SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 0-25036
VIDEONICS, INC.
(Exact name of Registrant as specified in its charter)
California 77-0118151
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1370 Dell Ave, Campbell, California 95008
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (408) 866-8300
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of April 30, 1999, there were 5,867,649 shares of the Registrant's
Common Stock outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
VIDEONICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Quarter Ended
March 31,
-------------
1999 1998
------- -------
Net revenues $ 3,665 $ 4,719
Cost of revenues 2,207 2,977
------- -------
Gross profit 1,458 1,742
------- -------
Operating expenses:
Research and development 898 1,382
Selling and marketing 996 1,641
General and administrative 374 424
------- -------
2,268 3,447
------- -------
Operating loss (810) (1,705)
Interest expense, net (13) (1)
------- -------
Net loss $ (823) $(1,706)
======= =======
Net loss per common share - basic
and diluted $ (0.14) $ (0.29)
======= =======
Shares used in computing net loss per
common share - basic and diluted 5,858 5,790
======= =======
The accompanying notes are an integral
part of these financial statements.
2
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VIDEONICS, INC.
CONDENSED BALANCE SHEETS
(in thousands)
March 31, December 31,
ASSETS 1999 1998
-------- --------
(unaudited)
Current assets:
Cash and cash equivalents $ 764 $ 837
Accounts receivable, net 899 852
Inventories 5,074 5,830
Prepaid and other current assets 212 122
-------- --------
Total current assets 6,949 7,641
Property and equipment, net 1,195 1,507
Other assets 16 16
-------- --------
Total assets $ 8,160 $ 9,164
======== ========
LIABILITIES
Current liabilities:
Note payable to shareholder $ 1,000 $ 1,000
Accounts payable 973 947
Accrued expenses 1,083 1,290
-------- --------
Total current liabilities 3,056 3,237
-------- --------
SHAREHOLDERS' EQUITY
Common stock, no par value:
Authorized: 30,000 shares
Issued and outstanding: 5,858 shares at
March 31, 1999 and 5,858 shares at
December 31, 1998 20,647 20,647
Retained deficit (15,543) (14,720)
-------- --------
Total shareholders' equity 5,104 5,927
-------- --------
Total liabilities and shareholders' equity $ 8,160 $ 9,164
======== ========
The accompanying notes are an integral
part of these financial statements.
3
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VIDEONICS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Quarter Ended
March 31,
-------------
1999 1998
------- -------
Cash flows from operating activities:
Net cash used in operating activities $ (104) $ (439)
------- -------
Cash flows from investing activities:
Cash received from sale of Nova 52 --
Purchase of property and equipment (21) (155)
------- -------
Net cash provided by (used in) investing activities 31 (155)
------- -------
Cash flows from financing activities:
Proceeds from issuance of note payable -- 619
Proceeds from issuance of common stock -- 13
------- -------
Net cash provided by financing activities -- 632
------- -------
Increase (decrease) in cash and cash equivalents (73) 38
Cash and cash equivalents at beginning of year 837 992
------- -------
Cash and cash equivalents at end of quarter $ 764 $ 1,030
======= =======
The accompanying notes are an integral
part of these financial statements.
4
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VIDEONICS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1. The condensed financial statements at March 31, 1999 and for the three
month period then ended are unaudited (except for the balance sheet
information as of December 31, 1998, which is derived from the
Company's audited financial statements) and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim periods. The
condensed financial statements should be read in conjunction with the
financial statements and notes thereto, together with management's
discussion and analysis of financial condition and results of
operations, contained in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998, as amended. The results of operations
for the three-month period ended March 31, 1999 are not necessarily
indicative of the results for the year ending December 31, 1999, or any
future interim period.
2. Inventories comprise (in thousands):
March 31, December 31,
1999 1998
------ ------
(unaudited)
Raw materials $ 4,010 $4,381
Work in process 382 375
Finished goods 682 1,074
------ ------
$5,074 $5,830
====== ======
3. Note Payable to Shareholder:
At March 31, 1999, the Company has an unsecured loan from a director
and significant shareholder of the Company. This loan, in the amount of
$1,000,000, bears interest at 8% per year, and is due on October 16,
1999. Accrued interest is payable on a quarterly basis. The shareholder
has agreed that, at the Company's option, the loan may be extended
until January 2000.
