SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by 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
VIDEONICS, INC.
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(Name of Registrant as Specified in Its Charter)
Videonics, Inc.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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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 calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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VIDEONICS, INC.
1370 Dell Avenue
Campbell, California 95008
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 p.m. on July 15, 1999, for the
following purposes:
1. To elect five (5) directors of the Company for terms expiring at the 2000
Annual Meeting of Shareholders;
2. To approve an amendment to the Company's Restated Articles of Incorporation
to effect a stock combination (reverse stock split) pursuant to which every
three (3) shares of the Company's outstanding common stock would be exchanged
for one (1) new share of common stock;
3. To ratify the selection of PricewaterhouseCoopers LLP as the Company's
accountants for the year ending December 31, 1999; and
4. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
The close of business on June 1, 1999 has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
Annual Meeting.
All shareholders are cordially invited to attend the Annual Meeting in
person. To assure your representation at the Annual Meeting, however, you are
urged to mark, sign, date and return the enclosed proxy card as promptly as
possible in the postage-prepaid envelope enclosed for that purpose. Any
shareholder attending the Annual Meeting may vote in person even if such
shareholder has returned a proxy.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND PROMPTLY MAIL YOUR PROXY IN THE ENVELOPE PROVIDED FOR YOUR CONVENIENCE.
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO THE ANNUAL MEETING AND, IF YOU
ATTEND THE ANNUAL MEETING, YOU MAY VOTE YOUR SHARES IN PERSON.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Gary L. Williams
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Gary L. Williams, Secretary
Dated: June 7, 1999
<PAGE>
VIDEONICS, INC.
1370 Dell Avenue
Campbell, California 95008
PROXY STATEMENT
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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 July 15, 1999, 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 June 20, 1999.
At the close of business on June 1, 1999, 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 5,867,649 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.
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any shareholder giving the proxy so desire. Shareholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be effective until
written notice of the revocation is received by the Company at or prior to the
Annual Meeting.
The attendance, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. If a quorum is present, the five (5) nominees
for Director (Proposal 1) receiving the highest number of votes cast by the
shares of Common Stock represented in person or by proxy at the Annual Meeting
will be elected to the Board of Directors. The amendment to the Company's
Restated Articles of Incorporation to effect a reverse stock split (Proposal 2)
must be approved by a majority of the Company's outstanding shares of Common
Stock. Under applicable California state law, if a quorum exists, action on a
matter other than those set forth in Proposals 1 and 2 is approved if a majority
of shares of Common Stock voting at the Annual Meeting in person or by proxy,
favor the proposed action. If less than a majority of outstanding shares
entitled to vote are represented at the Annual Meeting, a majority of the shares
so represented may adjourn the Annual Meeting to another date, time or place,
and notice need not
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be given of the new date, time or place if the new date, time or place is
announced at the meeting before an adjournment is taken.
Every shareholder voting for the election of directors may cumulate
such shareholder's votes and give one candidate a number of votes equal to the
number of directors (five) to be elected multiplied by the number of shares held
by such shareholder on the Record Date or may distribute the shareholder's vote
on the same principle among as many candidates as the shareholder thinks fit,
provided that votes cannot be cast for more than five (5) candidates. However,
no shareholder shall be entitled to cumulate votes unless such candidate's name
has been placed in nomination prior to the voting and the shareholder, or any
other shareholder, has given notice at the Annual Meeting prior to voting of the
intention to cumulate the shareholder's votes.
Abstentions and "broker non-votes" are counted as shares eligible to
vote at the Annual Meeting in determining whether a quorum is present, but do
not represent votes cast with respect to any Proposal. "Broker non-votes" are
shares held by a broker or nominee as to which instructions have not been
received from the beneficial owners or persons entitled to vote and the broker
or nominee does not have discretionary voting power.
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 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 Annual Meeting and described in this Proxy
Statement.
The Company's Annual report for the year ended December 31, 1998 is
enclosed with this Proxy Statement.
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PROPOSAL 1:
ELECTION OF DIRECTORS
Nominees
Five (5) 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 (5) 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 54 1986
Yeshwant Kamath 50 1997
Mark C. Hahn 49 1986
Carl E. Berg 61 1987
N. William Jasper, Jr. 51 1993
Except as set forth below, each of the nominees has been engaged in his
principal occupation during the past five years. There is no family relationship
between any director and any executive officer of the Company.
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.
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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.
