the effect of the Reverse Split upon the
market price for the Company's Common Stock cannot be accurately predicted. In
particular, there is no assurance that the price for shares of the Common
Stock after the Reverse Split will be times the price for shares of the
Common Stock immediately prior to the Reverse Split. Furthermore, no assurance
can be given that the proposed Reverse Split will achieve the desired results
that have been outlined above, nor can any assurance be given that the Reverse
Split will not adversely impact the market price of the Common Stock, or,
alternatively, that any increased price per share of the Common Stock
immediately after the proposed Reverse Split will be sustained for any
prolonged period of time. In addition, the Reverse Split may have the effect
of creating odd lots of stock for some stockholders and odd lots may be more
difficult to sell or have higher brokerage commissions associated with the
sale of such odd lots.
Effect of the Reverse Split
As a result of the Reverse Split, the number of whole shares of Common
Stock held by stockholders of record as of the close of business on the
Effective Date will automatically, without any action required by the
stockholders, be equal to the number of shares of Common Stock held
immediately prior to the close of business on the Effective Date divided by
, not including fractional shares. The rights and privileges of the
holders of shares of Common Stock will be unaffected by the Reverse Split. The
par value of the Common Stock will remain at $.01 per share following the
Effective Date of the Reverse Split, and the number of shares of issued Common
Stock will be reduced. Consequently, the aggregate par value of the issued
Common Stock will also be reduced. In addition, the number of authorized but
unissued shares of Common Stock will be increased by the Reverse Split, the
issuance of which may have the effect of diluting the earnings per share and
book value per share, as well as the stock ownership and voting rights, of
outstanding Common Stock. As the Reverse Split will increase the number of
authorized but unissued shares of Common Stock, it may be construed as having
an anti-takeover effect by permitting the issuance of shares to purchasers who
might oppose a hostile takeover bid or
5
<PAGE>
oppose any efforts to amend or repeal certain provisions of the Company's
Restated Certificate of Incorporation or Bylaws.
Stockholders have no right under Delaware law or under the Company's
Restated Certificate of Incorporation or Bylaws to dissent from the Reverse
Split.
The Common Stock is currently registered under Section 12(g) of the
Exchange Act and as a result, the Company is subject to periodic reporting and
other requirements of the Exchange Act. The Reverse Split will not affect the
registration of the Common Stock under the Exchange Act, and the Company has
no current intention of terminating its registration under the Exchange Act.
Upon consummation of the Reverse Split, the total number of shares
currently reserved for grants of stock options and all stock options
previously granted will be decreased proportionally. The cash consideration
payable per share upon exercise of the stock options will also be increased
proportionally upon the consummation of the Reverse Split.
Stockholders should note that if for any reason the Board of Directors
deems it advisable, the Proposed Amendment may be abandoned at any time before
the Effective Date, whether before or after the Special Meeting (even if such
proposal has been approved by the Stockholders).
Exchange of Stock Certificates
As soon as practicable after the Effective Date, the Company intends to
require stockholders to exchange their stock certificates ("Old Certificates")
for new certificates ("New Certificates") representing the number of whole
shares of Common Stock into which their shares of Common Stock have been
converted as a result of the Reverse Split. Stockholders will receive cash in
lieu of fractional shares resulting from the Reverse Split. Stockholders will
be furnished with the necessary materials and instructions for the surrender
and exchange of stock certificates at the appropriate time by the Company's
transfer agent. Stockholders will not be required to pay a transfer or other
fee in connection with the exchange of certificates. STOCKHOLDERS SHOULD NOT
SUBMIT ANY CERTIFICATES TO THE TRANSFER AGENT UNTIL REQUESTED TO DO SO.
Federal Income Tax Consequences of the Reverse Split
The following descriptive summary of the material federal income tax
consequences of the Reverse Split is based upon the Internal Revenue Code of
1986, as amended (the "Code"), the applicable Treasury Regulations promulgated
thereunder, judicial authority and current administrative rulings and
practices, all as in effect on the date of this Proxy Statement. The Company
has not sought and will not seek an opinion of counsel or a ruling from the
Internal Revenue Service regarding the federal income tax consequences of the
Reverse Split. This discussion is for general information only and does not
discuss consequences that may apply to special classes of taxpayers (e.g.,
non-resident aliens, broker-dealers or insurance companies) and does not
discuss the tax consequences under the laws of any foreign, state or local
jurisdictions. Stockholders are urged to consult their own tax advisors to
determine the particular consequences to themselves.
In general, the federal income tax consequences of the proposed Reverse
Split will vary among stockholders depending upon whether they receive the
Fractional Share Purchase Price or solely New Certificates in exchange for Old
Certificates. The Company believes that because the Reverse Split is not part
of a plan to increase periodically a stockholder's proportionate interest in
the Company's assets or earnings and profits, the Reverse Split will probably
have the following federal income tax effects:
1. A stockholder who receives solely New Certificates will not recognize
gain or loss on the exchange. In the aggregate, the stockholder's basis in the
Common Stock represented by New Certificates will be equal to the holder's
basis in the Common Stock represented by Old Certificates.
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<PAGE>
2. A stockholder who receives a portion of the Fractional Share Purchase
Price as a result of the Reverse Split will generally be treated as having
received the payment as a distribution in redemption of the Fractional Share,
as provided in Section 302(a) of the Code. Each affected stockholder will be
required to consult such stockholder's own tax advisor for the tax effect of
such redemption (i.e., exchange or dividend treatment) in light of such
stockholder's particular facts and circumstances.
3. The Reverse Split will constitute a reorganization within the meaning of
Section 368(a)(1)(E) of the Code and the Company will not recognize any gain
or loss as a result of the Reverse Split.
