<PAGE> 1
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 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use of the
commission only (as permitted by
rule 14A-6 (E) (2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule
14a-11 (c) or Rule 14a-12
PRINCETON VIDEO IMAGE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(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) (1) 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 transaction 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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<PAGE> 2
(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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(4) Date Filed:
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<PAGE> 3
PRINCETON VIDEO IMAGE, INC.
15 PRINCESS ROAD
LAWRENCEVILLE, NJ 08648
To Our Shareholders:
You are most cordially invited to attend the 1998 Annual Meeting of
Shareholders of Princeton Video Image, Inc. at 9:00 AM, local time, on Thursday,
December 10, 1998, at the Company's principal executive offices at 15 Princess
Road, Lawrenceville, New Jersey.
The Notice of Meeting and Proxy Statement on the following pages describe
the matters to be presented to the meeting.
It is important that your shares be represented at this meeting to assure
the presence of a quorum. Whether or not you plan to attend the meeting, we hope
that you will have your stock represented by signing, dating and returning your
proxy in the enclosed envelope, which requires no postage if mailed in the
United States, as soon as possible. Your stock will be voted in accordance with
the instructions you have given in your proxy.
Thank you for your continued support.
Sincerely,
Brown F Williams
Chairman of the Board
Princeton Video Image, Inc.
15 Princess Road
Lawrenceville, NJ 08648
<PAGE> 4
PRINCETON VIDEO IMAGE, INC.
15 PRINCESS ROAD
LAWRENCEVILLE, NJ 08648
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 10, 1998
The Annual Meeting of Shareholders (the "Meeting") of Princeton Video
Image, Inc., a Delaware corporation (the "Company"), will be held at the
Company's principal executive offices at 15 Princess Road, Lawrenceville, New
Jersey on Thursday, December 10, 1998, at 9:00 AM, local time, for the following
purposes:
(1) To elect six (6) directors to serve until the Annual Meeting of
Shareholders to be held in 1999 and until their successors shall have
been duly elected and qualified;
(2) To consider and vote upon a proposal to ratify the amendment of the
Company's Amended 1993 Stock Option Plan to increase the number of
shares of Common Stock reserved for issuance upon the exercise of
options granted under the plan from 1,560,000 shares to 2,160,000
shares;
(3) To ratify the appointment of PricewaterhouseCoopers LLP as the
independent public accountants of the Company for the fiscal year
ending June 30, 1999; and
(4) To transact such other business as may properly come before the Meeting
or any adjournment or adjournments thereof.
Holders of Common Stock of record at the close of business on Friday,
November 6, 1998, are entitled to notice of and to vote at the Meeting, or any
adjournment or adjournments thereof. A complete list of such shareholders will
be open to the examination of any shareholder at the Company's principal
executive offices at 15 Princess Road, Lawrenceville, NJ 08648 for a period of
10 days prior to the Meeting. The Meeting may be adjourned from time to time
without notice other than by announcement at the Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER OF
SHARES YOU MAY HOLD. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN
THE ENCLOSED RETURN ENVELOPE. THE PROMPT RETURN OF PROXIES WILL ENSURE A QUORUM
AND SAVE THE COMPANY THE EXPENSE OF FURTHER SOLICITATION. EACH PROXY GRANTED MAY
BE REVOKED BY THE STOCKHOLDER APPOINTING SUCH PROXY AT ANY TIME BEFORE IT IS
VOTED. IF YOU RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOUR SHARES ARE
REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH SUCH PROXY CARD SHOULD BE
SIGNED AND RETURNED TO ASSURE THAT ALL OF YOUR SHARES WILL BE VOTED.
By Order of the Board of Directors
Samuel A. McCleery,
Vice President, Marketing and Sales,
and Assistant Secretary
Lawrenceville, New Jersey
October 28, 1998
THE COMPANY'S 1998 ANNUAL REPORT ACCOMPANIES THE PROXY STATEMENT.
<PAGE> 5
PRINCETON VIDEO IMAGE, INC.
15 PRINCESS ROAD
LAWRENCEVILLE, NJ 08648
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Princeton Video Image, Inc. (the "Company") of proxies
to be voted at the Annual Meeting of Shareholders of the Company to be held on
December 10, 1998, (the "Meeting") at the Company's principal executive offices
at 15 Princess Road, Lawrenceville, New Jersey, at 9:00 AM, local time, and at
any adjournment or adjournments thereof. Holders of record of Common Stock, $.01
par value ("Common Stock"), as of the close of business on Friday, November 6,
1998, will be entitled to notice of and to vote at the Meeting and any
adjournment or adjournments thereof. Each share of Common Stock is entitled to
one vote on any matter presented at the Meeting. As of the date of this Proxy
Statement, there were 8,183,552 shares of Common Stock issued, outstanding and
entitled to vote.
If proxies in the accompanying form are properly executed and returned, the
Common Stock represented thereby will be voted in the manner specified therein.
If not otherwise specified, the Common Stock represented by the proxies will be
voted (i) FOR the election of the nominees below as directors, (ii) FOR the
proposal to ratify the amendment of the Company's Amended 1993 Stock Option
Plan, (iii) FOR the ratification of the appointment of PricewaterhouseCoopers
LLP as independent public accountants for the year ending June 30, 1999, and
(iv) in the discretion of the persons named in the enclosed form of proxy, on
any other proposals which may properly come before the Meeting or any
adjournment or adjournments thereof. Any shareholder who has submitted a proxy
may revoke it any time before it is voted by written notice addressed to and
received by the Secretary of the Company, by submitting a duly executed proxy
bearing a later date or by electing to vote in person at the Meeting. The mere
presence at the Meeting of the person appointing a proxy does not, however,
revoke the appointment.
The presence, in person or by proxy, of holders of Common Stock having a
majority of the votes entitled to be cast at the Meeting shall constitute a
quorum. Votes withheld, abstentions and broker non-votes will be counted for
purposes of determining the presence or absence of a quorum.
Directors are elected by a plurality vote. All other actions proposed
herein may be taken upon the affirmative vote of shareholders possessing a
majority of the voting power represented at the Meeting, provided a quorum is
present in person or by proxy. Only votes cast "for" a matter will constitute
affirmative votes. Proxies submitted by brokers that do not indicate a vote for
some of the proposals because such brokers do not have discretionary voting
authority on those proposals and have not received instructions from their
customers on those proposals (i.e., broker non-votes) are not considered to be
shares present for the purpose of calculating the vote on such proposals and
will not affect the outcome of such proposals. Similarly, abstentions to a
proposal are not counted as votes cast and, accordingly, will have no effect on
the outcome of a vote on such proposal.
This Proxy Statement, together with the related proxy card, is being mailed
to the shareholders of the Company on or about November 9, 1998. The Annual
Report to Shareholders of the Company for the year ended June 30, 1998,
including financial statements (the "Annual Report"), is being mailed
concurrently with this Proxy Statement to all shareholders of record as of
November 6, 1998. In addition, the Company has provided brokers, dealers, banks,
voting trustees and their nominees, at the Company's expense, with additional
copies of the Annual Report so that such record holders may supply such material
to beneficial owners.
ELECTION OF DIRECTORS
At the Meeting, directors are to be elected to hold office until the Annual
Meeting of Shareholders to be held in 1999 and until their successors shall have
been elected and qualified. The nominees for election to the
<PAGE> 6
Board of Directors are Brown F Williams, Lawrence Lucchino, Jerome J. Pomerance,
Enrique F. Senior, Eduardo Sitt and John B. Torkelsen.
It is the intention of the persons named in the enclosed form of proxy to
vote the stock represented thereby, unless otherwise specified in the proxy, for
the election as director of each of the persons named above, whose biographies
appear below. There are currently seven members of the Board. Pursuant to action
of the Board, the number of members of the Board of Directors will be reduced to
six members immediately prior to the Meeting because Mr. Greenlaw has advised
the Company that he will not stand for re-election. All of the persons whose
names and biographies appear below are at present directors of the Company. In
the event any nominee should become unavailable or unable to serve as a
director, it is intended that votes will be cast for a substitute nominee
designated by the Board of Directors. The Board of Directors has no reason to
believe that the nominees named will be unable to serve if elected. The nominees
have consented to being named in this Proxy Statement and to serve if elected.