Mark C. Hahn, a co-founder of the Company, has served as the Company's
Chief Technical Officer since February 1996, and Director since the Company's
inception in July 1986. 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
nine 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, 1998, there were five (5) meetings of
the Company's Board of Directors. Each Board member attended 90% or more of the
meetings of the Board of Directors and Committees of the Board of Directors on
which he served.
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 met one time during
1998.
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 did not meet during
1998.
The Company does not presently have a Nominating Committee.
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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. In
addition, non-employee directors (other than non-employee directors who are also
major shareholders), serving on the Company's Board of Directors on August 31st
of each year will be granted nonstatutory stock options to purchase 4,504 shares
of the Company's Common Stock. During 1998, Mr. Jasper received options to
purchase 9,008 shares of the Company's Common Stock representing director's
options for 1997 and 1998.
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PROPOSAL 2:
AMENDMENT OF ARTICLES OF INCORPORATION
The Company was notified by The Nasdaq Stock Market, Inc. ("Nasdaq") in
October, 1998 that its Common Stock would be de-listed from The Nasdaq National
Market System ("Nasdaq/NMS") if the Company's market value of public float
("MVPF") continued to be below $5,000,000. On May 17, 1999, the Company was
notified by Nasdaq that its Common Stock would be de-listed from Nasdaq/NMS on
May 20, 1999 and would thereafter be listed on The Nasdaq SmallCap Market
("Nasdaq/SmallCap"), subject to the Company meeting the requirements for
continued listing on Nasdaq/SmallCap. As of May 17, 1999, the Company met the
requirements for continued listing on the Nasdaq/SmallCap Market. However,
Nasdaq expressed concern in the Company's ability to sustain a bid price of
$1.00 or greater, absent the completion of a reverse stock split and therefore
has required the Company to affect the proposed reverse stock split as a
condition of continued listing on the Nasdaq/SmallCap Market. The Board of
Directors believes that it is in the best interests of the Company's
shareholders that the Company take all reasonable steps to maintain its listing
on Nasdaq/SmallCap rather than have the Company's Common Stock be traded on the
so called "pink sheets."
The Board of Directors has considered and approved a three for one
reverse stock split as a means of increasing the bid price of the Common Stock
above $1.00. Certain members of the Board of Directors have expressed
reservations about implementing the reverse stock split proposed herein because
of the mixed history such actions have had on companies in similar
circumstances. Post reverse split, a company's stock price may decline, which
would reduce substantially the overall market capitalization of a Company, as
opposed to a similar price decline prior to such reverse stock split.
Nonetheless, the Board of Directors believes that a reverse stock split, if the
Board, upon approval by the shareholders, chooses to implement such an action,
would be in the best interests of the Company and its shareholders if the
Company's Nasdaq/SmallCap listing could not otherwise be maintained. See
"PURPOSES OF THE REVERSE SPLIT" below.
The Board of Directors, recognizing that amending the Company's
Restated Articles of Incorporation to provide for a reverse stock split requires
the approval of the Company's shareholders and that some shareholders may have a
different view of the necessity for maintaining the Nasdaq/SmallCap listing, in
May, 1999 adopted resolutions, subject to approval by the Company's
shareholders, to amend the Company's Restated Articles of Incorporation (the
"Amendment") to: (i) effect a three for one stock combination (reverse stock
split) of the Company's outstanding shares of Common Stock (the "Reverse
Split"), and (ii) provide for rounding up fractional shares to the nearest whole
share. The Reverse Split will not change the number of the Company's authorized
shares of Common Stock or the par value of Common Stock.
If the Reverse Split is approved, the Company's Board of Directors will
have authority, without further shareholder approval, to effect the Reverse
Split pursuant to which each three (3) of the Company's outstanding shares (the
"Old Shares") of Common Stock owned by a
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shareholder would be exchanged for one (1) new share (the "New Shares"). The
number of Old Shares for which each New Share is to be exchanged is referred to
as the "Exchange Number."
The Reverse Split will be effected simultaneously for all Common Stock
and the Exchange Number will be the same for all Common Stock. Upon
effectiveness of the Reverse Split, each option or warrant right for Common
Stock would entitle the holder to acquire a number of shares equal to the number
of shares which the holder was entitled to acquire prior to the Reverse Split
divided by the Exchange Number at the exercise price in effect immediately prior
to the Reverse Split multiplied by the Exchange Number.
