<PAGE> 1
Exhibit 2.1
REORGANIZATION AGREEMENT
THIS REORGANIZATION AGREEMENT (this "Agreement") is dated as of
December 28, 2000 and is made by and among Presencia en Medios, S.A., a Mexican
corporation, (the "Seller"), Eduardo Sitt, David Sitt and Roberto Sonabend (each
a "Designated Party" and collectively, the "Designated Parties"), Presence in
Media LLC, a Delaware limited liability company ("LLC-1"), Virtual Advertisement
LLC, a Delaware limited liability company ("LLC-2"), PVI LA, LLC, a Delaware
limited liability company ("LLC-3"), Princeton Video Image, Inc., a New Jersey
corporation, (the "Purchaser") and Princeton Video Image Latin America, LLC, a
New Jersey limited liability company ("Newco").
PRELIMINARY STATEMENTS
A. The Seller is the owner of all of the outstanding membership
interests of LLC-1.
B. LLC-1 is the owner of all of the outstanding membership
interests of LLC-2.
C. LLC-2 is the owner of all of the outstanding membership
interests of LLC-3.
D. LLC-3 is the owner of 95,000 shares of capital stock of
Publicidad Virtual, S.A. de C.V. (the "LLC-3 Shares").
E. The Seller is the owner of 5,000 shares of capital stock of
the Publicidad Virtual, S.A. de C.V. (the "Seller Shares").
F. The Purchaser is the owner of all of the outstanding
membership interests of Newco.
G. The Purchaser wishes to acquire from the Seller, and the
Seller wishes to sell to the Purchaser, the Seller Shares.
H. Newco and LLC-2 wish to enter into a merger pursuant to which
LLC-2 will be merged with and into Newco and Newco will be the surviving entity.
In consideration of the premises and the mutual promises hereinafter
set forth, the parties hereby agree as follows:
1. Definitions. All capitalized terms used in this Agreement
shall have the meanings assigned to them elsewhere in this Agreement or as
specified below:
"Action" shall have the meaning set forth in Section 3.10
hereof.
<PAGE> 2
"Affiliate" shall mean, with respect to the Purchaser or the
Seller Group or any member thereof, a Person that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, the Purchaser or the Seller Group or any member thereof, as
the case may be.
"Agreement" shall have the meaning set forth in the opening
paragraph hereof.
"Articles of Incorporation" shall mean the Corporation's
certificate of incorporation in the form attached hereto as Schedule 1(a).
"Balance Sheet Date" shall have the meaning set forth in
Section 3.4(a) hereof.
"Business Day" shall mean any day other than a Saturday,
Sunday or day upon which banking institutions are authorized or required by law
to be closed in the State of New Jersey or in the Republic of Mexico.
"Bylaws" shall mean the Corporation's bylaws in the form
attached hereto as Schedule 1(b).
"Call Notice" shall have the meaning set forth in Section 9.3
hereof.
"Closing" shall mean the closing of the sale to, and purchase
by, the Purchaser of the Seller Shares and the consummation of the Merger.
"Closing Date" shall mean the date of the Closing as provided
in Section 2.4 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commission" shall mean the United States Securities and
Exchange Commission.
"Corporation" shall mean Publicidad Virtual, S.A. de C.V.
"Corporation Financial Statements" shall have the meaning set
forth in Section 3.4(a) hereof.
"Corporation Licenses and Permits" shall have the meaning set
forth in Section 3.13 hereof.
"Damages" shall have the meaning set forth in Section 9.1
hereof.
"Dasi" shall have the meaning set forth in Section 5.13
hereof.
"Dasi Agreement" shall have the meaning set forth in Section
5.13 hereof
2
<PAGE> 3
"Designated Parties" shall have the meaning set forth in the
opening paragraph hereof.
"Designated Party" shall have the meaning set forth in the
opening paragraph hereof.
"Effective Time" shall have the meaning set forth in Section
2.3 hereof.
"employee" and "consultant," when used with respect to
employees or consultants of any entity shall include any employee or consultant
made available to such entity pursuant to a contract between such entity and a
third party.
"Encumbrances" shall mean any liens, charges, claims, security
interests, restrictions, options, proxies, voting trusts or other encumbrances.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Escrow Merger Shares" shall have the meaning set forth in
Section 2.5 hereof.
"Escrow Sale Shares" shall have the meaning set forth in
Section 2.5 hereof.
"Escrow Shares" shall have the meaning set forth in Section
2.5 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission promulgated
thereunder, all as the same shall be in effect from time to time.
"Exercise Notice" shall have the meaning set forth in Section
7.2 hereof.
"Fair Market Value" shall mean, for any day, the average of
the closing sales prices of the PVI Common Stock (or the closing bid, if no
sales were reported) as quoted on the Nasdaq National Market, or if the PVI
Common Stock is not then quoted on the Nasdaq National Market, on any
established stock exchange, quotation system or bulletin board on which the PVI
Common Stock is listed or traded for the ten (10) trading days immediately
preceding such day.
"Intellectual Property Rights" shall mean all intellectual
property rights, including, without limitation, Proprietary Information,
patents, patent applications, patent rights, trademarks, trademark applications,
trade names, service marks, service mark applications, copyrights, copyright
applications, know-how, franchises, licenses, trade secrets, proprietary
processes and formulae.
"LLC-1" shall have the meaning set forth in the opening
paragraph hereof.
"LLC-2" shall have the meaning set forth in the opening
paragraph hereof.
3
<PAGE> 4
"LLC-3" shall have the meaning set forth in the opening
paragraph hereof.
"LLC-3 Shares" shall have the meaning set forth in Preliminary
Statement C.
"LLCs" shall mean LLC-1, LLC-2 and LLC-3, collectively.
"Material Adverse Effect" shall mean, when used in connection
with the Corporation, the LLCs or the Purchaser, any change or effect that,
individually or in the aggregate with all other such changes or effects, would
have a material adverse effect on the business, assets, results or operations,
or financial condition of such party and its Subsidiaries taken as a whole or
materially impair the ability of such party to perform its obligations under
this Agreement.
"Merger" shall have the meaning set forth in Section 2.3
hereof.
"Merger PVI Warrants" shall have the meaning set forth in
Section 2.3 hereof.
"Merger Shares" shall have the meaning set forth in Section
2.3 hereof.
"Mexican GAAP" shall mean generally accepted accounting
principles in Mexico, consistently applied throughout the specified period and
in the immediately prior comparable period.
"New Securities" shall mean (a) any capital stock of the
Purchaser whether or not currently authorized, (b) all rights, options, or
warrants to purchase capital stock of the Purchaser, and (c) all securities of
any type whatsoever that are, or may become, convertible into or exchangeable
for capital stock of the Purchaser; provided, however, that the term "New
Securities" shall not include (i) shares of PVI Common Stock designated by vote
of the PVI Board, or options to purchase such shares, that are issued or granted
to employees or consultants of the Purchaser; (ii) securities issued as a result
of any stock split, stock dividend, or reclassification of PVI Common Stock,
distributable on a pro rata basis to all holders of PVI Common Stock; (iii)
securities issued as a result of a merger, consolidation or reorganization
approved by the PVI Board; and (iv) securities issued in connection with a
transaction which the PVI Board in good faith reasonably determines to be a
strategic alliance, joint venture, partnership or other business arrangement, or
in connection with the licensing or acquisition by the Purchaser of technology
or intellectual property in a transaction which is approved by the PVI Board.
"Newco" shall have the meaning set forth in the opening
paragraph hereof.
"Officers' Certificate" shall mean a certificate for or on
behalf of an entity signed by the entity's president and its chief financial
officer, provided that if the entity does not have a chief financial officer on
the date of the Officers' Certificate, the entity's treasurer or other officer
performing the duties customarily performed by a chief financial officer shall
sign along with the entity's president, stating that (a) the officers signing
such certificate have made or have caused to be made such investigations as are
necessary in order to permit them to verify the accuracy of
4
<PAGE> 5
the information set forth in such certificate and (b) to the best of such
officers' knowledge, such certificate does not misstate any material fact and
does not omit to state any fact necessary to make the certificate not
misleading.
"Permitted Encumbrances" shall mean (a) Encumbrances set forth
on the schedules hereto, b) liens for taxes not yet due and payable and (c)
Encumbrances which are not individually or in the aggregate material.
"Permitted Transferee" shall mean (i) the Seller and its
Affiliates, (ii) any direct or indirect equity holder of any Person referred to
in clause (i) and any Affiliate of one or more of such equity holders, and (iii)
in the case of any of the foregoing Persons in clause (ii) who is an individual,
Permitted Transferee shall include such individual's immediate family, trusts
solely or primarily for the benefit of such person or such person's immediate
family members, and corporations, partnerships, limited liability companies or
other entities in which such individual or such individual's family members
and/or trusts are the majority equity holders as the case may be. For this
purpose, "immediate family" of a person means the person's spouse, parents,
children, adopted children, stepchildren and grandchildren.
"Person" shall mean and include an individual, a corporation,
a partnership, a trust, an unincorporated organization, a limited liability
company, a joint stock corporation, a joint venture, a government or any
department, agency or political subdivision thereof and any other entity.
"Proprietary Information" shall mean all customer lists,
source and object codes, algorithms, architecture, structure, display screens,
layouts, processes, inventions, trade secrets, know-how, development tools and
other proprietary rights owned by the Corporation, the LLCs or the Purchaser and
its Subsidiaries, as the case may be, pertaining to any product or service
manufactured, marketed or sold, or proposed to be manufactured, marketed or sold
(as the case may be), by the Corporation or the Purchaser and its Subsidiaries,
as the case may be, or used, employed or exploited in the development, license,
sale, marketing or distribution or maintenance thereof, and all documentation
and media constituting, describing or relating to the above, including, without
limitation, manuals, memoranda, know-how, notebooks, records and disclosures.
"Purchaser" shall have the meaning set forth in the opening
paragraph hereof.
"Purchaser Financial Statements" shall have the meaning set
forth in Section 4.5 hereof.
"Purchaser Indemnitees" shall have the meaning set forth in
Section 9.1.
"Purchaser Licenses and Permits" shall have the meaning set
forth in Section 4.14 hereof.
"PVI Board" shall mean the board of directors of the
Purchaser.
5
<PAGE> 6
"PVI Common Stock" shall mean the Purchaser's common stock, no
par value per share.
"PVI Securities" shall mean the Sale Shares, the Sale PVI
Warrants, the Merger Shares and the Merger PVI Warrants, collectively.
"PVI Warrants" shall mean warrants to purchase PVI Common
Stock having the exercise prices and terms set forth on Schedule 1.1 attached
hereto and being in substantially the forms attached as Schedule 1.1-A.
"Required Number of Directors" shall have the meaning set
forth in Section 7.1 hereof.
"Rules" shall have the meaning set forth in Section 20 hereof.
"Sale Notice" shall have the meaning set forth in Section
7.2(b) hereof.
"Sale Shares" shall have the meaning set forth in Section 2.2
hereof.
"Sale PVI Warrants" shall have the meaning set forth in
Section 2.2 hereof.
"SEC Reports" shall have the meaning set forth in Section 4.4
hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated thereunder,
all as the same shall be in effect from time to time.
"Seller" shall have the meaning set forth in the opening
paragraph hereof.
"Seller Group" shall mean (i) the Seller, (ii) Eduardo Sitt,
David Sitt and Roberto Sonabend, (iii) LLC-1 and (iv) any Permitted Transferee
that acquires PVI Common Stock or PVI Warrants and elects in a written agreement
substantially in the form of Schedule 1.2 attached hereto to be bound by the
provisions hereof which are applicable to the Seller Group for so long as such
Person owns PVI Common Stock or PVI Warrants.
"Seller Indemnitees" shall have the meaning set forth in
Section 9.1 hereof.
"Seller Shares" shall have the meaning set forth in
Preliminary Statement D.
"Shareholders Meeting" shall have the meaning set forth in
Section 4.24 hereof.
"Statute" shall have the meaning set forth in Section 4.25
hereof.
6
<PAGE> 7
"Subsidiary" shall mean any entity of which the majority of
the ordinary voting power is at the time as of which any determination is being
made owned by another entity either directly or through one or more
Subsidiaries.
"Substitute Collateral" shall mean cash, U.S. government
securities or an irrevocable letter of credit in favor of the Purchaser in a
form reasonably acceptable to the Purchaser and drawn upon a United States bank
reasonably acceptable to the Purchaser.
"Transaction Documents" shall mean (a) this Agreement, (b)
the certificates representing the PVI Common Stock to be conveyed hereunder, (c)
the certificates representing the PVI Warrants to be conveyed hereunder, (d) the
employment agreements by and between the Corporation or another Mexican
Subsidiary of the Purchaser and each of David Sitt and Roberto Sonabend dated as
of the Closing Date, (e) the consultant services agreement by and between the
Seller or any of its Affiliates and the Corporation or any of its Mexican
Affiliates, (f) the registration rights agreement by and among the Purchaser and
certain members of the Seller Group dated as of the Closing Date, (g) the stock
option agreements between the Purchaser and each of David Sitt and Roberto
Sonabend dated as of the Closing Date in the form attached hereto as Schedule
6.16, (h) the letter from the Corporation to the Seller in the form attached
hereto as Schedule 6.17(a) and (i) all other contracts, agreements, schedules,
certificates and other documents being delivered pursuant to or in connection
with this Agreement or the transactions contemplated hereby.
"U.S. GAAP" shall mean generally accepted accounting
principles in the United States, consistently applied throughout the specified
period and in the immediately prior comparable period.
2. Sale and Purchase of Seller Shares; Merger.
2.1 Agreement to Purchase and Sell. Upon the terms and subject
to the conditions set forth in this Agreement and upon the representations and
warranties made herein, at the Effective Time (as defined below), the Seller
shall sell to the Purchaser, and the Purchaser shall purchase from the Seller,
all of the Seller Shares.
2.2 Purchase Price. In consideration for the sale of the
Seller Shares, at the Effective Time the Purchaser shall issue to the Seller
133,918 shares of PVI Common Stock (the "Sale Shares") and 51,841 PVI Warrants
(the "Sale PVI Warrants").
2.3 Merger. Upon and subject to the terms of this Agreement,
LLC-2 shall merge with and into Newco (the "Merger") at the Effective Time. From
and after the Effective Time, the separate corporate existence of LLC-2 shall
cease and Newco shall continue as the surviving limited liability company in the
Merger. As of the Effective Time, without any action on the part of the holder
of the outstanding membership interests of LLC-2, the outstanding membership
interests of LLC-2 shall be converted into and become 2,544,435 shares of PVI
Common Stock (the "Merger Shares") and 984,984 PVI Warrants (the "Merger PVI
Warrants") and such membership interests shall thereafter no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist and the holder thereof shall cease to have any
7
<PAGE> 8
rights with respect thereto. The "Effective Time" shall be the time at which
LLC-2 and Newco file the certificates of merger prepared and executed in
accordance with the relevant provisions of the New Jersey Limited Liability
Company Act and the Delaware Limited Liability Company Act with the Secretaries
of State of the States of New Jersey and Delaware. The Merger shall have the
effects specified in this Agreement and in the New Jersey Limited Liability
Company Act and the Delaware Limited Liability Company Act.
2.4 Closing. Subject to the satisfaction of the conditions set
forth in Section 5 and 6 hereof, the Closing shall occur at the offices of
Smith, Stratton, Wise, Heher & Brennan, 600 College Road East, Princeton, New
Jersey 08540, on or before June 1, 2001 or such other date as the parties shall
mutually agree (the "Closing Date").
2.5 Closing Actions. At the Closing at the Effective Time, (i)
the Seller shall deliver to the Purchaser certificates representing the Seller
Shares, duly endorsed for transfer to the Purchaser, (ii) the Purchaser shall
deliver to the Seller certificates representing eighty percent (80%) of the Sale
Shares and all of the Sale PVI Warrants, (iii) the Purchaser shall deliver to
LLC-1 certificates representing eighty percent (80%) of the Merger Shares and
all of the Merger PVI Warrants, and (iv) the parties shall make the other
deliveries provided in Sections 5 and 6 hereof, as applicable. The remaining
twenty percent (20%) of the Sale Shares and the Merger Shares (such remaining
amount, the "Escrow Sale Shares" and the "Escrow Merger Shares," respectively,
and, collectively, the "Escrow Shares") shall be held by the Purchaser in
accordance with the terms of Section 2.6 of this Agreement.
2.6 Setoff; Delivery of the Escrow Shares. (a) Subject to
payment to the Purchaser of claims under the indemnity provisions or Section 8.7
of this Agreement and subject further to Section 9.4 hereof and except as
provided in this Section 2.6, the Purchaser shall hold the Escrow Shares for the
exclusive benefit of the Purchaser until released as provided in this Section
2.6 (provided that the Escrow Shares shall remain in escrow for such additional
time as is necessary to permit the resolution of any disputes). The parties
further agree that the Purchaser shall be entitled to set off from the Escrow
Shares a number of Escrow Shares having a Fair Market Value at the time of
setoff equal to any amounts that any member of the Seller Group is required to
pay to the Purchaser or its officers, directors, employees, agents or
Subsidiaries under this Agreement, or in the case of a violation of Section 8.7
of this Agreement, all of the Escrow Shares, provided that (i) any Escrow Shares
that the Purchaser seeks to set off shall remain in escrow until the resolution
of any disputes relating to the amount at issue, and (ii) prior to setting off
any Escrow Shares under this Section 2.6, the Purchaser shall send to the Seller
a written notice setting forth with reasonable specificity the nature of the
claim, the amount claimed and any additional information reasonably necessary to
allow the Seller to evaluate the validity of the claim under the terms of this
Agreement. Following receipt of such written notice, the Seller shall have
thirty (30) calendar days to evaluate and, at its own expense and at no cost or
unreasonable burden to the Purchaser or its officers, directors, employees,
agents or Subsidiaries, investigate the merits of the claim. If the Seller fails
to deliver a written notice to the Purchaser challenging such claim within such
30-day period, and if the Seller does not pay such claim in cash, the parties
agree that the Purchaser shall be entitled to deduct from the Escrow Shares a
number of Escrow Shares with a Fair Market Value equal to the entire unpaid
amount of such claim, or in the case of a violation of Section 8.7 of this
Agreement, all of Escrow Shares, such shares shall no longer be part of the
Escrow Shares and the Seller and LLC-1
8
<PAGE> 9
shall have no further right, title or interest in or to such shares. In the
event that the Seller delivers to the Purchaser a written notice within such
30-day period challenging the validity or amount of such claim, the parties
agree to make a good faith effort to resolve the dispute through negotiation
within ten (10) days of the date on which such written notice is delivered to
the Purchaser. In the event that no resolution is reached within such 10-day
period (or such longer period as the parties agree to in writing), either party
may refer such dispute to arbitration in accordance with Section 20 of this
Agreement. On the second anniversary of the Closing Date, one-half of the Escrow
Sale Shares and one-half of the Escrow Merger Shares shall be delivered to the
Seller and LLC-1, respectively, and on the fourth anniversary of the Closing
Date, the balance of the Escrow Sale Shares and the Escrow Merger Shares shall
be delivered to the Seller and LLC-1, respectively; provided, however, that the
Purchaser shall at all times retain a number of Escrow Shares with a Fair Market
Value equal to one hundred ten percent (110%) of any amount that is in dispute
(or all of the Escrow Shares if the Fair Market Value of the Escrow Shares is
less than one hundred ten percent (110%) of such amount); provided further, that
as soon as reasonably possible following the resolution of any dispute, the
Purchaser shall deliver the Escrow Sale Shares and the Escrow Merger Shares
which were withheld in connection with such dispute but not set-off by the
Purchaser to the Seller and LLC-1, respectively. Notwithstanding anything to the
contrary contained in this Section 2.6(a), the Seller may, at its option, pay in
cash any amounts due to the Purchaser hereunder with respect to which the
Purchaser would otherwise be entitled to retain Escrow Shares.
(b) The Purchaser shall release to the Seller or LLC-1 any
Escrow Shares as to which the Seller or LLC-1 has delivered to the Purchaser
Substitute Collateral in an amount equal to $4.00 per Escrow Share. The
Purchaser shall hold and apply the Substitute Collateral in accordance with the
terms of Section 2.6(a) hereof as if the Substitute Collateral were the Escrow
Shares. Whenever the Purchaser is entitled to set-off the Escrow Shares or
release the Escrow Shares pursuant to Section 2.6(a), it shall set-off or
release either the Escrow Shares or the Substitute Collateral as directed by the
Seller.
(c) The Seller and LLC-1 shall be entitled to vote the Escrow
Sale Shares and the Escrow Merger Shares, respectively. Stock dividends paid
with respect to the Escrow Shares, if any, shall be treated as Escrow Shares and
shall be set-off or released when the Escrow Shares to which such dividends
relate are set-off or released. Cash dividends paid with respect to the Escrow
Shares, if any, shall be invested, at the option of the Seller, in a money
market fund or U.S. government securities and together with interest earned
thereon shall be held by the Purchaser and set-off or released when the Escrow
Shares to which the dividend relates are set-off or released.
3. Representations and Warranties of the Seller and the LLCs.
Each of the Seller, LLC-1, LLC-2 and LLC-3 hereby represents and warrants to the
Purchaser and Newco as follows:
3.1 Organization. (a) The Corporation (a) is a limited
liability corporation duly organized, and validly existing under the laws of
Mexico, (b) has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as presently conducted, (c)
is duly qualified to do business in the jurisdictions set forth on Schedule
3.1(a), which constitute all of the jurisdictions in which the conduct of the
Corporation's business
9
<PAGE> 10
or its ownership, leasing or operation of property requires such qualification
where the absence of such qualification would have a Material Adverse Effect and
(d) except as set forth on Schedule 3.1(a), has never conducted business under
any name other than that set forth in this Agreement.
(b) Each of LLC-2 and LLC-3 (a) is a limited liability
corporation duly organized, validly existing and in good standing under the laws
of Delaware, (b) has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as presently conducted,
(c) is duly qualified to do business and is in good standing in the
jurisdictions set forth on Schedule 3.1(b), which constitute all of the
jurisdictions in which the conduct of its business or its ownership, leasing or
operation of property requires such qualification where the absence of such
qualification would have a Material Adverse Effect and (d) except as set forth
on Schedule 3.1(b), has never conducted business under any name other than that
set forth in this Agreement.
3.2 Equity Investments. Other than as set forth on Schedule
3.2, neither the Corporation nor LLC-2 nor LLC-3 has ever had, nor does it
presently have, any Subsidiaries, nor has it owned, nor does it presently own,
any capital stock or other proprietary interest, directly or indirectly, in any
corporation, association, trust, partnership, joint venture or other Person
(except, in the case of LLC-2, the membership interests in LLC-3 and in the case
of LLC-3, the LLC-3 Shares).
