SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment no. 1)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
Videonics, Inc.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------
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Payment of filing fee (Check the appropriate box):
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[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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(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
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
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paid previously. Identify the previous filing by registration statement
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<PAGE>
VIDEONICS, INC.
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Videonics, Inc., a California corporation (the "Company"), will be held at 1370
Dell Avenue, Campbell, California 95008 at 4:00 p.m. on Wednesday, August 19,
1998, for the following purposes:
Proposal 1. To elect five (5) directors of the Company for terms expiring
at the 1999 Annual Meeting;
Proposal 2. To ratify the selection of Coopers & Lybrand L.L.P. as the
Company's independent accountants for the year ending December 31, 1998;
and to transact such other business as may properly come before the meeting or
any adjournments thereof.
The close of business on June 22, 1998 has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
meeting.
PLEASE SIGN, DATE AND MAIL YOUR PROXY IN THE ENVELOPE PROVIDED FOR YOUR
CONVENIENCE. YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO THE MEETING, AND IF
YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors,
/s/ Mark C. Hahn
----------------
Mark C. Hahn
Secretary
Dated: June 24, 1998
<PAGE>
VIDEONICS, INC.
1370 Dell Ave.
Campbell, California 95008
PROXY STATEMENT
-------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Videonics, Inc. (the "Company") for use at
the Annual Meeting of Shareholders to be held on August 19, 1998, or at any
adjournments thereof (the "Annual Meeting"), for the purposes set forth herein
and in the foregoing Notice. This Proxy Statement and the accompanying Proxy are
being mailed to the Company's shareholders on or about July 6, 1998.
At the close of business on June 22, 1998, the record date fixed by the
Board of Directors of the Company for determining those shareholders entitled to
vote at the Annual Meeting (the "Record Date"), the outstanding shares of the
Company entitled to vote consisted of 5,848,149 shares of Common Stock. Each
shareholder of record at the close of business on the Record Date is entitled to
one vote for each share then held on each matter submitted to a vote of the
shareholders.
A form of proxy is enclosed for use at the Annual Meeting. The proxy may
be revoked by a shareholder at any time prior to the exercise thereof, and any
shareholder present at the Annual Meeting may revoke his proxy thereat and vote
in person if he or she so desires. When such proxy is properly executed and
returned, the shares it represents will be voted at the Annual Meeting in
accordance with any instructions noted thereon. If no direction is indicated,
all shares represented by valid proxies received pursuant to this solicitation
(and not revoked prior to exercise) will be voted for the election of the
nominees for directors named herein (unless authority to vote is withheld) and
in favor of all other proposals stated in the Notice of Meeting and described in
this Proxy Statement.
The Company's Annual Report for the year ended December 31, 1997 is
enclosed with this Proxy Statement.
1
<PAGE>
PROPOSAL 1:
ELECTION OF DIRECTORS
Nominees
Five directors, constituting the entire Board of Directors, are to be
elected at the Annual Meeting, each to hold office until the next Annual Meeting
and until their successors are elected and qualified. The Board of Directors has
nominated for election as directors the five persons indicated in the following
table. In the election of directors, the proxy holders intend, unless directed
otherwise, to vote for the election of the nominees named below, all of whom are
now members of the Board of Directors. It is not anticipated that any of the
nominees will decline or be unable to serve as director. If, however, that
should occur, the proxy holders will vote the proxies in their discretion for
any nominee designated by the present Board of Directors to fill the vacancy.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.
The following table gives certain information as to each person nominated
for election as a director:
Name Age Director Since
---- --- --------------
Michael L. D'Addio 53 1986
Yeshwant Kamath 49 1997
Mark C. Hahn 48 1986
Carl E. Berg 60 1987
N. William Jasper, Jr. 50 1993
Michael L. D'Addio, a co-founder of the Company, has served as Chief
Executive Officer and Chairman of the Board of Directors since the Company's
inception in July 1986. In addition Mr. D'Addio served as the Company's
President from July 1986 until November 1997. From May 1979 through November
1985 Mr. D'Addio served as President, Chief Executive Officer and Chairman of
the Board of Directors of Corvus Systems, a manufacturer of small computers and
networking systems. Mr. D'Addio holds an A.B. degree in Mathematics from
Northeastern University.