5
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VIDEONICS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
4. Sale of Nova Systems:
On January 29, 1999, the Company completed the sale of certain assets
and the assumption of certain liabilities related to its Nova Systems
Division ("Nova") to a privately held company in Massachusetts. For the
year ended December 31, 1998, Nova recorded revenues of $1.9 million
and a loss from operations of $248,000. For the year ended December 31,
1997, Nova recorded revenues of $2.8 million and a loss from operations
of $1.4 million, which included a write-off of $700,000 of
non-performing assets. Additionally in 1997, Videonics wrote off $1.9
million of intangibles related to Nova. The sale of Nova may provide
Videonics with net revenues from royalties of up to a maximum of
approximately $450,000, contingent upon future sales of Nova products
by the acquiring company. Royalties will be paid, to the extent due, by
the acquiring company on a monthly basis from March 1999 until receipt
of the approximately $450,000. The sale of Nova did not result in a
material capital gain or loss to Videonics.
5. Segment Information:
In 1998, Videonics adopted SFAS 131. At December 31, 1998, Videonics
presented two reportable segments - (1) Video Production and (2) Signal
Processing.
The Company's "Video Production" segment manufactures and sells video
post-production equipment into broadcast, cable, industry and home
producer markets. The Company's "Signal Processing" segment, which was
represented by the Company's Nova Division, manufactured and sold
signal conversion and processing equipment primarily into television
and cable studios. As described in Note 4, the Company's Nova System
Division ("Signal Processing" segment) was sold on January 29, 1999.
The table below presents information about reported segments for the
quarters ending March 31, (in thousands):
1999 1998
------ -----
Video Production
Sales $3,574 $4,200
Operating loss (774) (1,644)
Signal Processing
Sales 91 (1) 519
Operating loss (36)(1) (61)
(1) Results presented are through January 29, 1999, the date the
Company completed its sale of Nova.
6
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VIDEONICS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
6. Recent Accounting Pronouncement:
In June of 1998, the Financial Accounting Standards Board issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities", (SFAS 133) which establishes accounting and reporting
standards for derivative instruments, and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. Management has evaluated the effects of this
standard and believes there will be no material impact on the Company's
financial position or results of operations. The Company will adopt
SFAS 133 as required for its first quarterly filing of the year 2000.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion in this section "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, particularly statements regarding market
opportunities, market share growth, competitive growth, new product
introductions, success of research and development expenses, customer acceptance
of new products, gross margin and selling, general and administrative expenses.
These forward-looking statements involve risks and uncertainties, and the
cautionary statements set forth below, specifically those contained in "Factors
That May Affect Future Results of Operations," identify important factors that
could cause actual results to differ materially from those predicted in any such
forward-looking statements. Such factors include, but are not limited to,
adverse changes in general economic conditions, including adverse changes in the
specific markets for the Company's products, adverse business conditions,
decreased or lack of growth in the market for video post-production equipment,
adverse changes in customer order patterns, increased competition, lack of
acceptance of new products, pricing pressures, lack of success in technological
advancements, risks associated with foreign operations, risks associated with
the Company's efforts to comply with Year 2000 requirements, and other factors.
Results of Operations
Net Revenues. Net revenues decreased approximately 22% from $4.7
million in the first quarter of 1998 to $3.7 million in the first quarter of
1999. The decrease in revenue was due in part to the sale of the Company's Nova
Division and decreased sales of the Company's older videographer products.
Gross Profit. Gross profit decreased approximately 16% from $1.7
million in the first quarter of 1998 to $1.5 million in the first quarter of
1999. The decrease in gross profit is primarily due to the sale of Nova. Gross
profit, as a percentage of net revenues, increased to approximately 40% in the
first quarter of 1999 from approximately 37% for the first quarter of 1998. The
increase in gross profit as a percentage of revenues is due primarily to a
change in product mix.
Research and Development. Research and development expenses decreased
approximately 35% to $898,000 during the first quarter of 1999 compared to $1.4
million in the first quarter of 1998. The decrease was due to the Company's sale
of Nova, a decrease in personnel and reduced use of consultants.
Selling and Marketing. Selling and marketing expenses decreased
approximately 39% to $996,000 in the first quarter of 1999 compared to $1.6
million in the first quarter of 1998. As a percentage of net revenues, these
expenses decreased to 27% in the first quarter of 1999 compared to 35% in the
first quarter of 1998. The decrease was due to the Company's sale of Nova, a
decrease in personnel and reduced advertising expenses.
8
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General and Administrative. General and administrative expenses
decreased approximately 12% to $374,000 in the first quarter of 1999 compared to
$424,000 in the first quarter of 1998. Expenses as a percentage of net revenues
were essentially flat between quarterly comparison periods. The decrease in
actual expenses was primarily due to the sale of Nova.