The Company's Board of Directors will have the authority to determine
the exact timing of the effective date of the Reverse Split, without further
shareholder approval. Such timing will be determined in the judgment of the
Board of Directors, with the intention of maximizing the Company's ability to
remain in compliance with the continued listing maintenance requirements of
Nasdaq and other intended benefits of the Reverse Split to shareholders and the
Company. See " Purpose of the Reverse Split," below.
The Board of Directors also reserves the right, notwithstanding
shareholder approval and without further action by shareholders, not to proceed
with the Reverse Split, if, at any time prior to filing the Amendment with the
Secretary of State of the State of California, the Board of Directors, in its
sole discretion, determines that the Reverse Split is no longer in the best
interests of the Company and its shareholders. The Board of Directors may
consider a variety of factors in determining whether or not to implement the
Reverse Split including, but not limited to, overall trends in the stock market,
recent changes and anticipated trends in the per share market price of the
Company's Common Stock, business and transactional developments, and the
Company's actual and projected financial performance. The Board further believes
that for the reasons explained below, it is important, if possible, for the
Company to retain its listing on Nasdaq SmallCap.
The Reverse Split will not change the proportionate equity interests of
the Company's shareholders, nor will the respective voting rights and other
rights of shareholders be altered, except for possible immaterial changes due to
the rounding up of fractional shares to the nearest whole share as described
above. The Common Stock issued pursuant to the Reverse Split will remain fully
paid and non-assessable. The Company will continue to be subject to the periodic
reporting requirements of the Securities Exchange Act of 1934.
PURPOSES OF THE REVERSE SPLIT
Until May 19, 1999, the Company's Common Stock was quoted on
Nasdaq/NMS. On May 17, 1999, Nasdaq notified the Company that on May 20, 1999,
its Common Stock would thereafter be listed on Nasdaq/SmallCap because the
Company had not met the Nasdaq requirements for continued listing on Nasdaq/NMS.
Further, in order for the Common Stock to continue to be listed on
Nasdaq/SmallCap, the Company is required to continue to comply with various
listing maintenance standards established by Nasdaq. Among other things, (i) the
Company is required to have net tangible assets (total assets, excluding
goodwill, minus total
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liabilities) of at least $2 million or a market capitalization of at least $35
million or net income (in latest fiscal year or two of the three last fiscal
years) of at least $500,000, (ii) its Common Stock must have an aggregate market
value of shares held by persons other than officers and directors ("public
float") of at least $1,000,000, (iii) the Company must have at least 300 persons
who own at least 100 shares, and (iv) the minimum bid price for the Company's
Common Stock must be at least $1.00 per share.
In the May 17, 1999 letter from Nasdaq, it advised the Company that
significant concern existed regarding the Company's ability to demonstrate
sustained compliance with the Nasdaq/SmallCap listing maintenance standard of a
minimum bid price of at least $1.00 per share. Under Nasdaq's listing
maintenance standards, if the closing bid price of the Common Stock is under
$1.00 per share for thirty consecutive trading days and does not thereafter
regain compliance for a minimum of ten consecutive trading days during the
ninety calendar days following notification by Nasdaq, Nasdaq may de-list the
Common Stock from trading on the Nasdaq/SmallCap. The Company's continued
listing on the Nasdaq/SmallCap is subject to an ability to demonstrate sustained
compliance with the listing maintenance requirements of the Nasdaq/SmallCap.
Nasdaq has informed the Company that it must effect a Reverse Split to increase
its share price above $1.00 prior to July 18, 1999 or be subject to immediate
de-listing from the Nasdaq/SmallCap. If a de-listing were to occur, the Common
Stock would trade on the OTC Bulletin Board or in the "pink sheets" maintained
by the National Quotation Bureau, Inc. Such alternatives are generally
considered to be less efficient markets.
The principal purpose of the Reverse Split Proposal is to increase the
market price of the Company's Common Stock above the Nasdaq minimum bid
requirement of $1.00 per share (which does not adjust for the Reverse Split).
Furthermore, the Company believes that maintaining the Company's
Nasdaq/SmallCap listing may provide the Company with a broader market for its
Common Stock and facilitate the use of the Common Stock in acquisitions and
financing transactions in which the Company may engage. However, there can be no
assurance that, even after effectuating the Reverse Split, the Company will
continue to meet the minimum bid price and otherwise meet the requirements of
Nasdaq for continued inclusion for trading on Nasdaq/SmallCap. The history of
similar stock split combinations for companies in like circumstances is varied.
Frequently, after a reverse stock split, the adjusted price of a company's
shares drift down to the price prior to the reverse split being taken, a
consequence which could occur if the Company implements a reverse stock split.