Dr. Yeshwant Kamath, has served as President of the Company since November
1997. From 1993 to 1996, Dr. Kamath was the CEO and co-founder of KUB Systems,
which was acquired by Videonics. From 1982 to 1992, he was the CEO and
co-founder of Abekas Video Systems, which was acquired by Carlton
Communications, Plc. Dr. Kamath received his MS in Electronics from Syracuse
University in 1972 and his Ph.D. in Electronics from the University of
California at Berkeley in 1975. Dr. Kamath currently serves on the Board of
Directors of two public companies, Elantec Semiconductor, Inc. and Euphonix,
Inc. and is on the Board of Directors of KTEH, the San Jose based PBS television
station.
2
<PAGE>
Mark C. Hahn, a co-founder of the Company, has served as the Company's
Chief Technical Officer since February 1996, and Corporate Secretary and
Director since the Company's inception. Previously, Mr. Hahn served as the
Company's Vice President of Research and Development. Prior to co-founding the
Company, Mr. Hahn served as Vice President of Research and Chief Technologist of
Corvus Systems from May 1979 to February 1986. Mr. Hahn holds a B.S. degree in
Electrical Engineering from Princeton University and a M.S. degree in Electrical
Engineering from Stanford University.
Carl E. Berg, a co-founder of the Company, has served on the Company's
Board of Directors since June 1987. Mr. Berg is currently, and has for the last
eight years been, a private venture capital investor and industrial real estate
developer. Mr. Berg is also a member of the Board of Directors of Integrated
Device Technology, Inc., Valence Technology, Inc. and Systems Integrated
Research.
N. William Jasper, Jr. joined the Board of Directors of the Company in
August 1993. Since 1983, Mr. Jasper has been the President and Chief Operating
Officer of Dolby Laboratories, Inc.
Board Committees and Meetings
During the year ending December 31, 1997, there were four meetings of the
Company's Board of Directors at which all members were present, except for Mr.
Hahn, who was not present at one meeting.
The Audit Committee was established on December 15, 1994. The members of
the Audit Committee are Messrs. Berg and Jasper, neither of whom is an employee
of the Company. The functions of the Audit Committee are to define the scope of
the audit, review the auditor's reports and comments, and monitor the internal
auditing procedures of the Company. The Audit Committee did not meet during
1997.
The Compensation Committee was established on October 27, 1994. The
members of the Compensation Committee are Messrs. Berg and Jasper, neither of
whom is employed by the Company. The Compensation Committee makes
recommendations with respect to compensation of senior officers and granting of
stock options and stock awards. The Compensation Committee met one time during
1997.
The Company does not presently have a Nominating Committee.
3
<PAGE>
PROPOSAL 2:
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Coopers & Lybrand L.L.P. as the
Company's independent accountants for the year ending December 31, 1998 and has
further directed that management submit the selection of accountants for
ratification by the shareholders at the Annual Meeting. Coopers & Lybrand L.L.P.
was first appointed independent accountants of the Company for the year ended
December 31, 1991. A representative of Coopers & Lybrand L.L.P. is expected to
be present at the Annual Meeting, will have an opportunity to make a statement,
and is expected to respond to appropriate questions.
Shareholder ratification of the selection of Coopers & Lybrand L.L.P. as
the Company's independent accountants is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Coopers & Lybrand
L.L.P. to the shareholders for ratification as a matter of good corporate
practice. If the shareholders fail to ratify the selection, the Board will
reconsider whether or not to retain that firm. Even if the selection is
ratified, the Board in its discretion may direct the appointment of a different
independent accounting firm at any time during the year if the Board determines
that such a change would be in the best interests of the Company and its
shareholders.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of June 15, 1998, certain information
with respect to each person known by the Company to be a beneficial owner, as
defined in Rule 13d-3 ("Rule 13d-3") promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended (the "1934
Act"), of more than 5% of the outstanding Common Stock of the Company.
Percentage of
Outstanding
Name and Address Number of Shares Common
of Beneficial Owner Beneficially Owned Stock
- ------------------- ------------------ -------------
Carl E. Berg
10050 Bandley Drive
Cupertino, CA 95014 1,142,305 19%
Michael L. D'Addio
1370 Dell Avenue
Campbell, CA 95008(1) 902,962 15%
Mark C. Hahn
1370 Dell Avenue
Campbell, CA 95008(2) 563,831 9%
Joseph M. Cohen; Cowen &
Company; Cowen, Incorporated
Financial Square
New York, NY 10005-3597 541,500 9%
State of Wisconsin
Investment Board
P.O. Box 7842
Madison, WI 53707 535,000 9%
Wisdom Tree
Capital Management
1633 Broadway
38th Floor
New York, NY 10019 533,105 9%
(1) Includes 6,000 shares subject to stock options exercisable as of June 15,
1998 or within 60 days thereafter held by Mr. D'Addio's spouse, a Company
employee.