The current Board of Directors, including the nominees, is comprised of the
following persons:
<TABLE>
<CAPTION>
SERVED AS A
NAME AGE DIRECTOR SINCE POSITIONS WITH THE COMPANY
- ---- --- -------------- --------------------------------------
<S> <C> <C> <C>
Brown F Williams(1)......... 57 1990 Chairman of the Board
Douglas J. Greenlaw......... 54 1997 President, Chief Executive Officer and
Director
Lawrence Lucchino(1)........ 53 1994 Director
Jerome J. Pomerance(1)...... 57 1992 Director
Enrique F. Senior(1)........ 55 1994 Director
Eduardo Sitt(1)............. 67 1993 Director
John B. Torkelsen(1)........ 53 1995 Director
</TABLE>
- ---------------
(1) The nominees for election to the Board of Directors.
The principal occupations and business experience, for at least the past
five years, of each nominee are as follows:
BROWN F WILLIAMS is a co-founder of the Company and its Chairman of the
Board. Prior to his election as Chairman of the Board in January 1997, Mr.
Williams served the Company as its President and Chief Executive Officer, and he
has been a director of the Company since its organization in July 1990. Mr.
Williams also served as the Treasurer of the Company prior to Mr. Lawrence L.
Epstein's election to such office in February 1998. Mr. Williams is a senior
executive with more than 25 years experience in the development of high
technology products, primarily during his 20 years with RCA Laboratories, Inc.
Until 1987, Mr. Williams was a Vice President of David Sarnoff Research Center,
Inc. with responsibility for both hardware and software contract research
businesses. Between 1987 and 1991, Mr. Williams was active in a number of
start-up companies, either as a consultant on behalf of the funding groups or as
an executive employee on behalf of the managements of such companies. Mr.
Williams has had significant experience in product development, product
introduction and licensing in Europe and Japan, as well as in the United States.
DOUGLAS J. GREENLAW joined the Company in January 1997, when he was elected
President and Chief Executive Officer. Mr. Greenlaw was elected to the Board of
Directors of the Company in October 1997. Mr. Greenlaw has advised the Company
that he will not stand for re-election to the Board of Directors. Mr. Greenlaw
has also announced that he plans to step down as President and Chief Executive
Officer by the end of calendar year 1998. From 1994 through 1996, Mr. Greenlaw
was President and Chief Operating Officer of Multimedia, Inc. Mr. Greenlaw also
served on the board of directors of Multimedia and was Chairman of its Executive
Committee. Before joining Multimedia, Mr. Greenlaw had been Chairman and Chief
Executive Officer of Whittle Communications' Venture Division from 1991 through
1994.
LAWRENCE LUCCHINO has been a director of the Company since October 1994.
Mr. Lucchino enjoys a wide variety of connections with the professional sports
industry. In addition to his prior service as a member of the board of directors
of the Washington Redskins, an NFL team, Mr. Lucchino was also a member of the
MLB
2
<PAGE> 7
Operations Committee. He has served as President and Chief Executive Officer of
the ownership group of the San Diego Padres since December 1994. Prior to his
service with the Padres, Mr. Lucchino was a partner at the Washington, D.C. law
firm of Williams & Connolly from October 1993 to December 1994. Mr. Lucchino
also served as President of the Baltimore Orioles from May 1988 until October
1993.
JEROME J. POMERANCE was elected to the Board of Directors of the Company in
1992. He has served as the President of J.J. Pomerance & Co., Inc., a firm
providing strategic international business advice for product development and
applications, since November 1991. Prior to his founding of that firm, Mr.
Pomerance was Chief Operating Officer and Vice-Chairman of Kroll Associates,
Inc., a leading corporate investigation, due diligence and crisis management
firm. Before joining Kroll in 1983, he was Treasurer, and later President and
Chief Executive Officer, of a group of privately held international ophthalmic
companies and a director of the Optical Manufacturers Association over a period
of 20 years.
ENRIQUE F. SENIOR has been a director of the Company since October 1994. He
has been a Managing Director and Executive Vice President of Allen & Company
Incorporated since 1973. Mr. Senior has been a director of Dick Clark
Productions, Inc., a publicly held company, for over five years and on behalf of
Allen & Company Incorporated he is, or has recently been, financial advisor to
several corporations, including The Coca-Cola Company, Tri-Star Pictures,
Columbia Pictures and QVC Network.
EDUARDO SITT has been a director of the Company since October 1993. From
1964 until 1993, he was the principal shareholder and Chief Executive Officer of
Hilaturas de Michoacon, S.A., a Mexican textile manufacturer. Mr. Sitt is a
shareholder and, during the past five years, has served as a director of Grupo
Financiero BBV-Probursa, a publicly held financial corporation and parent
company of Mexico's fifth largest bank (Banco Bilbao Vizcaya, S.A.), a full
service stock brokerage house (Casa de Bolsa BBV-Probursa) and several other
financial firms. Mr. Sitt is the President and principal shareholder of, and the
individual designated to serve on the Board of Directors of the Company by,
Presencia en Medios, S.A. de C.V. ("Presencia"), a principal shareholder of the
Company, and is the Presidente del Consejo of Publicidad Virtual, S.A. de C.V.,
a joint venture formed by the Company and Presencia. He also serves as a
director of Albatros Textil, a textile manufacturer.
JOHN B. TORKELSEN has been a director of the Company since October 1995.
Since 1984, he has been President of Princeton Venture Research, Inc., an
investment banking, consulting and venture capital firm that he founded. He is
also President of its affiliate, PVR Securities, Inc., formed in 1987. Mr.
Torkelsen has served as the President of PVR Management, Inc., an affiliate of
Princeton Venture Research, Inc., since February 1998. Mr. Torkelsen is the
Manager of the General Partner of Acorn Technology Fund, L.P., a venture capital
fund specializing in early stage, high technology investing. Princeton Venture
Research, Inc. is the investment advisor to Acorn Technology Fund. Mr. Torkelsen
is currently a director of three other publicly held companies, Objective
Communications, Inc. of Portsmouth, New Hampshire, Voice Control Systems, Inc.
of Dallas, Texas, and Mikros Systems Corporation of Princeton, New Jersey.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE NOMINEES
FOR THE BOARD OF DIRECTORS.
COMMITTEES AND MEETINGS OF THE BOARD
The Board of Directors has a Compensation Committee, which makes
recommendations concerning salaries and incentive compensation for employees of
and consultants to the Company; an Audit Committee, which reviews the results
and scope of the audit and other services provided by the Company's independent
auditors; a Finance Committee, which manages the Company's investment funds,
oversees the Company's capital fundraising and reviews the performance of
licensees of the Company's technology; a Standards and Practices Committee,
which develops and maintains standards for customers' use of the Company's
technology and oversees such use; and a Nominating Committee, which nominates
candidates for election to the Board of Directors and to serve on committees of
the Board. The Nominating Committee does not consider nominees recommended by
shareholders.
3
<PAGE> 8
The Compensation Committee is comprised of Lawrence Lucchino, Enrique F.
Senior and John B. Torkelsen. The Compensation Committee held one meeting during
the year ended June 30, 1998. The Audit Committee is comprised of Brown F
Williams, Jerome J. Pomerance, Eduardo Sitt and John B. Torkelsen. The Audit
Committee did not hold a meeting during the year ended June 30, 1998. The
Nominating Committee is comprised of Brown F Williams, Lawrence Lucchino,
Enrique F. Senior and Douglas J. Greenlaw. The Nominating Committee did not hold
a meeting during the year ended June 30, 1998. There were eleven meetings of the
Board of Directors in the fiscal year ended June 30, 1998. With the exception of
Messrs. Lucchino and Torkelsen, each director and each committee member attended
at least 75% of all meetings of the Board of Directors and the committee(s) on
which he or she served, respectively, during the period in which he or she
served as a director or committee member.
COMPENSATION OF DIRECTORS
Directors do not receive cash compensation for services on the Board of
Directors or any committee thereof. The Company has granted, subject to certain
conditions (including, without limitation, conditions relating to vesting), to
Mr. Pomerance, options to purchase 50,000 shares, to Mr. Sitt, options to
purchase 40,000 shares, to each of Messrs. Lucchino, Senior and Torkelsen,
options to purchase 30,000 shares, and to Mr. Williams, options to purchase
20,000 shares, for their participation on the Board of Directors. Such options
were originally issued at exercise prices ranging from $8.00 to $17.50 per share
and were repriced in May 1998 so that all such options have an exercise price of
$8.00. All directors are reimbursed for expenses incurred in connection with
attendance at Board of Directors and committee meetings.
