[GRAPHIC     VIDEONICS                         1370 Dell Ave.
OMITTED]     The Video Editing Company         Campbell, CA 95008
                                               408-866-8300 o FAX: 408-866-4859
February 3, 1996

Steve Peters
20341-170th Ave NE
Woodinville, WA 98072

Dear Steve,

This letter will  formalize the offer we have reached.  As we had  discussed,  I
have  taken  much of the text from our  respective  e-mails  and  faxes,  so the
following  may be  choppy,  but I think  captures  the  intent  and  tone of our
discussions  and  agreements.  Let me know  if you  believe  anything  is not in
accordance  with our  agreements.  I look  forward to a mutually  enjoyable  and
beneficial relationship.

1. Your title will be Vice President of Research and Development and you will be
an Officer of the Corporation.

2. I think it is  worthwhile  to include your  "Summary of  Philosophy"  in this
document.  You wrote: "I have tried to keep the concerns of the Company in mind.
It will take a team effort to ensure  Company growth and I wouldn't want to harm
that team effort by my compensation or incentives.  I believe that I will become
a  key  element  in  the  Company's  success  and  the  Company  will  treat  me
accordingly.

My proposed  first  steps on the job would be to become  involved in the testing
and release to manufacturing of the current products.  In addition I want to use
all of the current  products in making  video's at my residence.  Together these
actions will allow me to get to know the people  involved  and the  capabilities
and limitations of the current product mix."

3. Base Salary.

Your base  salary will be $98K with a  guaranteed  bonus of $42K the first year.
Guaranteed bonuses will be $38K in year 2 and $34K in year 3.

4. Incentive Bonus
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Your thoughts on this are copied below:
"There will be no bonus in yr. 1 (due to move and  stock),  yr. 2 and on, I will
be eligible for an  incentive  bonus plan (can be applied to  guaranteed  Bonus)
that should have a reasonable  chance of exceeding the guaranteed  bonus by 50%.
Care  should be taken to insure my  incentives  cannot  lead to a conflict  with
other members of executive team. Some thoughts on incentive bonus  possibilities
(possible mixture that is easy to calculate):

Cash Bonus for each product released on Time (Able to ship to customers)

x% of revenue on new products for 1st year of shipments

Profit Sharing in Company

% Engineering productivity increase ($K of revenue per engineer for instance)

My job will be to insure efficiently developed, high-quality,  products produced
in a predictable  manner,  that are perceived as valuable by our customer  base.
The incentive  program should be based on these  attributes.  The most immediate
need is predictable  schedules  through R&D. It is important that these products
be  manufacturable  however,  so I should be measured  until the products can be
produced and shipped.  The products need to sell and the Company needs to make a
profit so the incentive should also take these factors into account (rather than
solely  R&D  performance  in  producing  the  product).  I agree to work out the
specific incentive program after I join.  Something to the effect of, as long as
the company is in good financial health and my performance is excellent there is
a reasonable chance for my total compensation to be in the $160,000 range."

 Videonics agrees with these concepts.

5.  Stock Options

An employee stock option to purchase 50,000 shares of stock will be granted upon
employment at the lowest possible  price.  To date in January,  since we offered
you  employment,  the lowest price has been $9.75. If the closing stock price is
lower than that between now and  February 19, 1996,  your option will be granted
at the lower price.  Vesting is in steps every six months, at 1/6 the total, for
three years.

You have said:
"I would like to have the  opportunity  to receive a further  option in one year
(or at least before the 3 year Evergreen  proposal).  I don't expect a guarantee
just a reasonable consideration.  It is my belief that this further option could
have  
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significant near term upside potential and if structured appropriately, could be
valuable to the Company by defining a stretch  incentive to be accomplished  for
this option."

We agree to consideration of additional options, but without any guarantees.  We
may  mutually   find  that  there  is  an   interrelationship   with   incentive
compensation. We agree that if you are terminated within one year after a merger
or buyout your shares will be fully vested.

6.  Company  life  insurance  is one and one half times  salary.  Currently  the
maximum amount available is $150,000.  If and when the maximum is increased your
salary plus guaranteed bonus will be eligible.