(2) Includes 6,000 shares subject to stock options exercisable as of June 15,
1998 or within 60 days thereafter held by Mr. Hahn's spouse, a Company
employee.
5
<PAGE>
SECURITY OWNERSHIP OF THE DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
The following table sets forth certain information, as of June 15, 1998
concerning each director and each executive officer, including their beneficial
ownership as defined in Rule 13d-3, of shares of Common Stock and beneficial
ownership of Common Stock by all officers and directors as a group.
<CAPTION>
Director/ Shares Percent
Officer Beneficially Beneficially
Name Age Since Positions Owned Owned
- ---- --- ----- --------- ----- -----
<S> <C> <C> <C> <C> <C>
Carl E. Berg 60 1987 Director 1,142,305 19%
Michael L. D'Addio(1) 53 1986 Chairman, CEO, 902,962 15
& Director
Mark C. Hahn(2) 48 1986 V.P., Chief 563,831 9
Technical Officer,
Secretary & Director
N. William Jasper, Jr.(3) 50 1993 Director 34,093 *
Yeshwant Kamath(4) 49 1997 President & Director 20,004 *
Jeffrey A. Burt(5) 45 1992 V.P. of Operations 42,000 *
James Francis 33 1992 E.V.P. of Sales and 21,000 *
Marketing
James A. McNeill(6) 53 1993 V.P. of Finance, 95,000 2
CFO & Assistant
Secretary
Stephen L. Peters(7) 44 1996 V.P. of Research and 29,338 *
Development
All executive officers and directors as a Group (9 persons)(8) 2,850,533 48%
<FN>
- ---------------
* Represents less than 1%
</FN>
</TABLE>
Jeffrey A. Burt has served as Vice President of Operations of the Company
since April 1992. From August 1991 to March 1992, Mr. Burt served the Company as
its Materials Manager. Prior to that time, from October 1990 until July 1991,
Mr. Burt acted as a consultant to the Company in the area of materials
management. From May 1989 to October 1990, Mr. Burt served as the Director of
Manufacturing of On Command Video. Mr. Burt holds a B.A. degree in Economics
from the University of Wisconsin at Whitewater.
James Francis served as Executive Vice President of Sales and Marketing
from September 1995 until November 1997. From March 1992 to August 1995, Mr.
Francis served the Company as its Vice President of International Sales. From
May 1990 to March 1992, Mr. Francis served the Company as its Manager of Far
East Marketing. Prior to joining the Company in 1990 Mr. Francis worked as a
computer programmer with IBM Corporation. Mr. Francis holds a B.S. degree in
Electrical Engineering and Japanese from Brigham Young University.
6
<PAGE>
James A. McNeill has served the Company as its Vice President of Finance
and Chief Financial Officer since November 1993. Mr. McNeill has served as
Assistant Secretary since October 1994. From 1991 until joining the Company, Mr.
McNeill served as Vice President, Finance of JHK & Associates, Inc., a
professional services firm. From 1978 to 1991, he served successively as Vice
President of Finance and President of U.S. Controls Holding, Inc. and its
subsidiaries, Reactor Controls, Inc. and Project Integration, Inc. Mr. McNeill
holds a B.S. degree in Accounting from Pennsylvania State University and is a
C.P.A. under the laws of California.
Stephen L. Peters has served the Company as its Vice President of Research
and Development since February 1996. From 1994 to February 1996, Mr. Peters
acted as a consultant in the areas of international business planning and
product development. From 1976 to 1980 and from 1983 to 1994, he served as a
Division Manager, R&D Manager, R&D Section Manager, Project Manager, and
development engineer at Hewlett-Packard. From 1980 to 1983 he served as Project
manager and senior engineer at Advanced Technology Labs. Mr. Peters holds B.S.
degrees from Oregon State University in Engineering Physics and Pre-medicine.