3.3 Capitalization.
(a) The Corporation is authorized to issue 100,000 shares of
capital stock. LLC-2 is authorized to issue one (1) membership interest. LLC-3
is authorized to issue one (1) membership interest.
(b) Schedule 3.3(b) attached hereto sets forth a description
of (i) the capital stock or other equity interests of the Corporation, LLC-2 and
LLC-3, including the names of the holders of each class of capital stock of the
Corporation and equity interests of LLC-2 and LLC-3 and the number of shares of
such class or other equity interests which are outstanding, and (ii) all
outstanding warrants, options, agreements, convertible securities or other
commitments pursuant to which the Corporation or LLC-2 or LLC-3 is or may become
obligated to issue any shares of its capital stock or other securities of the
Corporation or LLC-2 or LLC-3, respectively. All of the issued and outstanding
shares of the Corporation's capital stock and equity interests of LLC-2 and
LLC-3 have been duly authorized and are validly issued, fully paid and
non-assessable. Except as set forth on Schedule 3.3(b) attached hereto, (x)
there are no preemptive or similar rights to purchase or otherwise acquire
shares of capital stock of the Corporation or equity interests of LLC-2 or LLC-3
pursuant to any provision of law, the Articles of Incorporation or Bylaws or
other organizational documents, any agreement to which the Corporation or LLC-2
or LLC-3 is a party, or otherwise, except as contemplated by this Agreement, and
(y) there is no agreement, restriction or encumbrance (such as a right of first
refusal, right of first offer, proxy, voting agreement, etc.) with respect to
the sale, voting or transfer of any shares of capital stock of the Corporation
or equity interests of LLC-2 or LLC-3 (whether outstanding or issuable upon
conversion or exercise of outstanding securities) except as
10
<PAGE> 11
contemplated by this Agreement. True and correct copies of all such agreements,
restrictions and encumbrances have been delivered to the Purchaser. Except as
set forth in Schedule 3.3(b), as of the Closing, neither the Corporation nor
LLC-2 nor LLC-3 will be subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock or
other equity interests.
3.4 Financial Information.
(a) The Corporation has previously delivered to the Purchaser
an unaudited balance sheet and related financial statements as of September 30,
2000 (the "Balance Sheet Date") for the Corporation (collectively, the
"Corporation Financial Statements").
(b) The Corporation Financial Statements (together with any
notes thereto) (i) are true, correct and complete in all material respects, (ii)
are in accordance with the books and records of the Corporation, (iii) fairly
present in all material respects the financial condition of the Corporation as
of the date indicated and the results of operations and cash flows of the
Corporation for the period indicated and (iv) have been prepared in accordance
with Mexican GAAP.
(c) The Corporation has provided to the Purchaser's
accountants all information which they have requested in order to present the
Corporation Financial Statements in accordance with U.S. GAAP. All of such
information is true, accurate and complete in all material respects.
3.5 Absence of Undisclosed Liabilities. (a) The Corporation
has no obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) which were not provided for or disclosed in the Corporation
Financial Statements, except (i) those incurred in the ordinary course of
business which do not exceed $100,000, (ii) those reflected in Schedule 3.5
attached hereto and (iii) those under contracts, commitments or agreements of
the type required to be disclosed by the Seller or the LLCs on any schedule
hereto and so disclosed or which because of the dollar amount or the other
qualifications in this Agreement are not required to be listed on any schedule
hereto.
(b) Neither LLC-2 nor LLC-3 has any obligations or liabilities
of any nature (matured or unmatured, fixed or contingent).
3.6 Absence of Changes. Except as set forth on Schedule 3.6
attached hereto, since the Balance Sheet Date there has not been, and neither
the Corporation nor LLC-2 nor LLC-3 has agreed to cause:
(a) any material adverse change in the financial condition,
results of operations, assets, liabilities, or business of the Corporation or
LLC-2 or LLC-3;
(b) any borrowing or agreement to borrow any funds;
11
<PAGE> 12
(c) any asset or property of the Corporation or LLC-2 or LLC-3
made subject to an Encumbrance, other than Permitted Encumbrances;
(d) any waiver of any material right of the Corporation or
LLC-2 or LLC-3 or the cancellation of any material debt or claim held by the
Corporation or LLC-2 or LLC-3;
(e) any declaration or payment of dividends on, or other
distributions with respect to, or any direct or indirect redemption or
acquisition of, or any sale or issuance of, any shares of the capital stock of
the Corporation or equity interests of LLC-2 or LLC-3, or any agreement of
commitment therefore;
(f) any mortgage, pledge, sale, assignment or transfer of any
tangible or intangible assets of the Corporation or LLC-2 or LLC-3, except (i)
in the ordinary course of business consistent with past practices, (ii) those
reflected in the schedules attached hereto and (iii) those which because of the
dollar amount or other qualifications in this Agreement are not required to be
listed on any schedule hereto;
(g) any loan or advance or guarantee of indebtedness by the
Corporation or LLC-2 or LLC-3 to any Person or any agreement or commitment
therefor;
(h) any damage, destruction or loss (whether or not covered by
insurance) other than ordinary wear and tear materially adversely affecting the
assets, property or business of the Corporation or LLC-2 or LLC-3;
(i) any increase, direct or indirect, in the compensation paid
or payable to officers, directors, employees or consultants of the Corporation
or LLC-2 or LLC-3 or the Designated Parties;
(j) any change in the accounting or tax reporting methods or
practices followed by the Corporation or LLC-2 or LLC-3; or
(k) any change in any contract or agreement by which the
Corporation or LLC-2 or LLC-3 or their assets are bound which would have a
Material Adverse Effect.
3.7 Tax Matters. Except as set forth on Schedule 3.7 attached
hereto, all federal, state and local tax returns and tax reports required to be
filed by the Corporation and LLC-2 and LLC-3 have been filed with the
appropriate governmental agencies in all jurisdictions in which such returns and
reports are required to be filed and all of the foregoing are true, correct and
complete in all material respects. All income, profits, franchise, sales, use,
occupation, property, excise, payroll, withholding and other taxes (including
interest and penalties) shown as due on such returns and reports or required to
have been paid or accrued by the Corporation or LLC-2 or LLC-3 have been fully
paid or are adequately provided for in the Corporation Financial Statements. No
claims or deficiencies have been raised in writing by any taxing authority in
connection with any of the returns and reports referred to above, and no waivers
of statutes of limitations have been given or requested with respect to the
Corporation or LLC-2 or
12
<PAGE> 13
LLC-3 which are in effect. Neither the Corporation nor LLC-2 nor LLC-3 has made
any tax elections (other than elections which relate solely to matters of
accounting, depreciation or amortization) which would have a Material Adverse
Effect on the Corporation or LLC-2 or LLC-3, their financial condition, their
business as presently conducted or presently proposed to be conducted or any of
their properties or assets.
3.8 Assets. (a) Except as set forth on Schedule 3.8 attached
hereto and except for Permitted Encumbrances, the Corporation has good and
marketable title to all of the property and assets, real, personal or fixed,
tangible or intangible, reflected as assets in the Corporation Financial
Statements or not so reflected because not required to be reflected, but which
are used or useful in the business of the Corporation, or acquired by the
Corporation since the Balance Sheet Date (other than assets disposed of in the
ordinary course of business since that date and other assets leased or licensed
by or to the Corporation), subject to no mortgages, liens, security interests,
pledges, charges or other encumbrances of any kind other than Permitted
Encumbrances. The Corporation is not obligated under any contract or agreement
not included on any schedule hereto which materially adversely affects the
Corporation's business, properties, assets, prospects or condition (financial or
otherwise). The Corporation's leased premises, equipment and other tangible
assets are in good operating condition in all material respects subject to
ordinary wear and tear and are fit for use in the ordinary course of business.
(b) LLC-2 has no assets except for the membership interests in
LLC-3 and LLC-3 has not assets except for the LLC-3 Shares.
3.9 Intellectual Property Rights. Except as set forth on
Schedule 3.9 attached hereto:
(a) there are no Intellectual Property Rights necessary or
required to enable the Corporation to carry on its business as now conducted and
as presently proposed to be conducted. A complete list of the Corporation's
material Intellectual Property Rights is set forth on Schedule 3.9. Except as
set forth on Schedule 3.9, no third party has any ownership right, title,
interest, claim in or lien on any of the Corporation's material Intellectual
Property Rights, and
(b) to the knowledge of the Seller and each of the LLCs,
neither the Corporation nor LLC-2 nor LLC-3 has violated or infringed, or is
currently violating or infringing, and neither the Corporation nor any of the
LLCs nor the Seller has received any communications alleging that the
Corporation or LLC-2 or LLC-3 (or any of their employees or consultants) has
violated or infringed or, by conducting its business as presently proposed to be
conducted, would violate or infringe, the Intellectual Property Rights of any
other Person.
3.10 Litigation. Except as set forth on Schedule 3.10 attached
hereto, there is no action, suit, proceeding, claim, arbitration or
investigation ("Action") pending (or, to the knowledge of the Seller and each of
the LLCs, currently threatened) against the Corporation, LLC-2 or LLC-3, their
activities, properties or assets or, to the knowledge of the Seller and each of
the LLCs, against any Designated Party in connection with such Designated
Party's relationship with, or actions taken on behalf of, the Corporation or
LLC-2 or LLC-3. To the
13
<PAGE> 14
knowledge of the Seller and each of the LLCs, there is no factual or legal basis
for any such Action. Neither the Corporation nor LLC-2 nor LLC-3 is a party to
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality and there is no Action by
the Corporation or LLC-2 or LLC-3 currently pending or which the Corporation or
LLC-2 or LLC-3 intends to initiate.
3.11 No Defaults. Except as set forth on Schedule 3.11
attached hereto, neither the Corporation nor LLC-2 nor LLC-3 is in default (a)
under its Articles of Incorporation or Bylaws or other organizational documents,
or under any note, indenture, mortgage, or any other material contract,
agreement or instrument to which the Corporation or LLC-2 or LLC-3, as the case
may be, is a party or by which it or any of its property is bound or affected or
(b) with respect to any order, writ, injunction, judgment or decree of any court
or any federal, state, municipal or other domestic or foreign governmental
department, commission, board, bureau, agency or instrumentality. There exists
no condition, event or act which constitutes, or which after notice, lapse of
time or both, would constitute, a default under any of the foregoing.
3.12 Employees.
(a) Except as set forth on Schedule 3.12 attached hereto, the
Corporation is not bound by or subject to any contract, commitment or
arrangement with any labor union, and no labor union has requested, sought or
attempted to represent any employees, representatives or agents of the
Corporation. There is no strike or other material labor dispute involving the
Corporation pending nor, to the knowledge of the Seller and each of the LLCs, is
there any labor organization activity involving the Corporation's employees. To
the knowledge of the Seller and each of the LLCs, no Designated Party or
consultant who is currently employed or engaged by the Corporation intends to
terminate his or her employment or engagement with the Corporation, nor does the
Corporation have any present intention to terminate the employment or engagement
of any Designated Party or consultant.
(b) No Designated Party, or to knowledge of the Seller and
each of the LLCs, officer, director, employee or consultant presently associated
with the Corporation or LLC-2 or LLC-3 is obligated under any agreement
(including licenses, covenants or commitments of any nature) or subject to any
judgment, decree or order of any court or administrative agency, or any other
restriction, that would interfere with the use of his or her best efforts to
carry out his or her duties for the Corporation or LLC-2 or LLC-3 or to promote
the interests of the Corporation or LLC-2 or LLC-3 that would conflict with the
Corporation's or LLC-2's or LLC-3's business as presently conducted or proposed.
To the knowledge of the Seller and each of the LLCs, the carrying on of the
Corporation's or LLC-2's or LLC-3's business by any officer, director, employee,
consultant or Designated Party associated with the Corporation or LLC-2 or LLC-3
and the conduct of the Corporation's and LLC-2's and LLC-3's business as
presently conducted or proposed, will not conflict with or result in a breach of
the terms, conditions or provisions of, or constitute a default under, any
contract, covenant or instrument under which any Designated Party, or to the
knowledge of the Seller and each of the LLCs, any such officer, director,
employee or consultant is now obligated.
(c) Neither LLC-2 nor LLC-3 has any employees or consultants.
14
<PAGE> 15
3.13 Compliance. Except as set forth on Schedule 3.13 attached
hereto, the Corporation, LLC-2 and LLC-3 (a) have complied in all material
respects with all laws, ordinances, regulations and orders applicable to their
business or the ownership of their assets and have received no notice of
non-compliance therewith and (b) have obtained all governmental licenses and
permits necessary or required to enable the to carry on their business as now
conducted and as presently proposed to be conducted (the "Corporation Licenses
and Permits"), except where the failure to have done so would not have had a
Material Adverse Effect. Such licenses and permits are in full force and effect,
no violations have been recorded in respect of any such licenses or permits, and
no proceeding is pending or, to the knowledge of the Seller and each of the
LLCs, threatened, to revoke or limit any thereof.
3.14 Insurance. Schedule 3.14 attached hereto contains a
description of each insurance policy maintained by the Corporation, LLC-2 and
LLC-3 with respect to its properties, assets and business, and each such policy
is valid and enforceable and duly in force and all premiums with respect thereto
are paid to date.
3.15 Authorization of Transaction Documents. The Seller and
each of the LLCs has full legal power and authority to enter into and perform
the Transaction Documents to which it is a party. This Agreement has been duly
and validly executed and delivered by the Seller and each of the LLCs and
constitutes the valid and binding obligation of the Seller and each of the LLCs,
enforceable in accordance with its terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting creditors'
rights generally and to general principles of equity. The Transaction Documents
to which the Seller or any of the LLCs is a party (other than this Agreement),
upon due and valid execution and delivery by the Seller or the applicable LLC,
will constitute the valid and binding obligations of the Seller or the
applicable LLC, enforceable in accordance with their terms, subject to
applicable bankruptcy, reorganization, insolvency, moratorium and similar laws
affecting creditors' rights generally and to general principles of equity. The
execution and delivery of the Transaction Documents to which it is a party by
the Seller or any of the LLCs and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof by the Seller or
any of the LLCs will not (a) violate any provision of law, statute, rule or
regulation, or any ruling, writ, injunction, order, judgment or decree of any
court, administrative agency or other governmental body applicable to the Seller
or any of the LLCs or (b) except as set forth in Schedule 3.15 attached hereto,
conflict with or result in any breach of any of the terms, conditions or
provisions of, or require the consent of a third party under, or constitute
(with due notice or lapse of time, or both) a default (or give rise to any right
of termination, cancellation or acceleration) under, (i) the Articles of
Incorporation or Bylaws or the organizational documents of the Seller, any of
the LLCs or the Corporation or (ii) the Corporation Licenses and Permits or any
agreement listed on Schedule 3.19.
3.16 Ownership and Transfer of Seller and Merger Shares. The
Seller owns the Seller Shares, and LLC-3 owns the LLC-3 Shares, beneficially and
of record, free and clear of all Encumbrances. Delivery of certificates
representing the Seller Shares at Closing will transfer to the Purchaser good
and valid title to all of the Seller Shares free of all Encumbrances other than
encumbrances created by the Purchaser.
15
<PAGE> 16
3.17 Ownership of Membership Interests. LLC-1 owns all of the
outstanding equity interests in LLC-2, beneficially and of record, free and
clear of all Encumbrances. LLC-2 owns all of the outstanding equity interests in
LLC-3, beneficially and of record, free and clear of all Encumbrances.
Consummation of the Merger will transfer to Newco all of the outstanding equity
interests in LLC-3.
3.18 No Consents or Approval Required. Except as set forth on
Schedule 3.18 attached hereto, no consent, approval or authorization of, or
declaration to, or filing with, any Person (governmental or private) is required
for the valid authorization, execution, delivery and performance by the Seller
or any of the LLCs of the Transaction Documents or for the valid sale and
delivery of the Seller Shares or consummation of the Merger or the other
transactions contemplated hereby.
3.19 Agreements. (a) Schedule 3.19 attached hereto is a list
of all material contracts, commitments and agreements, written or oral, and all
contracts, commitments and agreements, written or oral which cannot be
terminated by the Corporation on less than one-year's notice, to which the
Corporation is a party. True and correct copies of all such contracts,
commitments and agreements have been made available for review by the Purchaser.
Except as listed on Schedule 3.19 or as otherwise contemplated hereby, the
Corporation is not a party to any written or oral (i) contract or contracts for
the future purchase of fixed assets or for the future purchase of materials,
supplies or equipment in excess of $75,000 individually or $300,000 in the
aggregate, (ii) contract or contracts for the employment of any officer,
individual employee or other Person on a full-time basis or any contract with
any Person on a consulting basis (including without limitation contracts with a
third party pursuant to which employees or consultants are made available to the
Corporation) in excess of $75,000 per year or $300,000 per year in the
aggregate, (iii) bonus, pension, profit-sharing, retirement, stock purchase,
stock option, hospitalization, medical insurance or similar plan, contract or
understanding in effect with respect to employees or any of them or the
employees of others, (iv) agreement or indenture relating to the borrowing of
money or to the mortgaging, pledging or otherwise placing of a lien on any
assets of the Corporation, (v) loan or guaranty of any obligation for borrowed
money or otherwise, (vi) lease or leases or agreement or agreements under which
the Corporation is lessee of or holds or operates any property, real or
personal, owned by any other party requiring payments of more than $75,000 per
year individually or $300,000 per year in the aggregate, (vii) lease or
agreement under which the Corporation is lessor of or permits any third party to
hold or operate any property, real or personal, owned or controlled by the
Corporation requiring payment in excess of $75,000 per year individually or
$300,000 per year in the aggregate, (viii) agreement or agreements or other
commitment for capital expenditures in excess of $75,000 per year individually
or $300,000 in the aggregate, (ix) contract, agreement or commitment under which
the Corporation is obligated to pay any broker's fees, finder's fees or any such
similar fees, to any third party, (x) contract, agreement or commitment under
which the Corporation has issued, or may become obligated to issue, any shares
of capital stock of the Corporation or any warrants, options, convertible
securities or other commitments pursuant to which the Corporation is or may
become obligated to issue any shares of its capital stock, (xi) any other
material contract, agreement, arrangement or understanding, (xii) contract or
agreement prohibiting it from freely engaging in any business or competing
anywhere in the world or (xiii) power of attorney or
16
<PAGE> 17
comparable delegation of authority. The Corporation is not in breach of any such
written agreement and, to the knowledge of the Seller and each of the LLCs, no
party to any such written agreement has provided the Corporation with notice
that such party intends to terminate or fail to renew such agreement.
(b) Except as otherwise contemplated hereby, neither LLC-2 nor
LLC-3 is a party to any contract, commitment or agreement, written or oral.
3.20 Disclosure. No written document, certificate, instrument
or statement furnished or made to the Purchaser by or on behalf of the Seller or
any of the LLCs under this Agreement contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading. Other than general business and
economic conditions, there is no fact known to the Seller or any of the LLCs
which may materially adversely affect the business, properties, or financial
condition of the Corporation or LLC-2 or LLC-3 which has not been set forth in
this Agreement or in the other documents, certificates, instruments or
statements furnished to the Purchaser by or on behalf of the Seller or any of
the LLCs.
3.21 Conflicts of Interest. Except for ownership of equity
interests in publicly traded companies and except as set forth on Schedule 3.21,
no Designated Party and, to the knowledge of the Seller and LLC-2 and LLC-3, no
officer, director or beneficial owner of more than 5% of the capital stock of
the Seller or LLC-2 or LLC-3 has any direct or indirect interest (a) in any
entity which does business with the Corporation or LLC-2 or LLC-3, (b) in any
property, asset or right which is used by the Corporation or LLC-2 or LLC-3 in
the conduct of its business, or (c) in any contractual relationship with the
Corporation or LLC-2 or LLC-3 other than as an employee, director, shareholder,
member or other equity holder.
3.22 Absence of Restrictive Agreements. To the knowledge of
the Seller and each of the LLCs, no employee of the Corporation is subject to
any secrecy or non-competition agreement or any agreement or restriction of any
kind that would impede in any way the ability of such employee to carry out
fully all activities of such employee in furtherance of the business of the
Corporation. To the knowledge of the Seller and each of the LLCs, no employer or
former employer of any employee of the Corporation has any claim of any kind
whatsoever in respect of any of the intellectual property rights of the
Corporation.
3.23 Accredited Investor. Each of the Seller and LLC-1 is an
accredited investor within the meaning of Rule 501(a) promulgated under the
Securities Act. The PVI Securities are being purchased or otherwise acquired for
its own account and not with the view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities
Act. It understands that the PVI Securities have not been registered under the
Securities Act or any applicable state laws by reason of their issuance or
contemplated issuance in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act and such laws, and that
the reliance of the Purchaser and others upon this exemption is predicated in
part upon this representation and warranty. It further understands that the PVI
Securities may not be transferred or resold without (a) registration under the
Securities
17
<PAGE> 18
Act and any applicable state securities laws, or (b) an exemption from the
requirements of the Securities Act and applicable state securities laws.
3.24 Investment Evaluation. Each of the Seller and LLC-1 has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the investment to be made
hereunder. It has and has had access to all of the Purchaser's books and records
and access to the Purchaser's executive officers as the Seller or LLC-1
requested.
3.25 Legend. Each of the Seller and LLC-1 understands that the
certificates for the PVI Securities will bear a legend in substantially the
following form in addition to any other legends that may be required under other
documents entered into in connection with this Agreement.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") OR THE SECURITIES ACT OF ANY STATE AND MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS
AND UNTIL REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES ACTS OR, IN
THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE
SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS PURSUANT TO
AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION OR IS IN ACCORDANCE WITH THE
PROVISIONS OF REGULATION S UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THESE
SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.
3.26 Business Affairs. Each of the Seller and LLC-1 is aware
of the Purchaser's business affairs and financial condition and has acquired
sufficient information about the Purchaser to reach an informed and
knowledgeable decision to acquire the PVI Securities. Each of the Seller and
LLC-1 recognizes that investment in the PVI Securities involves a number of
significant risks.
3.27 Brokers or Finders. Except as set forth on Schedule 3.27,
no agent, broker, investment banker or other Person is or will be entitled to
any broker's or finder's fee or any other commission or similar fee in
connection with any of the transactions contemplated by this Agreement based on
arrangements made by or on behalf of the Seller or any of the LLCs or any
Designated Party.