7.  Move.

Your thoughts on this are copied below:
"I believe  that it could take 4 months to complete  the move and during most of
that time I will be  maintaining  two  residences  and be away  from my  family.
During the  transition  period I will need to travel back and forth (and have my
family  travel as  appropriate).  I  propose a  suitable  2  bedroom,  furnished
apartment  for this time period (I am not sure what this would cost).  I suspect
this  would be one round  trip a week with at least 3 trips  where we would both
travel (or 19 round trips  total).  I would bring one of my cars to the Bay Area
at the third  trip so would  require 2 weeks of a rental car in the Bay Area and
maybe 10 days of rental cars in the Seattle area. I think we should consider the
travel  expenses  as a business  trip until I move into the  apartment.  At that
point I wouldn't  expect meals and laundry etc. to be reimbursed  since it would
become equivalent to my current situation."

Your travel costs will be covered as business expenses. We agree to a four month
transition  with  housing  supplied  at no cost to you for that time  period and
trips  approximately  as you propose.  Your family's travel costs  unfortunately
cannot be considered that way and part of the moving expenses will be taxable to
you.  We  believe  federal  and  state  law are the  same  on  moving  expenses.
Basically, household moving expenses and direct travel costs are deductible, but
not most other costs.  (Federal  law changed on this  starting in 1994.) We will
reimburse  you at  cost  for  deductible  expenses  and at 1.6  times  cost  for
reasonable, non-deductible expenses. This covers 37.5% allowance for federal and
state taxes. This should allow your move costs to come out basically a wash.

We  do  not  considered  expenses  related  to  selling  or  buying  a  home  as
reimbursable  expenses.  We will offer you  $10,000 as a moving  bonus to help a
little bit with housing  costs,  payable when you  relocate.  This bonus must be
repaid if you resign in less than one year.


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8.  Misc.

You suggested:
"I want to become  familiar with all of the current  Videonics  equipment.  This
would require a S-VHS VCR, Hi-8 VCR, and a Macintosh computer. I propose this be
purchased  by R&D for tax reasons and that my salary would be reduced by 1/2 the
total  cost and I would  then own this  equipment  (I  believe it is in both our
interests for me to do this). I estimate this would cost about $5K."

Your equipment proposal is acceptable to us.

9.  Severance Option

I think our dialog on this is clear, so I have left it intact.  Your quote:
"Although I do not  anticipate  any problems I think we should at least  discuss
the only real risk that I see. That is my relationship with Mark. Mark is key to
the  Company.  It is  critical  that  Mark is  coming  up with new  product  and
technology  ideas. It is also critical that these ideas get implemented.  If for
some  reason  Mark and I can't  work this out  (again I do not  think  this will
happen, just pointing out that it could) I understand that I would have to go. I
would be willing to give the Company that option up front if we agreed to terms.
It would  take me a year to  recover  fully so I  propose 1 years  salary  (with
guaranteed  bonus) and an  accelerated  vesting  of 6 months on my option.  This
would be the Company's option and not mine."

My reply. "We agree that you and Mark must work well together,  but it is in all
of our interests to make this happen, and we are all responsible if it does not.
We do not  think it is right to have  accelerated  vesting  on  termination  and
haven't  done this before.  We can offer three  months  severance if the company
terminates  you.  We  will  also  agree  to one  year  severance  pay if you are
terminated within one year after a merger or buyout."

Your answer: "Mark and I will get along very well. In fact I think we will be an
unstoppable  combination.  I  believe  it is in  both of our  interests  to have
discussed the severance issues in advance. Your proposal is acceptable to me."

10. Per our  discussions,  you will start work on the  afternoon  of Feb. 19. We
will give you an advance that will  approximate your first months salary at that
time, and deduct it from your first three bi-weekly paychecks.


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I think that  covers all the points we have  worked  out.  Please let me know if
there  are any  issues to  clarify  or  discuss.  I will be in the  office  this
afternoon and at home 408-255-1707 the rest of the weekend.  If not, please sign
indicating  your  agreement  below.  Please  call  before  faxing  back so I can
maintain confidentiality.

Welcome to Videonics!

Best regards,



/s/ James A. McNeill
---------------------------------
James A McNeill, CFO






I accept the offer as outlined.


/s/ Steve Peters
-----------------------------------
Steve Peters               Date