The Company will take reasonable steps to counter such a trend, but there can be
no assurance that the steps taken will be successful.
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CERTAIN EFFECTS OF THE REVERSE SPLIT
<TABLE>
The following tables illustrate the principal effects of the Reverse Split
on the Company's Common Stock:
<CAPTION>
Prior to After
Reverse Stock Reverse Stock
Split Split
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Number of Shares Common Stock, no par value:
Authorized...................... 30,000,000 30,000,000
----------- -----------
Outstanding (1)................. 5,867,649 1,955,883
----------- -----------
Available for Future Issuance (2) 24,132,351 28,044,117
========== ==========
Financial Data: (3)
Shareholders' Equity:
Common Stock.................... $20,646,689 $20,646,689
----------- -----------
Accumulated Deficit............. $15,542,661 $15,542,661
----------- -----------
Total Shareholders' Equity............... $ 5,104,028 $ 5,104,028
=========== ===========
Net loss per share:
Quarter ended March 31, 1999........... $(0.14) $(0.42)
Book Value Per Common Share............ $0.87 $2.61
<FN>
- ----------------
(1) Gives effect to the Reverse Split as if it occurred on the Record Date,
subject to further adjustment.
(2) Upon effectiveness of the Reverse Split, the number of authorized shares of
Common Stock that are not issued or outstanding would increase, as reflected in
this table. Although this increase could, under certain circumstances, have an
anti-takeover effect (for example, by permitting issuances which would dilute
the stock ownership of a person seeking to effect a change in the composition of
the Board of Directors or contemplating a tender offer or other transaction for
the combination of the Company with another company), the Reverse Split Proposal
is not being proposed in response to any effort of which the Company is aware to
accumulate the Company's shares of Common Stock or obtain control of the
Company, nor is it part of a plan by management to recommend a series of similar
amendments to the Board of Directors and shareholders. Other than the Reverse
Split Proposal, the Board does not currently
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contemplate recommending the adoption of any other amendments to the Company's
Restated Articles of Incorporation that could be construed to affect the ability
of third parties to take over or change control of the Company.
(3) Balance sheet data gives effect to the Reverse Split as if it occurred on
March 31, 1999, subject to further adjustment.
</FN>
</TABLE>
Shareholders should recognize that if the Reverse Split is effectuated
they will own a fewer number of shares than they presently own (a number equal
to the number of shares owned immediately prior to the filing of the Amendment
divided by the Exchange Number). While the Company expects that the Reverse
Split will result in an increase in the market price of the Common Stock, there
can be no assurance that the Reverse Split will increase the market price of the
Common Stock by a multiple equal to the Exchange Number or result in the
permanent increase in the market price (which is dependent upon many factors,
including the Company's performance and prospects). Also, should the market
price of the Company's Common Stock decline, the percentage decline as an
absolute number and as a percentage of the Company's overall market
capitalization may be greater than would pertain in the absence of a Reverse
Split. Furthermore, the possibility exists that liquidity in the market price of
the Common Stock could be adversely affected by the reduced number of shares
that would be outstanding after the Reverse Split. In addition, the Reverse
Split will increase the number of shareholders of the Company who own odd lots
(less than 100 shares). Shareholders who hold odd lots typically will experience
an increase in the cost of selling their shares, as well as possible greater
difficulty in effecting such sales. Consequently, there can be no assurance that
the Reverse Split will achieve the desired results that have been outlined
above.
PROCEDURE FOR EFFECTING REVERSE SPLIT AND EXCHANGE OF STOCK CERTIFICATES
If the Amendment is approved by the Company's shareholders, and if the
Board of Directors still believes that the Reverse Split is in the best
interests of the Company and its shareholders, the Company will file the
Amendment with the Secretary of State of the State of California at such time as
the Board has determined the appropriate effective time for such split. The
Reverse Split will become effective on the date of filing the Amendment (the
"Effective Date"). Beginning on the Effective Date, each certificate
representing Old Shares will be deemed for all corporate purposes to evidence
ownership of New Shares.
As soon as practicable after the Effective Date, shareholders will be
notified that the Reverse Split has been effected. The Company's transfer agent
will act as exchange agent (the "Exchange Agent") for purposes of implementing
the exchange of stock certificates. Holders of Old Shares will be asked to
surrender to the Exchange Agent certificates representing Old Shares in exchange
for certificates representing New Shares in accordance with the procedures to be
set forth in a letter of transmittal to be sent by the Company. No new
certificates will be issued to a shareholder until such shareholder has
surrendered such shareholder's outstanding certificate(s) together with the
properly completed and executed letter of transmittal to the Exchange Agent.