EXECUTIVE OFFICERS
The following table identifies the current executive officers of the
Company:
<TABLE>
<CAPTION>
NAME AGE CAPACITIES IN WHICH SERVED IN CURRENT POSITIONS SINCE
---- --- -------------------------- --------------------------
<S> <C> <C> <C>
Brown F Williams............. 57 Chairman of the Board January 1997
Douglas J. Greenlaw.......... 54 President, Chief Executive Officer and January 1997(1)
Director
Samuel A. McCleery(2)........ 47 Vice President, Marketing and Sales, and November 1991(2)
Assistant Secretary
Lawrence L. Epstein(3)....... 44 Vice President, Finance, Chief Financial February 1998
Officer and Treasurer
</TABLE>
- ---------------
(1) DOUGLAS J. GREENLAW was elected President and Chief Executive Officer in
January 1997 and was elected to the Board of Directors of the Company in
October 1997.
(2) SAMUEL A. MCCLEERY has been the Company's Vice President, Marketing and
Sales, since November 1991 and its Assistant Secretary since October 1997.
Prior to November 1991, Mr. McCleery was President of his own sports
marketing and events company with clients that included the Reagan
Foundation. From 1981 to 1989, Mr. McCleery served as the director of sports
marketing for Prince Manufacturing, the world's largest marketer of tennis
racquets. Prior to 1981, Mr. McCleery was a Director of New Business for Le
Coq Sportif, a division of Adidas (France).
(3) LAWRENCE L. EPSTEIN has been the Company's Vice President, Finance, Chief
Financial Officer and Treasurer since February 1998. Prior to joining the
Company, Mr. Epstein was Chief Financial Officer and Vice President of
Finance and Administration for Primestar Partners, L.P., the nation's second
largest Direct Broadcast Satellite provider, where he was responsible for
overall financial management as well as strategic and long-range planning.
Prior to joining Primestar in March, 1993, Mr. Epstein held several senior
financial positions with a number of CBS, Inc. units, including the CBS
Television Network, CBS News and CBS owned-and-operated stations from 1979
to 1993.
4
<PAGE> 9
KEY EMPLOYEES
Other key employees of the Company are as follows:
Howard J. Kennedy, 49 years old, joined the Company in March 1995 and
currently serves as its Director of Software Development and is responsible for
evaluating and directing the technical design of all software products with
emphasis on consistency and ease of implementation across product lines. Prior
to joining the Company, Mr. Kennedy worked at Intel Corporation from October
1988, where he was Architect and Principal Engineer in the Multimedia Systems
Technology Group. Prior to working at Intel Corp., Mr. Kennedy was co-owner of
Syntex Computer Systems and was instrumental in the development of digital video
interactive technology for clients including Sarnoff, Dow Jones News Retrieval
and Educational Testing Service.
Louis A. Lippincott, 45 years old, joined the Company in August 1995 and
currently serves as its Director of Hardware Development. Mr. Lippincott is
responsible for all hardware design and prototype implementation with special
focus on reliability, speed of implementation and the integration of hardware
and software strategies. Prior to joining the Company, Mr. Lippincott worked at
Intel Corporation from 1988 to 1994, during which period he served as the
Systems Architecture Leader in the Video Products Division and as the Team
Leader and Architect of Intel's Action Media Product. From 1994 through July
1995, Mr. Lippincott worked as a consultant with respect to hardware development
of PC-based digital video products.
Roy J. Rosser, 45 years old, is a co-founder of the Company and currently
serves as its Director of Product Development. As well as being one of the
inventors of the technology that is the basis for the L-VIS System, Dr. Rosser
is responsible for coining the "L-VIS" name. Actively involved in both field
operations and software development, Dr. Rosser's special focus is devising more
compelling applications of the L-VIS technology. Prior to joining the Company as
a full-time employee in November 1993, Dr. Rosser served as a scientific and
management consultant in the United Kingdom during 1992 and 1993. Dr. Rosser
holds three US patents. Before inventing L-VIS, Dr. Rosser was a research
physicist at the Princeton Plasma Physics Laboratory and a consultant to Laser
Division, Rutherford-Appleton Laboratories, Oxford, England.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the annual
and long-term compensation for the fiscal years ended June 30, 1998 and 1997 of
the Company's chief executive officer and certain other highly compensated
executive officers of the Company who were serving as executive officers at June
30, 1998 (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION STOCK
---------------- OPTION AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY (NUMBER OF SHARES) COMPENSATION
- --------------------------- ---- ------ ------------------ ------------
<S> <C> <C> <C> <C>
Brown F Williams.......................... 1998 $225,000 (1) $261,250(2)
Chairman of the Board 1997 225,000 (1) --
Douglas J. Greenlaw....................... 1998 $225,000 (1) --
President and Chief Executive Officer 1997 106,725 (1) --
Samuel A. McCleery........................ 1998 $150,000 (1) $ 99,000(2)
Vice President, Marketing and Sales 1997 150,000 (1) --
</TABLE>
- ---------------
(1) See "Option Grants in Last Fiscal Year" below, including the notes thereto.
(2) Reflects a compensation charge recorded by the Company in connection with
the exercise of warrants in July 1997. See "Certain Relationships and
Related Transactions -- Transactions with Management and
Others -- Indebtedness of Management."
5
<PAGE> 10
The following table sets forth certain information concerning grants of
stock options(1) during the fiscal year ended June 30, 1998, to the Named
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE
NAME GRANTED FISCAL 1998(1) PER SHARE EXPIRATION DATE
- ---- ---------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Brown F Williams...................... 20,000(2) 1.6% $8.00 March 2001
150,000(3) 12.4% January 2007
Douglas J. Greenlaw................... 120,293(4) 9.9% $8.00 February 2007
Samuel A. McCleery.................... 20,000(5) 1.6% $2.50 September 2007
50,000(6) 4.1% $8.00 March 2007
47,200(7) 100%(7) $8.00 (7)
</TABLE>
- ---------------
(1) Except as set forth in note (7) below with respect to the issuance of
certain contingent warrants to Mr. McCleery, the option grants set forth in
the table above, and discussed in the notes below, were issued pursuant to
the Company's Amended 1993 Stock Option Plan.
(2) On March 28, 1996, Mr. Williams was granted an option to purchase 20,000
shares of Common Stock at an exercise price of $17.50 per share with an
expiration date of March 28, 2001. On May 28, 1998 the option was repriced
to $8.00 per share. See "Compensation Committees' Report on Repricing of
Options" below. 15,555 shares underlying the repriced option were vested as
of May 28, 1998 and the remaining 4,445 shares vest in 8 equal monthly
installments commencing in June 1998.
(3) On January 24, 1997, Mr. Williams was granted an option to purchase 150,000
shares of Common Stock at an exercise price of $20.00 per share with an
expiration date of January 24, 2007. On May 28, 1998, such option was
repriced to $8.00 per share. See "Compensation Committees' Report on
Repricing of Options" below. 66,666 shares underlying the repriced option
were vested as of May 28, 1998 and the remaining 83,334 shares vest in 20
equal monthly installments commencing in June 1998.
(4) On February 1, 1997, Mr. Greenlaw was granted an option to purchase 210,000
shares of Common Stock at an exercise price of $20.00 per share with an
expiration date of February 1, 2007. In May 1998, in connection with the
amendment to Mr. Greenlaw's employment agreement, the option was repriced to
$8.00 per share and amended such that 70,293 shares were deemed exercisable
as of May 31, 1998 and an additional 50,000 shares vest in 30 equal monthly
installments commencing in June 1998. The right to purchase the remaining
89,707 shares was cancelled. See "Compensation Committees' Report on
Repricing of Options" below.
(5) The option, which was granted in September 1997 and vested immediately, was
granted to replace warrants to purchase 20,000 shares of Common Stock that
had been granted to Mr. McCleery when he joined the Company in November 1991
and subsequently expired, unexercised.
(6) On March 4, 1997, Mr. McCleery was granted an option to purchase 50,000
shares of Common Stock at an exercise price of $20.00 per share with an
expiration date of March 4, 2007. On May 28, 1998 the option was repriced to
$8.00 per share. See "Compensation Committees' Report on Repricing of
Options" below. 19,444 shares underlying the repriced option were vested as
of May 28, 1998 and the remaining 30,556 shares vest in 22 equal monthly
installments commencing in June 1998.