3.28 Televisa. Neither the Seller, any of the LLCs, any
Designated Party nor the Corporation believes that Televisa will not continue in
2001 its business relationship with the Corporation on terms reasonably
comparable to those in effect during 2000.
3.29. Interested Stockholder. As of the date hereof, none of
the Seller, the LLCs, any Designated Party or any other member of the Seller
Group is an "interested stockholder" as defined in N.J.S.A. 14A:10A-3.
4. Representations and Warranties of the Purchaser. Each of the
Purchaser and
18
<PAGE> 19
Newco hereby represents and warrants to the Seller, LLC-1, LLC-2 and LLC-3 as
follows:
4.1 Organization. The Purchaser is (a) a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, (b) has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
businesses as presently conducted, (c) is duly qualified and in good standing to
do business in the jurisdictions set forth on Schedule 4.1, which constitute all
of the jurisdictions in which the conduct of the Purchaser's business or its
ownership, leasing or operation of property requires such qualification where
the absence of such qualification would have a Material Adverse Effect and (d)
except as set forth on Schedule 4.1, has never conducted business under any name
other than that set forth in this Agreement.
4.2 Subsidiaries.
(a) Schedule 4.2(a) sets forth a complete and correct list of
each of the Purchaser's Subsidiaries. Except as set forth on Schedule 4.2(a),
the Purchaser owns, either directly or indirectly through one or more of its
Subsidiaries, all of the capital stock or other equity interests of its
Subsidiaries free and clear of all Encumbrances, other than transfer
restrictions imposed by applicable federal and state securities laws, statutes,
rules, regulations, orders or other restrictions of any court or governmental
entity applicable to the businesses conducted by the Purchaser and its
Subsidiaries. All of the issued and outstanding shares of capital stock or other
equity interests of each of the Purchaser's Subsidiaries held directly or
indirectly by the Purchaser have been duly authorized and are validly issued,
fully paid and nonassessable. No shares of capital stock or other equity
interests of any of the Purchaser's Subsidiaries are entitled to preemptive
rights. Except as set forth on Schedule 4.2(a) or as disclosed in the SEC
Reports (as defined in Section 4.4), there are no outstanding subscription
rights, options, warrants, convertible or exchangeable securities or other
rights of any character whatsoever relating to issued or unissued capital stock
or other equity interests of any of the Purchaser's Subsidiaries, or any
commitments of any character whatsoever relating to issued or unissued capital
stock or other equity interests of any of the Purchaser's Subsidiaries or
pursuant to which the Purchaser or any of its Subsidiaries is or may become
bound to issue or grant additional shares of its capital stock or other equity
interests or related subscription rights, options, warrants, convertible or
exchangeable securities or other rights, or to grant preemptive rights. Except
as set forth on Schedule 4.2(a) or as disclosed in the SEC Reports, there are no
voting trusts, stockholders agreements, proxies or other commitments or
understandings to which any of the Purchaser's Subsidiaries is a party with
respect to the voting or transfer of any capital stock or other equity interest
of any of the Purchaser's Subsidiaries. True and correct copies of all such
agreements, restrictions and encumbrances have been delivered to the Seller.
Except as set forth on Schedule 4.2(a), neither the Purchaser nor any of its
Subsidiaries has owned or presently owns, directly or indirectly, any interest
in any corporation, limited liability company, partnership, business association
or other Person.
(b) Each of the Purchaser's Subsidiaries is a corporation,
limited liability company, partnership, business association or other Person
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has the requisite power and authority to carry
on its business as it is now being conducted. Except as set
19
<PAGE> 20
forth on Schedule 4.2(b), each of the Purchaser's Subsidiaries is duly qualified
and licensed to do business, and is in good standing (and has paid all relevant
franchise or analogous taxes), in each jurisdiction where the character of its
assets owned or held under lease or the nature of the business conducted by it
makes such qualification necessary except where the failure of all of such
Subsidiaries to so qualify or be licensed could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
4.3 Capitalization.
(a) The Purchaser is authorized to issue 40,000,000 shares of
common stock, no par value, 1,000,000 shares of preferred stock, 167,000 shares
of Series A Redeemable Preferred Stock, $4.50 par value, and 93,300 shares of
Series B Redeemable Preferred Stock, $5.00 par value.
(b) Schedule 4.3(b) attached hereto sets forth a description
of (i) the capital stock of the Purchaser, including, to the Purchaser's
knowledge, the names of beneficial holders of 5% or more of the Purchaser's
capital stock, the number of shares held by such Persons, and the number of
outstanding shares of each class of capital stock, and (ii) all outstanding
warrants, options, agreements, convertible securities or other commitments
pursuant to which the Purchaser is or may become obligated to issue any shares
of its capital stock or other securities of the Purchaser. All of the issued and
outstanding shares of the Purchaser's capital stock have been duly authorized
and are validly issued, fully paid and non-assessable. Except as set forth on
Schedule 4.3(b) attached hereto, (x) there are no preemptive or similar rights
to purchase or otherwise acquire shares of capital stock of the Purchaser
pursuant to any provision of law, the Purchaser's articles of incorporation or
bylaws or any agreement or instrument to which the Purchaser is a party, or
otherwise, except as contemplated by this Agreement, and (y) there is no
agreement, restriction or encumbrance (such as a right of first refusal, right
of first offer, proxy, voting agreement, etc.) with respect to the sale, voting
or transfer of any shares of capital stock of the Purchaser (whether outstanding
or issuable upon conversion or exercise of outstanding securities) to which the
Purchaser is a party or which the Purchaser has knowledge of except as
contemplated by this Agreement. True and correct copies of all such agreements,
restrictions and encumbrances have been delivered to the Seller. Except as set
forth in Schedule 4.3(b), as of the Closing, neither Purchaser nor any of its
Subsidiaries will be subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock.
Except as set forth in Schedule 4.3(b), there are no agreements or arrangements
pursuant to which the Purchaser is required to register shares of PVI Common
Stock or any other equity securities under the Securities Act. None of the
outstanding equity securities of the Purchaser were issued in violation of the
Securities Act or the blue sky laws of any jurisdiction.
4.4 SEC Reports. The Purchaser has timely filed all proxy
statements, reports and other documents required to be filed by it with the
Commission under the Exchange Act from and after January 1, 1998, and the
Purchaser has made available to the Seller complete and correct copies of all
annual reports, quarterly reports, proxy statements and other reports filed by
the Purchaser with the Commission under the Exchange Act from and after such
date (collectively, the "SEC Reports"). Each SEC Report was on the date of its
filing in compliance in all material respects with the requirements of its
respective report form and did not on the date
20
<PAGE> 21
of filing contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were or will be
made, not misleading, and as of the date hereof there is no fact or facts not
disclosed in the SEC Reports that relate specifically to the Purchaser or any of
its Subsidiaries which could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Complete and correct copies of all
material correspondence between the Purchaser or any of its Subsidiaries, on the
one hand, and the SEC, on the other hand, have previously been made available to
the Seller.
4.5 Financial Statements. The consolidated financial
statements (including any related schedules and/or notes) included in the SEC
Reports (the "Purchaser Financial Statements") have been prepared in accordance
with U.S. GAAP and fairly present in all material respects the consolidated
financial condition, results of operations and changes in shareholders' equity
of the Purchaser and its Subsidiaries as of the respective dates thereof and for
the respective periods then ended (in each case subject, as to interim
statements, to changes resulting from year-end adjustments).
4.6 Absence of Undisclosed Liabilities. The Purchaser and its
Subsidiaries have no obligations or liabilities of any nature (matured or
unmatured, fixed or contingent) which were not provided for or disclosed in the
Purchaser Financial Statements, except (a) those incurred in the ordinary course
of business which do not exceed $100,000, (b) those reflected in Schedule 4.6.
attached hereto and (iii) those under contracts, commitments or agreements of
the type required to be disclosed by the Purchaser and Newco on any schedule
hereto and so disclosed or which because of the dollar amount or other
qualifications in this Agreement are not required to be listed on any schedule
hereto. All liability reserves established by the Purchaser and its Subsidiaries
are adequate in all respects. There are no loss contingencies (as such term is
used in Statement of Financial Accounting Standards No. 5 issued by the
Financial Accounting Standards Board in March 1975) which were not adequately
provided for in the Purchaser Financial Statements.
4.7 Absence of Changes. Except as set forth on Schedule 4.7
attached hereto, since June 30, 2000, there has not been and the Purchaser and
its Subsidiaries have not agreed to cause:
(a) any material adverse change in the financial condition,
results of operations, assets, liabilities, or business of the Purchaser or its
Subsidiaries;
(b) any borrowings or agreement to borrow any funds;
(c) any asset or property of the Purchaser or its Subsidiaries
made subject to an Encumbrance, other than Permitted Encumbrances;
(d) any waiver of any material right of the Purchaser or its
Subsidiaries or the cancellation of any material debt or claim held by the
Purchaser or its Subsidiaries;
(e) any declaration or payment of dividends on, or other
distributions with respect to, or any direct or indirect redemption or
acquisition of, or any sale or issuance of,
21
<PAGE> 22
any shares of the capital stock of the Purchaser or its Subsidiaries, or any
agreement of commitment therefore;
(f) any mortgage, pledge, sale, assignment or transfer of any
tangible or intangible assets of the Purchaser or its Subsidiaries, except (i)
in the ordinary course of business consistent with past practices, (ii) those
reflected in the schedules attached hereto and (iii) those which because of the
dollar amount or other qualifications in this Agreement are not required to be
listed on any schedule hereto;
(g) any loan or advance or guarantee of indebtedness by the
Purchaser or its Subsidiaries to any Person or any agreement or commitment
therefor;
(h) any damage, destruction or loss (whether or not covered by
insurance) other than ordinary wear and tear materially adversely affecting the
assets, property or business of the Purchaser or its Subsidiaries;
(i) any increase, direct or indirect, in the compensation paid
or payable to directors, executive officers or employees;
(j) any change in the accounting or tax reporting methods or
practices followed by the Purchaser or its Subsidiaries; or
(k) any change in any contract or agreement by which the
Purchaser or its Subsidiaries or their respective assets are bound which would
have a Material Adverse Effect.
4.8 Tax Matters. Except as set forth on Schedule 4.8 attached
hereto, all federal, state and local tax returns and tax reports required to be
filed by the Purchaser and its Subsidiaries have been filed with the appropriate
governmental agencies in all jurisdictions in which such returns and reports are
required to be filed and all of the foregoing are true, correct and complete in
all material respects. All income, profits, franchise, sales, use, occupation,
property, excise, payroll, withholding and other taxes (including interest and
penalties) shown as due on such returns and reports or required to have been
paid or accrued by the Purchaser and its Subsidiaries have been have been fully
paid or are adequately provided for in the Purchaser Financial Statements. No
claims or deficiencies have been raised in writing by any taxing authority in
connection with any of the returns and reports referred to above, and no waivers
of statutes of limitations have been given or requested with respect to the
Purchaser and its Subsidiaries which are in effect. The Purchaser and its
Subsidiaries have not made any tax elections (other than elections which relate
solely to matters of accounting, depreciation or amortization) which would have
a Material Adverse Effect on the Purchaser and its Subsidiaries, their
respective financial conditions, their respective businesses as presently
conducted or presently proposed to be conducted or any of their respective
properties or assets.
4.9 Assets. Except as set forth in the SEC Reports or on
Schedule 4.9 attached hereto and except for Permitted Encumbrances, the
Purchaser and its Subsidiaries have good and marketable title to all of the
property and assets, real, personal or fixed, tangible or intangible, reflected
as assets in the Purchaser Financial Statements or not so reflected because not
required to be reflected, but which are used or useful in the businesses of the
Purchaser and its Subsidiaries, or acquired by the Purchaser and its
Subsidiaries since the date of the most recent
22
<PAGE> 23
balance sheet contained in the SEC Reports (other than assets disposed of in the
ordinary course of business since that date), subject to no mortgages, liens,
security interests, pledges, charges or other encumbrances of any kind other
than Permitted Encumbrances. The Purchaser and its Subsidiaries are not
obligated under any contract or agreement not included on any schedule hereto
which materially adversely affects the Purchaser's and its Subsidiaries'
respective businesses, properties, assets, prospects or condition (financial or
otherwise). The Purchaser's and its Subsidiaries' leased premises, equipment and
other tangible assets are in good operating condition in all material respects
subject to ordinary wear and tear and are fit for use in the ordinary course of
business.
4.10 Intellectual Property Rights. Except as set forth on
Schedule 4.10 attached hereto:
(a) there are no Intellectual Property Rights necessary or
required to enable the Purchaser or its Subsidiaries to carry on their
respective businesses as now conducted and as presently proposed to be
conducted. A complete list of the Purchaser's and its Subsidiaries' material
Intellectual Property Rights is set forth on Schedule 4.10. Except as set forth
on Schedule 4.10, no third party has any ownership right, title, interest, claim
in or lien on any of the Purchaser's or its Subsidiaries' material Intellectual
Property Rights, and
(b) to the Purchaser's knowledge, the Purchaser and its
Subsidiaries have not violated or infringed, and are not currently violating or
infringing, and the Purchaser and its Subsidiaries have not received any
communications alleging that the Purchaser or its Subsidiaries (or any of their
respective employees or consultants) have violated or infringed or, by
conducting their respective businesses as presently proposed to be conducted,
would violate or infringe, the Intellectual Property Rights of any other Person.
4.11 Litigation. Except as set forth on Schedule 4.11 attached
hereto, there is no Action pending (or, to the Purchaser's knowledge, currently
threatened) against the Purchaser or its Subsidiaries, their respective
activities, properties or assets or, to the Purchaser's knowledge, against any
director, officer or employee in connection with such director's, officer's or
employee's relationship with, or actions taken on behalf of, the Purchaser or
its Subsidiaries. To the Purchaser's knowledge, there is no factual or legal
basis for any such Action. The Purchaser and its Subsidiaries are not parties to
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality and there is no Action by
the Purchaser or its Subsidiaries currently pending or which the Purchaser or
its Subsidiaries intend to initiate.
4.12 No Defaults. Except as set forth on Schedule 4.12
attached hereto, the Purchaser and its Subsidiaries are not in default (a) under
their respective articles of incorporation or bylaws or other organizational
documents, or under any note, indenture, mortgage, or any other material
contract, agreement or instrument to which the Purchaser or its Subsidiaries are
a party or by which they or any of their respective properties are bound or
affected or (b) with respect to any order, writ, injunction, judgment or decree
of any court or any federal, state, municipal or other domestic or foreign
governmental department, commission, board, bureau, agency or instrumentality.
There exists no condition, event or act which constitutes, or which after
notice, lapse of time or both, would constitute, a default under any of
23
<PAGE> 24
the foregoing.
4.13 Employees.
(a) Except as set forth in the SEC Reports or on Schedule 4.13
attached hereto, the Purchaser and its Subsidiaries are not bound by or subject
to any contract, commitment or arrangement with any labor union, and no labor
union has requested, sought or attempted to represent any employees,
representatives or agents of the Purchaser and its Subsidiaries. There is no
strike or other material labor dispute involving the Purchaser or its
Subsidiaries pending nor, to the Purchaser's knowledge, is there any labor
organization activity involving the Purchaser's or its Subsidiaries' employees.
To the Purchaser's knowledge, no officer, director, employee or consultant who
is currently employed or engaged by the Purchaser or its Subsidiaries intends to
terminate his or her employment or engagement with the Purchaser or its
Subsidiaries, as the case may be, nor does the Purchaser or its Subsidiaries
have any present intention to terminate the employment or engagement of any
officer, director, employee or consultant.
(b) To the Purchaser's knowledge, no officer, director,
employee or consultant presently associated with the Purchaser or its
Subsidiaries is obligated under any agreement (including licenses, covenants or
commitments of any nature) or subject to any judgment, decree or order of any
court or administrative agency, or any other restriction, that would interfere
with the use of his or her best efforts to carry out his or her duties for the
Purchaser or its Subsidiaries or to promote the interests of the Purchaser of
its Subsidiaries or that would conflict with the Purchaser's or its
Subsidiaries' businesses as presently conducted or proposed. To the Purchaser's
knowledge, the carrying on of the Purchaser's and its Subsidiaries' businesses
by any officer, director, employee or consultant presently associated with the
Purchaser or its Subsidiaries and the conduct of the Purchaser' or its
Subsidiaries' businesses as presently conducted or proposed, will not conflict
with or result in a breach of the terms, conditions or provisions of, or
constitute a default under, any contract, covenant or instrument under which any
such officer, director, employee or consultant is now obligated.
4.14 Compliance. Except as set forth on Schedule 4.14 attached
hereto, the Purchaser and its Subsidiaries (a) have complied in all material
respects with all laws, ordinances, regulations and orders applicable to their
respective businesses or the ownership of their respective assets and have
received no notice of non-compliance therewith and (b) have obtained all
governmental licenses and permits necessary or required to enable them to carry
on their respective businesses as now conducted and as presently proposed to be
conducted (the "Purchaser Licenses and Permits"), except where the failure to
have done so would not have had a Material Adverse Effect. Such licenses and
permits are in full force and effect, no violations have been recorded in
respect of any such licenses or permits, and no proceeding is pending or, to the
Purchaser's knowledge, threatened, to revoke or limit any thereof.
4.15 Insurance. Schedule 4.15 attached hereto contains a
description of each insurance policy maintained by the Purchaser and its
Subsidiaries with respect to their respective properties, assets and business,
and each such policy is valid and enforceable and duly in force and all premiums
with respect thereto are paid to date.
24
<PAGE> 25
4.16 Authorization of the Transaction Documents. The Purchaser
has full legal power and authority to enter into and perform the Transaction
Documents. This Agreement has been duly and validly executed and delivered by
the Purchaser and constitutes the valid and binding obligation of the Purchaser,
enforceable in accordance with its terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting creditors'
rights generally and to general principles of equity. The Transaction Documents
(other than this Agreement), upon due and valid execution and delivery by the
Purchaser, will constitute the valid and binding obligations of the Purchaser,
enforceable in accordance with their terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting creditors'
rights generally and to general principles of equity. The execution and delivery
of the Transaction Documents by the Purchaser and the consummation of the
transactions contemplated thereby and compliance with the provisions thereof by
the Purchaser will not (a) violate any provision of law, statute, rule or
regulation, or any ruling, writ, injunction, order, judgment or decree of any
court, administrative agency or other governmental body applicable to the
Purchaser or any of its Subsidiaries or (b) except as set forth on Schedule 4.16
hereof, conflict with or result in any breach of any of the terms, conditions or
provisions of, or require the consent of a third party under, or constitute
(with due notice or lapse of time, or both) a default (or give rise to any right
of termination, cancellation or acceleration) under the (i) Purchaser's or its
Subsidiaries' articles of incorporation or bylaws or other organizational
documents or (ii) the Purchaser Licenses and Permits or any agreement listed on
Schedule 4.19. The PVI Securities have been duly authorized and when issued as
contemplated herein will be validly issued, fully paid and nonassessable. The
shares of PVI Common Stock issuable upon the exercise of the Sale PVI Warrants
and the Merger PVI Warrants are duly authorized and validly reserved, and when
issued, will be validly issued, fully paid and non-assessable.
4.17 No Consents or Approvals Required. Except as set forth on
Schedule 4.17 attached hereto, no consent, approval or authorization of, or
declaration to, or filing with, any Person (governmental or private) is required
for the valid authorization, execution, delivery and performance by the
Purchaser of the Transaction Documents or for the valid sale and delivery of the
PVI Securities.
4.18 Shareholder Approval. The approval by the Purchaser's
shareholders of this Agreement and the other transactions contemplated hereby
consists of an affirmative vote of holders of a majority of the issued and
outstanding voting stock of the Purchaser and is the only vote of holders of any
class or series of the Purchaser's securities necessary to approve the
Purchaser's actions taken or to be taken in connection with this Agreement and
the other transactions contemplated hereby.
4.19 Agreements. (a) Schedule 4.19 attached hereto is a list
of all material contracts, commitments and agreements, written or oral, and all
contracts, commitments and agreements, written or oral which cannot be
terminated by the Purchaser or its Subsidiaries as the case may be on less than
one-year's notice, to which the Purchaser or any of its Subsidiaries is a party.
True and correct copies of all such contracts, commitments and agreements have
been made available for review by the Seller. Except as listed on Schedule 4.19
or as otherwise contemplated hereby, neither the Purchaser nor any of its
Subsidiaries is a party to any written or oral (a) contract or contracts for the
future purchase of fixed assets or for the future purchase of materials,
supplies or equipment in excess of $75,000 individually or $300,000 in the
aggregate,
25
<PAGE> 26
(b) contract or contracts for the employment of any officer, individual employee
or other Person on a full-time basis or any contract with any Person on a
consulting basis (including without limitation contracts with a third party to
which employees or consultants are made available to the Purchaser or any of its
Subsidiaries) in excess of $75,000 per year or $300,000 per year in the
aggregate, (c) bonus, pension, profit-sharing, retirement, stock purchase, stock
option, hospitalization, medical insurance or similar plan, contract or
understanding in effect with respect to employees or any of them or the
employees of others, (d) agreement or indenture relating to the borrowing of
money or to the mortgaging, pledging or otherwise placing of a lien on any
assets of the Purchaser or any of its Subsidiaries, (e) loan or guaranty of any
obligation for borrowed money or otherwise, (f) lease or leases or agreement or
agreements under which the Purchaser or any of its Subsidiaries is lessee of or
holds or operates any property, real or personal, owned by any other party
requiring payments of more than $75,000 per year individually or $300,000 per
year in the aggregate, (g) lease or agreement under which the Purchaser or any
of its Subsidiaries is lessor of or permits any third party to hold or operate
any property, real or personal, owned or controlled by the Purchaser or any of
its Subsidiaries requiring payments of more than $75,000 per year individually
or $300,000 per year aggregate, (h) agreement or agreements or other commitment
for capital expenditures in excess of $75,000 per year individually or $300,000
in the aggregate, (i) contract, agreement or commitment under which the
Purchaser or any of its Subsidiaries is obligated to pay any broker's fees,
finder's fees or any such similar fees, to any third party, (j) contract,
agreement or commitment under which the Purchaser or any of its Subsidiaries has
issued, or may become obligated to issue, any shares of capital stock of the
Purchaser or any of its Subsidiaries or any warrants, options, convertible
securities or other commitments pursuant to which the Purchaser or any of its
Subsidiaries is or may become obligated to issue any shares of its capital
stock, (k) any other material contract, agreement, arrangement or understanding,
or (l) contract or agreement prohibiting the Purchaser or any of its
Subsidiaries from freely engaging in any business or competing anywhere in the
world. Neither the Purchaser or any of its Subsidiaries is in breach of any such
written agreement and, to the Purchaser's knowledge, no party to any such
written agreement has provided the Purchaser or any of its Subsidiaries with
notice that such party intends to terminate or fail to renew such agreement.