Interest Expense, net. Interest expense increased to $13,000 in the
first quarter of 1999 compared to $1,000 in the first quarter of 1998. This
difference is primarily due to interest expense calculated on the $1.0 million
note payable to a director and significant shareholder of the Company, only
partially offset by interest income on lower cash balances available for
investment.
Benefit from Income Taxes. During the first quarter of 1999 and 1998,
the Company maintained a 100% valuation allowance against its deferred tax
assets due to the uncertainty surrounding the realization of such assets. If it
is determined that it is more likely than not that the deferred tax assets are
realizable, the valuation allowance will be reduced.
Factors That May Affect Future Results of Operations: The Company
believes that in the future its results of operations could be impacted by
factors such as delays in development and shipment of the Company's new products
and major new versions of existing products, market acceptance of new products
and upgrades, growth in the marketplace in which it operates, competitive
product offerings, and adverse changes in general economic conditions in any of
the countries in which the Company does business. The Company's results in prior
years have been affected by these factors, particularly with respect to
developing and introducing new products such as PowerScript, MXPro, Python and
Effetto Pronto in 1996, 1997 and 1998.
Due primarily to the factors noted above, the Company has experienced
substantial volatility in its operations. The Company's future earnings and
stock price may continue to be subject to significant volatility, particularly
on a quarterly basis. Any shortfall in revenue or earnings from levels expected
by securities analysts or anticipated by the Company based upon product
development and introduction schedules could have an immediate and significant
adverse effect on the trading price of the Company's common stock in any given
period. Additionally, the Company may not learn of such shortfalls until late in
the fiscal quarter, which could result in an even more immediate and adverse
effect on the trading price of the Company's common stock. Finally, the Company
participates in a highly dynamic industry, which often results in significant
volatility of the Company's common stock price. See the Company's 1998 Form 10-K
section entitled "Business - Research and Development".
Year 2000 Update
Many currently installed computer systems, software products and other
equipment utilizing microprocessors are coded to accept only two digit entries
in the date code field. These date code fields will need to accept four digit
entries to distinguish twenty-first century dates from twentieth century dates.
This is commonly referred to as the "Year 2000 issue."
The Company is aware of the Year 2000 issue and has commenced a program
to identify, remediate, test and develop plans to address the Year 2000 issue.
Its corporate networks and computing hardware operate on Unix and Microsoft
Windows NT Operating Systems. The Company relies on its fully integrated
Computer Associates MANMAN system ("MIS system") for all
9
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accounting, manufacturing, and procurement functions. The Company makes use of
EDI and other forms of electronic data exchange with two of its customers and
one financial institution. The Company has no automated manufacturing, or
automated testing systems which could be materially adversely affected by Year
2000 problems.
As of March 1999, the Company had completed several Year 2000 projects,
including upgrades of its Windows NT Operating System and tape backup software,
upgrade of its UNIX workstations, evaluation of the Company's MIS system,
evaluation of the Company's email and servers, evaluation of network routing,
interconnect, and firewall hardware and software compliance, evaluation of the
Company's telephone, security, and voicemail equipment and evaluation of the
Company's products. The Company's review of the Year 2000 issue with respect to
its internal systems preliminarily indicates no material problems.
As of March 1999, the following Year 2000 projects are in process:
completion of the new email system and the conversion of email from the old
system, upgrade of the UNIX Operating System for the HP3000 hardware which
supports the Company's MIS system (expected completion is May 1999). Upgrade of
the MIS system software (expected completion is June 1999), development of a
list of critical vendors and identification of any material vendor problems
(expected completion is May 1999) and evaluation of the Company's EDI partners
(expected completion is May 1999). Although testing is not complete, it appears
that the Company's products are "Year 2000 compliant" although, some products
may require the user to perform a simple reset of the product (ongoing during
1999). As of February 1999, the Company's aggregate expenditures (excluding
employee costs) in connection with Year 2000 compliance has been less than
$10,000 and the Company estimates the total cost of its Year 2000 projects will
be approximately $50,000.
The Company currently does not anticipate that the cost of Year 2000
compliance will be material to its financial condition or results of operations.
However, satisfactorily addressing the Year 2000 issue is dependent on many
factors, some of which are not completely within the Company's control. Further,
the Company does not currently have any contingency plans if its planning
activities fail. Should the Company's internal systems or the internal systems
of one or more significant vendors, manufacturers or suppliers fail to achieve
Year 2000 compliance, the Company's business and its results of operations could
be adversely affected. The failure to correct a material Year 2000 problem could
result in an interruption in, or failure of, certain normal business activities
or operations. Due to the general uncertainty inherent in the Year 2000 problem,
resulting in part from the uncertainty of the Year 2000 readiness of third-party
suppliers and customers, the Company is unable to determine at this time whether
the consequences of Year 2000 failures will have a material impact on the
Company's results of operations, liquidity or financial condition. The Company's
Year 2000 compliance project is expected to significantly reduce the Company's
level of uncertainty about the Year 2000 issue and, in particular, about the
Year 2000 compliance and readiness of third parties it deals with. The Company
believes that, with the implementation of new business systems and completion of
the project as scheduled, the possibility of significant interruptions of normal
operations should be reduced.