(7) On September 15, 1993, November 3, 1993 and November 4, 1994, the Company
issued five year warrants to Mr. McCleery to purchase 20,000, 13,600 and
13,600 shares of Common Stock, respectively, at an exercise price of $2.50
per share. As of May 28, 1998, the Company issued Mr. McCleery contingent
warrants to purchase up to 47,200 shares of Common Stock at an exercise
price of $8.00 per share, said warrants to be exercisable for a period of
five years from the respective expiration dates of the warrants previously
issued to Mr. McCleery, but only to the extent that the previously issued
warrants are
6
<PAGE> 11
not exercised. The original warrants and the contingent warrants were issued
outside of the Company's Amended 1993 Stock Option Plan. The contingent
warrants constitute one hundred percent (100%) of the warrants issued by the
Company to employees during the fiscal year ended June 30, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to
exercises of options to purchase Common Stock during the fiscal year ended June
30, 1998 by the Named Officers and unexercised options to purchase Common Stock
held by the Named Officers at June 30, 1998.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES VALUE JUNE 30, 1998 AT JUNE 30, 1998(1)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Brown F Williams......... -- -- 86,943 83,057 $ 0 $0
Douglas J. Greenlaw...... -- -- 71,959 48,334 $ 0 $0
Samuel A. McCleery....... -- -- 40,833 29,167 $42,500 $0
</TABLE>
- ---------------
(1) Based on the closing price on the Nasdaq National Market on June 30, 1998
($4.625)
COMPENSATION COMMITTEES' REPORT ON REPRICING OF OPTIONS
In May 1998 the Compensation Committee recommended and the Board of
Directors approved the repricing of certain stock options granted between July
1993 and March 1997 to various officers and directors, including stock options
to purchase 170,000, 120,293 and 50,000 shares of Common Stock held by Messrs.
Williams, Greenlaw and McCleery, respectively. The repricing was deemed
desirable due to the fact that fluctuations in the market value of the Common
Stock have made the options no longer appropriate for the purpose for which they
were granted: to provide incentives to promote the financial success and
progress of the Company. At the date of the repricing the market value of the
Common Stock was $5.219 and the exercise price under the options ranged from
$12.12 to $20.00. The options were repriced to $8.00, a price $1.00 above the
Company's initial public offering price of $7.00 per share.
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
In January 1997, the Company and Mr. Williams entered into an employment
agreement that provides for automatic annual renewal and permits the Company to
terminate the agreement upon 90 days' prior notice; provided, however, that Mr.
Williams' term of employment will be automatically extended for a period of
three years following a change in control of the Company. Pursuant to such
agreement, Mr. Williams' base salary will be $225,000 per year, subject to
increases at the discretion of the Board of Directors. Mr. Williams is eligible
for an annual bonus based on performance measures determined by the Compensation
Committee. In the event Mr. Williams' employment is terminated by the Company
without cause or in the event Mr. Williams terminates his employment due to a
detrimental change in the nature or scope of his employment or duties, he is
entitled to receive his then current salary for a period equal to the greater of
two years or the remainder of his current term of employment.
In January 1997, the Company and Mr. Greenlaw entered into an employment
agreement that provides for automatic annual renewal and permits the Company to
terminate the agreement upon 90 days' prior notice. Pursuant to the employment
agreement, Mr. Greenlaw's base salary is $225,000 per year, subject to increases
at the discretion of the Board of Directors. Mr. Greenlaw is eligible for an
annual bonus based on performance measures determined by the Compensation
Committee. In the event Mr. Greenlaw's employment is terminated by the Company
without cause, the agreement provides for a continuation of his then current
salary for a period of six months. Mr. Greenlaw has advised the Company that he
will not stand for re-election to the Board of Directors and has announced that
he plans to step down as President and Chief
7
<PAGE> 12
Executive Officer by the end of calendar 1998. His employment agreement was
amended to that effect in May 1998 (the "Amendment"). Pursuant to the Amendment,
the Company will continue to pay Mr. Greenlaw his salary (exclusive of bonuses)
through December 31, 1998 and Mr. Greenlaw may provide consulting services to
the Company at the Company's request between the date he resigns and February 1,
2001. In addition, the Amendment provided for amendments to the terms of Mr.
Greenlaw's stock options. See "Option Grants in Last Fiscal Year," including
Note 4 thereto.
In March 1997, the Company and Mr. McCleery entered into an employment
agreement that provides for automatic annual renewal and permits the Company to
terminate the agreement upon 90 days' prior notice; provided, however, that Mr.
McCleery's term of employment will be automatically extended for a period of
three years following a change in control of the Company. Pursuant to such
agreement, Mr. McCleery's base salary will be $150,000 per year, subject to
increases at the discretion of the Board of Directors. Mr. McCleery is eligible
for an annual bonus based on performance measures determined by the Compensation
Committee. In the event Mr. McCleery's employment is terminated by the Company
without cause or in the event Mr. McCleery terminates his employment due to a
detrimental change in the nature or scope of his employment or duties, he is
entitled to receive his then current salary for a period equal to the greater of
two years or the remainder of his current term of employment.
In February 1998, the Company and Mr. Epstein entered into an employment
agreement that provides for automatic annual renewal and permits the Company to
terminate the agreement upon 90 days' prior notice. Pursuant to the employment
agreement, Mr. Epstein's base salary will be $150,000 per year, subject to
increases at the discretion of the Board of Directors. Mr. Epstein is eligible
for an annual bonus based on performance measures determined by the Compensation
Committee. In the event Mr. Epstein's employment is terminated by the Company
without cause, he is entitled to receive his then current salary for a period of
six months, or twelve months in the event his employment is terminated in his
first year of employment. In the event Mr. Epstein terminates his employment due
to a detrimental change in the nature or scope of his employment or duties, he
is entitled to receive his then current salary for a period equal to the greater
of six months or the remainder of his current term of employment.
In addition to provisions in the above-described employment agreements
requiring each individual to maintain the confidentiality of the Company's
information and assign inventions to the Company, such executive officers have
agreed that during the terms of their employment agreements and for two years
thereafter, they will not compete with the Company by engaging in any capacity
in any business which is competitive with the business of the Company.
401(k) PLAN
In 1998, the Company adopted a tax-qualified employee savings and
retirement plan (the "401(k) Plan") covering all of the Company's employees.
Pursuant to the 401(k) Plan, employees may elect to reduce their current
compensation by up to the statutorily prescribed annual limit ($10,000 in 1998)
and have the amount of such reduction contributed to the 401(k) Plan. The 401(k)
Plan does not require additional matching contributions to the Plan by the
Company on behalf of participants in the Plan. Contributions by employees to the
Plan and income earned on such contributions are not taxable to employees until
withdrawn from the 401(k) Plan. The Trustees under the 401(k) Plan, at the
direction of each participant, invest the assets of the 401(k) Plan in any of
nine investment options.
8
<PAGE> 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of September 15, 1998, except as
otherwise indicated, by (i) each person who is known to
the Company to own beneficially more than 5% of the Common Stock, (ii) each of
the executive officers and the current directors of the Company, and (iii) all
of the directors and executive officers as a group.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(1)
----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------ ---------- --------
<S> <C> <C>
Enrique F. Senior(2)........................................ 1,114,094 12.3%
c/o Allen & Company Incorporated
711 Fifth Avenue
New York, NY 10020
Allen & Company Incorporated(3)............................. 1,092,430 12.1%
711 Fifth Avenue
New York, NY 10020
Eduardo Sitt(4)............................................. 645,972 7.8%
c/o Presencia en Medios, S.A. de C.V
Paseo de las Palmas
No. 735, desp 206
11000 Mexico, DF
Presencia en Medios, S.A. de C.V.(5)........................ 614,308 7.5%
Paseo de las Palmas
No. 735, desp 206
11000 Mexico, DF
Brown F Williams(6)......................................... 504,792 6.1%
c/o Princeton Video Image, Inc.