4.20 Disclosure. No written document, certificate, instrument
or statement furnished or made to the Seller by or on behalf of the Purchaser
under this Agreement contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements herein and
therein not misleading. Other than general business and economic conditions,
there is no fact known to the Purchaser which may materially adversely affect
the business, properties, or financial condition of the Purchaser or any of its
Subsidiaries which has not been set forth in this Agreement or in the other
documents, certificates, instruments or statements furnished to the Seller by or
on behalf of the Purchaser.
4.21 Conflicts of Interest. Except as set forth on Schedule
4.21, to the Purchaser's knowledge, no officer, director or beneficial holder of
more than 5% of the capital stock of the Purchaser or any of its Subsidiaries
has any direct or indirect interest (a) in any entity which does business with
the Purchaser or any of its Subsidiaries, (b) in any property, asset or right
which is used by the Purchaser or any of its Subsidiaries in the conduct of
their respective businesses, or (c) in any contractual relationship with the
Purchaser or any of its Subsidiaries other than as an employee, director or
shareholder.
26
<PAGE> 27
4.22 Absence of Restrictive Agreements. To the Purchaser's
knowledge, no employee of the Purchaser or its Subsidiaries is subject to any
secrecy or non-competition agreement or any agreement or restriction of any kind
that would impede in any way the ability of such employee to carry out fully all
activities of such employee in furtherance of the businesses of the Purchaser or
any of its Subsidiaries. To the Purchaser's knowledge, no employer or former
employer of any employee of the Purchaser or any of its Subsidiaries has any
claim of any kind whatsoever in respect of any of the intellectual property
rights of the Purchaser or any of its Subsidiaries.
4.23 Brokers or Finders Except as set forth on Schedule 4.23,
no agent, broker, investment banker or other Person is or will be entitled to
any broker's or finder's fee or any other commission or similar fee in
connection with any of the transactions contemplated by this Agreement based on
arrangements made by or on behalf of the Purchaser or any of its Subsidiaries.
4.24 Proxy Statement. Any proxy statement to be sent to the
shareholders of the Purchaser in connection with a meeting of the shareholders
of the Purchaser in connection with the transactions contemplated by this
Agreement (the "Shareholders Meeting"; such proxy statement as amended or
supplemented is referred to herein as the "Proxy Statement") will comply as to
form in all material respects with Article 14(a) of the Exchange Act and the
rules promulgated thereunder, and it shall not, on the date the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to shareholders
or at the time of the Shareholders Meeting, contain any untrue statement of a
material fact, or, in light of the circumstances under which made, omit to state
any material fact necessary in order to make the statements made therein not
false or misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Shareholders Meeting which has become false or misleading. If at
any time prior to the Closing any event relating to the Purchaser or any of its
Subsidiaries or any of their respective affiliates, officers or directors should
be discovered by the Purchaser that is required to be set forth in a supplement
to the Proxy Statement, the Purchaser shall promptly inform the Seller thereof.
4.25 New Jersey Anti-Takeover Statute. Based upon the
representations of the Seller and the LLCs herein, N.J.S.A. 14A:10A-1 et. seq.
is inapplicable to the acquisition of the PVI Securities and to the transactions
contemplated hereby and by the other Transaction Documents. The PVI Board has
approved and taken all action necessary to cause the restrictions contained in
N.J.S.A. 14A:10-1et seq. (the "Statute") to be inapplicable to (a) the grant and
exercise of the stock options constituting a part of the Transaction Documents,
and (b) the grant and exercise of the equity participation rights under Section
7.2 and 7.3 hereof, including the exercise of rights, options and warrants
acquired in accordance with such equity participation rights and the conversion
and exchange of securities acquired in connection with such equity participation
rights. The PVI Board has adopted resolutions intended, if and to the extent
permitted by the Statute and other applicable law, to render inapplicable the
restrictions imposed by the Statute with respect to (c) any other business
combination (as defined in the Statute) or issuance of securities or rights,
options or warrants (or exercise, conversion or exchange thereof) in which the
Purchaser or any of its Subsidiaries may engage with the Seller Group or any
Person deemed to be an interested stockholder (as defined in the Statute)
because of the Seller Group's ownership interest in the Purchaser, provided such
business combination or issuance is
27
<PAGE> 28
approved by a majority of the PVI Board excluding any designees of the Seller
Group or any such interested stockholder, and (d) any acquisition by any member
of the Seller Group or any such interested stockholder of securities of the
Purchaser or any of its Subsidiaries, or rights, options or warrants in respect
thereof (or exercise, conversion or exchange thereof) from any Person other than
the Purchaser and its Subsidiaries.
4.26 Acquisition Transactions/Business Combinations. Except as
specified by the Purchaser to the Seller in writing prior to the date of this
Agreement, no acquisition transaction or other business combination relating to
all or part of the assets of the Purchaser or its Subsidiaries or any of their
respective businesses is reasonably probable.
5. Conditions to Closing by Purchaser and Newco. The obligation of the
Purchaser to purchase the Seller Shares and of Newco to consummate the Merger
shall be conditioned on the satisfaction by the Seller and the LLCs, or the
waiver by the Purchaser, of the following conditions on the Closing Date.
5.1 Representations and Warranties. The representations and
warranties of the Seller and the LLCs contained in this Agreement were true and
correct in all material respects as of the date of this Agreement and at and as
of the Closing Date, as though then made, except for changes and events
occurring in the ordinary course of business and changes and events occurring
for reasons outside the control of the Seller or any of the LLCs.
5.2 The Articles of Incorporation. The Articles of
Incorporation and the organizational documents of LLC-2 and LLC-3 will be in
full force and effect and will not have been amended or modified in any way
which restrains, prohibits or adversely affects the transactions contemplated
hereby and by the other Transaction Documents.
5.3 Bylaws. The Bylaws will be in full force and effect and
will not have been amended or modified in any way which restrains, prohibits or
adversely affects the transactions contemplated hereby and by the other
Transaction Documents.
5.4 Legal Proceedings. No judgment, order or injunction shall
have been rendered by any tribunal or organization which restrains or prohibits
the transactions contemplated hereby. No statute, rule or regulation or order of
any court or administrative agency shall be in effect which restrains or
prohibits the transactions contemplated hereby.
5.5 Proceedings. All corporate and other proceedings taken or
required to be taken in connection with the transactions contemplated hereby to
be consummated at or prior to the Closing and all documents incident thereto
will be in a form and substance reasonably satisfactory to the parties and their
counsel, and the parties shall have received all such counterpart originals or
certified or other copies of such documents as they may reasonably request.
5.6 Compliance with Agreement. The Seller, the LLCs and each
other member of the Seller Group shall have performed and complied in all
material respects with all agreements and conditions required by this Agreement
to be performed or complied with by it prior to the Closing.
28
<PAGE> 29
5.7 Shareholder Approval. The transactions contemplated hereby
shall have been approved by the Purchaser's shareholders.
5.8 Seller/LLC-2 Approval. The transactions contemplated
hereby shall have been approved by the Seller's shareholders. The Merger shall
have been approved by the members of LLC-2.
5.9 Closing Documents. At the Closing, each of the Seller and
LLC-2 will have delivered to the Purchaser all of the following documents:
(a) An Officers' Certificate dated the date of the Closing,
stating that the conditions specified in Sections 5.1 through 5.8, inclusive
(other than Section 5.7), have been fully satisfied;
(b) a copy of the Articles of Incorporation;
(c) copies of all material third party and all governmental
consents, approvals and filings required in connection with the consummation of
the transactions hereunder;
(d) opinions from counsel for the Seller and LLC-2 addressed
to the Purchaser, dated the date of the Closing and in form and substance
reasonably satisfactory to the Purchaser;
(e) the minute books, stock transfer ledgers and other
corporate organizational documents of the Corporation, LLC-2 and LLC-3;
(f) certificates representing the Seller Shares and the LLC-3
Shares;
(g) a copy of the resolutions adopted by the Seller's
shareholders and by the members of LLC-2 approving this Agreement and the
transactions contemplated hereby and by the Transaction Documents, which
resolutions shall be reasonably satisfactory to the Purchaser;
(h) such other documents relating to the transactions
contemplated by the Transaction Documents as the Purchaser or its counsel may
reasonably request.
5.10 Employment Agreements. On the Closing Date, David Sitt
and Roberto Sonabend shall have entered into employment agreements with the
Purchaser or a Subsidiary of the Purchaser in the form attached hereto as
Schedule 5.10.
5.11 Consultant Services Agreement. On the Closing Date, the
Seller and the Corporation shall have entered into a consultant services
agreement in the form attached hereto as Schedule 5.11.
29
<PAGE> 30
5.12 Third Party Consents. The Seller shall have delivered to
the Purchaser all third-party consents listed on Schedule 3.15.
5.13 Termination of Contract. The management agreement between
the Corporation and Consultores Asociodos Dasi, S.C. ("Dasi," and with respect
to such management agreement, the "Dasi Agreement") shall have been terminated
in respect of services to be performed following the Closing Date.
5.14 Closing. The Closing shall occur on or prior to the
Closing Date.
6. Conditions to Closing by the Seller and LLC-2. The obligation of the
Seller to sell the Seller Shares to the Purchaser and of LLC-2 to consummate the
Merger shall be conditioned on the satisfaction by the Purchaser and Newco, or
the waiver by the Seller and LLC-2, of the following conditions on the Closing
Date.
6.1 Representations and Warranties. The representations and
warranties of the Purchaser and Newco contained in this Agreement were true and
correct in all material respects as of the date of this Agreement and at and as
of the Closing Date, as though then made, except for changes and events
occurring in the ordinary course of business and changes and events occurring
for reasons outside the control of the Purchaser or Newco.
6.2 The Articles of Incorporation. The Purchaser's articles of
incorporation will be in full force and effect and will not have been amended or
modified in any way which restrains, prohibits or adversely affects the
transactions contemplated hereby and by the other Transaction Documents.
6.3 Bylaws. The Purchaser's bylaws will be in full force and
effect and will not have been amended or modified in any way which restrains,
prohibits or adversely affects the transactions contemplated hereby and by the
other Transaction Documents.
6.4 Legal Proceedings. No judgment, order or injunction shall
have been rendered by any tribunal or organization which restrains or prohibits
the transactions contemplated hereby. No statute, rule or regulation or order of
any court or administrative agency shall be in effect which restrains or
prohibits the transactions contemplated hereby.
6.5 Proceedings All corporate and other proceedings taken or
required to be taken in connection with the transactions contemplated hereby to
be consummated at or prior to the Closing and all documents incident thereto
will be in a form and substance reasonably satisfactory to the parties and their
counsel, and the parties shall have received all such counterpart originals or
certified or other copies of such documents as they may reasonably request.
6.6 Compliance with Agreement The Purchaser and Newco shall
have performed and complied in all material respects with all agreements and
conditions required by this Agreement to be performed or complied with by them
prior to the Closing.
30
<PAGE> 31
6.7 Newco/Purchaser Approval. (a) The Merger shall have been
approved by the sole member of Newco.
(b) The transactions contemplated hereby shall have been
approved by the Purchaser's shareholders.
6.8 Seller's Approval. The transactions contemplated hereby
shall have been approved by the Seller's shareholders and by the members of
LLC-2.
6.9 Seller's Initial Designees to the PVI Board. The Seller's
initial designees to the PVI Board shall have been appointed thereto in
accordance with Section 7.1.
6.10 Listing. The Sale Shares and the Merger Shares (and the
shares of PVI Common Stock issuable upon the exercise of the Sale PVI Warrants
and Merger PVI Warrants) shall have been approved for listing on the Nasdaq
Stock Market, subject to official notice of issuance.
6.11 Closing Documents At the Closing, the Purchaser will have
delivered to the Seller all of the following documents:
(a) An Officers' Certificate signed by an officer of the
Purchaser, dated the date of the Closing, stating that the conditions specified
in Sections 6.1 through 6.7 inclusive, 6.9 and 6.10 have been fully satisfied;
(b) a certified copy of the Purchaser's articles of
incorporation;
(c) copies of all material third party and all governmental
consents, approvals and filings required in connection with the consummation of
the transactions hereunder;
(d) a certificate of good standing issued by this Secretary of
State of the State of New Jersey and any other jurisdiction in which the
Purchaser and its Subsidiaries are authorized to transact business.
(e) certificates representing the Sale Shares, the Sale PVI
Warrants, the Merger Shares and the Merger PVI Warrants, subject to the
retention of the Escrow Shares pursuant to Section 2.5 hereof;
(f) evidence, satisfactory to the Seller, that shares of PVI
Common Stock have been reserved for issuance and delivery upon conversion of the
Sale PVI Warrants and the Merger PVI Warrants;
(g) a copy of the resolutions adopted by the Purchaser's
shareholders at the Shareholders Meeting, which resolution shall be reasonably
satisfactory to the Seller;
31
<PAGE> 32
(h) an opinion from counsel for the Purchaser and Newco
addressed to the Seller, the Designated Parties and LLC-2, dated the date of the
Closing and in form and substance reasonably satisfactory to the Seller and
LLC-2; and
(i) such other documents relating to the transactions
contemplated by the Transaction Documents as the Seller or LLC-2 or their
counsel may reasonably request.
6.12 Employment Agreements. On the Closing Date, David Sitt
and Roberto Sonabend shall have entered into employment agreements with the
Purchaser or a Subsidiary of the Purchaser in the form attached hereto as
Schedule 5.10.
6.13 Consultant Services Agreement. On the Closing Date, the
Seller and the Corporation shall have entered into a consultant services
agreement in the form attached hereto as Schedule 5.11.
6.14 Registration Rights Agreement On the Closing Date, the
Purchaser shall have entered into a registration rights agreement with certain
members of the Seller Group substantially in the form attached hereto as
Schedule 6.14.
6.15 Third-Party Consents. The Purchaser shall have delivered
to the Seller all third-party consents listed on Schedule 4.16.
6.16 Stock Option Agreements. On the Closing Date, the
Purchaser shall have entered into stock option agreements in the form attached
hereto as Schedule 6.16 with each of David Sitt and Roberto Sonabend.
6.17 Corporation Letter. On the Closing Date the Corporation
shall have executed and delivered to the Seller a letter in the form attached
hereto as Schedule 6.17.
7. Covenants of the Purchaser. The Purchaser covenants and agrees with
the Seller and LLC-1 as follows:
7.1 Governance.
(a) Board Representation. As used herein "Required Number of
Directors" shall mean a number of members of the PVI Board determined as
follows:
<TABLE>
<CAPTION>
From and after the Closing Date, if the
number of shares of PVI Common Stock held by
the Seller Group represents a percentage of
all outstanding PVI Common Stock that is then the number of Required Directors is
------------------------------------------------- ----------------------------------------
<S> <C>
Greater than 20% 30% of the total number of directors
Greater than 12% but less than or equal to 20% 20% of the total number of directors
Greater than 3% but less than or equal to 12% 10% of the total number of directors
</TABLE>
32
<PAGE> 33
provided that from and after the first date after the Closing Date on which the
number of shares of PVI Common Stock held by the Seller Group is less than fifty
percent (50%) of the number of shares of PVI Common Stock held by the Seller
Group immediately following the Closing, the Required Number of Directors shall
be reduced to zero (0). In the event the Required Number of Directors as
calculated above is not a whole number, the Required Number of Directors shall
be rounded upwards to the nearest whole number. From and after the Closing Date,
the Purchaser agrees to take such action as may be necessary to (i) fix the
number of members of the PVI Board at not less than ten (10); (ii) nominate and
recommend for election the Required Number of Directors designated by the
Seller; (iii) as long as the Required Number of Directors is at least one (1),
nominate as a director of each of (w) the Corporation, (x) any entity of which
the Corporation is a Subsidiary, (y) any entity which is a Subsidiary of the
Corporation and (z) any Subsidiary of the Purchaser as to which a member of the
PVI Board who is not a full-time employee of the Purchaser is then serving as a
director which Subsidiary is actively undertaking business or has conducted or
proposes to conduct any debt or equity financing other than with the Purchaser
or any of its Subsidiaries, one (1) individual designated by the Seller and at
any time when the Purchaser or any of its Subsidiaries owns a majority of the
voting securities of such entity cause the election as a director of such
designee at each annual meeting of shareholders of such entity, provided that
this subsection (iii) of this Section 7.1(a) shall not apply to the board of
directors of the Corporation at any time when David Sitt or Roberto Sonabend is
a member of such board of directors; and (iv) as long as the Required Number of
Directors is at least one (1), appoint to such committees of the PVI Board as
the Seller shall request and the nominating committee shall approve, such
approval not to be unreasonably withheld (provided that such committees shall
constitute not less than one-half of the committees of the PVI Board and shall
include the nominating committee and the executive committee at any time when
such committees exist) one (1) of the members of the PVI Board that was
designated by the Seller. The initial designees of the Seller to the PVI Board
shall be Emilio Romano, Jaime Serra Puche and Eduardo Sitt. The Purchaser or its
Subsidiary, as applicable, shall provide the Seller with not less than 75 days'
prior notice of any meeting at which directors are to be elected. The Seller
Shall give notice to the Purchaser or its Subsidiary no later than 60 days prior
to such meeting of the persons designated by it as nominees for election as
directors. If the Seller fails to give notice to the Purchaser or its Subsidiary
as provided above, the designees of the Seller then serving as directors shall
be its designees for re-election. In the event a designee of the Seller is
unwilling or unable to serve as a director of a Subsidiary of the Purchaser or
on the PVI Board or a committee thereof, the Seller shall be entitled to
designate a replacement member as a director of such Subsidiary or to the PVI
Board or a committee thereof, as the case may be, which the Purchaser agrees to
recommend for election or appointment at any applicable meeting of the PVI Board
or shareholders of the Purchaser or such Subsidiary. All members of the Seller
Group shall vote all shares over which they exercise voting control in favor of
the designees of the Seller. If the shareholders of the Purchaser do not elect
the designee(s) of the Seller as director(s) of the Purchaser, the Purchaser
shall take all action required to increase the size of its Board of Directors by
the number of designees not elected and shall appoint such designees to fill
such newly-created directorships. The Seller agrees that it may not designate an
employee of the Purchaser or any Subsidiary of the Purchaser for election
33
<PAGE> 34
to the board of directors of a Subsidiary of the Purchaser, the PVI Board, or
any committee thereof, unless such board of directors or the PVI Board already
contains an employee of the Purchaser other than the Chairman and the Chief
Executive Officer of the Purchaser. So long as the Required Number of Directors
is at least one (1), a designee of the Seller shall be entitled to receive
prompt notice of, and to attend, meetings of all committees of the PVI Board of
which a designee of the Seller is not a member.
(b) Advisory Group. On or prior to the Closing Date, the
Purchaser shall create an advisory committee of up to seven (7) persons, who are
not members of the PVI Board and who have the marketing, technical, financial or
other experience to provide advice to management of the Purchaser on worldwide
management issues. Advisory committee members shall serve one year terms. The
Seller shall have the right to appoint two members to such advisory committee.
The initial designees of the Seller to such committee shall be David Sitt and
Roberto Sonabend. The Purchaser shall cause such advisory committee to meet from
time to time, but no less often than quarterly, to discuss strategic worldwide
management issues.
(c) Insurance. Subject to availability on commercially
reasonable terms, the Purchaser shall undertake reasonable efforts to maintain
directors' and officers' liability insurance covering each of the individuals
designated by the Seller to the PVI Board or the board of directors of a
Subsidiary of the Purchaser in such amounts, and with such coverage, as is
consistent with the Purchaser's current practice.
(d) Indemnification. Subject to the following sentence of this
Section 7.1(d), the Purchaser's articles of incorporation, by-laws and other
organizational documents and those of any Subsidiary of the Purchaser to which
the Seller Group has the right to designate a director, shall at all times when
the Seller Group has such right, to the fullest extent permitted by law, provide
for indemnification of, advancement of expenses to, and limitation of the
personal liability of, the members of the PVI Board and the members of the
boards of directors or other similar managing bodies of such Purchaser's
Subsidiaries and such other persons, if any, who, pursuant to a provision of
such articles of incorporation, by-laws or other organizational documents,
exercise or perform any of the powers or duties otherwise conferred or imposed
upon members of the PVI Board or the boards of directors or other similar
managing bodies of such Purchaser's Subsidiaries. Notwithstanding anything to
the contrary contained herein, the parties hereto acknowledge that the
Purchaser's certificate of incorporation as in effect on the date of this
Agreement does not contain such provisions and that amendment of such
certificate of incorporation to include such provision will require the approval
of the Purchaser's shareholders. The parties agree that the Purchaser's sole
obligation under this Section 7.1(d) with respect to such certificate of
incorporation is, subject to approval of the PVI Board, to submit, and recommend
approval of, an amendment to its certificate of incorporation to effect such a
provision to the meeting of shareholders referred to in Section 7.6 hereof and
if such amendment is approved, thereafter to comply with the provisions of this
Section 7.1(d) with respect to its certificate of incorporation. Unless
otherwise provided by law, such provisions may not be amended, repealed or
otherwise modified in any manner adverse to any member of the PVI Board or any
member of the boards of directors or other similar managing bodies of such
Purchaser's Subsidiaries as long as the Seller has a right to a designee without
the Seller's consent.
34
<PAGE> 35
7.2 Equity Participation.
(a) Each member of the Seller Group shall have a right to
purchase a pro rata portion of any New Securities which the Purchaser may, from
time to time, propose to sell and issue, subject to the terms and conditions set
forth below. Such member's pro rata portion shall equal a fraction, the
numerator of which is the number of shares of PVI Common Stock held by it on the
date of exercise of this right plus the number of shares of PVI Common Stock
issuable upon conversion or exchange of then outstanding convertible or
exchangeable securities or on exercise of then outstanding options, rights or
warrants held by it, and the denominator of which is the total number of shares
of PVI Common Stock then outstanding plus the number of shares of PVI Common
Stock issuable upon conversion or exchange of then outstanding convertible or
exchangeable securities or on exercise of then outstanding options, rights or
warrants.
(b) In the event the Purchaser intends to issue New
Securities, the Purchaser shall give each member of the Seller Group notice of
such intention, describing the type of New Securities to be issued, the price
thereof, and the general terms upon which the Purchaser proposes to effect such
issuance (the "Sale Notice"). Each member of the Seller Group shall have twenty
(20) days from the date of any Sale Notice to agree to purchase all or part of
its pro rata share of such New Securities for the price and upon the terms and
conditions specified in the Sale Notice by giving notice to the Purchaser
stating the quantity of New Securities to be so purchased ("Exercise Notice").