The foregoing statements are forward looking. The Company's actual
results could differ because of several factors, including those set forth in
the subsection entitled "Factors That May Affect Future Results of Operations".
10
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Liquidity and Capital Resources
From the Company's inception until its initial public offering in
December 1994, which resulted in net proceeds to the Company of $15.8 million,
the Company financed its operations through private sales of equity, shareholder
loans, cash flow from operations, and bank borrowings. At March 31, 1999, the
Company's principal source of liquidity is cash of approximately $764,000.
Additionally, at March 31, 1999, the Company had borrowings from a director and
significant shareholder totaling $1.0 million at an interest rate of 8.0% per
year, due October 16, 1999. The shareholder has agreed that, at the Company's
option, the loan may be extended until January 2000.
Net cash used by operations was $104,000 for the first quarter of 1999
compared to $439,000 for the same period last year. The use of cash from
operating activities during the first quarter of 1999 is due to a net loss
before depreciation and a decrease in accrued expenses, substantially offset by
a decrease in inventories. The use of cash from operating activities during the
first quarter of 1998 is primarily due to a net loss before the provisions for
doubtful accounts, excess and obsolete inventories and depreciation, an increase
in receivables, offset partially by a decrease in inventories and prepaid income
taxes and an increase in accounts payable. Net cash provided by investing
activities for the first quarter of 1999 was $31,000, as the Company received
$52,000 in connection with the sale of Nova, offset partially by property and
equipment expenditures primarily for computers, software and engineering
equipment used in research and development and other activities. Net cash used
by investing activities for the first quarter of 1998 was $155,000, due to
property and equipment expenditures primarily for computers, software and
engineering equipment used in research and development and other activities.
Financing activities during the first quarter of 1999 did not provide cash. Net
cash provided in financing activities during the first quarter of 1998 was
$632,000 primarily from the Promissory Note and the receipt of cash from the
exercise of the stock options issued under the Company's Stock Option Plans.
The Company has incurred losses and negative cash flows from operations
for each of the two years in the period ended March 31, 1999 and is dependent
upon support from a director and significant shareholder and upon generating
sufficient revenues from existing and soon to be released products in order to
fund operations. This shareholder has agreed that, at the Company's option, the
loan may be extended until January 2000. In addition, Management has taken steps
to reduce costs, including the sale of its Nova Systems Division, which had
incurred losses in each of the two years in the period ended December 31, 1998.
The Company is assessing its product lines to identify how to enhance existing
or create new distribution channels. During 1999, the Company is developing and
expects to release two next generation products for its core Video Production
segment. The Company believes that its current cash, borrowings from a
shareholder, together with its operating cash flows, will be sufficient to meet
the Company's requirements for working capital, and capital expenditures,
through the end of 1999. The Company does not currently have any commitment from
a commercial source or its director and significant shareholder to provide any
additional funding as of the date of this report.
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Item 3. Quantitative and Qualitative Disclosure about Market Risk
The Company's market risk disclosures pursuant to Item 3 are not
material and are therefore not required.
12
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description of Document
----------- -----------------------
10.11 Key Employee Agreement between Jeffrey Burt and
Videonics dated February 25, 1999.
10.12 Key Employee Agreement between James McNeill and
Videonics dated February 25, 1999.
10.13 Key Employee Agreement between Gary Williams and
Videonics dated February 25, 1999.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended March 31,
1999.
13
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
VIDEONICS, INC.
---------------
Registrant
May 13, 1999 /s/ Gary L. Williams
------------ --------------------
Date Gary L. Williams
Vice President of Finance,
Chief Financial Officer
(Chief Accounting Officer
and Authorized Signer)
14
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INDEX OF EXHIBITS
Exhibits:
10.11 Key Employee Agreement between Jeffrey Burt and
Videonics dated February 25, 1999.............. __
10.12 Key Employee Agreement between James McNeill and
Videonics dated February 25, 1999.............. __
10.13 Key Employee Agreement between Gary Williams and
Videonics dated February 25, 1999.............. __
27. Financial Data Schedule ......................... __
15
EXHIBIT 10.11
KEY EMPLOYEE AGREEMENT
This Key Employee Agreement is made and entered into as of February 25,
1999, by and between Videonics, Inc., a California corporation ("Videonics") and
Jeffrey Burt, an individual ("Employee").