15 Princess Road
Lawrenceville, NJ 08648
Jerome J. Pomerance(7)...................................... 191,506 2.3%
Samuel A. McCleery(8)....................................... 172,978 2.1%
John B. Torkelsen(9)........................................ 120,514 1.5%
Lawrence Lucchino(10)....................................... 101,664 1.2%
Douglas J. Greenlaw(11)..................................... 102,792 1.2%
Lawrence L. Epstein(12)..................................... 25,000 *
All directors and executive officers as a group (9
persons)(13)................................................ 2,979,312 30.9%
</TABLE>
- ---------------
* Less than one percent
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to stock options and warrants currently exercisable or exercisable within
60 days are deemed outstanding for computing the percentage ownership of
the person holding such options and the percentage ownership of any group
of which the holder is a member, but are not deemed outstanding for
computing the percentage ownership of any other person. Except as indicated
by footnote, and subject to community property laws where applicable, the
persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
Applicable percentage of ownership is based on 8,183,552 shares of Common
Stock outstanding as of September 15, 1998. Outstanding shares of Series A
and Series B Preferred Stock are not reflected above because such Preferred
Stock has no voting rights and is not convertible. See "Description of
Capital Stock-Preferred Stock."
(2) Includes 234,204 shares of Common Stock and 478,226 shares of Common Stock
underlying warrants owned of record by Allen & Company Incorporated
("Allen"), of which Mr. Senior is a Managing Director and Executive Vice
President. Also includes 380,000 shares of Common Stock underlying the
Representatives' Warrants received by Allen as partial consideration for
services rendered on behalf of the Company with respect to the Company's
initial public offering. See "Certain Transactions." (See Note 3.) The
Company has been informed by Allen that the shares of Common Stock owned of
record by Allen reflect ownership of such shares on behalf of Allen and
certain of its officers, directors and
9
<PAGE> 14
employees. By virtue of his positions with Allen, Mr. Senior may, under
certain circumstances derive economic benefit from such securities.
Includes 21,664 shares of Common Stock underlying options that were
exercisable within 60 days of September 15, 1998. Does not include 6,436
shares of Common Stock held directly by certain officers, directors or
employees of Allen.
(3) Includes 478,226 shares of Common Stock underlying warrants. Also includes
380,000 shares of Common Stock underlying the Representatives' Warrants
received by Allen as partial consideration for services rendered on behalf
of the Company with respect to the Company's initial public offering. See
"Certain Transactions." Does not include shares of Common Stock underlying
options owned by Enrique F. Senior, a Managing Director and Executive Vice
President of Allen and a director of the Company. Does not include 6,436
shares of Common Stock held directly by certain officers, directors or
employees of Allen. (See prior footnote.)
(4) Includes 579,376 shares of Common Stock and 34,932 shares of Common Stock
underlying warrants owned by Presencia, of which Mr. Sitt is President and
a principal shareholder. (See Note 5.) Includes 31,664 shares of Common
Stock underlying options that were exercisable within 60 days of September
15, 1998.
(5) Includes 579,376 shares of Common Stock and 34,932 shares of Common Stock
underlying warrants. Does not include shares of Common Stock underlying
options owned by Eduardo Sitt, the President and a principal shareholder of
Presencia and a director of the Company. (See prior footnote.)
(6) Includes 3,266 shares of Common Stock owned by Sandra Williams, as
custodian for Bronwyn Williams, Mr. and Mrs. Williams' minor daughter, and
3,266 shares owned by Sandra Williams, Mr. Williams' wife. Also includes
387,706 shares of Common Stock and 110,554 shares of Common Stock
underlying options that were exercisable within 60 days of September 15,
1998. Does not include 5,000 and 2,200 shares of Common Stock owned by Mr.
Williams' brother and a trust of which Mr. Williams' mother is a
beneficiary, respectively. Mr. Williams disclaims beneficial ownership of
the shares of Common Stock that are owned by Sandra Williams, individually
and as custodian for Bronwyn Williams.
(7) Includes 20,000 shares of Common Stock owned by J.J. Pomerance & Co., Inc.
of which Mr. Pomerance is the President. Also includes 129,842 shares of
Common Stock and 41,664 shares of Common Stock underlying options that were
exercisable within 60 days of September 15, 1998.
(8) Includes 78,000 shares of Common Stock, 47,200 shares of Common Stock
underlying warrants and 47,778 shares of Common Stock underlying options
granted to Mr. McCleery that were exercisable within 60 days of September
15, 1998.
(9) Includes 5,992 shares of Common Stock owned by Pamela R. Torkelsen, Mr.
Torkelsen's wife, and 29,658 shares of Common Stock and 48,200 shares of
Common Stock underlying warrants owned by Princeton Venture Research, Inc.,
a company of which Mr. Torkelsen is the sole shareholder. Also includes
15,000 shares of Common Stock owned by Acorn Technology Fund, L.P., a
limited partnership of which Acorn Technology Partners, L.L.C. is the
general partner. Mr. Torkelsen is the Manager of Acorn Technology Partners.
Includes 21,664 shares of Common Stock underlying options that were
exercisable within 60 days of September 15, 1998. Mr. Torkelsen disclaims
beneficial ownership of the shares of Common Stock that are owned by Mrs.
Torkelsen.
(10) Includes 80,000 shares of Common Stock underlying options owned by LL
Sports Inc. that were exercisable within 60 days of September 15, 1998. Mr.
Lucchino controls LL Sports Inc. Also includes 21,664 shares of Common
Stock underlying options that were exercisable within 60 days of September
15, 1998.
(11) Includes 12,500 shares of Common Stock and 80,292 shares of Common Stock
underlying options granted to Mr. Greenlaw that were exercisable within 60
days of September 15, 1998. Also includes 10,000 shares purchased by Mr.
Greenlaw subsequent to September 15, 1998.
(12) Includes 25,000 shares of Common Stock underlying options granted to Mr.
Epstein that were exercisable within 60 days of September 15, 1998.
10
<PAGE> 15
(13) Includes 988,558 shares of Common Stock underlying warrants. Includes
481,944 shares of Common Stock underlying options that were exercisable
within 60 days of September 15, 1998.
As of September 15, 1998, the only executive officer or current director of
the Company who beneficially owned shares of Series A Preferred Stock was Brown
F Williams, who held 700 shares of Series A Preferred Stock, or 1.0% of the
outstanding Series A Preferred Stock. (The foregoing does not include the
holdings of a trust of which Mr. Williams' mother is a beneficiary.)
As of September 15, 1998, the only executive officers or current directors
of the Company who beneficially owned shares of Series B Preferred Stock were
John B. Torkelsen, who beneficially owned 6,200 shares of Series B Preferred
Stock (of which 1,000 shares were owned by Pamela R. Torkelsen, Mr. Torkelsen's
wife, and 5,200 shares were owned by PVR, a company of which Mr. Torkelsen is
the sole shareholder), and Eduardo Sitt, who beneficially owned 6,041 shares of
Series B Preferred Stock (all of which was owned by Presencia, a company of
which Mr. Sitt is President and a principal shareholder). Mr. Torkelsen and Mr.
Sitt beneficially own 7.2% and 7.0% of the outstanding Series B Preferred Stock,
respectively, and 14.2% of the outstanding Series B Preferred Stock,
collectively.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Consulting Agreements
John B. Torkelsen, a director of the Company, is the sole shareholder and
President of Princeton Venture Research, Inc. ("PVR"), a shareholder of the
Company. PVR entered into an arrangement with the Company regarding the services
of a consultant that PVR provided to the Company for several months in 1995. In
connection with such arrangement, in September 1997 the Company granted PVR
warrants to purchase 20,000 shares of Common Stock at an exercise price of $4.50
per share. Commencing in July 1997, PVR furnished the Company with extensive
consulting services in connection with financial structuring, negotiations with
various major shareholders and preparation of the Bridge Financing. In
connection with such services, the Company has paid PVR a fee of $100,000. In
consideration for financial advisory services rendered to the Company in
connection with the Company's October 1997 bridge financing, the Company paid
PVR Securities, Inc., an affiliate of PVR, a fee of $70,000, or five percent of
the gross proceeds of such bridge financing obtained from investors introduced
to the Company by PVR Securities, Inc. In connection with the exercise of
warrants to purchase Common Stock in May 1995, Mr. Torkelsen, Pamela R.
Torkelsen, Mr. Torkelsen's wife, and PVR executed promissory notes in favor of
the Company in the amounts of $80,000, $20,000 and $24,000, respectively. Such
transactions were canceled on February 1, 1998. In connection with the purchase
of Common Stock under the Company's 1997 rights offering, Mrs. Torkelsen and PVR
executed promissory notes in favor of the Company in the amounts of $9,720 and
$50,542.50, respectively. Such notes were subsequently paid in full by Mrs.
