<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:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
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(l)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(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):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] 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:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
PRINCETON VIDEO IMAGE, INC.
15 PRINCESS ROAD
LAWRENCEVILLE, NJ 08648
TO OUR SHAREHOLDERS:
You are most cordially invited to attend the 1999 Annual Meeting of
Shareholders of Princeton Video Image, Inc. at 9:00 AM, local time, on Friday,
December 3, 1999, 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> 3
PRINCETON VIDEO IMAGE, INC.
15 PRINCESS ROAD
LAWRENCEVILLE, NJ 08648
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 3, 1999
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 Friday, December 3, 1999, at 9:00 AM, local time, for the following
purposes:
(1) To elect eight (8) directors to serve until the Annual Meeting of
Shareholders to be held in 2000 and until their successors shall have
been duly elected and qualified;
(2) To consider and vote upon a proposal to ratify a proposed amendment to
Article III, Section 4 of the Bylaws of the Company regarding vacancies
and newly created directorships;
(3) To consider and vote upon a proposal to ratify an amendment to the
Company's Amended 1993 Stock Option Plan to provide automatic stock
option grants, the vesting of which is based on attendance at meetings,
to the members of the Board of Directors for their service on the Board
of Directors;
(4) To ratify the appointment of PricewaterhouseCoopers LLP as the
independent public accountants of the Company for the fiscal year
ending June 30, 2000; and
(5) 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,
October 15, 1999, 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.
The Company's current Board of Directors is comprised of seven persons.
Prior to the date hereof, the Board of Directors of the Company amended Article
III, Section 2 of the Bylaws of the Company to provide as follows: The
authorized number of directors of the Company shall be established from time to
time by the Board and shall not be less than one (1) nor more than eleven (11).
Pursuant to this bylaw, the size of the Board of Directors has been expanded to
eight for the Meeting. This will permit the shareholders to elect all eight
nominees at the Meeting. The amendment will further allow for future increases
in the size of the Board, up to eleven persons.
<PAGE> 4
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 SHAREHOLDER 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, Business Development,
and Assistant Secretary
Lawrenceville, New Jersey
October 28, 1999
THE COMPANY'S 1999 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 3, 1999, (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 of
the Company (the "Common Stock"), as of the close of business on Friday, October
15, 1999, 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 that date, there were
8,228,091 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
ratification of the proposed amendment to Article III, Section 4 of the Bylaws
of the Company regarding vacancies and newly created directorships; (iii) FOR
the ratification of the proposed amendment of the Company's Amended 1993 Stock
Option Plan; (iv) FOR the ratification of the appointment of
PricewaterhouseCoopers LLP as independent public accountants for the year ending
June 30, 2000, and (v) 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 October 28, 1999. The Annual
Report to Shareholders of the Company for the year ended June 30, 1999,
including financial statements (the "Annual Report"), is being mailed
concurrently with this Proxy Statement to all shareholders of record as of
October 15, 1999. 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.
<PAGE> 6
ELECTION OF DIRECTORS
At the Meeting, directors are to be elected to hold office until the Annual
Meeting of Shareholders to be held in 2000 and until their successors shall have
been elected and qualified. The nominees for election to the Board of Directors
are Brown F Williams, Dennis P. Wilkinson, Donald P. Garber, 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. All of the persons
whose names and biographies appear below are at present directors of the
Company, with the exception of Mr. Garber. The size of the Board of Directors
has been expanded to eight for the Meeting to permit the shareholders to elect
all eight nominees at the Meeting. 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 following is the name and age of each nominee:
<TABLE>
<CAPTION>
NAME AGE
- ---- ---
<S> <C>
Brown F Williams............................................ 58
Dennis P. Wilkinson......................................... 51
Donald P. Garber............................................ 42
Lawrence Lucchino........................................... 54
Jerome J. Pomerance......................................... 58
Enrique F. Senior........................................... 56
Eduardo Sitt................................................ 68
John B. Torkelsen........................................... 54
</TABLE>
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.
DENNIS P. WILKINSON joined the Company in November 1998 as President and
Chief Executive Officer. Mr. Wilkinson was elected to the Board of Directors of
the Company in December 1998. Prior to joining the Company, Mr. Wilkinson served
as Senior Vice President of Marketing and Programming at Primestar, Inc., then
the second largest Direct Broadcast Satellite provider in the United States from
May 1995 through September 1998. Before joining Primestar, he was Senior Vice
President of Consumer Marketing at Time Warner Entertainment/Home Box Office
from 1992 to 1995.
DONALD P. GARBER was recently appointed the Commissioner, President and
Chief Executive Officer of Major League Soccer in August 1999. Prior to such
appointment, Mr. Garber served in various positions with the National Football
League over the past fifteen years. Most recently he served as Senior Vice
President of NFL International, the NFL's international division, where he was
responsible for managing the NFL Europe
2
<PAGE> 7
league, from October 1996 to July 1999. Prior to working with NFL International,
Mr. Garber was Vice President of Business Development and Special Events for NFL
Properties from 1990 to 1996.
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, Mr. Lucchino served as President of the Baltimore
Orioles from May 1988 until October 1993. He has been a member of the MLB
Operations Committee and currently serves on the Commissioner's Blue Ribbon Task
Force on Baseball Economics. Mr. Lucchino has served as President and Chief
Executive Office of the San Diego Padres since December 1994, and has been a
partner in the Washington, D.C. law firm of Williams & Connolly since 1978.
