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.

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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.

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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/ James McNeill
                                       -----------------
                                       Print Name: James McNeill



                                       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                  40,000              $0.78            2/16/09




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