Torkelsen and PVR. Mr. Torkelsen is the Manager and a member of Acorn Technology
Partners, L.L.C., the general partner of Acorn Technology Fund, L.P., which
purchased 1.5 units in the Company's October 1997 bridge financing. Each unit
consisted of one note in the principal amount of $100,000 and a warrant to
purchase 10,000 shares of Common Stock at an exercise price of $0.01 per share.
The purchase price of each unit was $100,000. In January 1998, Acorn Technology
Fund L.P. exercised their warrants to purchase 15,000 shares of Common Stock.
Enrique F. Senior, a director of the Company, is a Managing Director and
Executive Vice President of Allen & Company Incorporated ("Allen"), which is a
principal shareholder of the Company, furnishes general financial advisory
services to the Company from time to time and acted as a representative of the
several underwriters in the Company's initial public offering. Except as
described herein, no fees have been paid to Allen or to Mr. Senior in connection
with such services and there are no arrangements providing for the payment of
fees for such services. Pursuant to a placement agent agreement, Allen was paid
a fee of $247,000 plus expenses, and received warrants to purchase 28,226 shares
of Common Stock at an exercise price of $19.25 per share, for raising funds for
the Company in a financing that closed in February 1996. In May 1998 the
exercise price of such warrants was reduced to $8.00 per share. See "-- Warrant
Repricing"
11
<PAGE> 16
below. Allen, as a representative of the several underwriters, received
underwriting discounts and commissions in the aggregate amount of approximately
$1,306,666.67, as well as warrants initially exercisable for 380,000 shares of
Common Stock at an exercise price of $8.40 per share, for services rendered on
behalf of the Company relating to its initial public offering. See "Security
Ownership of Certain Beneficial Owners and Management." Allen may serve as a
market maker for the Common Stock.
In 1993, the Company entered into a 50/50 joint venture with Presencia, a
principal shareholder of the Company, pursuant to which the parties formed
Publicidad Virtual, S.A. de C.V., a Mexican limited liability company
("Publicidad"), which was granted an exclusive, royalty-free license to use,
market and sub-license the Company's L-VIS System throughout Mexico, Central and
South America and the Spanish-speaking markets in the Caribbean basin. Presencia
was granted warrants to purchase 24,000 shares of Common Stock at an exercise
price of $15.00 per share in March 1996, in consideration of Presencia's
expenses incurred by Presencia in connection with Publicidad. In May 1998 the
exercise price of such warrants was reduced to $8.00 per share. See "-- Warrant
Repricing" below. Such warrants expire in March 2001. Presencia purchased three
units in the Company's October 1997 bridge financing. Following the closing of
such bridge financing, a bridge financing investor assigned an additional
100,000 warrants to Presencia. In January 1998 Presencia purchased 130,000
shares of the Common Stock of the Company upon the exercise of bridge financing
warrants. Mr. Eduardo Sitt is the President and a principal shareholder of
Presencia. See "Election of Directors" and "Security Ownership of Certain
Beneficial Owners and Management."
Indebtedness of Management
Brown F Williams, Chairman of the Board of the Company, exercised a warrant
to purchase 190,000 shares of Common Stock in July 1997 in exchange for his
non-recourse promissory note in the principal amount of $475,000, the aggregate
exercise price of such warrants. Such note bears an annual interest rate of 8.5%
and has a term of five years. However, the note will become payable in full when
all of the shares issued upon the exercise of such warrants become freely
transferable under applicable securities laws. Mr. Williams' obligations under
the note are secured by a pledge of such shares, and Mr. Williams is required to
assign to the Company any cash or marketable securities received with respect to
such shares. In connection with the exercise of the warrant in exchange for a
non-recourse note, the Company recorded a compensation charge of $261,250 in the
first quarter of Fiscal 1998. As of October 1, 1998, the entire loan amount of
$522,069, including accrued interest, remained outstanding.
Samuel A. McCleery, Vice President of Marketing and Sales of the Company,
exercised a warrant to purchase 72,000 shares of Common Stock in July 1997 in
exchange for his non-recourse promissory note in the principal amount of
$180,000, the aggregate purchase price of such warrants. The terms of such note,
and of the pledge of such shares that secures Mr. McCleery's obligations under
the note, are identical to those of Mr. Williams' note and pledge. In connection
with the exercise of the warrant in exchange for a non-recourse note, the
Company recorded a compensation charge of $99,000 in the first quarter of Fiscal
1998. As of October 1, 1998, the entire loan amount of $197,835, including
accrued interest, remained outstanding.
The total number of shares issued to Brown F Williams and Samuel A.
McCleery in exchange for notes payable to the Company which were outstanding as
of June 30, 1998 is 262,000 shares of Common Stock (or 3.2% of the outstanding
shares of Common Stock). Specifically, Mr. Williams received 190,000 shares of
Common Stock in exchange for a note in the amount of $475,000 and Mr. McCleery
received 72,000 Shares of Common Stock in exchange for a note in the amount of
$180,000.
In December 1997, Messrs. Williams and McCleery signed non-recourse
promissory notes (the "Tax Notes") in the amounts of $122,920 and $46,580,
respectively, as consideration for money received for the express purpose of
paying the tax liabilities incurred by each of them in connection with the
exercise of their warrants. The obligations under the Tax Notes are secured by
pledge agreements pursuant to which each of Messrs. Williams and McCleery
pledged their shares of Common Stock. Each of the Tax Notes bears an annual
interest rate of 8.5%. Each of the Tax Notes becomes due and payable upon the
earlier of (i) the first anniversary of the date on which all of such officer's
pledged shares become freely transferable, and (ii) the date on which such
officer sells, assigns or otherwise disposes of, for consideration, any interest
in any share of
12
<PAGE> 17
capital stock of the Company. As of October 1, 1998, the entire loan amounts of
$130,715 and $49,536, including accrued interest, remained outstanding under
Messrs. Williams' and McCleery's Tax Notes, respectively.
Registration Rights
The Company has granted certain demand and "piggyback" registration rights
to the holders of 3,583,652 outstanding shares of Common Stock and 792,130
shares of Common Stock issuable upon the exercise of outstanding warrants,
including Allen & Company Incorporated, Presencia en Medios, S.A. de C.V., Brown
F Williams, Sandra Williams, Douglas J. Greenlaw, Samuel A. McCleery, Jerome J.
Pomerance, Pamela R. Torkelsen and Princeton Venture Research, Inc. The Company
has also granted registration rights with respect to the 400,000 shares of
Common Stock issuable upon the exercise of the warrants granted to the
representatives of the several underwriters of the Company's initial public
offering of Common Stock in December 1997, including 380,000 shares of Common
Stock underlying a warrant granted to Allen & Company Incorporated. Subject to
certain conditions and limitations, the registration rights granted to such
holders give them the right to require the Company to register all or any
portion of the Common Stock held by them or issuable upon the exercise of
warrants held by them that are not transferable in a three-month period pursuant
to Rule 144 (collectively, the "Registrable Securities") in connection with any
registration by the Company of its securities on certain registration statements
under the Securities Act. Commencing in December 1998, the holders of at least
200,000 shares of the Registrable Securities may request registration on Form
S-3 once during any 12-month period, if such registration is available to the
Company at the time of such request and the shares to be registered constitute
at least two percent of the Common Stock (calculated on a fully diluted basis).
Following such a request, all holders of Registrable Securities will be given an
opportunity to participate in such registration. The registration rights
described herein are subject to certain notice requirements, timing restrictions
and volume limitations which may be imposed by the underwriters of an offering.
The Company is required to bear the expenses of all such registrations, except
for the underwriting discounts and commissions relating to the sale of the
shares of Common Stock held by such investors.
Warrant Repricing
As of May 28, 1998 the Board of Directors of the Company reduced to $8.00
per share the exercise price of various warrants, including warrants held by the
following parties with respect to the aggregate number of shares indicated: (i)
Allen & Company Incorporated -- 478,226 shares, (ii) Princeton Venture Research,
Inc. -- 28,200, and (iii) Presencia en Medios, S.A. de C.V. -- 34,932 shares. As
of the date of the repricing the market value of the Common Stock was $5.219 per
share and the exercise price under the warrants ranged from $12.50 to $19.25 per
share.
Additional Transactions
Douglas J. Greenlaw, Chief Executive Officer and President of the Company,
purchased one unit in the Company's October 1997 bridge financing. Each unit
consisted of one note in the principal amount of $100,000 and a warrant to
purchase 10,000 shares of Common Stock at an exercise price of $0.01 per share.