SOLICITATION OF PROXIES
The cost of solicitation of proxies will be borne by the Company. In
addition to the solicitation of proxies by mail, officers and employees of the
Company may solicit in person, by telephone, facsimile, or other electronic
means. The Company may, in its discretion, reimburse brokers or persons
holding stock in their names, or in the names of their nominees, for their
expenses in sending proxies and proxy material to beneficial owners.
REVOCATION OF PROXY
Subject to the terms and conditions set forth herein, all proxies received
by the Company will be effective, notwithstanding any transfer of the shares
to which such proxies relate, unless prior to the Special Meeting the
Company's Secretary receives a written notice of revocation signed by the
person who, as of the record date, was the registered holder of such shares.
The notice of revocation must indicate the certificate number or numbers of
the shares to which such revocation relates and the aggregate number of shares
represented by such certificate(s).
STOCKHOLDER PROPOSALS
In order to be included in proxy materials for the next Annual Meeting,
stockholders' proposed resolutions must be received by the Company on or
before December 1, 1999. Proposals submitted after such date will be
considered untimely unless otherwise permitted by applicable SEC rules and
regulations and the Company's Bylaws. Stockholder proposals submitted outside
of the process described in Rule 14a-8 of the Securities Exchange Act of 1934,
as amended will not be considered at any meeting of stockholders. Proposals
should be submitted by certified mail, return receipt requested, addressed to
Daniel A. Potter, Chief Executive Officer of the Company, and must comply with
the above requirements and all applicable SEC rules and regulations and the
Company's Bylaws.
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<PAGE>
MISCELLANEOUS
Management does not know of any other matters which may come before this
Special Meeting. However, if any other matters are properly presented to the
Special Meeting, it is the intention of the person named in the accompanying
proxy to vote, or otherwise act, in accordance with his judgment and
discretion on such matters.
By Order of the Board of Directors
[LOGO APPEARS HERE]
Daniel C. Howard
Secretary
St. Paul, Minnesota
September , 1999
MANAGEMENT HOPES THAT THE STOCKHOLDERS WILL ATTEND THE MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
8
<PAGE>
EXHIBIT A
RESOLVED: That the first paragraph of Article Four of the Restated
Certificate of Incorporation be and hereby is deleted in its entirety and the
following paragraphs are inserted in lieu thereof:
"4: That, upon the filing date of this Certificate of Amendment of this
Restated Certificate of Incorporation (the "Effective Date"), a one-for-
reverse stock split of the Corporation's Class A Common Stock shall become
effective, pursuant to which each shares of Class A Common Stock
outstanding and held of record by each stockholder of the Corporation
(including treasury shares) immediately prior to the Effective Date shall be
reclassified and combined into one share of Class A Common Stock automatically
and without any action by the holder thereof upon the Effective Date and shall
represent one share of Class A Common Stock from and after the Effective Date.
No fractional shares of Class A Common Stock shall be issued as a result of
such reclassification and combination. In lieu of any fractional shares to
which the stockholder would otherwise be entitled, the Corporation shall pay
cash equal to such fraction multiplied by the then fair market value of the
Class A Common Stock as determined by the Board of Directors of the
Corporation.
The total number of shares of stock which the Corporation shall have the
authority to issue is Sixty-Seven Million (67,000,000) shares, Sixty Million
(60,000,000) of which shall be Class A Common Stock, $.01 par value per share,
Two Million (2,000,000) of which shall be Class B Common Stock, $.01 par value
per share, and Five Million (5,000,000) of which shall be Preferred Stock,
$.01 par value per share, amounting in the aggregate to Six Hundred Seventy
Thousand and 00/100 Dollars ($670,000.00)."
9
<PAGE>
VIDEO UPDATE, INC
Proxy for Special Meeting of Stockholders to be held September 27, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED hereby appoints Daniel A. Potter and John M. Bedard as
Proxies, with full power of substitution, to vote for and on behalf of the
undersigned at the Special Meeting of Stockholders of VIDEO UPDATE, INC. (the
"Corporation") to be held at the Corporation's principal place of business, 3100
World Trade Center, 30 East Seventh Street, St. Paul, Minnesota 55101, on
September 27, 1999 at 10:00 a.m., and at any adjournment(s) or postponement(s)
thereof, upon and with respect to all shares of the Class A Common Stock of the
Corporation, $.01 par value per share, to which the undersigned would be
entitled to vote and act if personally present. The undersigned hereby directs
Daniel A. Potter and John M. Bedard to vote in accordance with their judgment
and discretion on any and all matters which may properly come before the Special
Meeting, all as indicated in the Notice of the Special Meeting, receipt of which
is hereby acknowledged, and to act on the following matters set forth in such
Notice as specified by the undersigned.
(Continued and to be signed on the other side.)
- --------------------------------------------------------------------------------
[reverse side]
Please date, sign and mail your proxy card back as soon as possible!
Special Meeting of Stockholders of Video Update, Inc.
September 27, 1999
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
[x] Please mark your
vote as in this example
(1) Proposal to amend the Restated Certificate of FOR AGAINST ABSTAIN
Incorporation to effect a Reverse Stock Split
(2) The Proxies named above are directed to vote in their judgment and
discretion as to any and all other matters as may properly come before the
meeting or any adjournment(s) or postponement(s) thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE ITEM SET FORTH
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ABOVE UNLESS A CONTRARY SPECIFICATION IS MADE.
PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
_________ _________________ ______________ __________ Dated:______, 1999
Signature Signature if Held (Printed Name) (Address)
Jointly
NOTE: Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If the
person named on the stock certificate has died, please submit evidence of your
authority. If a corporation, please sign in full corporate name by the
President or authorized officer and indicate the signer's office. If a
partnership, sign in the partnership name by authorized person.