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.,
an entity that was originally formed as a joint venture 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 April 1999, Mr. Torkelsen has been President of Equity Valuation Advisors,
Inc., an affiliated financial consulting company. He also serves as President of
its affiliate, PVR Securities, Inc., formed in 1987. Mr. Torkelsen is the
Manager of the General Partner (Acorn Technology Partners, LLC) of Acorn
Technology Fund, L.P., a venture capital fund specializing in early stage, high
technology investing. From 1984 to March 1999, he was President of Princeton
Venture Research, Inc., an investment, banking, consulting and venture capital
firm that he founded. Mr. Torkelsen currently serves as a director of one other
publicly held company, 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
3
<PAGE> 8
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.
The Compensation Committee is comprised of Lawrence Lucchino, Enrique F.
Senior and John B. Torkelsen. The Compensation Committee held nine meetings
during the year ended June 30, 1999. The Audit Committee is comprised of Enrique
F. Senior, Eduardo Sitt and John B. Torkelsen. The Audit Committee did not hold
a meeting during the year ended June 30, 1999, but has subsequently held one
meeting. The Nominating Committee currently is comprised of Brown F Williams,
Lawrence Lucchino, and Enrique F. Senior. The Nominating Committee held one
meeting during the year ended June 30, 1999. Douglas J. Greenlaw, a former
director, President and Chief Executive, also served on the Nominating Committee
until the date of his resignation in December 1998. There were nine meetings of
the Board of Directors in the fiscal year ended June 30, 1999. With the
exception of Mr. Lucchino, each director attended at least 75% of all meetings
of the Board of Directors and the committee(s) on which he served during the
period in which he 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 of common stock, 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 per share of common stock. In October 1999, the
Company also granted to each of the current directors an option to purchase
10,000 shares of common stock at an exercise price of $4.688 per share. In
addition, each nominee will also receive, subject to the shareholder's
ratification of the proposed amendment to the Company's Amended 1993 Stock
Option Plan at the Meeting (see discussion below), an option to purchase 10,000
shares of common stock at an exercise price of $4.688, the vesting of which will
be based upon attendance at future board meetings. All directors are reimbursed
for expenses incurred in connection with attendance at Board of Directors and
committee meetings.
4
<PAGE> 9
EXECUTIVE OFFICERS
The following table identifies the current executive officers of the
Company:
<TABLE>
<CAPTION>
IN CURRENT
NAME AGE CAPACITIES IN WHICH SERVED POSITIONS SINCE
- ---- --- --------------------------------------- ---------------
<S> <C> <C> <C>
Brown F Williams..................... 58 Chairman of the Board January 1997
Dennis P. Wilkinson.................. 51 President, Chief Executive Officer and November 1998 (1)
Director
Lawrence L. Epstein(2)............... 45 Vice President, Finance, Chief February 1998
Financial Officer and Treasurer
Paul Slagle(3)....................... 48 Vice President, Marketing and Sales October 1999
Samuel A. McCleery................... 48 Vice President, Business Development, September 1999(4)
and Assistant Secretary
</TABLE>
- ---------------
(1) DENNIS P. WILKINSON was elected President and Chief Executive Officer in
November 1998 and was elected to the Board of Directors of the Company in
December 1998.
(2) 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., then 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.
(3) PAUL SLAGLE has been the Company's Vice President, Marketing and Sales,
since October 1999. Prior to October 1999, Mr. Slagle served as Vice
President of Integrated Sales & Marketing for ESPN from July 1994 to October
1999. From August 1991 through June 1994, Mr. Slagle was Director of
National Television for Wieden & Kennedy. Prior to 1991, Mr. Slagle has also
served as Vice President of Special Events for Streff-Buchanan
Communications.
(4) SAMUEL A. MCCLEERY has been the Company's Vice President, Business
Development, since September 1999 and its Assistant Secretary since October
1997. From November 1991 through September 1999, Mr. McCleery was the
Company's Vice President, Marketing and Sales. 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).
5
<PAGE> 10
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the annual
and long-term compensation for the fiscal years ended June 30, 1999, 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, 1999 (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............................. 1999 $229,167 -- $ 25,000
Chairman of the Board 1998 225,000 20,000 261,250(1)
1997 225,000 150,000 --
Dennis P. Wilkinson.......................... 1999 $161,474 400,000 $ 25,000
President and Chief Executive Officer 1998 -- -- --
1997 -- -- --
Lawrence L. Epstein.......................... 1999 $150,000 -- --
Vice President, Finance, Chief 1998 31,346 100,000 --
Financial Officer and Treasurer 1997 -- -- --
Samuel A. McCleery........................... 1999 $150,000 -- --
Vice President, Marketing and Sales 1998 150,000 20,000 $ 99,000(1)
1997 150,000 50,000 --
Douglas J. Greenlaw(2)....................... 1999 $112,500 -- --
1998 225,000 120,293 --
1997 106,725 210,000 --
</TABLE>
- ---------------
(1) 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."
(2) Mr. Greenlaw previously served as the President and Chief Executive Officer
of the Company.
The following table sets forth certain information concerning grants of
stock options during the fiscal year ended June 30, 1999, 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 1999(1) PER SHARE EXPIRATION DATE
- ---- ---------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Dennis P. Wilkinson(1)................. 200,000 32.6% $4.563 November 2008
200,000 32.6% 7.00 November 2008
</TABLE>
- ---------------
(1) The first option for 200,000 shares is exercisable as to approximately 5,555
shares per month over a period of three years commencing November 1999. The
second option for 200,000 shares is exercisable in annual increments of up
to 50,000 shares based upon the Company's attainment of certain revenue
milestones.