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Shareholders should not destroy any stock certificate and should not submit any
certificates until requested to do so.
FRACTIONAL SHARES
No scrip or fractional certificates will be issued in connection with
the Reverse Split. Shareholders who otherwise would be entitled to receive
fractional shares because they hold a number of Old Shares not evenly divisible
by the Exchange Number, will be entitled, upon surrender to the Exchange Agent
of certificates representing such shares, to receive one whole share of Common
Stock in lieu of a fractional share.
NO DISSENTER'S RIGHTS
Under California law, shareholders are not entitled to dissenter's
rights with respect to the proposed Amendment.
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT
The following is a summary of certain material federal income tax
consequences of the Reverse Split, and does not purport to be complete. It does
not discuss any state, local, foreign or minimum income or other U.S. federal
tax consequences. Also, it does not address the tax consequences to holders that
are subject to special tax rules, such as banks, insurance companies, regulated
investment companies, personal holding companies, foreign entities, nonresident
alien individuals, broker-dealers and tax-exempt entities. The discussion is
based on the provisions of the United States federal income tax law as of the
date hereof, which is subject to change retroactively as well as prospectively.
This summary also assumes that the Old Shares were, and the New Shares will be,
held as a "capital asset," as defined in the Internal Revenue Code of 1986, as
amended (generally, property held for investment). The tax treatment of a
shareholder may vary depending upon the particular facts and circumstances of
such shareholder. EACH SHAREHOLDER SHOULD CONSULT WITH SUCH SHAREHOLDER'S OWN
TAX ADVISOR WITH RESPECT TO THE CONSEQUENCES OF THE REVERSE SPLIT.
No gain or loss should be recognized by a shareholder of the Company
upon such shareholder's exchange of Old Shares for New Shares pursuant to the
Reverse Split. The aggregate tax basis of the New Shares received in the Reverse
Split (including any fraction of a New Share deemed to have been received) will
be the same as the shareholder's aggregate tax basis in the Old Shares exchanged
therefor. The shareholder's holding period for the New Shares will include the
period during which the shareholder held the Old Shares surrendered in the
Reverse Split.
VOTE REQUIRED AND RECOMMENDATION
The Board of Directors of the Company unanimously recommends a vote
"FOR" the Reverse Split Proposal. The affirmative vote of the holders of a
majority of all outstanding shares of Common Stock entitled to vote on this
proposal will be required for approval of the Amendment.
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PROPOSAL 3:
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers L.L.P. as the
Company's independent accountants for the year ending December 31, 1999 and has
further directed that management submit the selection of accountants for
ratification by the shareholders at the Annual Meeting. PricewaterhouseCoopers
L.L.P. was first appointed independent accountants of the Company for the year
ended December 31, 1991. A representative of PricewaterhouseCoopers 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 PricewaterhouseCoopers 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
PricewaterhouseCoopers 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.
13
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
<TABLE>
The following table sets forth the beneficial ownership of the Company's
Common Stock as of April 30, 1999, 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.
<CAPTION>
Percentage of
Outstanding
Name and Address Number of Shares Common
of Beneficial Owner Beneficially Owned Stock
- ------------------ ------------------ -------------
<S> <C> <C>
Carl E. Berg
10050 Bandley Drive
Cupertino, CA 95014 1,142,305 19%
Michael L. D'Addio
1370 Dell Avenue
Campbell, CA 95008(1) 921,012(1) 15%
Mark C. Hahn
1370 Dell Avenue
Campbell, CA 95008 557,831 9%
State of Wisconsin
Investment Board
P.O. Box 7842
Madison, WI 53707 535,000 9%
<FN>
(1) Includes 8,250 shares subject to stock options exercisable as of April
30, 1999 or within 60 days thereafter held by Mr. D'Addio's spouse, a
Company employee.