R E C I T A L S
A. Employee is employed as an officer of Videonics and has been granted
options to purchase shares of Videonics Common Stock as set forth on Exhibit A
attached hereto (individually, an "Option" and collectively, the "Options")
under Videonics' 1987 Stock Option Plan and/or Amended 1996 Stock Option Plan
(the "Plans").
B. Videonics and Employee desire to enter into this Agreement to provide
an incentive for Employee to continue providing services to Videonics.
C. The Board of Directors has approved and authorized the entry into
Agreement with Employee.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby
covenant and agree as follows:
ARTICLE I
ACCELERATION OF OPTION VESTING
1.1 Accelerated Vesting of Options. Each Option is hereby amended
to provide that it shall accelerate so that Employee shall have the right, at
all times until the expiration or earlier termination of such Option, to
exercise the unexercised portion of the Option, including the portions thereof
which would otherwise not be exercisable, from and after any Involuntary
Termination (as defined below) within twelve (12) months after a Change in
Control (as defined below) that occurs while Employee is an employee of
Videonics, any of its subsidiaries or any entity which assumes the rights and
duties of Videonics under the Plans.
1.2 Definitions.
(a) "Change of Control" shall mean any merger, sale,
consolidation, reorganization, recapitalization or other business combination
with, to, or into one or more third parties which after such event Videonics is
not the surviving entity or as a result of which Videonics' shareholders, by
virtue of their shareholdings in Videonics immediately prior to such merger,
sale, consolidation, reorganization, recapitalization or other business
combination do not own directly or indirectly own more than fifty percent (50%)
of the surviving entity immediately after such transaction.
1
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(b)"Involuntary Termination" shall mean any termination of Employee's
employment with Videonics, any of its subsidiaries or any entity which
assumes the rights and duties of Videonics under the Plans, for reasons
other than (1) Employee's death, (2) Employee's total and permanent
disability, (3) Employee's voluntary termination of employment other
than for Good Reason (as defined below) or (4) Termination for Cause
(as defined below).
(c) "Good Reason" shall mean a reduction in Employee's base
compensation or a material reduction in benefits, a material change in
responsibilities or duties, or a requirement to relocate, except for office
relocations that would not increase Employee's one-way commute distance by more
than forty (40) miles.
(d) "Termination for Cause" shall mean (i) Employee's
continued failure to perform his duties in good faith to the best of his ability
after receipt of appropriate warnings consistent with the performance review
policies in place and applicable to Employee at such time, (ii) Employee's
engaging in willful misconduct which is demonstrably and materially injurious to
Videonics, any of its subsidiaries or any entity which assumes the rights and
duties of Videonics under the Plans, (iii) Employee's conviction of a felony or
(iv) Employee's commission of an act of fraud upon Videonics, any of its
subsidiaries or any entity which assumes the rights and duties of Videonics
under the Plans.
ARTICLE II
NOT EMPLOYMENT CONTRACT
Employee shall continue to be an "at will" employee of Videonics.
Nothing in this Agreement shall confer upon Employee any right to continue in
the employ of Videonics or shall interfere with or restrict in any way the
rights of Videonics, which are hereby expressly reserved, to discharge the
employee at any time for any reason whatsoever, with or without cause, subject
to the provisions of applicable law. This is not an employment contract.
ARTICLE III
NO ASSIGNMENT
(a) This Agreement is personal to each of the parties hereto. No party
may assign or delegate any rights or obligations hereunder without first
obtaining the written consent of the other party hereto; provided, that in the
case of Videonics, such rights and obligations shall inure to the benefit of and
be binding upon any successor corporation or entity with which Videonics may be
merged or otherwise combined or which may acquire Videonics' assets in whole or
substantial part.
(b) This Agreement shall inure to the benefit of and be enforceable by
Employee and his personal or legal representatives, executors, administrators,
successors, heirs, distributees, devises and legatees. If Employee should die,
payments due to Employee hereunder shall be paid in accordance with the terms of
this Agreement to his devisee, legatee or designee or, if there is no such
designee, to his estate, unless otherwise provided in the Options.
2
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ARTICLE IV
GENERAL PROVISIONS
4.1 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
4.2 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
4.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
4.5 Notices. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given (a) five (5) days after deposit with the U.S. Postal
Service or other applicable postal service, if delivered by first class mail,
postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day
after the business day of deposit with Federal Express or similar overnight
courier, freight prepaid, or (d) one day after the business day of delivery by
facsimile transmission, if deliverable by facsimile transmission, with copy by
first class mail, postage prepaid, and shall be addressed, to the parties at the
respective addresses set forth on the signature page of this Agreement or at
such other address as such party may designate by ten (10) days' advance written
notice to the other parties hereto.