6
<PAGE> 11
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to
exercises of options to purchase Common Stock during the fiscal year ended June
30, 1999 by the Named Officers and unexercised options to purchase Common Stock
held by the Named Officers at June 30, 1999.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES VALUE JUNE 30, 1999 AT JUNE 30, 1999(1)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Brown F Williams.............. -- -- 140,834 29,166 -- --
Dennis P. Wilkinson........... -- -- 38,889 361,111 -- --
Lawrence L. Epstein........... -- -- 44,444 55,556 -- --
Samuel A. McCleery............ -- -- 57,500 12,500 $40,620 --
Douglas J. Greenlaw........... -- -- 91,959 28,334 -- --
</TABLE>
- ---------------
(1) Based on the closing price on the Nasdaq National Market on June 30, 1999:
$4.531.
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 accord with the provisions of the agreement, in April 1999 the
Board of Directors approved an increase in Mr. Williams base salary to $250,000,
effective May 1, 1999, and awarded Mr. Williams a bonus of $25,000. 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 November 1998, the Company and Mr. Wilkinson entered into a three-year
employment agreement that provides for automatic renewal for three year periods
and permits the Company to terminate the agreement upon 90 days' prior notice.
Pursuant to the employment agreement, Mr. Wilkinson's base salary is $275,000
per year, subject to an increase of $25,000 per year at the discretion of the
Board of Directors. In addition, Mr. Wilkinson is eligible to receive a bonus of
$25,000 at the end of each year based on performance measures determined by the
Board of Directors. Pursuant to the agreement, Mr. Wilkinson received options to
purchase shares of Common Stock. See "Option Grants in Last Fiscal Year" above.
In the event Mr. Wilkinson's employment is terminated by the Company without
cause, the agreement provides for a continuation of his then current salary for
the balance of the then current term, but in no case less than twelve months.
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.
7
<PAGE> 12
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. 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 October 1999, the Company and Mr. Slagle 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. Slagle's base salary will be $175,000 per year, subject to
increases at the discretion of the Board of Directors. Mr. Slagle will also
receive a signing bonus in the amount of $70,000 payable in two installments:
$35,000 thirty days after his date of hire and $35,000 after the first
anniversary of his date of hire. In addition, Mr. Slagle is eligible to receive
a bonus of no less than $75,000 upon the satisfactory completion of his first
year of employment. Pursuant to the agreement, Mr. Slagle will receive an option
to purchase 65,000 shares of Common Stock. In the event Mr. Slagle's employment
is terminated by the Company without cause, he is entitled to receive his then
current salary for a period of three months. In the event Mr. Slagle terminates
his employment due to a detrimental change in the nature of scope of his
employment or duties, he is entitled to receive his then current salary for a
period of three months.
In January 1997, the Company and Mr. Greenlaw entered into an employment
agreement pursuant to which his base salary was $225,000 per year. The
employment agreement was amended in May 1998 (the "Amendment"). Pursuant to the
Amendment, the Company payed Mr. Greenlaw his salary, exclusive of bonuses,
through December 31, 1998. Under the Amendment, Mr. Greenlaw may provide
consulting services to the Company at the Company's request through February 1,
2001.
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 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 1999) and have the
amount of such reduction contributed to the 401(k) Plan. In 1999, the Board of
Directors authorized an amendment to the Plan pursuant to which the Company will
match fifty percent (50%) of employees' contributions with a contribution of
Common Stock having an initial fair market value equivalent to the employee
contribution, up to five percent (5%) of the participant's contribution,
effective as of July 1, 1999. Contributions by both the Company and 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 1, 1999, 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 directors,
nominees and executive officers 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)........................................ 1,112,916 12.2%
c/o Allen & Company Incorporated
711 Fifth Avenue
New York, NY 10020
Allen & Company Incorporated(3)............................. 1,085,972 12.0%
Allen Holding Inc.
Herbert A. Allen
711 Fifth Avenue
New York, NY 10020
Eduardo Sitt(4)............................................. 651,252 7.9%
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 7.4%
Paseo de las Palmas
No. 735, desp 206
11000 Mexico, DF
Brown F Williams(6)......................................... 551,739 6.6%
c/o Princeton Video Image, Inc.
15 Princess Road
Lawrenceville, NJ 08648
Lawrence L. Epstein(7)...................................... 55,556 *
Donald P. Garber............................................ 0 *
Douglas J. Greenlaw(8)...................................... 121,126 1.5%
Lawrence Lucchino(9)........................................ 106,944 1.3%
Samuel A. McCleery(10)...................................... 188,255 2.3%
Jerome J. Pomerance(11)..................................... 196,786 2.4%
John B. Torkelsen(12)....................................... 87,636 1.1%
Dennis P. Wilkinson(13)..................................... 61,111 *
All directors and executive officers as a group (9
persons)(14).............................................. 3,133,321 32.0%
</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
9
<PAGE> 14
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 8,213,665 shares of Common
Stock outstanding as of September 1, 1999. 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 227,746 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 immediately
below. By virtue of his positions with Allen, Mr. Senior may, under certain
circumstances derive economic benefit from such securities. Includes 26,944
shares of Common Stock underlying options that were exercisable within 60
days of September 1, 1999. Does not include shares of Common Stock held by
Allen in its capacity as a market maker or shares of Common Stock held
directly by certain officers, directors or employees of Allen.