In July 1998, Mr. Greenlaw purchased 10,000 shares of Common Stock upon the
exercise of such warrant.
RATIFICATION OF AMENDMENT TO INCREASE THE
AUTHORIZED SHARES UNDER THE AMENDED 1993 STOCK OPTION PLAN
GENERAL
The Board of Directors of the Company has approved an amendment to the
Amended 1993 Stock Option Plan (the "Plan") to increase the number of shares of
Common Stock reserved for issuance upon the exercise of options granted under
the Plan from 1,560,000 to 2,160,000. At June 30, 1998, options to purchase
1,317,507 shares were outstanding under the Plan, leaving 242,493 shares
available for grant. In the event that any option under the Plan expires or is
terminated without having been exercised in full, the shares of
13
<PAGE> 18
Common Stock allocable to the unexercised portion of such option may again be
subjected to an option under the Plan. At October 1, 1998 the market value of
the Common Stock underlying the options was $4.125 per share based on the
closing price.
The Plan was adopted by the Board of Directors and ratified by the
stockholders of the Company in August 1993. Directors, officers, employees and
consultants of the Company or any of its subsidiaries are eligible to receive
options pursuant to the terms of the Plan. The Company currently has seven
directors (one of whom advised the Company that he will not stand for
re-election to the Board of Directors at the Meeting), four officers (two of
whom are also directors), approximately 47 employees (including the officers)
and seven consultants. The Board believes that providing selected persons with
an opportunity to invest in the Company will give them additional incentive to
increase their efforts on behalf of the Company and will enable the Company to
attract and retain the best available employees, officers, directors and
consultants. Furthermore, the Company's President, has announced that he will
step down by the end of calendar 1998 and the Company has initiated a search for
a Chief Executive Officer. The Company believes that it may be necessary to
include stock options as additional compensation for a Chief Executive Officer.
An increase in the number of shares available under the Plan is necessary to
provide sufficient shares to achieve these goals.
Stockholder approval of the amendment to the Plan is being sought to
satisfy Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") which requires stockholder approval of amendment of the Plan in order
that options granted under the Plan may qualify as incentive stock options
("ISOs") and thus be entitled to receive special tax treatment under the Code
and to satisfy a Bylaw of the National Association of Securities Dealers which
requires companies whose shares are reported on the NASDAQ National Market
System to obtain stockholder approval of stock option plans.
Options granted under the Plan may be either ISO's as defined in Section
422 of the Code, or non-qualified stock options ("NQSOs"). ISOs may be granted
only to employees of the Company and are subject to the following limitations,
in addition to restrictions applicable to all stock options under the Plan: (1)
an ISO may not be granted to an employee who at the time of grant owns in excess
of 10% of the outstanding Common Stock of the Company, unless the exercise price
under the option is at least 110% of the fair market value of the stock subject
to the option as of the date of grant of the option and the option term is no
more than five years, (2) the aggregate fair market value (determined as of the
time the option is granted) of stock with respect to which ISOs are exercisable
for the first time by an optionee during any calendar year (under all option
plans of the Company) may not exceed $100,000, (3) the exercise price of an ISO
must be not less than the fair market value of the stock at the time the option
is granted, (4) ISOs may not be sold, pledged or otherwise transferred other
than by will or by the laws of descent and distribution, and (5) in the event of
termination of an ISO holder's employment with the Company, any ISOs which are
then exercisable must be exercised within three months of such termination (or
within twelve months if the termination is the result of death or disability).
Options that do not meet the above qualifications will be treated as NQSOs.
TERMS OF THE PLAN.
Administration of the Plan. With respect to grants of options to employees
or consultants who are also officers or directors of the Company, the Plan is
administered by the Board of Directors of the Company, or a committee
constituted in compliance with Rule 16b-3 under the Securities Exchange Act of
1934, as amended, and other applicable law. With respect to grants of options to
employees or consultants who are neither directors nor officers of the Company,
the Plan is administered by (1) the Board, or (2) a committee designated by the
Board.
The Plan may be administered by multiple administrative bodies. Presently,
the Plan is administered by the Board. The Board or a committee designated by
the Board, as the case may be, shall, in its capacity as administrator, be
hereinafter referred to as the "Administrator."
Powers of the Administrator. In addition to the functions otherwise
discussed in this Proxy Statement, the Administrator shall determine, subject to
the terms and conditions of the Plan, (1) the consultants and
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<PAGE> 19
employees to whom options may be granted, (2) whether and to what extent options
are granted, (3) the number of shares covered by an option, (4) the
consideration to be paid upon the exercise of an option, and (5) all other terms
and conditions of an option.
Exercise Price. The exercise price of an option is determined by the
Board, subject to the applicable provisions of the Code, as discussed above.
Agreement. Options will be evidenced by written agreements.
Term of Option; Vesting. The term of an option will be stated in the
option agreement, provided that no option may be exercisable after the
expiration of ten years from the date it is granted and no ISO granted to a
holder of ten percent of the total voting power of the Company may be
exercisable after the expiration of five years from the date it is granted.
Transferability. Options may not be sold or otherwise transferred other
than by will or by the laws of descent and distribution and during the lifetime
of the optionee shall be exercisable only by the optionee.
Adjustments. Appropriate adjustments will be made in the number of shares
of stock covered by the Plan or subject to options granted under the Plan, and
in the exercise price per share of such options, in the event that the number of
outstanding shares of Common Stock of the Company is changed by a stock
dividend, stock split, reverse stock split, combination, reclassification or
similar change in the capital structure of the Company without consideration.
In the event of the proposed dissolution or liquidation of the Company, the
Board shall notify the optionee at least fifteen days prior to such proposed
action. To the extent it has not been previously exercised, the Option will
terminate immediately prior to the consummation of such proposed action.
In the event of a merger of the Company with or into another corporation,
options shall be assumed or equivalent options shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation.
In the event the successor corporation does not assume the options or substitute
equivalent options, the Board shall provide for optionees to have the right to
exercise options as to all underlying stock, including shares as to which the
options would not otherwise be exercisable. If the Board makes options fully
exercisable in lieu of assumption or substitution in the event of a merger, the
Board shall notify optionees that the options shall be fully exercisable for a
period of fifteen (15) days from the date of notice, and the options will
terminate upon the expiration of such period.
Amendment and Termination of the Plan. Options may be granted under the
Plan from time to time until August 2003. The Board may at any time terminate or
amend the Plan, provided that (i) no amendment can be made which would impair
the rights of any optionee under any grant theretofore made without the consent
of the optionee, and (ii) stockholder approval must be obtained for any
amendment for which such approval is required by applicable laws or regulations.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary discusses certain of the federal income tax
consequences associated with options granted under the Plan. This description of
tax consequences is based upon present federal tax laws and regulations and does
not purport to be a complete description of the federal income tax consequences
applicable to an optionee under the Plan. Accordingly, each optionee should
consult with his or her own tax advisor regarding the federal, state and local
tax consequences of the grant of an option and any subsequent exercise and
whether any action is appropriate.
Non-Qualified Stock Options. There are no federal income tax consequences
associated with the grant of a NQSO. Upon the exercise of a NQSO, the optionee
generally must recognize ordinary compensation income equal to the "spread"
between the exercise price and the fair market value of the Company's Common
Stock on the date of exercise. Any gain realized on disposition of shares
purchased upon exercise of the NQSO will be treated as capital gain for federal
income tax purposes.
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<PAGE> 20
Incentive Stock Options. There will be no regular federal income tax
liability upon exercise of an ISO. However, the "spread" between the exercise
price and the fair market value of the Company's Common Stock on the date of
exercise will be treated as an adjustment to income for federal alternative
minimum tax purposes and may subject the optionee to the alternative minimum tax
in the year of exercise.
Any gain realized on disposition of shares purchased upon exercise of an
ISO will be treated as long-term capital gain for federal income tax purposes if
such shares are held for at least twelve months after the date of the issuance
of the shares pursuant to the exercise of the ISO and are disposed of at least
two years after the date of grant of the ISO. If the shares are disposed of
within twelve months after the date of issuance of the shares or within two
years after the date of grant of the ISO, the optionee will recognize
compensation income (taxable at ordinary income rates) to the extent of the
excess, if any, of the fair market value of such shares on the date of exercise
over the exercise price of the ISO.