</FN>
</TABLE>
14
<PAGE>
SECURITY OWNERSHIP OF THE DIRECTORS
AND EXECUTIVE OFFICERS
<TABLE>
The following table sets forth certain information, as of April 30, 1999
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
Officer Beneficially Percent
Name Age Since Positions Owned Owned
- ---- --- ----- --------- ----- -----
<S> <C> <C> <C> <C> <C>
Carl E. Berg 61 1987 Director 1,142,305 19%
Michael L. D'Addio 54 1986 Chairman, 921,012(1) 15
CEO & Director
Mark C. Hahn 49 1986 V.P., Chief 557,831 9
Technical Officer,
& Director
N. William Jasper, Jr. 51 1993 Director 37,282(2) *
Yeshwant Kamath 50 1997 President & 150,006(3) 2
Director
Jeffrey A. Burt 46 1992 V.P. of 49,500(4) *
Operations
James A. McNeill 53 1993 Senior V.P. 102,500(5) 2
Gary L. Williams 32 1999 V.P. of 13,378(6) *
Finance, CFO and
Secretary
All executive officers and directors as a group (8 persons)(7) 2,973,814 49%
<FN>
- -------------------
* Represents less than 1%
(1) Includes 8,250 shares subject to stock options exercisable as of April
30, 1999 or within 60 days thereafter held by Mr. D'Addio's spouse, a
Company employee.
(2) Includes 6,002 shares subject to stock options exercisable as of April
30, 1999 or within 60 days thereafter.
(3) Includes 150,006 shares subject to stock options exercisable as of April
30, 1999 or within 60 days thereafter.
15
<PAGE>
(4) Includes 49,500 shares subject to stock options exercisable as of April
30, 1999 or within 60 days thereafter.
(5) Includes 22,500 shares subject to stock options exercisable as of April
30, 1999 or within 60 days thereafter.
(6) Includes 13,378 shares subject to stock options exercisable as of April
30, 1999 or within 60 days thereafter. Mr. Williams was promoted to the
position of Vice President of Finance and CFO on February 4, 1999.
(7) Includes an aggregate of 249,636 shares issuable upon exercise of stock
options as set forth in notes (1) - (6) above.
</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 A. McNeill has served the Company as its Senior Vice President since
February 1999. From November 1993 to January 1999, Mr. McNeill served as the
Company's Vice President of Finance and Chief Financial Officer. Mr. McNeill
also served as Assistant Secretary from October 1994 to January 1999. 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. Mr.
McNeill was promoted to Senior Vice President of the Company on February 4,
1999.
Gary L. Williams has served the Company as its Vice President of Finance,
Chief Financial Officer and Secretary since February 1999. From February 1995 to
January 1999, Mr. Williams served as the Company's Controller. From July 1994 to
January 1995, he served as Controller for Western Micro Technology, a publicly
traded company in the electronics distribution business. From January 1990 to
June 1994, he worked in public accounting for Coopers & Lybrand LLP. Mr.
Williams is a Certified Public Accountant and has a Bachelors Degree in Business
Administration, with an emphasis in Accounting from San Diego State University.
16
<PAGE>
EXECUTIVE COMPENSATION
<TABLE>
The following table sets forth the total compensation earned by the Chief
Executive Officer and each of the four most highly compensated executive
officers of the Company whose salary and bonus for fiscal year 1998 exceeded
$100,000 for services rendered in all capacities for the years ended December
31, 1998, 1997, and 1996.
<CAPTION>
Summary Compensation Table
Annual Long-Term
Compensation(2) Compensation
--------------- ------------ All Other
Name and Salary Bonus Option/ Compensation
Principal Position Year ($) ($) SARs (#) ($)
- ------------------ ---- --- --- -------- ---
<S> <C> <C> <C> <C> <C>
Michael L. D'Addio 1998 $150,000 0 0 0
Chief Executive Officer 1997 $130,667 0 0 0
1996 $92,000 $2,704 0 0
Yeshwant Kamath 1998 $150,000 $37,500 680,008(5) 0
President 1997 $100,500(3) $5,000(3) 40,008(4) 0
Jeffrey A. Burt 1998 $122,693 0 30,000(6) 0
Vice President of 1997 $110,000 0 30,000(6) $30,200(1)
Operations 1996 $92,000 $3,362 30,000 $70,517(1)
James A. McNeill 1998 $150,000 0 30,000(7) 0
Vice President of 1997 $121,667 $11,667 30,000(7) 0
Finance, CFO & 1996 $92,000 $2,704 30,000 0
Assistant Secretary
Stephen L. Peters 1998 $98,000 $42,000 50,008(10) 0
Vice President of 1997 $98,000 $42,000 60,010(10) $10,000(9)
Research and Development 1996 $85,750(8) $36,750(8) 50,004 0
<FN>
- ---------------------
(1) Amounts represent gain recognized on exercise of nonstatutory stock
options issued under the Company's 1987 Stock Option Plan.
(2) Except for annual compensation reported in this table, there is no other
annual compensation to report.