- -------------
(1) Includes 6,000 shares subject to stock options exercisable as of June 15,
1998 or within 60 days thereafter held by Mr. D'Addio's spouse, a Company
employee.
(2) Includes 6,000 shares subject to stock options exercisable as of June 15,
1998 or within 60 days thereafter held by Mr. Hahn's spouse, a Company
employee.
(3) Includes 2,813 shares subject to stock options exercisable as of June 15,
1998 or within 60 days thereafter.
(4) Includes 20,004 shares subject to stock options exercisable as of June
15, 1998 or within 60 days thereafter.
(5) Includes 42,000 shares subject to stock options exercisable as of June
15, 1998 or within 60 days thereafter.
(6) Includes 15,000 shares subject to stock options exercisable as of June
15, 1998 or within 60 days thereafter.
(7) Includes 28,338 shares subject to stock options exercisable as of June
15, 1998 or within 60 days thereafter.
(8) Includes an aggregate of 120,155 shares included pursuant to notes (1)-
(7).
7
<PAGE>
EXECUTIVE COMPENSATION
<TABLE>
The following table sets forth the total compensation earned by the Chief
Executive Officer and the executive officers of the Company for services
rendered in all capacities for the years ended December 31, 1997, 1996 and 1995.
Summary Compensation Table
<CAPTION>
Annual Long-Term
Compensation Compensation
------------------------------------------- All Other
Salary Bonus Option/ Compensation
Principal Position Year ($) ($) SARs (#) ($) (3)
- ------------------ ---- --- --- -------- -------
<S> <C> <C> <C> <C> <C>
Michael L. D'Addio 1997 $130,667 0 0 0
Chief Executive Officer 1996 $92,000 $2,704 0 0
1995 $92,000 $19,068 0 0
Yeshwant Kamath 1997 $100,500(1) $5,000(1) 40,008(2) 0
President
Jeffrey A. Burt 1997 $110,000 0 30,000(4) $30,200
Vice President of 1996 $92,000 $3,362 30,000 $70,517
Operations 1995 $92,000 $19,068 0 $64,133
James Francis 1997 $50,000(7) $84,454(5) 56,512(6) $10,442
Executive Vice President of 1996 $52,000 $124,160(5) 51,504 0
Sales and Marketing 1995 $52,000 $149,958(5) 5,000 $229,875
James A. McNeill 1997 $121,667 $11,667 30,000(8) 0
Vice President of 1996 $92,000 $2,704 30,000 0
Finance, CFO & 1995 $92,000 $19,068 0 0
Assistant Secretary
Stephen L. Peters 1997 $98,000 $42,000 60,010(9) $10,000(10)
Vice President of 1996 $85,750(11) $36,750(11) 50,004 0
Research and Development
<FN>
- ----------------------
(1) Dr. Kamath was appointed President of the Company in November 1997.
According to his employment agreement, Dr. Kamath was guaranteed a $5,000
bonus for the year 1997.
(2) Includes repriced options to purchase 40,008 shares of Common Stock.
(3) Amounts represent gain recognized on exercise of nonstatutory stock
options issued under the Company's 1987 Stock Option Plan.
8
<PAGE>
(4) Includes repriced options to purchase 30,000 shares of Common Stock.
(5) With respect to Mr. Francis, bonus amounts are commissions calculated as
a percentage of sales revenues.
(6) Includes repriced options to purchase 56,512 shares of Common Stock.
(7) Mr. Francis resigned from the Company in December 1997.
(8) Includes repriced options to purchase 30,000 shares of Common Stock.
(9) Includes repriced options to purchase 50,008 shares of Common Stock.
(10) Represents relocation bonus.
(11) Mr. Peters joined the Company in February 1996. Mr. Peters was guaranteed
a bonus of $3,500 per month during his first year of employment.
Accordingly, the 1996 Summary Compensation Table information set forth
above includes only that compensation earned by Mr. Peters from February
19, 1996 through December 31, 1996.
</FN>
</TABLE>
9
<PAGE>
<TABLE>
The following tables set forth as to the Chief Executive Officer and each
of the executive officers named under the summary compensation table, certain
information with respect to options to purchase shares of Common Stock of the
Company as of and for the year ended December 31, 1997. No options were granted
to Michael D'Addio, the Chief Executive Officer, for such year.