Compensation Deduction. To the extent compensation income is recognized by
an optionee in connection with the exercise of a NQSO or a "disqualifying
disposition" of stock obtained upon exercise of an ISO, the Company generally
would be entitled to a matching compensation deduction (assuming the requisite
withholding requirements are satisfied).
As of October 1, 1998, the Company had granted options to purchase an
aggregate of 1,317,507 shares of Common Stock (net of cancellations) under the
Plan at a weighted average exercise price of $8.35 per share. As of October 1,
1998, options to purchase 933,862 shares of Common Stock were exercisable and
options to purchase zero (0) shares of Common Stock had been exercised under the
Plan. See "Election of Directors -- Compensation of Directors."
As of October 1, 1998, the following persons or groups had received options
to purchase shares of Common Stock under the Plan as follows: (i) the Chief
Executive Officer and the other executive officers: Brown F Williams 170,000
shares, Douglas J. Greenlaw 120,293 shares, Samuel A. McCleery 70,000 shares,
and Lawrence Epstein 100,000 shares; (ii) all current executive officers of the
Company as a group: 460,293 shares; (iii) all current directors who are not
executive officers as a group: 180,000 shares; (iv) each nominee for director
who is not the Chief Executive Officer or an executive officer: Lawrence
Lucchino 30,000 shares, Jerome J. Pomerance 50,000 shares, Enrique F. Senior
30,000 shares, Eduardo Sitt 40,000 shares, and John B. Torkelsen 30,000 shares;
(v) all employees, including all current officers who are not executive
officers, as a group: 180,000 shares.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE AMENDMENT TO THE COMPANY'S AMENDED 1993 STOCK OPTION PLAN.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has, subject to shareholder
ratification, retained PricewaterhouseCoopers LLP to serve as independent public
accountants of the Company for the fiscal year ending June 30, 1999 because it
is an internationally recognized accounting firm familiar with the accounting,
tax and financial issues that relate to and affect technology companies involved
in sports advertising. PricewaterhouseCoopers LLP has personnel that specialize
in high technology and sports advertising and has assigned such personnel to
work with Princeton Video Image, Inc. PricewaterhouseCoopers LLP also served as
independent public accountants of the Company for the fiscal year ended June 30,
1998.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT PUBLIC ACCOUNTANTS
OF THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 30, 1999.
One or more representatives of PricewaterhouseCoopers LLP is expected to
attend the Meeting and have an opportunity to make a statement and/or respond to
appropriate questions from shareholders.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission ("SEC") and the NASD. Officers, directors and greater than
ten percent shareholders are required by SEC regulation to furnish the Company
with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for specified fiscal years, the Company
believes that all its officers, directors, and greater than ten percent
beneficial owners complied with all filing requirements applicable to them with
respect to transactions during fiscal 1997 except that Form 3s reflecting the
holdings of Messrs. Williams, McCleery, Lucchino, Sitt and Pomerance were
originally submitted for filing with the Securities and Exchange Commission on
December 16, 1997 and, because the initial filings were deemed illegible by the
SEC, were resubmitted and filed on December 23, 1997 or, with respect to Mr.
Sitt, on January 9, 1998. Form 3s reflecting the holdings of Messrs. Greenlaw
and Torkelsen were filed one and seven days late, respectively.
SHAREHOLDERS' PROPOSALS
Shareholders deciding to submit proposals for inclusion in the Company's
proxy statement and form of proxy relating to the 1999 Annual Meeting of
Shareholders must advise the Chairman of the Company of such proposals in
writing by August 12, 1999. In addition, the proxy solicited by the Board of
Directors of the Company for the 1999 Annual Meeting of Shareholders will confer
discretionary authority to vote on any shareholder proposal presented at that
meeting, unless the Chairman of the Company receives written notice of such
proposal no later than September 25, 1999.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for
action at the Meeting other than the matters referred to above and does not
intend to bring any other matters before the Meeting. However, if other matters
should come before the Meeting, it is intended that holders of the proxies will
vote thereon in their discretion.
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<PAGE> 22
GENERAL
The accompanying proxy is solicited by and on behalf of the Board of
Directors of the Company, whose notice of meeting is attached to this Proxy
Statement, 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 personal
interview, telephone and telegram by directors, officers and other employees of
the Company who will not be specially compensated for these services. The
Company has retained the services of American Stock Transfer & Trust Company to
assist in the proxy solicitation at a fee estimated to be $2,500. The Company
will also request that brokers, nominees, custodians and other fiduciaries
forward soliciting materials to the beneficial owners of shares held of record
by such brokers, nominees, custodians and other fiduciaries. The Company will
reimburse such persons for their reasonable expenses in connection therewith.
Certain information contained in this Proxy Statement relating to the
occupations and security holdings of directors and officers of the Company is
based upon information received from the individual directors and officers.
PRINCETON VIDEO IMAGE, INC. HAS FURNISHED, WITHOUT CHARGE, A COPY OF ITS
REPORT ON FORM 10-KSB FOR THE YEAR ENDED JUNE 30, 1998, INCLUDING FINANCIAL
STATEMENTS AND SCHEDULES THERETO BUT NOT INCLUDING EXHIBITS, TO EACH OF ITS
SHAREHOLDERS OF RECORD ON NOVEMBER 6, 1998 AND WILL FURNISH TO EACH BENEFICIAL
STOCKHOLDER SUCH REPORT UPON WRITTEN REQUEST MADE TO THE SECRETARY OF THE
COMPANY. A REASONABLE FEE WILL BE CHARGED FOR COPIES OF REQUESTED EXHIBITS.
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE IN
THE ENCLOSED RETURN ENVELOPE. A PROMPT RETURN OF YOUR PROXY CARD WILL BE
APPRECIATED AS IT WILL SAVE THE EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors
Samuel A. McCleery,
Vice President, Marketing and Sales,
and Assistant Secretary
Lawrenceville, New Jersey
October 28, 1998
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REVOCABLE PROXY
[X] PLEASE MARK VOTES PRINCETON VIDEO IMAGE, INC.
AS IN THIS EXAMPLE
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE CORPORATION FOR THE ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby constitutes and appoints Brown F Williams, Samuel
A. McCleery and Lawrence Epstein and each of them, his or her true and lawful
agents and proxies with full power of substitution in each, to represent and to
vote on behalf of the undersigned all of the shares of Common Stock of Princeton
Video Image, Inc. (the "Company") which the undersigned is entitled to vote at
the Annual Meeting of Shareholders of the Company to be held at the Company's
principal executive offices at 15 Princess Road, Lawrenceville, New Jersey at
9:00 A.M., local time, on Thursday, December 10, 1998, and at any adjournment or
adjournments thereof, upon the following proposals more fully described in the
Notice of Annual Meeting of Shareholders and Proxy Statement for the Meeting
(receipt of which is hereby acknowledged).
With- For All
For hold Except
1. ELECTION OF DIRECTORS. [ ] [ ] [ ]
(Mark one only)
NOMINEES: BROWN F WILLIAMS, LAWRENCE LUCCHINO, JEROME J. POMERANCE, ENRIQUE F.
SENIOR, EDUARDO SITT AND JOHN B. TORKELSEN
(INSTRUCTIONS: To withhold authority for any individual nominee, write that
nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
Please be sure to sign and date
this Proxy in the box below Dated:
Signature of Shareholder Signature of Shareholder if held Jointly
For Against Abstain
2. Approval of proposal to ratify the [ ] [ ] [ ]
appointment of PricewaterhouseCoopers
LLP as the independent public
accountants of the Company for the
fiscal year ending June 30, 1999.
For Against Abstain
3. Approval of proposal to ratify the [ ] [ ] [ ]
amendment of the Company's Amended 1993
Stock Option Plan to increase the number
of shares of Common Stock reserved for
issuance upon the exercise of options
granted under the Plan from 1,560,000
shares to 2,160,000 shares.
I Will Will Not Attend the
4. In their discretion, the proxies are [ ] [ ] Meeting
authorized to vote upon other matters as
may properly come before the Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2 AND 3.
DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.
PRINCETON VIDEO IMAGE, INC.
- --------------------------------------------------------------------------------
This proxy must be signed exactly as the name appears hereon. When shares are
held by joint tenants, both should sign. If the signer is a corporation, please
sign full corporate name by duly authorized officer, giving full title as such.
If a partnership, please sign in partnership name by authorized person.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