(3) Includes 227,746 shares of Common Stock and 478,226 shares of Common Stock
underlying warrants owned of record by Allen. 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 shares
of Common Stock held by Allen in its capacity as a market maker or shares
of Common Stock held directly by certain officers, directors or employees
of Allen. See Note 2 immediately above. Does not include 200,000 shares of
Common Stock underlying a warrant received by Allen with respect to its
services as a placement agent in connection with the Company's private
placement of Common Stock on October 20, 1999. In addition to Allen, Allen
Holding Inc., the holder of all of the outstanding stock of Allen, and
Herbert A. Allen, the controlling stockholder of Allen Holding Inc., may,
consistent with applicable rules, be deemed the beneficial owner of the
securities held by Allen.
(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 immediately below. Includes 36,944
shares of Common Stock underlying options that were exercisable within 60
days of September 1, 1999.
(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 Note 4 immediately above.
(6) Includes 8,426 shares of Common Stock owned by Sandra Williams, as
custodian for Bronwyn Williams, Mr. and Mrs. Williams' minor daughter, and
53,266 shares owned by Sandra Williams, Mr. Williams' wife. Also includes
332,546 shares of Common Stock and 157,501 shares of Common Stock
underlying options that were exercisable within 60 days of September 1,
1999. 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 55,556 shares of Common Stock underlying options granted to Mr.
Epstein that were exercisable within 60 days of September 1, 1999.
(8) Includes 22,500 shares of Common Stock and 98,626 shares of Common Stock
underlying options granted to Mr. Greenlaw that were exercisable within 60
days of September 1, 1999.
(9) Includes 80,000 shares of Common Stock underlying options owned by LL
Sports Inc. that were exercisable within 60 days of September 1, 1999. Mr.
Lucchino controls LL Sports Inc. Also includes
10
<PAGE> 15
26,944 shares of Common Stock underlying options that were exercisable
within 60 days of September 1, 1999.
(10) Includes 78,000 shares of Common Stock, 47,200 shares of Common Stock
underlying warrants and 63,055 shares of Common Stock underlying options
granted to Mr. McCleery that were exercisable within 60 days of September
1, 1999.
(11) 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 46,944 shares of Common Stock underlying options that were
exercisable within 60 days of September 1, 1999.
(12) Includes 5,992 shares of Common Stock owned by Pamela R. Torkelsen, Mr.
Torkelsen's wife, 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 6,500 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 26,944 shares of Common
Stock underlying options that were exercisable within 60 days of September
1, 1999. Mr. Torkelsen disclaims beneficial ownership of the shares of
Common Stock that are owned by Mrs. Torkelsen.
(13) Includes 61,111 shares of Common Stock underlying options granted to Mr.
Wilkinson that were exercisable within 60 days of September 1, 1999.
(14) Includes 988,558 shares of Common Stock underlying warrants. Includes
680,569 shares of Common Stock underlying options that were exercisable
within 60 days of September 1, 1999.
As of September 1, 1999, 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 1, 1999, 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 Princeton Venture Research, Inc., 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.
11
<PAGE> 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Consulting and Other Agreements
John B. Torkelsen, a director of the Company, 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 (the "October 1997 Bridge Financing"). Each unit consisted of one
promissory note in the principal amount of $100,000 and bearing interest at a
rate of 10%, and warrants (the "Bridge Warrants") 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. Following the Company's initial public offering of Common
Stock, the Company paid the principal and all accrued interest on all of the
notes issued in the October 1997 Bridge Financing. In January 1998, Acorn
Technology Fund L.P. exercised their Bridge Warrants to purchase 15,000 shares
of Common Stock and has subsequently sold 8,500 of such shares. See "Security
Ownership of Certain Beneficial Owners and Management."
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, has furnished 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. Allen, as a
representative of the several underwriters, received underwriting discounts and
commissions in the aggregate amount of $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 of Common Stock in December 1997. See "Security
Ownership of Certain Beneficial Owners and Management." Allen may serve as a
market maker for the Common Stock.
On October 20, 1999 the Company issued 1,592,727 shares of Common Stock to
investors at $5.50 per share in connection with a private placement. Allen acted
as the placement agent for the private placement and received a commission of
$438,000 and a warrant to purchase 200,000 shares of Common Stock at an exercise
price of $6.60 at any time on or before October 21, 2006. See "Registration
Rights" below.
In 1993, the Company entered into a 50/50 joint venture with Presencia en
Medios, S.A. de C.V. ("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. Such warrants expire in March 2001. As of January 1, 1999, the
Company entered into an Amendment Agreement with Publicidad which amended the
terms of the license. Pursuant to the amended license, Publicidad will pay to
the Company a royalty on annual net revenues as follows: (i) a 17% royalty on
net revenues of up to $3,000,000, (ii) a 25% royalty on incremental annual net
revenues exceeding $3,000,000 and up to $6,000,000, and (iii) a 20% royalty on
incremental annual net revenues exceeding $6,000,000. The Company also entered
into a Stock Purchase Agreement, dated as of January 1, 1999, with Presencia and
Eduardo Sitt, the President and a principal shareholder of Presencia, and a
director of the Company. In accord with the terms and conditions of such Stock
Purchase Agreement, the Company sold its interest in Publicidad to Presencia and
Mr. Sitt for an aggregate purchase price of $121,000.
12
<PAGE> 17
Presencia purchased three units in the October 1997 Bridge Financing.