The price specified in the Sale Notice shall be the pro rata portion of the
price at which the New Securities are sold by the Purchaser less (i)
commissions, discounts, brokers' or finder's fees or similar charges plus (ii)
one-half of any such commissions, discounts, brokers' or finder's fees or
similar charges which are imposed upon the sale of the New Securities to the
members of the Seller Group. If the price to be paid by the other purchasers of
the New Securities is payable in a form of consideration other than cash or
cash-equivalents, the price to be paid by the members of the Seller Group shall
be calculated on the basis of the fair market value of such consideration as
reasonably determined in good faith by the PVI Board.
(c) The closing of the purchase of New Securities by a member
of the Seller Group upon exercise of its rights hereunder shall take place at
such location, date and time as the parties shall agree but not later than
ninety (90) days following the delivery of the Sale Notice. At the closing, the
Purchaser shall deliver to each purchasing member of the Seller Group (i)
certificates representing all of the New Securities to be purchased, and (ii)
such other agreements executed by the Purchaser which grant any rights or
privileges to such purchasing member of the Seller Group as are being granted to
the other purchasers in such issuance. At the closing, the purchasing members of
the Seller Group shall deliver to the Purchaser (i) payment for the New
Securities, and (ii) such other agreements as are executed by the other
purchasers in such issuance which may include, without limitation,
representations by such purchasers to the Purchaser and agreements which
restrict such purchaser's rights with respect to the New Securities, and in any
event, at the request of the Purchaser, a duly executed certificate reasonably
satisfactory to the Purchaser containing such representations and warranties of
the purchasing member of the Seller Group with respect to federal and state
securities laws as the
35
<PAGE> 36
Purchaser may reasonably request. The certificates representing the New
Securities may contain a legend stating that they are issued subject to the
registration requirements of the Act, as amended, and applicable state
securities laws.
(d) Each member of the Seller Group or its Permitted
Transferee may transfer at any time or from time to time its rights under
Section 7.1 through 7.3 (inclusive) to any other member of the Seller Group.
(e) In the event any member of the Seller Group fails to
exercise a participation right as described in this Section 7.2 with respect to
any New Securities within the periods specified above, the Purchaser may, issue
the New Securities at a price and on terms and conditions no less favorable to
the Purchaser than those specified in the Sale Notice at any time within 90 days
of the failure to so exercise such rights.
7.3 Special Pre-Closing Equity Participation. Prior to the
Closing Date, the provisions of Section 7.2 shall apply to any sale which is
consummated or approved prior to the Closing Date by the Purchaser of New
Securities and of securities which would be New Securities except for the fact
that such securities are to be issued in connection with a transaction which the
PVI Board in good faith reasonably determines to be a strategic alliance, joint
venture, partnership or other business arrangement, or in connection with the
licensing or acquisition by the Purchaser of technology or intellectual
property, provided that the provisions of this Section 7.3 shall not apply to
sales and issuances of securities to such Persons and in such amounts as shall
have been specified by the Purchaser in writing prior to the date of this
Agreement; and provided, further, that the Seller Group shall, for purposes of
Section 7.2 and 7.3, be deemed to own all of the PVI Securities at all times
prior to Closing.
7.4 Termination. The rights of the members of the Seller Group
and the obligations of the Purchaser pursuant to Sections 7.2 and 7.3 shall
commence on the date hereof and terminate on the earliest of (i) the termination
of this Agreement pursuant to Section 10, (ii) the fourth anniversary of the
Closing, and (iii) the first date following the Closing Date on which the
members of the Seller Group own in the aggregate twelve percent (12%) or less of
the then outstanding shares of PVI Common Stock.
7.5 Conduct of Business. The Purchaser and its Subsidiaries
will take the following actions prior to Closing.
(a) conduct their respective businesses in the ordinary course
and refrain from taking any action that would cause any representation of
warranty made herein to be untrue or materially misleading or cause any
condition to Closing set forth in Section 6 hereof to fail to be satisfied;
(b) comply in all material respects with their respective
contractual obligations and legal requirements applicable to each of them;
36
<PAGE> 37
(c) permit the Seller and any of its employees, agents and
representatives to have reasonable access to the Purchaser's and its
Subsidiaries' books and records of accounts;
(d) make available to the Seller copies of all documents
referenced on the Schedules hereto and not attached hereto (including, without
limitation, contracts, deeds, lease agreements, intellectual property license
agreements, intellectual property registrations, environmental site assessments,
and real property title search results); and
(e) provide the Seller with such other instruments, agreements
and documents as the Seller may reasonably request.
7.6 Proxy Statement Shareholders Meeting. The Purchaser shall
hold a meeting of its shareholders as soon as practicable after the date hereof
for the purpose of acting upon this Agreement and the transactions contemplated
hereby and by the other Transaction Documents. The Purchaser shall recommend
that its shareholders approve this Agreement and such transactions. The
Purchaser will use its reasonable best efforts to take, or cause to be taken,
all actions necessary to prepare the Proxy Statement, file the Proxy Statement
with the Commission and respond to any comments it may have, and distribute the
Proxy Statement to the Purchaser's shareholders as expeditiously as practicable.
The Purchaser shall give the Seller a reasonable opportunity to review and
comment on the Proxy Statement and related communications with shareholders of
the Purchaser, and the Seller shall have the right to consent to any
descriptions of or references to (i) the Seller or any of its Affiliates, and
(ii) the Transaction Documents and the other agreements executed concurrently
therewith and the transactions contemplated thereby in the Proxy Statement or
such communications, which consent shall not be unreasonably withheld or
delayed.
7.7 Listing. The Purchaser shall use its best efforts to cause
the Sale Shares and the Merger Shares to be listed on the Nasdaq Stock Market or
such other exchange or quotation system on which the PVI Common Stock is then
listed during the term of this Agreement and for so long as any Sale Shares or
Merger Shares or Sale PVI Warrants or Merger PVI Warrants are outstanding. Prior
to the Closing, the Purchaser shall prepare and submit to the Nasdaq Stock
Market or such other exchange or quotation system a listing application covering
the Sale Shares and the Merger Shares (and the shares of PVI Common Stock
issuable upon the exercise of the Sale PVI Warrants and Merger PVI Warrants) and
shall use its best efforts to obtain approval for the listing of such shares on
such exchange or quotation system, subject to official notice of issuance.
7.8 Reserve Shares. The Purchaser will at all times reserve
and keep available, solely for issuance and delivery upon the exercise of the
Sale PVI Warrants and Merger PVI Warrants, the number of shares of PVI Common
Stock from time to time issuable upon the exercise of such warrants at the time
outstanding. All shares of PVI Common Stock issuable upon exercise of the Sale
PVI Warrants and Merger PVI Warrants shall be duly authorized and when issued
upon such conversion or exercise, shall be validly issued, fully paid and
nonassessable.
37
<PAGE> 38
7.9 Post-Closing Access. From and after the Closing, Purchaser
shall make available to the Seller Group and its representatives such
information and documents as they may reasonably request in respect of matters
relating to the Corporation occurring on or prior to the Closing and shall
either maintain all books and records of the Corporation for periods prior to
the Closing or deliver such books and records to the Seller or its designee.
7.10 Employees. The Purchaser will offer, or cause a
Subsidiary of the Purchaser to offer, employment to all of Dasi's employees
(other than David Sitt and Roberto Sonabend, who will be employed pursuant to
employment agreements in the form attached hereto as Schedule 5.10) who on the
Closing Date are rendering services to the Corporation on terms and conditions
similar to those on which they are employed on the Closing Date.
7.11 Closing Deliveries. The Purchaser will execute and
deliver, and cause Newco to execute and deliver, at Closing all of the
Transaction Documents to which it or Newco is party and will deliver at Closing
all of the documents described in Section 6.11 hereof, subject only to
satisfaction or waiver of the conditions to Closing set forth in Section 5
hereof.
8. Covenants of the Seller. The Seller covenants and agrees with the
Purchaser as follows:
8.1 Conduct of Business. The Seller will cause the
Corporation, LLC-2 and LLC-3 to take the following actions prior to the Closing:
(a) conduct their respective businesses in the ordinary course
and refrain from taking any action that would cause any representation or
warranty made herein to be untrue or materially misleading or cause any
condition to Closing set forth in Section 5 hereof to fail to be satisfied;
(b) comply in all material respects with their respective
contractual obligations and legal requirements applicable to each of them;
(c) permit the Purchaser and any of its employees, agents and
representatives to have reasonable access to the Corporation's, LLC-2's and
LLC-3's books and records of account;
(d) make available to the Purchaser copies of all documents
referenced on the Schedules hereto and not attached hereto (including, without
limitation, contacts, deeds, lease agreements, intellectual property license
agreements, intellectual property registrations, environmental site assessments,
and real property title search results); and
(e) provide the Purchaser with such other instruments,
agreements and documents as the Purchaser may reasonably request.
8.2 Transfer of Seller Shares and LLC-3 Shares. Prior to the
Closing Date, the Seller, LLC-1, LLC-2 and LLC-3 will not sell, transfer, pledge
or otherwise dispose of, or
38
<PAGE> 39
cause or allow any Encumbrance to be placed upon, the Seller Shares, the LLC-2
membership interests, the LLC-3 membership interests or the LLC-3 Shares,
respectively.
8.3 Employees. It will cause Dasi to use its best efforts to
cause all of Dasi's employees who on the Closing Date are rendering services to
the Corporation to become employees of the Purchaser or a Subsidiary of the
Purchaser on terms and conditions similar to those on which they are employed on
the Closing Date. The Purchaser will be responsible for, and shall indemnify the
Seller Group and Dasi from and against any loss, liability or expense in respect
of, all payments owed to such employees as a result of any matter arising prior
to Closing to the extent the Corporation has not paid Dasi in respect thereof
and any matter arising after the Closing, including the full amount of any
severance obligations in respect of persons who become employees of the
Purchaser or a Subsidiary of the Purchaser and whose employment terminated
following the Closing Date, provided, however, that the Seller shall be
responsible for, and shall indemnify the Purchaser from and against any loss,
liability or expense in respect of, payment of any claims by such employees for
compensation but not severance related to services performed prior to Closing to
the extent Dasi has been paid by the Corporation in respect thereof.
8.4 Compliance with U.S. Securities Laws; Manipulation, etc.
Subject to the last sentence of this Section 8.4, the members of the Seller
Group shall (i) comply with all U.S. Federal securities laws, including all
volume limitation and market manipulation rules and regulations, and the rules
and regulations of the Nasdaq National Market (or applicable exchange), in
respect of the PVI Securities, (ii) not enter into a transaction with the intent
or foreseeable affect of manipulating the price of the PVI Common Stock in
violation of applicable law, (iii) not make any public announcement with respect
to, or enter into or agree, offer, propose or seek to enter into, or otherwise
be involved in or part of, directly or indirectly, any acquisition transaction
or other business combination relating to all or part of the Purchaser or its
Subsidiaries or any acquisition transaction for all or part of the assets of the
Purchaser or any Subsidiary of the Purchaser or any of their respective
businesses; (iv) not make, or in any way participate in, directly or indirectly,
any "solicitation' of "proxies" (as such terms are used in the rules of the
Securities and Exchange Commission) to vote, or seek to advise or influence any
Person with respect to voting of any voting securities of the Purchaser; (v) not
form, join or in any way participate in a "group" (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended) with respect to any
voting securities of the Purchaser or any of its Subsidiaries; (vi) not seek or
propose, alone or in concert with others, to influence of control the
Purchaser's management or policies; (vii) not directly or indirectly enter into
any discussions, negotiations, arrangements or understanding with any other
Person with respect to any of the foregoing activities or propose any of such
activities to any other Person; (viii) not advise, assist, encourage, act as a
financing source for or otherwise invest in any other Person in connection any
of the foregoing activities; and (ix) not disclose any intention, plan or
arrangement inconsistent with any of the foregoing. Each member of the Seller
Group shall promptly advise the Purchaser of any inquiry or proposal made to it
with respect to any of the foregoing. Subject to the last sentence of this
Section 8.4, no member of the Seller Group will (i) request the Purchaser or its
advisors, directly or indirectly, to (1) amend or waive any provision of this
Section 8.4 (including this sentence) or (2) otherwise consent to any action
inconsistent with any provision of this Section 8.4 (including this sentence);
or (ii) take any initiative with
39
<PAGE> 40
respect to the Purchaser or any of its Subsidiaries which could require the
Purchaser to make a public announcement regarding (1) such initiative, (2) any
of the activities referred to in the second preceding sentence, or (3) the
possibility of a member of the Seller Group or any other Person acquiring
control of all or part of the Purchaser of any of its Subsidiaries or any of
their properties, assets or businesses, whether by means of business combination
or otherwise. Notwithstanding anything contained herein to the contrary, nothing
contained in this Section 8.4 shall (w) limit what any member of the Seller
Group may say or propose to the PVI Board, members of the Purchaser's senior
management and to other members of the Seller Group or their respective
Permitted Transferees, (x) prevent any member of the Seller Group from voting
any securities of the Purchaser in its sole discretion and explaining to any
Person the reason for its votes, (y) entering into arrangements or agreements
with other members of the Seller Group regarding any securities of the Purchaser
or (z) making any filing or disclosures required by applicable law.
8.5 Sales of PVI Common Stock. In addition to any applicable
limitation restrictions under Rule 144 of the Securities Act of 1933, as
amended, no member of the Seller Group shall transfer, pursuant to sale or
otherwise to any Person (other than the Purchaser) which is not a member of the
Seller Group, within any 30 day period, a number of shares of PVI Common Stock
which together with all other shares of PVI Common Stock sold by members of the
Seller Group during such 30 day period is equal to or greater than the greater
of (i) five percent (5%) of the aggregate number of shares of PVI Common Stock
which is then outstanding or (ii) 650,000 shares; provided, however, in no event
shall any of member of the Seller Group directly or indirectly enter into any
bulk sales of PVI Common Stock with any competitor, contract partner or
potential strategic investor of the Purchaser or a Subsidiary of the Purchaser
if the PVI Board determines, in good faith, that such sale will be detrimental
to the Purchaser. Members of the Seller Group shall give the PVI Board at least
ten (10) business days' advance notice of any proposed bulk sale of PVI Common
Stock for purposes of complying with this provision. The provisions of this
Section 8.5 shall not apply to sales made by members of the Seller Group to a
third party in connection with a tender offer, merger or other transaction
approved by the PVI Board or to any third party which, after the consummation of
such sale, will own at least fifty-one percent (51%) of the outstanding PVI
Common Stock, provided that such third party is not an affiliate or associate
(as such terms are defined in Rule 405 under the Securities Act) of a member of
the Seller Group or a member of a "group" (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended) of which any member
of the Seller Group is a member.
8.6 Purchases of PVI Common Stock. No member of the Seller
Group shall, without the prior written approval of the PVI Board, directly or
indirectly, through any other Person (whether as an officer, director, employee,
partner, consultant, holder of equity or debt investment, lender or in any other
manner or capacity), acquire, offer or propose to acquire, or agree or seek to
acquire, directly or indirectly, by purchase or otherwise, other than from a
member of the Seller Group, any securities or direct or indirect rights or
options to acquire any securities of the Purchaser or Person in control of the
Purchaser, except purchases in accordance with Sections 7.2 and 7.3 of this
Agreement, if following such purchase the aggregate number of shares of PVI
Common Stock owned by the Seller Group would, in the aggregate, exceed thirty
percent (30%) of the number of shares of PVI Common Stock outstanding after such
acquisition.
40
<PAGE> 41
The provisions of this Section 8.6. shall not apply to acquisitions made by
members of the Seller Group (a) upon exercise of the PVI Warrants or the
exercise of rights, options or warrants acquired in accordance with Sections 7.2
and 7.3 of this Agreement, the conversion or exchange of securities acquired in
accordance with Sections 7.2 and 7.3 of this Agreement, or the acquisition of
options by David Sitt and Roberto Sonabend pursuant to any of the Transaction
Documents (and the exercise, of any such options) or (b) during the period
starting with the commencement of, or first public disclosure of an intent to
commence, a tender or exchange offer by any third party for at least thirty
percent (30%) of the outstanding PVI Common Stock and ending with the
completion, abandonment or withdrawal of such offer (provided that with the
approval of the PVI Board, not to be unreasonably withheld, the members of the
Seller Group may complete any such acquisition which was commenced during such
period), provided that such third party is not an affiliate or associate (as
such terms are defined in Rule 405 under the Securities Act) of any member of
the Seller Group or a member of "group" (within the meaning of Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended) of which any member of the
Seller Group and provided further that each member of the Seller Group hereby
grants to the chief executive officer of the Purchaser an irrevocable proxy to
vote all shares of PVI Common Stock purchased pursuant to clause (b) of this
sentence and agrees to deliver such forms of proxy or other documents as the
Purchaser may reasonably request in order to confirm such proxy.
8.7 Non-Competition. No member of the Seller Group shall,
directly or indirectly, through any other Person, firm, corporation or other
entity (whether as an officer, director, employee, partner, consultant, holder
of equity or debt investment, lender or in any other manner or capacity) for a
period of four (4) years from the Closing Date:
(a) in Central America and South America, design, manufacture,
sell, market, offer to sell or supply video or television technology similar to
that being developed or sold by the Purchaser and any Subsidiary of the
Purchaser on the Closing Date for any reason;
(b) solicit, induce, encourage or attempt to induce or
encourage any employee of the Purchaser or any Subsidiary of the Purchaser to
terminate his or her employment with the Purchaser or any Subsidiary of the
Purchaser or to breach any other obligation to the Purchaser or any Subsidiary
of the Purchaser;
(c) solicit, interfere with, disrupt, alter or attempt to
disrupt or alter the relationship, contractual or otherwise, between the
Purchaser or any Subsidiary of the Purchaser and any customer, potential
customer, or supplier of the Purchaser or Subsidiary of the Purchaser; or
(d) engage in or participate in any business conducted under
any name that shall be the same as or similar to the name of the Purchaser, any
Subsidiary of the Purchaser or any trade name used by such Persons.
Each member of the Seller Group acknowledges that the
foregoing geographic, activity and time limitations contained in this Section
8.7 are reasonable and properly required for the adequate protection of the
Purchaser's business and the business of the Purchaser's
41
<PAGE> 42
Subsidiaries. In the event that any such geographic, activity or time limitation
is deemed to be unreasonable by a court, each member of the Seller Group shall
submit to the reduction of either said activity or time limitation to such
activity or period as the court shall deem reasonable. In the event that a
member of the Seller Group is in violation of the aforementioned restrictive
covenants, then the time limitation thereof shall be extended for a period of
time equal to the pendency of such proceedings, including appeals.
Notwithstanding the foregoing, no member of the Seller Group shall be in breach
of this Section 8.7 if such Person holds three percent (3%) or less of the
outstanding securities of a publicly traded corporation.
8.8 Seller Group. At the Closing the Seller will provide the
Purchaser with the names of all of the members of the Seller Group and
thereafter will advise the Purchaser of any additions or deletions to such list
within five (5) days after such additions or deletions.
8.9 Termination. Subject to Section 9.4 hereof, the
obligations of the members of the Seller Group pursuant to Sections 8.4, 8.5 and
8.6 of this Agreement, and the proxy referred to in the last sentence of Section
8.6, shall terminate on the earliest of (i) February 4, 2002, (ii) the first
date on which the Seller Group owns in the aggregate less than ten percent (10%)
of the outstanding PVI Common Stock, (iii) the date on which Dennis P. Wilkinson
ceases to be the chief executive officer of the Purchaser and (iv) the date on
which any third party or "group" (within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) (other than the Seller Group)
acquires thirty percent (30%) or more of PVI Common Stock except in a
transaction approved by the PVI Board, and the obligations of the members of the
Seller Group pursuant to the remainder of Section 8 of this Agreement shall
terminate on the fourth anniversary of the date of this Agreement, provided that
the obligations of the members of the Seller Group pursuant to Section 8.7 will
terminate if Purchaser or any of its Affiliates breaches an obligation under the
Transaction Documents and fails to cure such breach within 10 days after notice
from the Seller.
8.10 Shareholder and Member Approval. The Seller shall hold a
meeting of its shareholders as soon as practicable after the date hereof for the
purpose of acting upon this Agreement and the transactions contemplated hereby
and by the other Transaction Documents. The Seller shall recommend that its
shareholders approve this Agreement and such transactions. The Seller will cause
the members of LLC-2 to approve this Agreement and such transactions.
8.11 Closing Deliveries. The Seller will execute and deliver,
and cause the Corporation, LLC-2, LLC-3 and each member of the Seller Group to
execute and deliver, at Closing all of the Transaction Documents to which it,
the Corporation, LLC-2, LLC-3 or a member of the Seller Group is party and will
deliver at Closing all of the documents described in Section 5.9 hereof, subject
only to satisfaction or waiver of the conditions to Closing set forth in Section
6 hereof. The Seller will refrain from taking any action that would cause any
representation or warranty made herein to be untrue or materially misleading or
cause any condition to Closing set forth in Section 5 hereof to fail to be
satisfied.
9. Indemnification; Additional and Special Remedies.
42
<PAGE> 43
9.1 Indemnification. Subject to the limitations and other
provisions of this Section 9, each member of the Seller Group shall, with
respect to the representations, warranties, covenants and agreements made by it
herein, indemnify, defend and hold the Purchaser and its officers, employees,
agents and Affiliates (the "Purchaser Indemnitees") harmless against all
liability, loss or damage, together with all reasonable, out-of-pocket costs and
expenses related thereto (including legal and accounting fees and expenses)
("Damages"), arising from the untruth, inaccuracy, breach of or failure to
perform any such representations, warranties, covenants or agreements of the
Seller or its Affiliates. The Purchaser shall, with respect to the
representations, warrants, covenants and agreements made by it herein,
indemnify, defend and hold the members of the Seller Group and their respective
officers, employees, agents and Affiliates (the "Seller Indemnitees") harmless
against all Damages arising from the untruth, inaccuracy, breach of or failure
to perform any such representations, warranties, covenants or agreements of the
Purchaser or its Affiliates. The party or parties being indemnified are referred
to herein as "Indemnitee" and the indemnifying party is referred to as the
"Indemnitor."