4.6 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Employee and Videonics.
4.7 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provisions were so excluded and shall be enforceable in accordance with its
terms.
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4.8 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties with respect to the
subject matter hereof and no party shall be liable or bound to any other party
in any manner by any warranties, representations, or covenants except as
specifically set forth herein or therein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
"VIDEONICS"
VIDEONICS, INC.
By: /s/ Michael D'Addio
-------------------
Name: Michael D'Addio
Title: Chief Executive Officer
Address: 1370 Dell Avenue
Campbell, California 95008
"EMPLOYEE"
/s/ Jeffrey Burt
----------------
Print Name: Jeffrey Burt
Address:
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EXHIBIT A
Date of Option Grant Number of Shares Exercise Price Termination Date
-------------------- ---------------- -------------- ----------------
6/24/98 30,000 $1.50 6/24/08
2/16/99 25,000 $0.78 2/16/09
5
EXHIBIT 10.12
KEY EMPLOYEE AGREEMENT
This Key Employee Agreement is made and entered into as of February 25,
1999, by and between Videonics, Inc., a California corporation ("Videonics") and
James McNeill, an individual ("Employee").
R E C I T A L S
A. Employee is employed as an officer of Videonics and has been granted
options to purchase shares of Videonics Common Stock as set forth on Exhibit A
attached hereto (individually, an "Option" and collectively, the "Options")
under Videonics' 1987 Stock Option Plan and/or Amended 1996 Stock Option Plan
(the "Plans").
B. Videonics and Employee desire to enter into this Agreement to provide
an incentive for Employee to continue providing services to Videonics.
C. The Board of Directors has approved and authorized the entry into
Agreement with Employee.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby
covenant and agree as follows:
ARTICLE I
ACCELERATION OF OPTION VESTING
1.1 Accelerated Vesting of Options. Each Option is hereby amended
to provide that it shall accelerate so that Employee shall have the right, at
all times until the expiration or earlier termination of such Option, to
exercise the unexercised portion of the Option, including the portions thereof
which would otherwise not be exercisable, from and after any Involuntary
Termination (as defined below) within twelve (12) months after a Change in
Control (as defined below) that occurs while Employee is an employee of
Videonics, any of its subsidiaries or any entity which assumes the rights and
duties of Videonics under the Plans.
1.2 Definitions.
(a) "Change of Control" shall mean any merger, sale,
consolidation, reorganization, recapitalization or other business combination
with, to, or into one or more third parties which after such event Videonics is
not the surviving entity or as a result of which Videonics' shareholders, by
virtue of their shareholdings in Videonics immediately prior to such merger,
sale, consolidation, reorganization, recapitalization or other business
combination do not own directly or indirectly own more than fifty percent (50%)
of the surviving entity immediately after such transaction.
1
<PAGE>
(b)"Involuntary Termination" shall mean any termination of Employee's
employment with Videonics, any of its subsidiaries or any entity which
assumes the rights and duties of Videonics under the Plans, for reasons
other than (1) Employee's death, (2) Employee's total and permanent
disability, (3) Employee's voluntary termination of employment other
than for Good Reason (as defined below) or (4) Termination for Cause
(as defined below).
(c) "Good Reason" shall mean a reduction in Employee's base
compensation or a material reduction in benefits, a material change in
responsibilities or duties, or a requirement to relocate, except for office
relocations that would not increase Employee's one-way commute distance by more
than forty (40) miles.
(d) "Termination for Cause" shall mean (i) Employee's continued failure
to perform his duties in good faith to the best of his ability after receipt of
appropriate warnings consistent with the performance review policies in place
and applicable to Employee at such time, (ii) Employee's engaging in willful
misconduct which is demonstrably and materially injurious to Videonics, any of
its subsidiaries or any entity which assumes the rights and duties of Videonics
under the Plans, (iii) Employee's conviction of a felony or (iv) Employee's
commission of an act of fraud upon Videonics, any of its subsidiaries or any
entity which assumes the rights and duties of Videonics under the Plans.
ARTICLE II
NOT EMPLOYMENT CONTRACT
Employee shall continue to be an "at will" employee of Videonics.
Nothing in this Agreement shall confer upon Employee any right to continue in
the employ of Videonics or shall interfere with or restrict in any way the
rights of Videonics, which are hereby expressly reserved, to discharge the
employee at any time for any reason whatsoever, with or without cause, subject
to the provisions of applicable law. This is not an employment contract.