Following the closing of the October 1997 Bridge Financing, an investor assigned
an additional 100,000 Bridge Warrants to Presencia. In January 1998, Presencia
purchased 130,000 shares of the Common Stock of the Company upon the exercise of
Bridge 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
purchase price of the shares of common stock underlying 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 June
30, 1999 and September 1, 1999, principal and interest in the amount $552,395
and $559,125, respectively, remained outstanding.
Samuel A. McCleery, Vice President, Business Development 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 the shares of common stock underlying
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 June 30, 1999 and September
1, 1999, principal and interest in the amount $209,325 and $211,875,
respectively, 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, 1999 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 capital stock of the Company. As of June 30, 1999 and September
1, 1999, principal and interest in the amount $138,824 and $140,566,
respectively, remained outstanding under Mr. William's Tax Notes. As of June 30,
1999 and September 1, 1999, principal and interest in the amount $52,608 and
$53,268, respectively, remained outstanding under Mr. McCleery's Tax Notes.
Registration Rights
The Company has granted registration rights with respect to 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. 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
13
<PAGE> 18
Common Stock issuable upon the exercise of such warrants, that are not
transferable in a three-month period pursuant to Rule 144 in connection with any
registration by the Company of its securities on certain registration statements
under the Securities Act. These shares were registered at the time of the
Company's initial public offering. The Company has also granted registration
rights with respect to the 200,000 shares of Common Stock issuable upon the
exercise of the warrant granted to Allen in connection with the Company's
private placement of Common Stock on October 20, 1999. Subject to certain
conditions and limitations, these registration rights give Allen the one-time
right, commencing October 20, 2000, to require the Company to register not less
than 50% of such shares held by Allen at such time. The registration rights also
require the Company to register such shares at Allen's request, in the event the
company intends to file a registration statement for its own account or on
behalf of selling shareholders. All of 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 -- 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.
RATIFICATION OF PROPOSED
AMENDMENT OF THE BYLAWS
The Board of Directors of the Company has approved a proposed amendment to
Article III, Section 4 of the Bylaws to grant the Board of Directors the
authority to appoint new directors in the event of any vacancy in the Board and
to fill newly created directorships to the full extent permitted by Section
14A:6 -5(1) of the New Jersey Business Corporation Act.
Currently, the Bylaws permit the Board to fill any vacancies. However, the
Board believes that it is equally important that it be able to fill newly
created directorships so that in the event well qualified and available
prospective directors are identified, such persons may be added to the board as
soon as reasonably possible. Currently, newly created directorships may only be
filled at an annual or special meeting of the shareholders of the Company.
The following is the proposed amended version of Article III, Section 4 in
its entirety:
4. VACANCIES AND NEWLY CREATED DIRECTORSHIPS
"Any directorship not filled at the annual meeting, any vacancy, however
caused, occurring in the Board, and newly created directorships resulting
from an increase in the authorized number of directors, may be filled by
the affirmative vote of a majority of the remaining directors even though
less than a quorum of the Board, or by a sole remaining director. A
director so elected by the Board shall hold office until his successor
shall have been elected and qualified. If, for any reason, the Corporation
shall at any time have no directors then in office, any shareholder may
call a special meeting of shareholders for the election of directors and,
over his/her signature, shall give notice of such meeting in accordance
with these Bylaws."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE AMENDMENT TO THE COMPANY'S BYLAWS.
14
<PAGE> 19
RATIFICATION OF AMENDMENT TO
THE AMENDED 1993 STOCK OPTION PLAN TO
AUTHORIZE AUTOMATIC ANNUAL STOCK OPTION GRANTS
TO THE MEMBERS OF THE BOARD OF DIRECTORS
General
Subject to shareholder ratification, the Board of Directors of the Company
has approved an amendment to the Amended 1993 Stock Option Plan (the "Plan") to
automatically grant each Director, at the time of his or her election to the
Board of Directors, an option to purchase 10,000 shares of the Company's Common
Stock. The exercise price under the stock options will be the closing price of
the Common Stock on the date of grant, except with respect to options issued to
the nominees elected at the Meeting for which the exercise price will be $4.688,
the closing price of the Common Stock on the date the Board of Directors
approved the proposed amendment. The options will vest, with respect to each
director, as to 2,500 shares for each meeting of the Board of Directors attended
by such director. Although the Plan already permits stock option grants to the
Board of Directors, the Board of Directors believes that a formal policy for the
issuance of stock options, which vest based upon the director's attendance at
meetings, is desirable.
At June 30, 1999, 2,160,000 shares of Common Stock were authorized for
issuance under the Plan and options to purchase 1,573,185 shares were
outstanding under the Plan, leaving 586,815 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 Common Stock allocable to the unexercised
portion of such option may again be subjected to an option under the Plan. At
September 1, 1999 the market value of the Common Stock underlying the options
was $4.188 per share based on the closing price.
The Plan was adopted by the Board of Directors and ratified by the
shareholders of the Company in August 1993 and was most recently amended and
ratified by the shareholders to increase the number of shares in the Plan in
December 1998. 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, four officers (two of whom
are also directors), approximately 54 employees (including the officers) and
five 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.
Stockholder approval of the amendment to the Plan is being sought in accord
with a Bylaw of the National Association of Securities Dealers which requires
companies whose shares are reported on the NASDAQ National Market System to
obtain shareholder 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.
15
<PAGE> 20
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 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.