17
<PAGE>
(3) Dr. Kamath was appointed President of the Company in November 1997.
Pursuant to his employment agreement, Dr. Kamath was guaranteed a $5,000
bonus for the year 1997.
(4) Includes repriced options to purchase 40,008 shares of Common Stock.
(5) Includes repriced options to purchase 360,008 shares of Common Stock.
(6) Includes repriced options to purchase 30,000 shares of Common Stock.
(7) Includes repriced options to purchase 30,000 shares of Common Stock. Mr.
McNeill was promoted to the position of Senior Vice President on February
9, 1999.
(8) Mr. Peters joined the Company in February 1996. Mr. Peters was guaranteed
a bonus of $3,500 per month during his first year of employment.
Accordingly, the Summary Compensation Table information for 1996 set
forth above includes only that compensation earned by Mr. Peters from
February 19, 1996 through December 31, 1996.
(9) Represents relocation bonus.
(10) Includes repriced options to purchase 50,008 shares of Common Stock. Mr.
Peters resigned as the Company's Vice President of Research and
Development on March 5, 1999.
</FN>
</TABLE>
18
<PAGE>
<TABLE>
The following tables set forth as to the Chief Executive Officer and each
of the other executive officers named in the Summary Compensation Table, certain
information with respect to options to purchase shares of Common Stock of the
Company as of and for the year ended December 31, 1998.
Option/SAR Grants in 1998
<CAPTION>
Number of % of Total Potential Realizable
Securities Options/ Value at Assumed Annual
Underlying SARs Exercise Rates of Stock Price
Option/ Granted to or Base Appreciation for
SARs Employees Price Option Term(5)
Granted In ($/per Exp. -----------------
Name (#)(1) 1998(2) Share) Date 0% ($) 5% ($) 10% ($)
- --------------------- -------- -------- ------ ----- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jeffrey A. Burt 30,000(3) 2.0% $1.50 6/24/08 0 $28,300 $71,718
Yeshwant Kamath 360,008(3) 24.0% $1.50 6/24/08 0 $339,611 $860,640
320,000(4) 21.3% $2.10 3/23/08 0 $427,648 $1,083,745
James A. McNeill 30,000(3) 2.0% $1.50 6/24/08 0 $28,300 $71,718
Stephen L. Peters 50,008(3) 3.3% $1.50 6/24/08 0 $47,175 $119,550
<FN>
- -------------------
(1) Options granted in this table have exercise prices equal to the fair
market value of the Company's Common Stock 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.
(2) The Company granted options to purchase a total of 1,503,246 shares of
Common Stock to employees and Directors in 1998. Included in the options
granted are 989,222 of options that were issued in connection with the
Company's repricing of stock options on June 24, 1998.
(3) Options were issued in connection with the Company's June 24, 1998
repricing. Repriced options will follow the vesting of the original
vesting schedule for the options they replaced, except options will
remain unvested until June 24, 1999 at which time vesting of new options
will vest according to the original option vesting schedule.
(4) Mr. Kamath was issued an option to purchase 320,000 shares of Common
Stock pursuant to his employment agreement.
(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
19
<PAGE>
and do not represent the Company's estimate or projection of the future
growth of the price of the Company's Common Stock.
</FN>
</TABLE>
<TABLE>
Aggregated Option/SAR Exercises in 1998
and Fiscal 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 - - - 360,008 - -
Jeffrey A. Burt - - 27,000 30,000 $4,410 -
James A. McNeill - - - 30,000 - -
Stephen L. Peters - - 5,001 55,009 - -
<FN>
- -----------------
(1) Calculated on the basis of the closing price of $0.63 on December 31,
1998, minus the exercise price.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Ten-Year Option/SAR Repricing
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 6/24/98 30,000 $1.50 $5.00 $1.50 9 years 56 days
8/19/97 30,000 $5.00 $7.50 $5.00 8 years 177 days
Yeshwant Kamath 6/24/98 40,008 $1.50 $5.00 $1.50 9 years 56 days
6/24/98 320,000 $1.50 $2.13 $1.50 9 years 273 days
8/19/97 40,008 $5.00 $9.00 $5.00 8 years 285 days
James A. McNeill 6/24/98 30,000 $1.50 $5.00 $1.50 9 years 56 days
8/19/97 30,000 $5.00 $7.50 $5.00 8 years 177 days
Stephen L. Peters 6/24/98 50,008 $1.50 $5.00 $1.50 9 years 56 days
8/19/97 50,008 $5.00 $7.50 $5.00 8 years 177 days
</TABLE>
20
<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. Mr. Peters resigned as the Company's Vice President of Research
and Development on March 5, 1999.