(b) If the matter with respect to which the Indemnitee seeks
indemnification involves a claim asserted against the Indemnitee by a third
party, promptly after receipt by the Indemnitee of notice of the commencement of
any action, it will notify the Indemnitor in writing of the commencement thereof
but the omission so to notify the Indemnitor will not relieve the Indemnitor
from any liability which it may have to the Indemnitee unless the Indemnitor is
prejudiced by such omission. In case any such action shall be brought against
the Indemnitee and it shall notify the Indemnitor of the commencement thereof,
the Indemnitor shall be entitled to participate in, and, to the extent that it
may wish to assume the defense thereof, with counsel satisfactory to the
Indemnitee, and after notice from the Indemnitor to the Indemnitee of its
election to assume the defense thereof, the Indemnitor shall not be liable to
the Indemnitee for any legal or other expenses subsequently incurred by the
Indemnitee in connection with the defense thereof unless (i) the Indemnitee
shall have employed separate counsel in connection with the assertion of legal
defenses in accordance with the proviso to this sentence, (ii) the Indemnitor
shall not have employed counsel satisfactory to the Indemnitee to represent the
Indemnitee within a reasonable time, (iii) the Indemnitor and its counsel do not
actively and vigorously pursue the defense of such action, or (iv) the
Indemnitor has authorized the employment of counsel for the Indemnitee at the
expense of the Indemnitor; provided, however, that the Indemnitee shall have the
right to employ counsel to represent it if, in its reasonable judgment, it is
advisable for it to be represented by separate counsel because separate defenses
are available, or because a conflict of interest exists between the Indemnitee
and the Indemnitor in respect to such claim, and in such event the fees and
expenses of such separate counsel shall be paid by the Indemnitor. In such
circumstance, the Indemnitee shall designate the counsel. The Indemnitor will
not be liable to the Indemnitee for any settlement of any action or claim
without the consent of the Indemnitor and the Indemnitor may not unreasonably
withhold its consent to any settlement. The Indemnitor will not consent to entry
of any judgment or enter into any settlement or compromise any claim which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to the Indemnitee of a full release from all liability with respect to
such claim or litigation.
(c) The Purchaser will have no obligation to indemnify any
Seller Indemnitee, and no member of the Seller Group will have any obligation to
indemnify any
43
<PAGE> 44
Purchaser Indemnitee, in respect of any breach of Sections 4 or 3 of this
Agreement, as the case may be, as set forth in this Section 9.1 until the Seller
Indemnitees or the Purchaser Indemnitees, as the case may be, have suffered
Damages by reason of all such breaches in excess of a One Hundred Thousand
Dollars ($100,000.00) aggregate threshold (at which point the Indemnitor will be
obligated to indemnify the Purchaser or the Seller Group, as the case may be,
from and against all such Damages in excess of such $100,000).
9.2 Limitation on Remedies. Except as provided in Section 9.3
hereof, the Purchaser's sole remedy for indemnification or for any violation of
this Agreement or any Officers' Certificate or other instrument delivered in
connection herewith by a member of the Seller Group shall be to retain all or a
portion of the Escrow Shares or Substitute Collateral as provided in Section 2.6
hereof. The Purchaser shall have no other recourse to, and shall not bring any
action against, the members of the Seller Group or their assets and shall have
no rights of set-off against any liability or obligation owed to any member of
the Seller Group in respect of any such violation.
9.3 Additional Remedies. In addition to any other available
remedies under applicable law or the terms of this Agreement, the Purchaser
shall have the following remedies in the event that any member of the Seller
Group breaches Section 8.6 of this Agreement:
(a) Each member of the Seller Group hereby grants to the chief
executive officer of the Purchaser an irrevocable proxy to vote all shares of
PVI Common Stock purchased by it in violation of Section 8.6 of this Agreement;
and
(b) The Purchaser shall have the right to purchase all or a
portion of the shares of PVI Common Stock acquired by any member of the Seller
Group in violation of Section 8.6 of this Agreement. The price to be paid by the
Purchaser for each such share of PVI Common Stock shall be paid in cash (or in
other immediately available funds) and shall be equal to the par value of such
share of PVI Common Stock. In the event that the Purchaser elects to exercise
its right to purchase the shares of PVI Common Stock pursuant to this Section
9.3(b), the Purchaser shall deliver to the relevant member of the Seller Group a
notice (the "Call Notice") specifying the aggregate number of shares of PVI
Common Stock the Purchaser shall purchase and a date, not less than fifteen (15)
nor more than sixty (60) days from the date of the Call Notice, for the closing
of the transaction.
9.4 Special Remedies. If the Purchaser shall fail to comply
with its obligations under Section 7.1 of this Agreement and such failure is not
cured within ten (10) days after notice of such failure from Seller, then,
notwithstanding anything contained in this Agreement or any of the Transaction
Documents to the contrary, at the end of such ten (10) day period (i) the
obligations of the members of the Seller Group pursuant to Section 8.7 hereof
and comparable obligations in the other Transaction Documents shall terminate,
(ii) the Purchaser shall release to the Seller one-half of the Escrow Shares
then held in escrow, (iii) all Sale PVI Warrants, Merger PVI Warrants and stock
options subject to the stock option agreements described in Section 6.16 hereof
which are not then vested shall vest, (iv) the five percent (5%)/650,000 share
limitation on sales within a thirty (30) day period imposed by Section 8.5 shall
terminate, and (v) the Holder or Holders (as defined in the registration rights
agreement
44
<PAGE> 45
included in the Transaction Documents) shall be entitled to demand registration
of their Registrable Securities pursuant to Section 2.1 of such registration
rights agreement and such demand shall not count as one of the Demand
Registrations to which such Holders are entitled under such registration rights
agreement. If the Purchaser is unable to perform its obligations under Section
7.1 as a result of an order of a court or administrative agency or a rule or
regulation of any stock exchange or automated quotation system on which the PVI
Common Stock is then listed, then the remedies provided in this Section 9.4
shall be the sole remedies for the Purchaser's failure to perform its
obligations under Section 7.1 hereof. Except as provided in the immediately
preceding sentence, the remedies in this Section 9.4 shall be in addition to any
other remedies which the Seller Group may have at law or in equity as a result
of the Purchaser's failure to comply with its obligations under Section 7.1 of
this Agreement.
9.5 Survival of Representations and Warranties. All of the
representations and warranties of the Seller, the LLCs, and the Purchaser and
Newco contained in this Agreement shall survive the Closing (even if the damaged
party knew or had reason to know of any misrepresentation or breach of warranty
at the time of Closing) and continue in full force and effect for a period of
fourteen (14) months after the Closing Date; provided, however, that (i)
notwithstanding the foregoing, the representations in Section 3.7 and 4.8 shall
survive the Closing until the end of the statute of limitations period under
applicable law, and (ii) if, at any time prior to the expiration of the period
of survival of a representation and warranty, an Indemnitee delivers to the
Indemnitor a notice pursuant to Section 9.1(b) asserting a claim for
indemnification based on a breach in or an alleged breach of such representation
and warranty, then such claim shall survive the expiration of such
representation and warranty until such time as such claim is fully and finally
resolved.
10 Termination. This Agreement and the transactions contemplated hereby
may be terminated at any time prior to the Closing:
10.1 Mutual Consent. By mutual written consent of the
Purchaser and the Seller;
10.2 Cut-Off Date . By the Purchaser or the Seller upon five
(5) days' notice to the other if the Closing shall not have occurred on or
before June 1, 2001 or such other date, if any, as the Seller and the Purchaser
shall agree upon in writing;
10.3 Misrepresentation or Breach . By the Purchaser or the
Seller upon five (5) days' notice to the other if there has been a material
misrepresentation or breach of warranty or covenant on the part of the other
party and such breach has not been waived;
10.4 Impossibility . By the Purchaser or the Seller upon five
(5) days' notice to the other if any of the conditions specified in this
Agreement as a precondition to the closing by the other party has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of the other party to comply
with its obligations under this Agreement); or
45
<PAGE> 46
10.5 Tax Liability. By the Purchaser or the Seller upon five
(5) days' notice to the other if it determines that it or its Affiliates will be
subject to a tax liability in excess of $500,000 as a result of the consummation
of the transactions contemplated hereby and the other party does not agree to
assume and be responsible for such tax liability on a full, after-tax basis.
11. Fees and Expenses. Each party shall be responsible for payment of
its own fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby, provided that if this Agreement is terminated
pursuant to Section 10.2 or Section 10.4 because the transactions contemplated
hereby have not been approved by the holders of the PVI Common Stock, the
Purchaser shall reimburse the Seller for its reasonable out-of-pocket expenses
(including attorneys' fees) incurred in connection with this Agreement and the
transactions contemplated hereby upon delivery of invoices in form reasonably
acceptable to the Purchaser and provided further that if the transactions
contemplated hereby are consummated, the Corporation shall be responsible for
payment of the fees and expenses of the Seller and the Designated Parties
incurred in connection with this Agreement and the transactions contemplated
hereby. If this Agreement is terminated by a party pursuant to Section 10.3 or
if the Closing does not occur because of the breach or default of a party, the
terminating or non-defaulting party shall be reimbursed by the other party for
its reasonable out-of-pocket expenses (including attorneys' fees) incurred in
connection with this Agreement and the transactions contemplated hereby upon
delivery of invoices in form reasonably acceptable to the reimbursing party. The
Purchaser, at its sole election, may make any reimbursement which it is required
to make pursuant to this Section 11 in shares of PVI Common Stock having a Fair
Market Value equal to the amount of the required reimbursement at the time such
reimbursement is made.
12. Successors and Assigns; Parties in Interest. This Agreement shall
bind and inure to the benefit of (a) the members of the Seller Group, (b) the
Purchaser, (c) Newco and (d) their respective successors and assigns, including
without limitation any Person who succeeds to the rights or properties of the
Purchaser as the result of a merger, consolidation, acquisition of substantially
all of the Purchaser's assets or similar transaction. In that connection, all
references herein to the securities of the Purchaser, or any class thereof, or
any options, rights or warrants in respect thereof, shall include the
securities, or any class thereof, or any options, rights or warrants in respect
thereof, of any Person who is a successor to the Purchaser. No party may assign
its rights under this Agreement without the consent of the other, which consent
shall not be unreasonably withheld, provided that either of the Purchaser or
Newco may at any time prior to the Closing assign its rights under Section 2
hereof to any of its Affiliates if the Purchaser guarantees the performance of
the obligations hereunder by such Person and provided further that a member of
the Seller Group may assign its rights under this Agreement at any time to any
Permitted Transferee who has agreed in writing to be bound by the terms and
conditions of this Agreement which are binding upon members of the Seller Group.
13. Entire Agreement. This Agreement (as amended from time to time) and
the other writings referred to herein or delivered pursuant hereto which form a
part hereof contain the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior and contemporaneous arrangements
or understandings with respect thereto.
46
<PAGE> 47
14. Notices. All notices, requests, consents and other communications
hereunder to any party shall be in writing and shall be delivered in person or
duly sent by overnight courier, facsimile transmission or first class registered
or certified mail, return receipt requested, postage prepaid, addressed to such
party at the address set forth below or such other address as may hereafter be
designated in writing by the addressee to the addressor listing all parties:
(a) If to a member of the Seller Group or any of the LLC's, to:
Presencia en Medios, SA de CV
Palmas # 735-206
Mexico DF 11000
MEXICO
Attn: Eduardo Sitt
With a copy (which shall not constitute notice) to:
Fried Frank Harris Shriver & Jacobson
One New York Plaza
New York, NY 10004
Facsimile: 212-859-4000
Attn: Joseph A. Stern, Esq.
(b) If to the Purchaser or Newco:
Princeton Video Image, Inc.
15 Princess Road
Lawrenceville, N.J. 08648
Facsimile: 609-912-0044
With a copy (which shall not constitute notice) to:
Smith, Stratton, Wise, Heher & Brennan
600 College Road East
Princeton, New Jersey 08540
Facsimile: 609-987-6651
Attn: Richard J. Pinto, Esq.
All such notices and communications shall be deemed to have been give in the
case of (a) facsimile transmission on the date sent, (b) personal delivery on
the date of such delivery, (c) overnight courier on the day following delivery
to such courier and (d) mailing on the third day after the posting thereof.
15. Changes. The terms and provisions of this Agreement may not be
modified or amended, or any of the provisions hereof waived, temporarily or
permanently, except pursuant to the consent of the affected party.
47
<PAGE> 48
16. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
17. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey, without regard to conflict
of laws.
19. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
20. Arbitration. Any dispute that arises under this Agreement shall be
referred by either party to arbitration, which shall be conducted in accordance
with the rules of the American Arbitration Association (the "Rules"), and which
shall take place in Princeton, New Jersey. In the event of an arbitration
involving only two of the parties hereto, there shall be three arbitrators of
whom each of the claimant and the respondent shall select one in accordance with
the Rules. The two named arbitrators shall select a third arbitrator to serve as
presiding arbitrator within thirty (30) calendar days of the selection of the
second arbitrator. In the event of an arbitration involving more than two
parties, there shall be three arbitrators who shall be jointly nominated by the
parties. If any arbitrator has not been named within the time limits specified
herein and in the Rules, such appointment shall be made by the American
Arbitration Association upon the written request of any claimant or respondent
within thirty (30) calendar days of such request. The decision of such
arbitrators shall be binding, final and unappealable by the parties The fees and
expenses associated with any such arbitration shall be borne as the arbitrator
determines.
21. Adjustments. All references herein to a specific number of PVI
Securities, including the number of PVI Securities, the PVI Common Stock
ownership threshold specified in Section 7.1(a), and the limit of 650,000 shares
set forth in Section 8.5, and the $4.00 formula price per share for the release
of Escrow Shares under Section 2.6(b) hereof, shall be appropriately adjusted to
reflect any reclassification, recapitalization or reorganization of the
Purchaser's securities, or any stock split, reverse stock split, stock dividend
or similar event.
22. Further Assurances. The parties hereto shall, subsequent to the
date hereof, execute and deliver such further documentation, and take such
further action, in each case without cost to the other party, as shall be
reasonably requested by such other party hereto to further evidence and perfect
the completion of the transactions contemplated hereby.
48
<PAGE> 49
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their behalf.
PRINCETON VIDEO IMAGE, INC.
By: /s/ Dennis P. Wilkinson
----------------------------------------
Name: Dennis P. Wilkinson
-----------------------------------
Title: President / CEO
-----------------------------------
PRINCETON VIDEO IMAGE
LATIN AMERICA, LLC
By: /s/ Dennis P. Wilkinson
----------------------------------------
Name: Dennis P. Wilkinson
--------------------------------------
Title: President / CEO
-----------------------------------
<PAGE> 50
SELLER:
PRESENCIA EN MEDIOS, S.A.
By: /s/ David Sitt
----------------------------------------
Name: David Sitt
--------------------------------------
Title: Director General
-----------------------------------
PRESENCE IN MEDIA LLC
By: /s/ David Sitt
----------------------------------------
Name: David Sitt
--------------------------------------
Title: Director General
-----------------------------------
VIRTUAL ADVERTISEMENT LLC
By: /s/ David Sitt
----------------------------------------
Name: David Sitt
--------------------------------------
Title: Director General
-----------------------------------
PVI LA, LLC
By: /s/ David Sitt
-----------------------------------------
Name: David Sitt
---------------------------------------
Title: Director General
------------------------------------
<PAGE> 51
DESIGNATED PARTIES:
By Power of Attorney to David Sitt
/s/ David Sitt
--------------------------------------
Eduardo Sitt
/s/ David Sitt
--------------------------------------
David Sitt
/s/ Roberto Sonabend
--------------------------------------
Roberto Sonabend
<PAGE> 52
Omitted Schedule
Schedule 5.10 has been omitted pursuant to Regulation S-K, Item 601(b)(2). The
registrant will furnish a copy of this Exhibit to the Securities and Exchange
Commission upon request.
<PAGE> 53
SCHEDULE 1(a)
CORPORATION'S CERTIFICATE OF INCORPORATION
and
SCHEDULE 1(b)
CORPORATION'S BYLAWS
[Provided under separate cover.]
<PAGE> 54
SCHEDULE 1.1
WARRANTS: EXERCISE PRICES AND TERMS
<PAGE> 55
SCHEDULE 1.1
WARRANT EXERCISE PRICES AND TERMS
<TABLE>
<CAPTION>
Number of Shares Warrant Group Exercise Price Vesting Period Expiration Date
---------------- ------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
106,329 A* $8.40 N/A 12/16/02
142,835 B* $8.00 N/A 04/15/04
5,316 C* $4.50 N/A 09/30/05
15,478 D* $8.00 N/A 03/01/06
53,165 E* $6.05 N/A 10/22/06
5,734 F* $8.00 N/A 01/01/07
18,608 G $20.00 N/A 3 years after
Commencement Date
147,256 H $3.72 N/A 05/09/03
180,159 H $5.05 N/A 06/14/04
146,524 H $7.47 N/A 05/27/04
3,323 H $9.31 N/A 08/08/04
795 H $10.34 N/A 07/21/05
2,658 H $12.12 N/A 04/03/02
74,300 I $5.05 18 months** 06/14/04
78,985 I $7.47 18 months** 05/27/04
2,196 I $10.34 18 months** 07/21/05
26,582++ J *** N/A ***
26,582++ K *** N/A ***
</TABLE>
* The Parallel Warrants (as defined in the attached Form of Warrant) for each
Warrant Group are set forth on the following page.
** The vesting period has been calculated from December 14, 2000. Warrants which
would have vested between December 14, 2000 and the Closing Date if they had
been issued on December 14, 2000 will be treated as fully vested on the Closing
Date and the vesting period for the remainder of the warrants will be reduced
accordingly.
*** The exercise price and expiration date will be identical to those contained
in the Parallel Warrant
++ This Warrant will be issuable only upon delivery to Allen & Co. of the
Parallel Warrant
<PAGE> 56
<TABLE>
<CAPTION>
Warrant Group Parallel Warrant Number Number of Shares
------------- ----------------------- ----------------
<S> <C> <C>
A (Unnumbered - held by 380,000
Allen & Co.)
(Unnumbered - held by Barington 20,000
Capital)
B 37 13,600
50 20,000
176 2,000
177 1,000
174 2,000
175 2,000
112 450,000
129 10,932
178 22,200
52 13,600
C 145 20,000
D 127 6,000
131 28,226
132 24,000
E (Unnumbered - held by 200,000
Allen & Co.)
F 133-141, 144 21,572
J To be issued to Allen & Co. on 100,000
Closing Date
K To be issued to Allen & Co. on 100,000
delivery of fairness opinion
</TABLE>
<PAGE> 57
SCHEDULE 1.1A
FORMS OF PVI WARRANT
<PAGE> 58
[FORM OF WARRANT FOR GROUPS A-F]
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR THE LAWS OF ANY STATE. THEY MAY NOT BE SOLD OR
OTHERWISE TRANS- FERRED UNLESS THEY ARE REGISTERED UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
_______ Warrants
PRINCETON VIDEO IMAGE, INC.
WARRANT CERTIFICATE
This warrant certificate ("Warrant Certificate") certifies
that for value received in consideration for certain services rendered, and for
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, _________________________ or registered permitted assigns (the
"Holder") is the owner of the number of warrants ("Warrants") specified above,
each of which entitles the Holder thereof to purchase, at any time on or before
the Expiration Date (as hereinafter defined), one fully paid and non-assessable
share of Common Stock, no par value ("Common Stock"), of Princeton Video Image,
Inc., a New Jersey corporation (the "Company"), at a purchase price of $_______
per share of Common Stock in lawful money of the United States of America in
cash or by certified or cashier's check or a combination of cash and certified
or cashier's check (subject to adjustment as hereinafter provided).
1. Warrant; Purchase Price
Each Warrant shall entitle the Holder initially to purchase
one share of Common Stock of the Company and the purchase price payable upon
exercise of the Warrants (the "Purchase Price") shall initially be $_______ per
share of Common Stock. The Purchase Price and number of shares of Common Stock
issuable upon exercise of each Warrant are subject to adjustment as provided in
Article 6. The shares of Common Stock issuable upon exercise of the Warrants
(and/or other shares of common stock so issuable by reason of any adjustments
pursuant to Article 6) are sometimes referred to herein as the "Warrant Shares."
2. Exercise; Expiration Date
2.1 The Warrants are exercisable, at the option of the Holder,
in whole or in part at any time and from time to time on or after the date
hereof and on or before the Expiration Date, upon surrender of this Warrant
Certificate to the Company together with a duly completed
1
<PAGE> 59
Notice of Exercise, in the form attached hereto as Exhibit A, and payment of an
amount equal to the Purchase Price times the number of Warrants to be exercised.
In the case of exercise of less than all the Warrants represented by this
Warrant Certificate, the Company shall cancel the Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate for
the balance of such Warrants.
2.2 The term "Expiration Date" shall mean 5:00 p.m. New York
time on _______________.
3. Registration and Transfer on Company Books
3.1 The Company shall maintain books for the registration and
transfer of the Warrants and the registration and transfer of the Warrant
Shares.
3.2 Prior to due presentment for registration of transfer of
this Warrant Certificate, or the Warrant Shares, the Company may deem and treat
the registered Holder as the absolute owner thereof.
3.3 Neither this Warrant Certificate, nor the Warrants
represented hereby, may be sold, assigned or otherwise transferred voluntarily
by the Holder, other than to a Permitted Transferee (a "Permitted Transfer"),
without the consent of the Company. As used herein, the following terms shall
have the following definitions. "Affiliate" shall mean a Person that directly,
or indirectly through one or more intermediaries, controls or is controlled by,
or is under common control with, another Person. "Permitted Transferee" means
(i) the Holder and its Affiliates, (ii) any direct or indirect equity holder of
any Person referred to in clause (i) and any Affiliate of one or more of such
equity holders, and (iii) in the case of any of the foregoing Persons in clause
(ii) who is an individual, Permitted Transferee shall include such individual's
immediate family, trusts solely or primarily for the benefit of such person or
such person's immediate family member, and corporations, partnerships, limited
liability companies or other entities in which such individual or such
individual's family members and/or trusts are the majority equity holders as the
case may be. For this purpose, "immediate family" of a person means the person's
spouse, parents, children, adopted children, stepchildren and grandchildren.
"Person" shall mean and include an individual, a corporation, a partnership, a
trust, an unincorporated organization, a limited liability company, a joint
stock corporation, a joint venture, a government or any department, agency or
political subdivision thereof and any other entity. The Company shall register
upon its books any Permitted Transfer of a Warrant Certificate, upon surrender
of same to the Company with a written instrument of transfer duly executed by
the registered Holder or by a duly authorized attorney. Upon any such
registration of Permitted Transfer, new Warrant Certificate(s) shall be issued
to the transferee(s) and the surrendered Warrant Certificate shall be canceled
by the Company. A Warrant Certificate may also be exchanged, at the option of
the Holder, for new Warrant Certificates of different denominations representing
in the aggregate the number of Warrants evidenced by the Warrant Certificate
surrendered.