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<PAGE> 21
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.
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 September 1, 1999, the Company had granted options to purchase an
aggregate of 1,556,248 shares of Common Stock (net of cancellations) under the
Plan at a weighted average exercise price of $5.84 per share. As of September 1,
1999, options to purchase 1,078,502 shares of Common Stock were exercisable and
options to purchase 1,541 shares of Common Stock had been exercised under the
Plan. See "Election of Directors -- Compensation of Directors."
As of September 1, 1999, 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, Dennis Wilkinson 400,000 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: 860,293 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: 526,233 shares. In October
1999, the Company also granted to each of the current directors an option to
purchase 10,000 shares of Common Stock.
In the event the proposed amendments to the Plan are ratified by the
shareholders, each nominee for election at the Meeting will receive an option to
purchase 10,000 shares of Common Stock of the Company at an exercise price of
$4.688 per share, the vesting of which is based on attendance at Board of
Directors' meetings.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE AMENDMENT TO THE COMPANY'S AMENDED 1993 STOCK OPTION PLAN.
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<PAGE> 22
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, 2000.
PricewaterhouseCoopers LLP also served as independent public accountants of the
Company for the fiscal year ended June 30, 1999.
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, 2000.
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.
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 1999 except that Mr. Williams
inadvertently failed to timely file a report relating to two gift transactions
which were later reported on a Form 5.
SHAREHOLDERS' PROPOSALS
Shareholders deciding to submit proposals for inclusion in the Company's
proxy statement and form of proxy relating to the 2000 Annual Meeting of
Shareholders must advise the Chairman of the Company of such proposals in
writing by June 27, 2000. In addition, the proxy solicited by the Board of
Directors of the Company for the 2000 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 10, 2000.
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> 23
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.
THE ANNUAL REPORT TO SHAREHOLDERS OF THE COMPANY FOR THE FISCAL YEAR ENDED
JUNE 30, 1999, WHICH INCLUDES FINANCIAL STATEMENTS, HAS BEEN MAILED TO
STOCKHOLDERS OF THE COMPANY. THE ANNUAL REPORT TO SHAREHOLDERS DOES NOT FORM ANY
PART OF THE MATERIAL FOR THE SOLICITATIONS OF PROXIES. THE COMPANY WILL PROVIDE
WITHOUT CHARGE TO EACH BENEFICIAL SHAREHOLDER A COPY OF ITS ANNUAL REPORT ON
FORM 10-KSB, INCLUDING FINANCIAL STATEMENTS THERETO, UPON WRITTEN REQUEST MADE
TO THE SECRETARY OF THE COMPANY. THE COMPANY WILL PROVIDE COPIES OF EXHIBITS TO
THE ANNUAL REPORT ON FORM 10-KSB FOR A REASONABLE FEE.
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, Business Development,
and Assistant Secretary
Lawrenceville, New Jersey
October 28, 1999
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<PAGE> 24
[PURSUANT TO SCHEDULE 14A, ITEM 10, INSTRUCTION 3, THE FOLLOWING PLAN IS
SUBMITTED FOR FILING WITH THE COMMISSION AS AN APPENDIX TO THE PROXY STATEMENT
AND WILL NOT BE PROVIDED TO SECURITY HOLDERS]
PRINCETON VIDEO IMAGE, INC.
AMENDED 1993 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be Incentive Stock Options (as
defined under Section 422 of the Code) or Non-Statutory Stock Options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Certain Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Committee appointed by the Board in
accordance with paragraph (a) of Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means Princeton Video Image, Inc., a New Jersey
corporation.
(g) "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render
services and is compensated for such services, and any director of
the Company whether compensated for such services or not provided
that if and in the event the Company registers any class of any
equity security pursuant to the Exchange Act, the term Consultant
shall thereafter not include directors who are not compensated for
their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee" means the absence of any
interruption or termination of the employment relationship by the
Company or any
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<PAGE> 25
Subsidiary. Continuous Status as an Employee shall not be considered
interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Board, provided
that such leave is for a period of not more than ninety (90) days,
unless reemployment upon the expiration of such leave is guaranteed
by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or (iv) in the case of
transfers between locations of the Company or between the Company,
its Subsidiaries or its successor.
(i) "Date of Grant" means the date on which an Option is granted
under this Plan pursuant to Section 13 of the Plan.
(j) "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be
sufficient to constitute "employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(l) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without
limitation the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") System, its Fair Market Value shall be the closing
sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange for the last
market trading day prior to such date as reported in the Wall
Street Journal or such other source as the Administrator deems
reliable or;
(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not
reported, its Fair Market Value shall be the mean between the
high and low asked prices for the Common Stock for the last
market trading day prior to such date or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good
faith by the Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the
Code.
(n) "Non-Statutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
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<PAGE> 26
(o) "Option" means a stock option granted pursuant to the Plan.
(p) "Option Agreement" shall mean the agreement which must be
entered into between the Optionee and the Company upon the grant of
an Option by the Company to the Optionee pursuant to Section 17 of
the Plan.
(q) "Optioned Stock" means the Common Stock subject to an Option.
(r) "Optionee" means a person who receives an Option.
(s) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(t) "Plan" means this 1993 Stock Option Plan.