<CAPTION>
Option/SAR Grants in 1997
Number of % of Total Potential Realizable
Securities Options/ Value at Assumed Annual
Underlying SARs Exercise Rates of Stock Price
Option/ Granted to or Base Appreciation for
SARs Employees Price Option Term (5)
Granted In ($/per Exp. -------------------------------
Name (#) (1) 1997 (2) Share) Date 0% ($) 5% ($) 10% ($)
- --------------------- -------- -------- ------ ----- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Jeffrey A. Burt 30,000(3) 3.2% $5.00 8/19/07 0 $94,334 $239,061
James Francis 56,512(3) 6.1% $5.00 8/19/07 0 $177,700 $450,328
Yeshwant Kamath 40,008(3) 4.3% $5.00 8/19/07 0 $125,804 $318,812
James A. McNeill 30,000(3) 3.2% $5.00 8/19/07 0 $94,334 $239,061
Stephen L. Peters 10,002(4) 1.1% $3.81 4/15/07 0 $23,985 $60,782
50,008(3) 5.4% $5.00 8/19/07 0 $157,249 $398,499
- ------------------
<FN>
(1) Options granted in this table have exercise prices equal to the fair
market value on the date of grant. All such options typically become
exercisable at a rate of 1/8 after the first full six months of
employment, and 1/8 every six months thereafter for a total four year
vesting period following the date of grant. Options granted prior to
August 19, 1997, typically became exercisable at a rate of 1/6 after the
first full six months of employment, and 1/6 every six months thereafter
for a total three year vesting period following the date of grant.
(2) The Company granted options to purchase a total of 929,534 shares of
Common Stock to employees in 1997.
(3) Options were issued in connection with the Company's August 19, 1997
repricing. Repriced options had vesting periods extended from three years
to four years.
(4) Mr. Peters grant of 10,002 shares in April 1997 were issued under a three
year vesting schedule.
(5) Potential realizable value assumes that the stock price increases from
the date of grant until the end of the option term (10 years) at the
annual rate specified (0%, 5%, 10%). Annual compounding results in total
appreciation of 63% (at 5% per year) and 159% (at 10% per year). The 5%
and 10% assumed rates of appreciation (over the deemed fair market value
at the grant date) are mandated by the rules of the Securities and
Exchange Commission and do not represent the Company's estimate or
projection of the future of the Company's Common Stock.
</FN>
</TABLE>
10
<PAGE>
<TABLE>
Aggregated Option/SAR Exercises in 1997
and Year-End Option/SAR Values
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired on Value Underlying Unexercised In-the-Money Options/SARs
Exercise Realized Options/SARs at Year-End at Year-End(1)
Name # $ Exercisable Unexercisable Exercisable Unexercisable
- -------------------- --------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael L. D'Addio - - - - - -
Yeshwant Kamath - - 15,003 25,005 - -
Jeffrey A. Burt 6,000 $30,200 38,250 18,750 $98,775 -
James Francis 2,000 $10,442 56,881 - $102,433 -
Mark C. Hahn - - - - - -
James A. McNeill - - 11,250 18,750 - -
Stephen L. Peters - - 20,420 39,590 $520 $2,601
- --------------------
<FN>
(1) Calculated on the basis of the closing price of $4.13 on December 31,
1997, minus the exercise price.
</FN>
</TABLE>
<TABLE>
Ten-Year Option/SAR Repricing
<CAPTION>
Market Length of
Number of Price of Exercise Original
Securities Stock at Price at Option Term
Underlying Time of Time of Remaining at
Option/SARs Repricing Repricing New Date of
Repriced or or or Exercise Repricing or
Name Date Amended Amendment Amendment Price Amendment
- ---------------------- ---- ------- --------- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey A. Burt 8/19/97 30,000 $5.00 $7.50 $5.00 8 years 177 days
James Francis 8/19/97 5,000 $5.00 $11.75 $5.00 7 years 139 days
8/19/97 51,512 $5.00 $7.50 $5.00 8 years 177 days
Yeshwant Kamath 8/19/97 40,008 $5.00 $9.00 $5.00 8 years 285 days
James A. McNeill 8/19/97 30,000 $5.00 $7.50 $5.00 8 years 177 days
Stephen L. Peters 8/19/97 50,008 $5.00 $7.50 $5.00 8 years 177 days
</TABLE>
11
<PAGE>
Employment Agreements
In February 1996, the Company entered into an employment agreement with
Mr. Peters, pursuant to which he presently receives a base salary of $98,000 per
year, plus a guaranteed bonus of $42,000 the first year, $38,000 in the second
year, and $34,000 in the third year. In addition, Mr. Peters is eligible to
receive an incentive bonus, in his second and third years of employment, based
on performance. Pursuant to this agreement, Mr. Peters received an option to
purchase 50,004 shares of the Company's Common Stock under the Stock Option Plan
at an exercise price of $7.50 per share which vests over three years. The
agreement provides that if Mr. Peters is terminated within one year after a
merger or buyout, his shares will be fully vested and he will receive one years
severance pay.