ARTICLE III
NO ASSIGNMENT
(a) This Agreement is personal to each of the parties hereto. No party
may assign or delegate any rights or obligations hereunder without first
obtaining the written consent of the other party hereto; provided, that in the
case of Videonics, such rights and obligations shall inure to the benefit of and
be binding upon any successor corporation or entity with which Videonics may be
merged or otherwise combined or which may acquire Videonics' assets in whole or
substantial part.
(b) This Agreement shall inure to the benefit of and be enforceable by
Employee and his personal or legal representatives, executors, administrators,
successors, heirs, distributees, devises and legatees. If Employee should die,
payments due to Employee hereunder shall be paid in accordance with the terms of
this Agreement to his devisee, legatee or designee or, if there is no such
designee, to his estate, unless otherwise provided in the Options.
2
<PAGE>
ARTICLE IV
GENERAL PROVISIONS
4.1 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
4.2 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
4.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
4.5 Notices. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given (a) five (5) days after deposit with the U.S. Postal
Service or other applicable postal service, if delivered by first class mail,
postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day
after the business day of deposit with Federal Express or similar overnight
courier, freight prepaid, or (d) one day after the business day of delivery by
facsimile transmission, if deliverable by facsimile transmission, with copy by
first class mail, postage prepaid, and shall be addressed, to the parties at the
respective addresses set forth on the signature page of this Agreement or at
such other address as such party may designate by ten (10) days' advance written
notice to the other parties hereto.
4.6 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Employee and Videonics.
4.7 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provisions were so excluded and shall be enforceable in accordance with its
terms.
3
<PAGE>
4.8 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties with respect to the
subject matter hereof and no party shall be liable or bound to any other party
in any manner by any warranties, representations, or covenants except as
specifically set forth herein or therein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
"VIDEONICS"
VIDEONICS, INC.
By: /s/ Michael D'Addio
-------------------
Name: Michael D'Addio
Title: Chief Executive Officer
Address: 1370 Dell Avenue
Campbell, California 95008
"EMPLOYEE"
/s/ James McNeill
-----------------
Print Name: James McNeill
Address:
------------------------------
------------------------------
4
<PAGE>
EXHIBIT A
Date of Option Grant Number of Shares Exercise Price Termination Date
-------------------- ---------------- -------------- ----------------
6/24/98 30,000 $1.50 6/24/08
2/16/99 40,000 $0.78 2/16/09
5
EXHIBIT 10.13
KEY EMPLOYEE AGREEMENT
This Key Employee Agreement is made and entered into as of February 25,
1999, by and between Videonics, Inc., a California corporation ("Videonics") and
Gary Williams, an individual ("Employee").
R E C I T A L S
A. Employee is employed as an officer of Videonics and has been granted
options to purchase shares of Videonics Common Stock as set forth on Exhibit A
attached hereto (individually, an "Option" and collectively, the "Options")
under Videonics' 1987 Stock Option Plan and/or Amended 1996 Stock Option Plan
(the "Plans").
B. Videonics and Employee desire to enter into this Agreement to provide
an incentive for Employee to continue providing services to Videonics.
C. The Board of Directors has approved and authorized the entry into
Agreement with Employee.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby
covenant and agree as follows:
ARTICLE I
ACCELERATION OF OPTION VESTING
1.1 Accelerated Vesting of Options. Each Option is hereby amended
to provide that it shall accelerate so that Employee shall have the right, at
all times until the expiration or earlier termination of such Option, to
exercise the unexercised portion of the Option, including the portions thereof
which would otherwise not be exercisable, from and after any Involuntary
Termination (as defined below) within twelve (12) months after a Change in
Control (as defined below) that occurs while Employee is an employee of
Videonics, any of its subsidiaries or any entity which assumes the rights and
duties of Videonics under the Plans.
1.2 Definitions.
(a) "Change of Control" shall mean any merger, sale,
consolidation, reorganization, recapitalization or other business combination
with, to, or into one or more third parties which after such event Videonics is
not the surviving entity or as a result of which Videonics' shareholders, by
virtue of their shareholdings in Videonics immediately prior to such merger,
sale, consolidation, reorganization, recapitalization or other business
combination do not own directly or indirectly own more than fifty percent (50%)
of the surviving entity immediately after such transaction.
1
<PAGE>
(b)"Involuntary Termination" shall mean any termination of Employee's
employment with Videonics, any of its subsidiaries or any entity which
assumes the rights and duties of Videonics under the Plans, for reasons
other than (1) Employee's death, (2) Employee's total and permanent
disability, (3) Employee's voluntary termination of employment other
than for Good Reason (as defined below) or (4) Termination for Cause
(as defined below).