(u) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(v) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 2,160,000 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Administration With Respect to Directors and Officers. With
respect to grants of Options to Employees or Consultants who are
also officers or directors of the Company, the Plan shall be
administered by (A) the Board or (B) a Committee designated by the
Board to administer the Plan, which Committee shall be constituted
in such a manner (A) as to permit transactions under the Plan to
qualify for the exemption from Section 16(b) of the Exchange Act
pursuant to Rule 16b-3 promulgated thereunder ("Rule 16b-3") and (B)
to satisfy the legal requirements relating to the administration of
incentive stock option plans, of New Jersey corporate and
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<PAGE> 27
securities laws and of the Code (the "Applicable Laws"). Once appointed,
such Committee shall continue to serve in its designated capacity until
otherwise directed by the Board. From time to time the Board may increase
the size of the Committee and appoint additional members thereof, remove
members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws and Rule 16b-3.
(ii) Multiple Administrative Bodies. If permitted by Rule 16b-3, the
Plan may be administered by different bodies with respect to directors,
non-director officers and Employees and Consultants who are neither
directors nor officers.
(iii) Administration With Respect to Consultants and Other
Employees. With respect to grants of Options to Employees or Consultants
who are neither directors nor officers of the Company, the Plan shall be
administered by (A) the Board or (B) a Committee designated by the Board,
which Committee shall be constituted in such a manner as to satisfy the
Applicable Laws. Once appointed, such Committee shall continue to serve in
its designated capacity until otherwise directed by the Board. From time
to time the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however
caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
(iv) Formula Awards to Directors.
(A) Each person who on October 1, 1999 was a nominee for
election as a director at the Company's 1999 annual meeting of
shareholders shall be granted a Non-Statutory Stock Option to purchase
10,000 Shares. The Date of Grant of such Option shall be October 1, 1999.
Each such Option shall vest and become exercisable in equal increments of
2,500 Shares on the date of each Board meeting attended by such person
following his election or reelection as a director at the Company's 1999
annual meeting of shareholders, provided that on the date of such Board
meeting the director is serving as a director of the Company. Options that
have not vested on or before the day preceding the 2000 annual meeting of
shareholders of the Company following such director's election or
reelection shall expire.
(B) On the date of a director's election, reelection or
appointment to the Board, such director shall be granted a Non-Statutory
Stock Option to purchase 10,000 Shares. The Date of Grant of such Option
shall be the date of such director's election, reelection or appointment
to the Board. Each such Option shall vest and become exercisable in equal
increments of 2,500 Shares on the date of each Board meeting attended by
such director following such director's election, reelection or
appointment provided that on such date the director is serving as a
director of the
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<PAGE> 28
Company. Options that have not vested on or before the day preceding the
first annual meeting of shareholders of the Company following such
director's election, reelection or appointment shall expire. Any director
or nominee who has been granted an Option pursuant to Section 4(a)(iv)(A)
shall not be granted an Option under this Section 4(a)(iv)(B) before the
date of the 2000 annual meeting of shareholders of the Company.
(C) Options granted pursuant to this Section 4(a)(iv)
shall have a per share exercise price equal to the Fair Market Value per
share on the Date of Grant and, shall, expire ten years from the Date of
Grant or on such earlier date as is provided in Section 4(a)(iv)(A),
4(a)(iv)(B) or Section 7 hereof. Once an Option granted pursuant to this
Section, or any portion thereof, has become exercisable, it shall remain
exercisable regardless of whether or not the director holding the Option
later ceases to be a director of the Company.
(b) Powers of the Administrator. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(l) of the Plan;
(ii) to select the Consultants and Employees to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such Option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Option granted hereunder (including,
but not limited to, the share price and any restriction or limitation or
waiver of forfeiture restrictions regarding any Option and/or the shares
of Common Stock relating thereto, based in each case on such factors as
the Administrator shall determine, in its sole discretion);
(vii) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(f) instead of Common Stock;
(viii) to determine whether, to what extent and under what
circumstances Common Stock and other amounts payable with respect to an
Option under this Plan shall be deferred either automatically or at the
election of the participant
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<PAGE> 29
(including providing for and determining the amount, if any, of any deemed
earnings on any deferred amount during any deferral period); and
(ix) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted.
(c) Effect of Committee's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. Eligibility.
(a) Non-Statutory Stock Options may be granted to Employees
and Consultants and directors and officers who are not Employees or Consultants.
Incentive Stock Options may be granted only to Employees. An Employee or
Consultant who has been granted an Option may, if he is otherwise eligible, be
granted an additional Option or Options.