2
<PAGE> 60
3.4 No sale, transfer, assignment, hypothecation or other
disposition of the Warrant Shares shall be made unless any such transfer,
assignment or other disposition will comply with the rules and statutes
administered by the Securities and Exchange Commission (the "Commission") and
(i) a registration statement under the Securities Act of 1933, as amended (the
"Act"), including such shares is currently in effect, or (ii) in the opinion of
counsel satisfactory to the Company a current registration statement is not
required for such disposition of the shares.
4. Reservation of Shares
The Company covenants that it will at all times reserve and
keep available out of its authorized capital stock, solely for the purpose of
issue upon exercise of the Warrants, such number of shares of capital stock as
shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that all shares of capital stock which shall be issuable upon
exercise of the Warrants shall be duly and validly issued and fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof, and that upon issuance such shares shall be listed on each
national securities exchange or automated over-the-counter trading system, if
any, on which the other shares of such outstanding capital stock of the Company
are then listed.
5. Loss or Mutilation
Upon receipt by the Company of reasonable evidence of the
ownership of and the loss, theft, destruction or mutilation of any Warrant
Certificate and, in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company, or, in the case of mutilation, upon
surrender and cancellation of the mutilated Warrant Certificate, the Company
shall execute and deliver in lieu thereof a new Warrant Certificate representing
an equal number of Warrants.
6. Adjustment of Purchase Price and Number of
Shares Deliverable
6.1 The number of Warrant Shares purchasable upon the exercise
of each Warrant and the Purchase Price with respect to the Warrant Shares shall
be subject to adjustment as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its Common Stock payable in shares of its capital stock, (ii)
subdivide its outstanding shares of Common Stock through stock split or
otherwise, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, or (iv) issue by reclassification of its
Common Stock (including any reclassification in connection with a consolidation
or merger in which the Company is the continuing corporation) other securities
of the Company, the number and/or nature of Warrant Shares purchasable upon
exercise of each Warrant immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive the kind and number of Warrant Shares or
other securities of the Company which he would have owned or have been entitled
to receive after the happening of any of the events described above, had such
Warrant
3
<PAGE> 61
been exercised immediately prior to the happening of such event or any record
date with respect thereto. Any adjustment made pursuant to this paragraph (a)
shall become effective retroactively as of the record date of such event.
(b) In the event of any capital reorganization or any
reclassification of the capital stock of the Company or in case of the
consolidation or merger of the Company with another corporation (other than a
consolidation or merger in which the outstanding shares of the Company's Common
Stock are not converted into or exchanged for other rights or interests), or in
the case of any sale, transfer or other disposition to another corporation of
all or substantially all the properties and assets of the Company (any such
event, a "Triggering Event"), the Holder of each Warrant shall thereafter be
entitled to purchase (and it shall be a condition to the consummation of any
such reorganization, reclassification, consolidation, merger, sale, transfer or
other disposition that appropriate provisions shall be made so that such Holder
shall thereafter be entitled to purchase) the kind and amount of shares of stock
and other securities and property (including cash) which the Holder would have
been entitled to receive had such Warrants been exercised immediately prior to
the effective date of such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition; and in any such case appropriate
adjustments shall be made in the application of the provisions of this Article 6
with respect to rights and interest thereafter of the Holder of the Warrants to
the end that the provisions of this Article 6 shall thereafter be applicable, as
near as reasonably may be, in relation to any shares or other property
thereafter purchasable upon the exercise of the Warrants. The provisions of this
Section 6.1(b) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales, transfers or other
dispositions.
(c) Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant is adjusted, as provided in this Section 6.1, the
Purchase Price with respect to the Warrant Shares shall be adjusted by
multiplying such Purchase Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of Warrant Shares
purchasable upon the exercise of each Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of Warrant Shares
so purchasable immediately thereafter.
6.2 No adjustment in the number of Warrant Shares purchasable
under the Warrants, or in the Purchase Price with respect to the Warrant Shares,
shall be required unless such adjustment would require an increase or decrease
of at least 1% in the number of Warrant Shares issuable upon the exercise of
such Warrant, or in the Purchase Price thereof; provided, however, that any
adjustments which by reason of this Section 6.2 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All final results of adjustments to the number of Warrant Shares and the
Purchase Price thereof shall be rounded to the nearest one thousandth of a share
or the nearest cent, as the case may be. Anything in this Section 6 to the
contrary notwithstanding, the Company shall be entitled, but shall not be
required, to make such changes in the number of Warrant Shares purchasable upon
the exercise of each Warrant, or in the Purchase Price thereof, in addition to
those required by such Section, as it in its discretion shall determine to be
advisable in order that any dividend or distribution in shares of Common Stock,
subdivision, reclassification or combination of shares of Common
4
<PAGE> 62
Stock, issuance of rights, warrants or options to purchase Common Stock, or
distribution of shares of stock other than Common Stock, evidences of
indebtedness or assets (other than distributions of cash out of retained
earnings) or convertible or exchangeable securities hereafter made by the
Company to the holders of its Common Stock shall not result in any tax to the
holders of its Common Stock or securities convertible into Common Stock.
6.3 Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant or the Purchase Price of such Warrant Shares is
adjusted, as herein provided, the Company shall mail to the Holder, at the
address of the Holder shown on the books of the Company, a notice of such
adjustment or adjustments, prepared and signed by the Chairman of the Board,
Chief Financial Officer or Secretary of the Company, which sets forth the number
of Warrant Shares purchasable upon the exercise of each Warrant and the Purchase
Price of such Warrant Shares after such adjustment, a brief statement of the
facts requiring such adjustment and the computation by which such adjustment was
made.
6.4 The Company shall give notice to the Holder by registered
mail, if at any time prior to the expiration or exercise in full of the
Warrants, any of the following events shall occur:
(a) The Company shall authorize the payment of any dividend
payable in any securities upon shares of Common Stock or authorize the making of
any distribution to the holders of shares of Common Stock;
(b) The Company shall authorize the issuance to all holders of
Common Stock of any additional shares of Common Stock or of rights, options or
warrants to subscribe for or purchase Common Stock or any of any other
subscription rights, options or warrants;
(c) A dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, or sale or conveyance of
the property of the Company as an entirety or substantially as an entirety); or
(d) A capital reorganization or reclassification of the Common
Stock (other than a subdivision or combination of the outstanding Common Stock
and other than a change in the par value of the Common Stock) or any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and that does not result in any reclassification or change of Common
Stock outstanding) or any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially an entirety.
Such giving of notice shall be initiated at least 10 business days prior to the
date fixed as a record date or effective date or the date of closing of the
Company's stock transfer books for the determination of the shareholders
entitled to such dividend, distribution, or subscription rights, or for the
determination of the shareholders entitled to vote on such proposed merger,
consolidation, sale, conveyance, dissolution, liquidation or winding up. Such
notice shall specify such record date or the date of the closing of the stock
transfer books, as the case may be. Failure to provide
5
<PAGE> 63
such notice shall not affect the validity of any action taken in connection with
such dividend, distribution or subscription rights, or proposed merger,
consolidation, sale, conveyance, dissolution, liquidation or winding up.
7. Conversion Rights
7.1 In lieu of exercise of any portion of the Warrants as
provided in Section 2.1 hereof, the Warrants represented by this Warrant
Certificate (or any portion thereof) may, at the election of the Holder, be
converted into the nearest whole number of shares of Common Stock equal to: (1)
the product of (a) the number of shares of Common Stock then issuable upon the
exercise of the Warrants to be so converted and (b) the excess, if any, of (i)
the Market Price Per Share (as determined pursuant to Section 9.2) with respect
to the date of conversion over (ii) the Purchase Price in effect on the business
day next preceding the date of conversion, divided by (2) the Market Price Per
Share with respect to the date of conversion. For example, if the Market Price
per Share on the date of conversion is $4.00 and the Purchase Price is $2.00,
then the Holder would be entitled to receive 15,000 shares of Common Stock upon
conversion of 30,000 Warrants.
7.2 The conversion rights provided under this Section 7 may be
exercised in whole or in part and at any time and from time to time while any
Warrants remain outstanding. In order to exercise the conversion privilege, the
Holder shall surrender to the Company, at its offices, this Warrant Certificate
accompanied by a duly completed Notice of Conversion in the form attached hereto
as Exhibit B. The Warrants (or so much thereof as shall have been surrendered
for conversion) shall be deemed to have been converted immediately prior to the
close of business on the day of surrender of such Warrant Certificate for
conversion in accordance with the foregoing provisions. As promptly as
practicable on or after the conversion date, the Company shall issue and shall
deliver to the Holder (i) a certificate or certificates representing the number
of shares of Common Stock to which the Holder shall be entitled as a result of
the conversion, and (ii) if the Warrant Certificate is being converted in part
only, a new certificate of like tenor and date for the balance of the
unconverted portion of the Warrant Certificate.
8. Voluntary Adjustment by the Company
The Company may, at its option, at any time during the term of
the Warrants, reduce the then current Purchase Price to any amount deemed
appropriate by the Board and/or extend the date of the expiration of the
Warrants.
9. Fractional Shares and Warrants; Determination of Market
Price Per Share
9.1 Anything contained herein to the contrary notwithstanding,
the Company shall not be required to issue any fraction of a share of Common
Stock in connection with the exercise of Warrants. Warrants may not be exercised
in such number as would result (except for the provisions of this paragraph) in
the issuance of a fraction of a share of Common Stock unless
6
<PAGE> 64
the Holder is exercising all Warrants then owned by the Holder. In such event,
the Company shall, upon the exercise of all of such Warrants, issue to the
Holder the largest aggregate whole number of shares of Common Stock called for
thereby upon receipt of the Purchase Price for all of such Warrants and pay a
sum in cash equal to the remaining fraction of a share of Common Stock,
multiplied by its Market Price Per Share (as determined pursuant to Section 9.2
below) as of the last business day preceding the date on which the Warrants are
presented for exercise.
9.2 As used herein, the "Market Price Per Share" with respect
to any class or series of Common Stock on any date shall mean the average
closing price per share of Company's Common Stock for the 20 trading days
immediately preceding such date. The closing price for each such day shall be
the last sale price regular way or, in case no such sale takes place on such
day, the average of the closing bid and asked prices regular way, in either case
on the principal securities exchange on which the shares of such Common Stock of
the Company are listed or admitted to trading or, if applicable, the last sale
price, or in case no sale takes place on such day, the average of the closing
bid and asked prices of such Common Stock on NASDAQ or any comparable system, or
if such Common Stock is not reported on NASDAQ, or a comparable system, the
average of the closing bid and asked prices as furnished by two members of the
National Association of Securities Dealers, Inc. selected from time to time by
the Company for that purpose. If such bid and asked prices are not available,
then "Market Price Per Share" shall be equal to the fair market value of such
Common Stock as determined in good faith by the Board.
10. Parallel Warrants
Exhibit C attached hereto sets forth a list of warrants
previously issued by the Company (the "Parallel Warrants"). If a Parallel
Warrant or any portion thereof is amended or forfeited other than in bona fide
consideration of services to be rendered to the Company by the holder thereof
with the approval of the Company's Board of Directors, then a pro rata portion
of the Warrants shall be similarly amended or forfeited at the option of the
Holder upon payment by the Holder to the Company of such consideration, if any,
as is paid to the Company by the holder of the Parallel Warrant in connection
with such amendment or upon payment by the Company to the Holder of such
consideration, if any, as is paid to the holder of the Parallel Warrant by the
Company. If the consideration paid by or to the holder of the Parallel Warrant
is in a form other than cash or cash-equivalents, the consideration to be paid
by or to the Holder shall be calculated on the basis of the fair market value of
such consideration as reasonably determined in good faith by the Company's Board
of Directors. If no consideration is paid in connection with such amendment or
forfeiture, the Warrant shall, at the option of the Holder, be amended or
forfeited in the same fashion as the Parallel Warrant. The Company shall give
the Holder prompt written notice at its address reflected on the records of the
Company of any amendment or forfeiture referred to in this Section 10. As used
herein, "pro rata portion" shall mean a number of Warrants equal to the
aggregate number of Warrants then represented by this Certificate multiplied by
a fraction, the numerator of which is the number of shares issuable upon
exercise of the Parallel Warrants so being amended or expiring and the
denominator of which is the aggregate number of shares then issuable upon the
exercise of the Parallel Warrants.
7
<PAGE> 65
11. Governing Law
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed by its officers thereunto duly authorized and
its corporate seal to be affixed hereon, as of this ____ day of _________,
200__.
PRINCETON VIDEO IMAGE, INC.
By:
------------------------------------
Name: Brown F Williams
Title: Chairman
[SEAL]
Attest:
By:
----------------------------------
Name:
Title:
8
<PAGE> 66
EXHIBIT A
NOTICE OF EXERCISE
The undersigned hereby irrevocably elects to exercise,
pursuant to Section 2 of the Warrant Certificate accompanying this Notice of
Exercise, _______ Warrants of the total number of Warrants owned by the
undersigned pursuant to the accompanying Warrant Certificate, and herewith makes
payment of the Purchase Price of such shares in full.
Name of Holder
---------------------------------
Signature
---------------------------------
Address:
---------------------------------
---------------------------------
---------------------------------
<PAGE> 67
EXHIBIT B
NOTICE OF CONVERSION
The undersigned hereby irrevocably elects to convert, pursuant to Section 7 of
the Warrant Certificate accompanying this Notice of Conversion, _______ Warrants
of the total number of Warrants owned by the undersigned pursuant to the
accompanying Warrant Certificate into shares of the Common Stock of the Company
(the "Shares").
The number of Shares to be received by the undersigned shall be calculated in
accordance with the provisions of Section 7.1 of the accompanying Warrant
Certificate.
Name of Holder:
---------------------------------
Signature:
---------------------------------
Address:
---------------------------------
---------------------------------
---------------------------------
<PAGE> 68
[FORM OF WARRANT FOR GROUP G]
THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE LAWS
OF ANY STATE. THEY MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED UNLESS THEY ARE
REGISTERED UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
_______ Warrants
PRINCETON VIDEO IMAGE, INC.
WARRANT CERTIFICATE
This warrant certificate ("Warrant Certificate") certifies
that for value received in consideration for certain services rendered, and for
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, _________________________ or registered permitted assigns (the
"Holder") is the owner of the number of warrants ("Warrants") specified above,
each of which entitles the Holder thereof to purchase, at any time on or before
the Expiration Date (as hereinafter defined), one fully paid and non-assessable
share of Common Stock, no par value ("Common Stock"), of Princeton Video Image,
Inc., a New Jersey corporation (the "Company"), at a purchase price of $_______
per share of Common Stock in lawful money of the United States of America in
cash or by certified or cashier's check or a combination of cash and certified
or cashier's check (subject to adjustment as hereinafter provided).
1. Warrant; Purchase Price
Each Warrant shall entitle the Holder initially to purchase
one share of Common Stock of the Company and the purchase price payable upon
exercise of the Warrants (the "Purchase Price") shall initially be $_______ per
share of Common Stock. The Purchase Price and number of shares of Common Stock
issuable upon exercise of each Warrant are subject to adjustment as provided in
Article 6. The shares of Common Stock issuable upon exercise of the Warrants
(and/or other shares of common stock so issuable by reason of any adjustments
pursuant to Article 6) are sometimes referred to herein as the "Warrant Shares."
2. Exercise; Expiration Date
2.1 The Warrants shall vest and become exercisable on the
Commencement Date (as defined in the warrant identified on Exhibit C hereto) and
upon such vesting shall be exercisable, at the option of the Holder, in whole or
in part at any time and from time to time on
1
<PAGE> 69
or after the date hereof and on or before the Expiration Date, upon surrender of
this Warrant Certificate to the Company together with a duly completed Notice of
Exercise, in the form attached hereto as Exhibit A, and payment of an amount
equal to the Purchase Price times the number of Warrants to be exercised.
Notwithstanding anything to the contrary contained herein or in the Transaction
Documents (as such term is defined under the Reorganization Agreement referred
to herein), if the Purchaser (as such term is defined under the Reorganization
Agreement referred to herein) shall fail to comply with its obligations under
Section 7.1 of the Reorganization Agreement dated as of December ___, 2000 among
Presencia en Medios, S.A., Eduardo Sitt, David Sitt, Roberto Sonabend, Presence
in Media LLC, Virtual Advertisement LLC, PVI LA, LLC, the Company and Princeton
Video Image Latin America, LLC, and such failure is not cured within ten (10)
days after notice of such failure from the Holder or any member of the Seller
Group (as defined in the Reorganization Agreement referred to herein), then at
the end of such ten (10) day period, the Warrants shall automatically vest and
become exercisable. In the case of exercise of less than all the Warrants
represented by this Warrant Certificate, the Company shall cancel the Warrant
Certificate upon the surrender thereof and shall execute and deliver a new
Warrant Certificate for the balance of such Warrants.
2.2 The term "Expiration Date" shall mean 5:00 p.m. New York
time on the third anniversary of the Commencement Date.
3. Registration and Transfer on Company Books
3.1 The Company shall maintain books for the registration and
transfer of the Warrants and the registration and transfer of the Warrant
Shares.
3.2 Prior to due presentment for registration of transfer of
this Warrant Certificate, or the Warrant Shares, the Company may deem and treat
the registered Holder as the absolute owner thereof.
3.3 Neither this Warrant Certificate, nor the Warrants
represented hereby, may be sold, assigned or otherwise transferred voluntarily
by the Holder, other than to a Permitted Transferee (a "Permitted Transfer"),
without the consent of the Company. As used herein, the following terms shall
have the following definitions. "Affiliate" shall mean a Person that directly,
or indirectly through one or more intermediaries, controls or is controlled by,
or is under common control with, another Person. "Permitted Transferee" means
(i) the Holder and its Affiliates, (ii) any direct or indirect equity holder of
any Person referred to in clause (i) and any Affiliate of one or more of such
equity holders, and (iii) in the case of any of the foregoing Persons in clause
(ii) who is an individual, Permitted Transferee shall include such individual's
immediate family, trusts solely or primarily for the benefit of such person or
such person's immediate family member, and corporations, partnerships, limited
liability companies or other entities in which such individual or such
individual's family members and/or trusts are the majority equity holders as the
case may be. For this purpose, "immediate family" of a person means the person's
spouse, parents, children, adopted children, stepchildren and grandchildren.
"Person" shall mean and include an individual, a corporation, a partnership, a
trust, an
2
<PAGE> 70
unincorporated organization, a limited liability company, a joint stock
corporation, a joint venture, a government or any department, agency or
political subdivision thereof and any other entity. The Company shall register
upon its books any Permitted Transfer of a Warrant Certificate, upon surrender
of same to the Company with a written instrument of transfer duly executed by
the registered Holder or by a duly authorized attorney. Upon any such
registration of Permitted Transfer, new Warrant Certificate(s) shall be issued
to the transferee(s) and the surrendered Warrant Certificate shall be canceled
by the Company. A Warrant Certificate may also be exchanged, at the option of
the Holder, for new Warrant Certificates of different denominations representing
in the aggregate the number of Warrants evidenced by the Warrant Certificate
surrendered.
3.4 No sale, transfer, assignment, hypothecation or other
disposition of the Warrant Shares shall be made unless any such transfer,
assignment or other disposition will comply with the rules and statutes
administered by the Securities and Exchange Commission (the "Commission") and
(i) a registration statement under the Securities Act of 1933, as amended (the
"Act"), including such shares is currently in effect, or (ii) in the opinion of
counsel satisfactory to the Company a current registration statement is not
required for such disposition of the shares.
4. Reservation of Shares
The Company covenants that it will at all times reserve and
keep available out of its authorized capital stock, solely for the purpose of
issue upon exercise of the Warrants, such number of shares of capital stock as
shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that all shares of capital stock which shall be issuable upon
exercise of the Warrants shall be duly and validly issued and fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof, and that upon issuance such shares shall be listed on each
national securities exchange or automated over-the-counter trading system, if
any, on which the other shares of such outstanding capital stock of the Company
are then listed.
5. Loss or Mutilation
Upon receipt by the Company of reasonable evidence of the
ownership of and the loss, theft, destruction or mutilation of any Warrant
Certificate and, in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company, or, in the case of mutilation, upon
surrender and cancellation of the mutilated Warrant Certificate, the Company
shall execute and deliver in lieu thereof a new Warrant Certificate representing
an equal number of Warrants.
6. Adjustment of Purchase Price and Number of
Shares Deliverable
6.1 The number of Warrant Shares purchasable upon the exercise
of each Warrant and the Purchase Price with respect to the Warrant Shares shall
be subject to adjustment as follows:
3
<PAGE> 71
(a) In case the Company shall (i) declare a dividend or make a
distribution on its Common Stock payable in shares of its capital stock, (ii)
subdivide its outstanding shares of Common Stock through stock split or
otherwise, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, or (iv) issue by reclassification of its
Common Stock (including any reclassification in connection with a consolidation
or merger in which the Company is the continuing corporation) other securities
of the Company, the number and/or nature of Warrant Shares purchasable upon
exercise of each Warrant immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive the kind and number of Warrant Shares or
other securities of the Company which he would have owned or have been entitled
to receive after the happening of any of the events described above, had such
Warrant been exercised immediately prior to the happening of such event or any
record date with respect thereto. Any adjustment made pursuant to this paragraph
(a) shall become effective retroactively as of the record date of such event.
(b) In the event of any capital reorganization or any
reclassification of the capital stock of the Company or in case of the
consolidation or merger of the Company with another corporation (other than a
consolidation or merger in which the outstanding shares of the Company's Common
Stock are not converted into or exchanged for other rights or interests), or in
the case of any sale, transfer or other disposition to another corporation of
all or substantially all the properties and assets of the Company (any such
event, a "Triggering Event"), the Holder of each Warrant shall thereafter be
entitled to purchase (and it shall be a condition to the consummation of any
such reorganization, reclassification, consolidation, merger, sale, transfer or
other disposition that appropriate provisions shall be made so that such Holder
shall thereafter be entitled to purchase) the kind and amount of shares of stock
and other securities and property (including cash) which the Holder would have
been entitled to receive had such Warrants been exercised immediately prior to
the effective date of such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition; and in any such case appropriate
adjustments shall be made in the application of the provisions of this Article 6
with respect to rights and interest thereafter of the Holder of the Warrants to
the end that the provisions of this Article 6 shall thereafter be applicable, as
near as reasonably may be, in relation to any shares or other property
thereafter purchasable upon the exercise of the Warrants. The provisions of this
Section 6.1(b) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales, transfers or other
dispositions.