(c) "Good Reason" shall mean a reduction in Employee's base
compensation or a material reduction in benefits, a material change in
responsibilities or duties, or a requirement to relocate, except for office
relocations that would not increase Employee's one-way commute distance by more
than forty (40) miles.
(d) "Termination for Cause" shall mean (i) Employee's continued failure
to perform his duties in good faith to the best of his ability after receipt of
appropriate warnings consistent with the performance review policies in place
and applicable to Employee at such time, (ii) Employee's engaging in willful
misconduct which is demonstrably and materially injurious to Videonics, any of
its subsidiaries or any entity which assumes the rights and duties of Videonics
under the Plans, (iii) Employee's conviction of a felony or (iv) Employee's
commission of an act of fraud upon Videonics, any of its subsidiaries or any
entity which assumes the rights and duties of Videonics under the Plans.
ARTICLE II
NOT EMPLOYMENT CONTRACT
Employee shall continue to be an "at will" employee of Videonics.
Nothing in this Agreement shall confer upon Employee any right to continue in
the employ of Videonics or shall interfere with or restrict in any way the
rights of Videonics, which are hereby expressly reserved, to discharge the
employee at any time for any reason whatsoever, with or without cause, subject
to the provisions of applicable law. This is not an employment contract.
ARTICLE III
NO ASSIGNMENT
(a) This Agreement is personal to each of the parties hereto. No party
may assign or delegate any rights or obligations hereunder without first
obtaining the written consent of the other party hereto; provided, that in the
case of Videonics, such rights and obligations shall inure to the benefit of and
be binding upon any successor corporation or entity with which Videonics may be
merged or otherwise combined or which may acquire Videonics' assets in whole or
substantial part.
(b) This Agreement shall inure to the benefit of and be enforceable by
Employee and his personal or legal representatives, executors, administrators,
successors, heirs, distributees, devises and legatees. If Employee should die,
payments due to Employee hereunder shall be paid in accordance with the terms of
this Agreement to his devisee, legatee or designee or, if there is no such
designee, to his estate, unless otherwise provided in the Options.
2
<PAGE>
ARTICLE IV
GENERAL PROVISIONS
4.1 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
4.2 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
4.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
4.5 Notices. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given (a) five (5) days after deposit with the U.S. Postal
Service or other applicable postal service, if delivered by first class mail,
postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day
after the business day of deposit with Federal Express or similar overnight
courier, freight prepaid, or (d) one day after the business day of delivery by
facsimile transmission, if deliverable by facsimile transmission, with copy by
first class mail, postage prepaid, and shall be addressed, to the parties at the
respective addresses set forth on the signature page of this Agreement or at
such other address as such party may designate by ten (10) days' advance written
notice to the other parties hereto.
4.6 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Employee and Videonics.
4.7 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provisions were so excluded and shall be enforceable in accordance with its
terms.
3
<PAGE>
4.8 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties with respect to the
subject matter hereof and no party shall be liable or bound to any other party
in any manner by any warranties, representations, or covenants except as
specifically set forth herein or therein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
"VIDEONICS"
VIDEONICS, INC.
By: /s/ Michael D'Addio
---------------------
Name: Michael D'Addio
Title: Chief Executive Officer
Address: 1370 Dell Avenue
Campbell, California 95008
"EMPLOYEE"
/s/ Gary Williams
-----------------
Print Name: Gary Williams
Address:
------------------------------
------------------------------
4
<PAGE>
EXHIBIT A
Date of Option Grant Number of Shares Exercise Price Termination Date
-------------------- ---------------- -------------- ----------------
1/30/98 6,000 $2.50 1/30/08
6/24/98 6,000 $1.50 6/24/08
6/24/98 10,504 $1.50 6/24/08
2/16/99 50,000 $0.78 2/16/09
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S INCOME STATEMENT AND BALANCE SHEET DATED MARCH 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 764
<SECURITIES> 0
<RECEIVABLES> 899
<ALLOWANCES> 0
<INVENTORY> 5,074
<CURRENT-ASSETS> 6,949
<PP&E> 1,195
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,160
<CURRENT-LIABILITIES> 3,056
<BONDS> 0
0
0
<COMMON> 20,647
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,160
<SALES> 3,665
<TOTAL-REVENUES> 3,665
<CGS> 2,207
<TOTAL-COSTS> 2,207
<OTHER-EXPENSES> 2,268
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (823)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (823)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