(b) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Non-Statutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Non-Statutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options
shall be taken into account in the order in which they were granted, and the
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his right or the Company's right
to terminate his employment or consulting relationship at any time, with or
without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 18 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 14 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter
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<PAGE> 30
term as may be provided in the Option Agreement. However, in the case of an
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following: In the case of an Incentive Stock
Option (i) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant; (ii) granted to any Employee, not
described in Section 8(a)(i), the per Share exercise price shall be no less than
100% of the Fair Market Value per Share on the date of grant.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) authorization to the Company to retain from the
total number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (6) delivery
of a properly executed exercise notice together with irrevocable instructions to
a broker to promptly deliver to the Company the amount of sale or loan proceeds
required to pay the exercise price, (7) delivery of an irrevocable subscription
agreement for the Shares which irrevocably obligates the option holder to take
and pay for the Shares not more than twelve months after the date of delivery of
the subscription agreement, (8) any combination of the foregoing methods of
payment, or (9) such other consideration and method of payment for the issuance
of Shares to the extent permitted under Applicable Laws. In making its
determination as to the type of consideration to accept, the Board shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board and set forth in the Option Agreement,
including performance
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<PAGE> 31
criteria with respect to the Company and/or the Optionee, and as shall be
permissible under the terms of the Plan. An Option may not be exercised for a
fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment. In the event of termination of an Optionee's
consulting relationship or Continuous Status as an Employee with the Company (as
the case may be), such Optionee may, but only within ninety (90) days (or such
other period of time as is determined by the Board, with such determination in
the case of an Incentive Stock Option being made at the time of grant of the
Option and not exceeding ninety (90) days) after the date of such termination
(but in no event later than the expiration date of the term of such Option as
set forth in the Option Agreement), exercise his Option to the extent that
Optionee was entitled to exercise it at the date of such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section 9(b)
above, in the event of termination of an Optionee's consulting relationship or
Continuous Status as an Employee as a result of his total and permanent
disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only
within twelve (12) months from the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
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<PAGE> 32
(d) Death of Optionee. In the event of the death of an
Optionee, the Option may be exercised, at any time within twelve (12) months
following the date of death (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(e) Rule 16b-3. Options granted to persons subject to Section
16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions. Shares acquired pursuant to exercise of an Option by any
person who is subject to Section 16(b) of the Exchange Act may not be sold or
otherwise disposed of for a period of six (6) months following the Date of
Grant.
(f) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
10. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
11. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by electing to have the Company withhold
from the Shares to be issued upon exercise of the Option, if any, that number of
Shares having a Fair Market Value equal to the amount required to be withheld.
The Fair Market Value of the Shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the
applicable Tax Date;
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<PAGE> 33
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or
disapproval of the Administrator; and
(d) if the Optionee is subject to Rule 16b-3, the election
must comply with the applicable provisions of Rule 16b-3 and shall be subject to
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
12. Adjustments Upon Changes in Capitalization or Merger. Subject to
any required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company,
the Board shall notify the Optionee at least fifteen (15) 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, the
Option shall be assumed or an equivalent option shall be substituted by such
successor corporation or a Parent or Subsidiary of such successor corporation.
In the event that such successor corporation does not agree to assume the Option
or to substitute an equivalent option, the Board shall, in lieu of such
assumption or substitution, provide for the Optionee to have the right to
exercise the
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<PAGE> 34
Option as to all of the Optioned Stock, including Shares as to which the Option
would not otherwise be exercisable. If the Board makes an Option fully
exercisable in lieu of assumption or substitution in the event of a merger, the
Board shall notify the Optionee that the Option shall be fully exercisable for a
period of fifteen (15) days from the date of such notice, and the Option will
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed if, following the merger, the
Option or right confers the right to purchase, for each Share of stock subject
to the Option immediately prior to the merger, the consideration (whether stock,
cash, or other securities or property) received in the merger by holders of
Common Stock for each Share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger was not solely common
stock of the successor corporation or its Parent, the Board may, with the
consent of the successor corporation and the participant, provide for the
consideration to be received upon the exercise of the Option, for each Share of
stock subject to the Option, to be solely common stock of the successor
corporation or its Parent equal in Fair Market Value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
13. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each person to whom an Option is so
granted within a reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without Optionee's consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or with Section 422 of the Code (or any other applicable law or
regulation, including the requirements of the NASD or an established stock
exchange), the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and
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<PAGE> 35
delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the Shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance. As a condition to the exercise of an Option, the
Company may require the person exercising such Option to represent and warrant
at the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is required
by any of the aforementioned relevant provisions of law.
16. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
17. Agreements. Options shall be evidenced by written agreements in
such form as the Board shall approve from time to time.
18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law.
19. Information to Optionees. The Company shall provide to each
Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports and other information which are
provided to all shareholders of the Company. The Company shall not be required
to provide such information if the issuance of Options under the Plan is limited
to key employees whose duties in connection with the Company assure their access
to equivalent information.
* * * * *
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<PAGE> 36
REVOCABLE PROXY
PRINCETON VIDEO IMAGE, INC.
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE CORPORATION FOR
ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby constitutes and appoints Brown F Williams, Dennis P.
Wilkinson 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 Friday, December 3, 1999, 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
For hold All
Except
1. ELECTION OF DIRECTOR (Mark one only.) / / / / / /
NOMINEES: BROWN F WILLIAMS, DENNIS P. WILKINSON, DONALD P. GARBER, 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.
- --------------------------------------------------------------------------------
2. Approval of proposal to ratify the proposed amendment to Article III,
Section 4 of the Bylaws of the Company regarding vacancies of and newly
created directorships.
For Against Abstain
/ / / / / /
3. Approval of proposal to ratify the amendment to the Company's Amended 1993
Stock Option Plan to provide automatic stock option grants to the members of
the Board of Directors for their service on the Board of Directors.
For Against Abstain
/ / / / / /
4. 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, 2000.
For Against Abstain
/ / / / / /
5. In their discretion, the proxies are authorized to vote upon other matters
as may properly come before the Meeting.
I Will I Will Not
/ / / / Attend
the
Meeting
Please be sure to sign and
date this Proxy in the box
below. Dated:
---------------------------
- ----------------------------- ----------------------------------
Signature of Shareholder Signature of Shareholder if
held Jointly
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, 3, AND 4.
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 the full corporate name by a duly authorized officer, giving full title as
such. If a partnership, please sign in the partnership name by a duly authorized
person.
PLEASE ACT PROMPTLY.
SIGN, DATE & MAIL YOUR PROXY CARD TODAY.
