FOCUS Enhancements, Inc. (NASDAQ: FCSE – news) announced that the
Company has entered into a definitive
agreement to merge with Videonics, Inc. (NASDAQ: VDNX – news). The agreement
provides for each share of Videonics
common stock to be converted into 0.87 shares of FOCUS Enhancements common
stock. Completion of the merger requires,
among other things, the approval of the stockholders of Videonics and FOCUS.
The merger is expected to be completed in
December of this year.

Upon completion of the merger, each share of Videonics common stock would be
exchanged for .87 shares of FOCUS
common stock. Based on pro forma shares outstanding at June 30, 2000, the
existing FOCUS stockholders would own
83.7% of the combined company and the existing Videonics stockholders would
own 16.3%. In addition, Videonics option
holders will exchange their options for options in FOCUS pursuant to the
same exchange ratio. The combined entity had total
revenues of over $28 million for the twelve months ended June 30, 2000, on a
pro forma basis. The merger is expected to be
accounted for as a purchase and FOCUS expects a non-recurring restructuring
charge to be taken in connection with the
merger.

Upon completing the merger, Michael D’Addio, Videonics Chairman & Chief
Executive Officer, will become President, Chief
Executive Officer, and a Director of FOCUS Enhancements. Gary Williams,
Videonics Chief Financial Officer, will become
FOCUS Enhancements Chief Financial Officer. Thomas Massie, FOCUS’ Chairman
of the Board, will remain in that position.
Brett Moyer, FOCUS’ Executive Vice President and Chief Operating Officer,
will also remain in that position. The Board of
Directors after the transaction will initially consist of seven members,
three from Videonics and four from FOCUS.

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