In November 1997, the Company entered into an employment agreement with
Dr. Kamath, pursuant to which he presently receives a base salary of $150,000
per year, with a guaranteed bonus of $5,000 for 1997. In addition, Dr. Kamath is
eligible to receive an incentive bonus, in 1998, based on performance. Pursuant
to this agreement, Dr. Kamath received an option to purchase 320,000 shares of
the Company's Common Stock at an exercise price of $2.125 per share which vests
over four years. The agreement provides that if Dr. Kamath is terminated within
one year after a merger or buyout, his shares will be fully vested and he will
receive one years severance pay.
Remuneration of Non-Employee Directors
The Company does not compensate non-employee directors who are also major
shareholders, such as Mr. Berg, for their services. Other non-employee
directors, such as Mr. Jasper, receive $500 for each board meeting attended.
Report of the Compensation Committee With Respect to Executive Compensation
The Compensation Committee of the Board of Directors (the "Committee") was
established on October 27, 1994. The functions of the Committee are to make
recommendations to the Board concerning salaries and incentive compensation for
the Company's executive officers.
The Company's executive compensation program has been designed to (i)
attract and retain executives capable of leading the Company to meet its
business objectives and to motivate them to enhance long-term shareholder value
through compensation that is comparable to the levels offered by other companies
in similar industries; (ii) motivate key executive officers to achieve strategic
business initiatives and reward them for their achievement; and (iii) align the
interests of executives with the long-term interests of the Company's
shareholders through award opportunities resulting in the ownership of the
Company's Common Stock. Annual compensation for the Company's executive officers
may consist of three elements: cash salary, cash incentive bonus, and stock
option grants. Stock option grants provide an incentive which focuses the
executive's attention on managing the Company from the perspective of an owner
with an equity stake in the business. These stock options will generally provide
value to the recipient only when the price of the Company's stock increases
above the option grant price.
The Committee recognizes that the salary paid to Mr. D'Addio, the
Company's Chief Executive Officer, is substantially below that paid to others in
comparable positions of similar companies. Therefore, the Committee increased
the annual salary of Mr. D'Addio to $150,000 in 1997 from $92,000. Mr. D'Addio
had declined salary increases recommended by the Committee since 1994. The
Committee believes that Mr. D'Addio's current salary is still significantly
below the salary of CEO's in comparable public companies. However, Mr. D'Addio
has to date declined any additional increase.
12
<PAGE>
During 1998, it is anticipated that the Committee will conduct annual
performance reviews comparing actual Company progress against annual plans.
Elements of such plans, including progress on product development, sales and
marketing, expense control and organizational development, may be considered.
The Compensation Committee
Carl E. Berg N. William Jasper, Jr.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
The Compensation Committee consists of Messrs. Berg and Jasper, neither of
whom is employed by the Company. There are no Compensation Committee interlocks
between the Company and other entities involving the Company's executive
officers and Board members who serve as executive officers of such entities.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Commission initial reports of ownership and reports of changes in ownership
of Common Stock and other equity securities of the Company. Officers, directors
and greater than ten percent shareholders are required by Commission regulation
to furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports and amendments thereto furnished to the Company and written
representations that no other reports were required, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten percent
beneficial owners were complied with during the year ended December 31, 1997,
provided, however, that two timely filed Form 4 reports for Mr. Berg were later
amended to reflect the nature of ownership.
Certain Transactions
There is no pending litigation or proceeding involving a director,
officer, employee or other agent of the Company as to which indemnification from
the Company is being sought nor is the Company aware of any pending or
threatened litigation that may result in claims for indemnification by any
director, officer, employee or other agents.