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 options to purchase 320,000 shares of the
Company's Common Stock. These options were granted by the Company's Board of
Directors on March 23, 1998, at fair market value, and will vest 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.
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. The Committee increased the annual
salary of Mr. D'Addio, the Company's CEO to $150,000 in 1997 from $92,000. Mr.
D'Addio had declined salary increases recommended by the
21
<PAGE>
Committee since 1994. The Committee recognizes that Mr. D'Addio's current salary
is still significantly below the salary of CEO's in comparable public companies,
however, Mr. D'Addio declined any additional increase.
During 1999, 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.
Section 16(a) Beneficial Ownership Reporting Compliance
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 from the reporting persons that no other reports were required,
the Company believes that 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, 1998.
Certain Relationships and Related 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.
On January 24, 1997, the Company loaned $250,000 to Steve Peters, Vice
President of Research and Development of the Company. The loan had an interest
rate of 6% per annum, and was due and payable in one lump sum on January 4,
2000. The loan was secured by a deed of
22
<PAGE>
trust on Mr. Peters' home in Saratoga, California. As of December 31, 1998, the
loan had been repaid in full and the security interest in Mr. Peters' home was
released.
At December 31, 1998, the Company has an unsecured loan from Carl Berg, a
director and 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. Mr. Berg has agreed that, at the Company's
option, the loan's maturity date may be extended until January 2000.
23
<PAGE>
Performance Measurement Comparison
<TABLE>
The following graph compares the annual percentage change in the
cumulative shareholder return of the Common Stock of the Company, with CRSP
Total Return Index for the Nasdaq Stock Market (Domestic Companies) and the CRSP
Total Return Index for the Nasdaq Electronic Component Companies, for the period
beginning December 15, 1994 and ending December 31, 1998. 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 descriptions data is supplied in accordance with Rule 304(d) of
Regulation S-T]
<CAPTION>
Cumulative Total Return
--------------------------------------------------------------------------
12/15/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C>
Videonics, Inc. 100 116 107 81 38 6
Nasdaq (Domestic) 100 103 149 183 225 316
Electronic Component
Companies 100 106 175 303 317 491
</TABLE>
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.
24
<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 facsimile. Arrangements will be made with brokerage houses and
other custodians, nominees and fiduciaries for the forwarding of solicitation
material 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 2000 Annual Meeting of Shareholders must be received by the Company no
later than February 20, 2000, in order to be included in the proxy statement and
proxy relating to the 2000 Annual Meeting.
Discretionary Authority
The Annual Meeting is called for the specific purposes set forth in the
Notice of Annual 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 holder will be entitled to exercise discretionary authority.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Gary L. Williams
---------------------------
Gary L. Williams, Secretary
Dated: June 7, 1999
Campbell, California
25
<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
substitution, and hereby authorizes them to vote all shares of Common Stock of
the undersigned at the 1999 Annual Meeting of the Company, to be held at
Videonics, Inc., 1370 Dell Ave., Campbell, California, on Tuesday, July 15,
1999, 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.
The Board of Directors recommends a vote FOR proposals 1, 2, and 3.
1. Election of Directors.
Nominees: M. D'Addio, Y. Kamath, M. Hahn, C. Berg, W. Jasper
[ ] For [ ] Withheld
[ ] --------------------------------------
For all nominees except as noted above
2. To approve an amendment to the Company's Restated Articles of
Incorporation to effect a stock combination (reverse stock split)
pursuant to which every three (3) shares of the Company's outstanding
Common Stock would be exchanged for one (1) new share of Common Stock.
[ ] For [ ] Against [ ] Abstain
3. Selection of Independent Accountants.
[ ] For [ ] Against [ ] Abstain
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments or
postponement thereof.
26
<PAGE>
The undersigned shareholder hereby acknowledges receipt of the Notice of Annual
Meeting and Proxy Statement and hereby revokes any proxy or proxies heretofore
given. This proxy may be revoked at any time prior to the Annual Meeting. If you
received more than one proxy card, please date, sign and return all cards in the
accompanying envelope.
Please sign exactly as name appears below. 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 a corporation, please
sign in the corporate name by President or other authorized officer. If a
partnership, please sign in the partnership name by authorized person.
Signature: Date:
---------------------------------- --------------------------
Signature: Date:
---------------------------------- --------------------------
27