Pursuant to Mr. Peters' employment agreement, the Company loaned Mr.
Peters $250,000 on January 24, 1997. The loan bears interest at a rate of 6% per
annum, and is due and payable in one lump sum on January 4, 2000. The loan is
secured by a deed of trust on Mr. Peters' home in Saratoga, California.
13
<PAGE>
Performance Measurement Comparison
The following graph compares the total shareholder return of the Common
Stock of the Company, CRSP Total Return Index for the Nasdaq Stock Market
(Domestic Companies) and the CRSP Total Return Index for the Nasdaq Electronic
Component Companies, since December 15, 1994. The graph assumes that $100.00 was
invested on December 15, 1994, the effective date of the Company's initial
public offering of Common Stock.
[The following descriptive data is supplied in accordance with Rule 304 (d) of
Regulation S-T]
12/15/94 12/31/94 12/31/95 12/31/96 12/31/97
Videonics, Inc. 100 116 107 81 38
Nasdaq (Domestic) 100 103 149 183 225
Electronic Comp. 100 106 175 303 317
The Company's stock was publicly traded for sixteen calendar days during
the Company's year ended December 31, 1994. These indices are calculated on a
dividend reinvested basis. The Company emphasizes that the performance of the
Company's stock over the period shown is not necessarily indicative of the
future performance of the Company's stock.
14
<PAGE>
OTHER MATTERS
Expenses of Solicitation
The accompanying proxy is solicited by and on behalf of the Board of
Directors of the Company, and the entire cost of such solicitation will be borne
by the Company. In addition to the use of the mails, proxies may be solicited by
directors, officers and employees of the Company, by personal interview,
telephone and telegraph. Arrangements will be made with brokerage houses and
other custodians, nominees and fiduciaries for the forwarding of solicitation
material and annual reports to the beneficial owners of stock held of record by
such persons, and the Company will reimburse them for reasonable out-of-pocket
and clerical expenses incurred by them in connection therewith.
Financial and Other Information
All financial information is incorporated by reference to the information
contained in the Financial Statements included in the Company's Annual Report to
security holders.
Shareholder Proposals
Proposals of shareholders that are intended to be presented at the
Company's 1999 Annual Meeting of shareholders must be received by the Company no
later than December 15, 1998, in order to be included in the proxy statement and
proxy relating to that Annual Meeting.
Discretionary Authority
The Annual Meeting is called for the specific purposes set forth in the
Notice of Meeting as discussed above, and also for the purpose of transacting
such other business as may properly come before the Annual Meeting. At the date
of this Proxy Statement the only matters which management intends to present, or
is informed or expects that others will present for action at the Annual
Meeting, are those matters specifically referred to in such Notice. As to any
matters which may come before the Annual Meeting other than those specified
above, the proxy holders will be entitled to exercise discretionary authority.
By Order of the Board of Directors,
/s/ Mark C. Hahn
----------------
Mark C. Hahn
Secretary
Dated: June 24, 1998
Campbell, California
15
<PAGE>
Appendix A
PROXY
VIDEONICS, INC.
ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Michael L. D'Addio, Yeshwant Kamath, Mark
C. Hahn, Carl E. Berg and N. William Jasper, Jr. as proxies, each with the power
of substitution, and hereby authorizes them to vote all shares of Common Stock
of the undersigned at the 1998 Annual Meeting of the Company, to be held at
Videonics, Inc., 1370 Dell Ave., Campbell, California, on Wednesday, August 19,
1998, and at any adjournments or postponements thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED "FOR" THE ELECTION OF DIRECTORS AND "FOR" THE OTHER PROPOSALS SET FORTH
ON THE REVERSE SIDE
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
<PAGE>
<TABLE>
<CAPTION>
[x]Please mark
votes as in
this example
<S> <C>
The Board of Directors recommends a vote FOR proposals 1 and 2.
FOR AGAINST ABSTAIN
1. Election of Directors. 2. Selection of Independent [ ] [ ] [ ]
Accountants.
Nominees: M. D'Addio, Y. Kamath, M. Hahn, C. Berg, W. Jasper
FOR WITHHELD
[ ] [ ]
[ ]
--------------------------------------
For all nominees execpt as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Plese sign exactly as name appears hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please
give full name as such.
Signature: Date: Signature: Date:
----------------------------------- ----------- ------------------------------------ -----------
</TABLE>