(c) Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant is adjusted, as provided in this Section 6.1, the
Purchase Price with respect to the Warrant Shares shall be adjusted by
multiplying such Purchase Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of Warrant Shares
purchasable upon the exercise of each Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of Warrant Shares
so purchasable immediately thereafter.
6.2 No adjustment in the number of Warrant Shares purchasable
under the Warrants, or in the Purchase Price with respect to the Warrant Shares,
shall be required unless
4
<PAGE> 72
such adjustment would require an increase or decrease of at least 1% in the
number of Warrant Shares issuable upon the exercise of such Warrant, or in the
Purchase Price thereof; provided, however, that any adjustments which by reason
of this Section 6.2 are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All final results of
adjustments to the number of Warrant Shares and the Purchase Price thereof shall
be rounded to the nearest one thousandth of a share or the nearest cent, as the
case may be. Anything in this Section 6 to the contrary notwithstanding, the
Company shall be entitled, but shall not be required, to make such changes in
the number of Warrant Shares purchasable upon the exercise of each Warrant, or
in the Purchase Price thereof, in addition to those required by such Section, as
it in its discretion shall determine to be advisable in order that any dividend
or distribution in shares of Common Stock, subdivision, reclassification or
combination of shares of Common Stock, issuance of rights, warrants or options
to purchase Common Stock, or distribution of shares of stock other than Common
Stock, evidences of indebtedness or assets (other than distributions of cash out
of retained earnings) or convertible or exchangeable securities hereafter made
by the Company to the holders of its Common Stock shall not result in any tax to
the holders of its Common Stock or securities convertible into Common Stock.
6.3 Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant or the Purchase Price of such Warrant Shares is
adjusted, as herein provided, the Company shall mail to the Holder, at the
address of the Holder shown on the books of the Company, a notice of such
adjustment or adjustments, prepared and signed by the Chairman of the Board,
Chief Financial Officer or Secretary of the Company, which sets forth the number
of Warrant Shares purchasable upon the exercise of each Warrant and the Purchase
Price of such Warrant Shares after such adjustment, a brief statement of the
facts requiring such adjustment and the computation by which such adjustment was
made.
6.4 The Company shall give notice to the Holder by registered
mail, if at any time prior to the expiration or exercise in full of the
Warrants, any of the following events shall occur:
(a) The Company shall authorize the payment of any dividend
payable in any securities upon shares of Common Stock or authorize the making of
any distribution to the holders of shares of Common Stock;
(b) The Company shall authorize the issuance to all holders of
Common Stock of any additional shares of Common Stock or of rights, options or
warrants to subscribe for or purchase Common Stock or any of any other
subscription rights, options or warrants;
(c) A dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, or sale or conveyance of
the property of the Company as an entirety or substantially as an entirety); or
(d) A capital reorganization or reclassification of the Common
Stock (other than a subdivision or combination of the outstanding Common Stock
and other than a change in the par value of the Common Stock) or any
consolidation or merger of the Company with or into
5
<PAGE> 73
another corporation (other than a consolidation or merger in which the Company
is the continuing corporation and that does not result in any reclassification
or change of Common Stock outstanding) or any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially an
entirety.
Such giving of notice shall be initiated at least 10 business days prior to the
date fixed as a record date or effective date or the date of closing of the
Company's stock transfer books for the determination of the shareholders
entitled to such dividend, distribution, or subscription rights, or for the
determination of the shareholders entitled to vote on such proposed merger,
consolidation, sale, conveyance, dissolution, liquidation or winding up. Such
notice shall specify such record date or the date of the closing of the stock
transfer books, as the case may be. Failure to provide such notice shall not
affect the validity of any action taken in connection with such dividend,
distribution or subscription rights, or proposed merger, consolidation, sale,
conveyance, dissolution, liquidation or winding up.
7. Conversion Rights
7.1 In lieu of exercise of any portion of the Warrants as
provided in Section 2.1 hereof, the Warrants represented by this Warrant
Certificate (or any portion thereof) may, at the election of the Holder, be
converted into the nearest whole number of shares of Common Stock equal to: (1)
the product of (a) the number of shares of Common Stock then issuable upon the
exercise of the Warrants to be so converted and (b) the excess, if any, of (i)
the Market Price Per Share (as determined pursuant to Section 9.2) with respect
to the date of conversion over (ii) the Purchase Price in effect on the business
day next preceding the date of conversion, divided by (2) the Market Price Per
Share with respect to the date of conversion. For example, if the Market Price
per Share on the date of conversion is $4.00 and the Purchase Price is $2.00,
then the Holder would be entitled to receive 15,000 shares of Common Stock upon
conversion of 30,000 Warrants.
7.2 The conversion rights provided under this Section 7 may be
exercised in whole or in part and at any time and from time to time while any
Warrants remain outstanding. In order to exercise the conversion privilege, the
Holder shall surrender to the Company, at its offices, this Warrant Certificate
accompanied by a duly completed Notice of Conversion in the form attached hereto
as Exhibit B. The Warrants (or so much thereof as shall have been surrendered
for conversion) shall be deemed to have been converted immediately prior to the
close of business on the day of surrender of such Warrant Certificate for
conversion in accordance with the foregoing provisions. As promptly as
practicable on or after the conversion date, the Company shall issue and shall
deliver to the Holder (i) a certificate or certificates representing the number
of shares of Common Stock to which the Holder shall be entitled as a result of
the conversion, and (ii) if the Warrant Certificate is being converted in part
only, a new certificate of like tenor and date for the balance of the
unconverted portion of the Warrant Certificate.
8. Voluntary Adjustment by the Company
6
<PAGE> 74
The Company may, at its option, at any time during the term of
the Warrants, reduce the then current Purchase Price to any amount deemed
appropriate by the Board and/or extend the date of the expiration of the
Warrants.
9. Fractional Shares and Warrants; Determination of
Market Price Per Share
9.1 Anything contained herein to the contrary notwithstanding,
the Company shall not be required to issue any fraction of a share of Common
Stock in connection with the exercise of Warrants. Warrants may not be exercised
in such number as would result (except for the provisions of this paragraph) in
the issuance of a fraction of a share of Common Stock unless the Holder is
exercising all Warrants then owned by the Holder. In such event, the Company
shall, upon the exercise of all of such Warrants, issue to the Holder the
largest aggregate whole number of shares of Common Stock called for thereby upon
receipt of the Purchase Price for all of such Warrants and pay a sum in cash
equal to the remaining fraction of a share of Common Stock, multiplied by its
Market Price Per Share (as determined pursuant to Section 9.2 below) as of the
last business day preceding the date on which the Warrants are presented for
exercise.
9.2 As used herein, the "Market Price Per Share" with respect
to any class or series of Common Stock on any date shall mean the average
closing price per share of Company's Common Stock for the 20 trading days
immediately preceding such date. The closing price for each such day shall be
the last sale price regular way or, in case no such sale takes place on such
day, the average of the closing bid and asked prices regular way, in either case
on the principal securities exchange on which the shares of such Common Stock of
the Company are listed or admitted to trading or, if applicable, the last sale
price, or in case no sale takes place on such day, the average of the closing
bid and asked prices of such Common Stock on NASDAQ or any comparable system, or
if such Common Stock is not reported on NASDAQ, or a comparable system, the
average of the closing bid and asked prices as furnished by two members of the
National Association of Securities Dealers, Inc. selected from time to time by
the Company for that purpose. If such bid and asked prices are not available,
then "Market Price Per Share" shall be equal to the fair market value of such
Common Stock as determined in good faith by the Board.
10. Certain Amendments
If the warrant identified on Exhibit C attached hereto (the "Parallel
Warrant") or any portion thereof is amended or forfeited other than in bona fide
consideration of services to be rendered to the Company by the holder thereof
with the approval of the Company's Board of Directors, then an equal portion of
the Warrants shall be similarly amended or forfeited at the option of the Holder
upon payment by the Holder to the Company of such consideration, if any, as is
paid to the Company by the holder of the Parallel Warrant in connection with
such amendment or upon payment by the Company to the Holder of such
consideration, if any, as is paid to the holder of the Parallel Warrant by the
Company. If the consideration paid by or to the holder of the Parallel Warrant
is in a form other than cash or cash-equivalents, the consideration to be paid
by or to the Holder shall be calculated on the basis of the fair market value of
such
7
<PAGE> 75
consideration as reasonably determined in good faith by the Company's Board of
Directors. If no consideration is paid in connection with such amendment or
forfeiture, the Warrant shall, at the option of the Holder, be amended or
forfeited in the same fashion as the Parallel Warrant. The Company shall give
the Holder prompt written notice at its address reflected on the records of the
Company of any amendment or forfeiture referred to in this Section 10.
11. Governing Law
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
8
<PAGE> 76
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed by its officers thereunto duly authorized and
its corporate seal to be affixed hereon, as of this ____ day of _________,
200__.
PRINCETON VIDEO IMAGE, INC.
By:
-----------------------
Name: Brown F Williams
Title: Chairman
[SEAL]
Attest:
By:
--------------------------
Name:
Title:
<PAGE> 77
EXHIBIT A
NOTICE OF EXERCISE
The undersigned hereby irrevocably elects to exercise,
pursuant to Section 2 of the Warrant Certificate accompanying this Notice of
Exercise, _______ Warrants of the total number of Warrants owned by the
undersigned pursuant to the accompanying Warrant Certificate, and herewith makes
payment of the Purchase Price of such shares in full.
Name of Holder ________________________
Signature ________________________
Address: ________________________
________________________
________________________
<PAGE> 78
EXHIBIT B
NOTICE OF CONVERSION
The undersigned hereby irrevocably elects to convert, pursuant to Section 7 of
the Warrant Certificate accompanying this Notice of Conversion, _______ Warrants
of the total number of Warrants owned by the undersigned pursuant to the
accompanying Warrant Certificate into shares of the Common Stock of the Company
(the "Shares").
The number of Shares to be received by the undersigned shall be calculated in
accordance with the provisions of Section 7.1 of the accompanying Warrant
Certificate.
Name of Holder: ________________________
Signature: ________________________
Address: ________________________
________________________
________________________
<PAGE> 79
EXHIBIT C
PARALLEL WARRANT
Warrant No. 120 dated August 23, 1994 in the amount of 70,000 shares
(held by Blockbuster Entertainment Corporation)
<PAGE> 80
[FORM TO BE USED FOR GROUP H]
THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE LAWS
OF ANY STATE. THEY MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED UNLESS THEY ARE
REGISTERED UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
_______ Warrants
PRINCETON VIDEO IMAGE, INC.
WARRANT CERTIFICATE
This warrant certificate ("Warrant Certificate") certifies
that for value received in consideration for certain services rendered, and for
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, _________________________ or registered permitted assigns (the
"Holder") is the owner of the number of warrants ("Warrants") specified above,
each of which entitles the Holder thereof to purchase, at any time on or before
the Expiration Date (as hereinafter defined), one fully paid and non-assessable
share of Common Stock, no par value ("Common Stock"), of Princeton Video Image,
Inc., a New Jersey corporation (the "Company"), at a purchase price of $_______
per share of Common Stock in lawful money of the United States of America in
cash or by certified or cashier's check or a combination of cash and certified
or cashier's check (subject to adjustment as hereinafter provided).
1. Warrant; Purchase Price
Each Warrant shall entitle the Holder initially to purchase
one share of Common Stock of the Company and the purchase price payable upon
exercise of the Warrants (the "Purchase Price") shall initially be $_______ per
share of Common Stock. The Purchase Price and number of shares of Common Stock
issuable upon exercise of each Warrant are subject to adjustment as provided in
Article 6. The shares of Common Stock issuable upon exercise of the Warrants
(and/or other shares of common stock so issuable by reason of any adjustments
pursuant to Article 6) are sometimes referred to herein as the "Warrant Shares."
2. Exercise; Expiration Date
2.1 The Warrants are exercisable, at the option of the Holder,
in whole or in part at any time and from time to time on or after the date
hereof and on or before the Expiration Date, upon surrender of this Warrant
Certificate to the Company together with a duly completed
1
<PAGE> 81
Notice of Exercise, in the form attached hereto as Exhibit A, and payment of an
amount equal to the Purchase Price times the number of Warrants to be exercised.
In the case of exercise of less than all the Warrants represented by this
Warrant Certificate, the Company shall cancel the Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate for
the balance of such Warrants.
2.2 The term "Expiration Date" shall mean 5:00 p.m. New York
time on _______________.
3. Registration and Transfer on Company Books
3.1 The Company shall maintain books for the registration and
transfer of the Warrants and the registration and transfer of the Warrant
Shares.
3.2 Prior to due presentment for registration of transfer of
this Warrant Certificate, or the Warrant Shares, the Company may deem and treat
the registered Holder as the absolute owner thereof.
3.3 Neither this Warrant Certificate, nor the Warrants
represented hereby, may be sold, assigned or otherwise transferred voluntarily
by the Holder, other than to a Permitted Transferee (a "Permitted Transfer"),
without the consent of the Company. As used herein, the following terms shall
have the following definitions. "Affiliate" shall mean a Person that directly,
or indirectly through one or more intermediaries, controls or is controlled by,
or is under common control with, another Person. "Permitted Transferee" means
(i) the Holder and its Affiliates, (ii) any direct or indirect equity holder of
any Person referred to in clause (i) and any Affiliate of one or more of such
equity holders, and (iii) in the case of any of the foregoing Persons in clause
(ii) who is an individual, Permitted Transferee shall include such individual's
immediate family, trusts solely or primarily for the benefit of such person or
such person's immediate family member, and corporations, partnerships, limited
liability companies or other entities in which such individual or such
individual's family members and/or trusts are the majority equity holders as the
case may be. For this purpose, "immediate family" of a person means the person's
spouse, parents, children, adopted children, stepchildren and grandchildren.
"Person" shall mean and include an individual, a corporation, a partnership, a
trust, an unincorporated organization, a limited liability company, a joint
stock corporation, a joint venture, a government or any department, agency or
political subdivision thereof and any other entity. The Company shall register
upon its books any Permitted Transfer of a Warrant Certificate, upon surrender
of same to the Company with a written instrument of transfer duly executed by
the registered Holder or by a duly authorized attorney. Upon any such
registration of Permitted Transfer, new Warrant Certificate(s) shall be issued
to the transferee(s) and the surrendered Warrant Certificate shall be canceled
by the Company. A Warrant Certificate may also be exchanged, at the option of
the Holder, for new Warrant Certificates of different denominations representing
in the aggregate the number of Warrants evidenced by the Warrant Certificate
surrendered.
2
<PAGE> 82
3.4 No sale, transfer, assignment, hypothecation or other
disposition of the Warrant Shares shall be made unless any such transfer,
assignment or other disposition will comply with the rules and statutes
administered by the Securities and Exchange Commission (the "Commission") and
(i) a registration statement under the Securities Act of 1933, as amended (the
"Act"), including such shares is currently in effect, or (ii) in the opinion of
counsel satisfactory to the Company a current registration statement is not
required for such disposition of the shares.
4. Reservation of Shares
The Company covenants that it will at all times reserve and
keep available out of its authorized capital stock, solely for the purpose of
issue upon exercise of the Warrants, such number of shares of capital stock as
shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that all shares of capital stock which shall be issuable upon
exercise of the Warrants shall be duly and validly issued and fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof, and that upon issuance such shares shall be listed on each
national securities exchange or automated over-the-counter trading system, if
any, on which the other shares of such outstanding capital stock of the Company
are then listed.
5. Loss or Mutilation
Upon receipt by the Company of reasonable evidence of the
ownership of and the loss, theft, destruction or mutilation of any Warrant
Certificate and, in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company, or, in the case of mutilation, upon
surrender and cancellation of the mutilated Warrant Certificate, the Company
shall execute and deliver in lieu thereof a new Warrant Certificate representing
an equal number of Warrants.
6. Adjustment of Purchase Price and Number of Shares
Deliverable
6.1 The number of Warrant Shares purchasable upon the exercise
of each Warrant and the Purchase Price with respect to the Warrant Shares shall
be subject to adjustment as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its Common Stock payable in shares of its capital stock, (ii)
subdivide its outstanding shares of Common Stock through stock split or
otherwise, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, or (iv) issue by reclassification of its
Common Stock (including any reclassification in connection with a consolidation
or merger in which the Company is the continuing corporation) other securities
of the Company, the number and/or nature of Warrant Shares purchasable upon
exercise of each Warrant immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive the kind and number of Warrant Shares or
other securities of the Company which he would have owned or have been entitled
to receive after the happening of any of the events described above, had such
Warrant
3
<PAGE> 83
been exercised immediately prior to the happening of such event or any record
date with respect thereto. Any adjustment made pursuant to this paragraph (a)
shall become effective retroactively as of the record date of such event.
(b) In the event of any capital reorganization or any
reclassification of the capital stock of the Company or in case of the
consolidation or merger of the Company with another corporation (other than a
consolidation or merger in which the outstanding shares of the Company's Common
Stock are not converted into or exchanged for other rights or interests), or in
the case of any sale, transfer or other disposition to another corporation of
all or substantially all the properties and assets of the Company (any such
event, a "Triggering Event"), the Holder of each Warrant shall thereafter be
entitled to purchase (and it shall be a condition to the consummation of any
such reorganization, reclassification, consolidation, merger, sale, transfer or
other disposition that appropriate provisions shall be made so that such Holder
shall thereafter be entitled to purchase) the kind and amount of shares of stock
and other securities and property (including cash) which the Holder would have
been entitled to receive had such Warrants been exercised immediately prior to
the effective date of such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition; and in any such case appropriate
adjustments shall be made in the application of the provisions of this Article 6
with respect to rights and interest thereafter of the Holder of the Warrants to
the end that the provisions of this Article 6 shall thereafter be applicable, as
near as reasonably may be, in relation to any shares or other property
thereafter purchasable upon the exercise of the Warrants. The provisions of this
Section 6.1(b) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales, transfers or other
dispositions.
(c) Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant is adjusted, as provided in this Section 6.1, the
Purchase Price with respect to the Warrant Shares shall be adjusted by
multiplying such Purchase Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of Warrant Shares
purchasable upon the exercise of each Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of Warrant Shares
so purchasable immediately thereafter.
6.2 No adjustment in the number of Warrant Shares purchasable
under the Warrants, or in the Purchase Price with respect to the Warrant Shares,
shall be required unless such adjustment would require an increase or decrease
of at least 1% in the number of Warrant Shares issuable upon the exercise of
such Warrant, or in the Purchase Price thereof; provided, however, that any
adjustments which by reason of this Section 6.2 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All final results of adjustments to the number of Warrant Shares and the
Purchase Price thereof shall be rounded to the nearest one thousandth of a share
or the nearest cent, as the case may be. Anything in this Section 6 to the
contrary notwithstanding, the Company shall be entitled, but shall not be
required, to make such changes in the number of Warrant Shares purchasable upon
the exercise of each Warrant, or in the Purchase Price thereof, in addition to
those required by such Section, as it in its discretion shall determine to be
advisable in order that any dividend or distribution in shares of Common Stock,
subdivision, reclassification or combination of shares of Common
4
<PAGE> 84
Stock, issuance of rights, warrants or options to purchase Common Stock, or
distribution of shares of stock other than Common Stock, evidences of
indebtedness or assets (other than distributions of cash out of retained
earnings) or convertible or exchangeable securities hereafter made by the
Company to the holders of its Common Stock shall not result in any tax to the
holders of its Common Stock or securities convertible into Common Stock.
6.3 Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant or the Purchase Price of such Warrant Shares is
adjusted, as herein provided, the Company shall mail to the Holder, at the
address of the Holder shown on the books of the Company, a notice of such
adjustment or adjustments, prepared and signed by the Chairman of the Board,
Chief Financial Officer or Secretary of the Company, which sets forth the number
of Warrant Shares purchasable upon the exercise of each Warrant and the Purchase
Price of such Warrant Shares after such adjustment, a brief statement of the
facts requiring such adjustment and the computation by which such adjustment was
made.
6.4 The Company shall give notice to the Holder by registered
mail, if at any time prior to the expiration or exercise in full of the
Warrants, any of the following events shall occur:
(a) The Company shall authorize the payment of any dividend
payable in any securities upon shares of Common Stock or authorize the making of
any distribution to the holders of shares of Common Stock;
(b) The Company shall authorize the issuance to all holders of
Common Stock of any additional shares of Common Stock or of rights, options or
warrants to subscribe for or purchase Common Stock or any of any other
subscription rights, options or warrants;
(c) A dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, or sale or conveyance of
the property of the Company as an entirety or substantially as an entirety); or
(d) A capital reorganization or reclassification of the Common
Stock (other than a subdivision or combination of the outstanding Common Stock
and other than a change in the par value of the Common Stock) or any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and that does not result in any reclassification or change of Common
Stock outstanding) or any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially an entirety.
Such giving of notice shall be initiated at least 10 business days prior to the
date fixed as a record date or effective date or the date of closing of the
Company's stock transfer books for the determination of the shareholders
entitled to such dividend, distribution, or subscription rights, or for the
determination of the shareholders entitled to vote on such proposed merger,
consolidation, sale, conveyance, dissolution, liquidation or winding up. Such
notice shall specify such record date or the date of the closing of the stock
transfer books, as the case may be. Failure to provide
5
<PAGE> 85
such notice shall not affect the validity of any action taken in connection with
such dividend, distribution or subscription rights, or proposed merger,
consolidation, sale, conveyance, dissolution, liquidation or winding up.
7. Conversion Rights
7.1 In lieu of exercise of any portion of the Warrants as
provided in Section 2.1 hereof, the Warrants represented by this Warrant
Certificate (or any portion thereof) may, at the election of the Holder, be
converted into the nearest whole number of shares of Common Stock equal to: (1)
the product of (a) the number of shares of Common Stock then issuable upon the
exercise of the Warrants to be so converted and (b) the excess, if any, of (i)
the Market Price Per Share (as determined pursuant to Section 9.2) with respect
to the date of conversion over (ii) the Purchase Price in effect on the business
day next preceding the date of conversion, divided by (2) the Market Price Per
Share with respect to the date of conversion. For example, if the Market Price
per Share on the date of conversion is $4.00 and the Purchase Price is $2.00,
then the Holder would be entitled to receive 15,000 shares of Common Stock upon
conversion of 30,000 Warrants.
7.2 The conversion rights provided under this Section 7 may be
exercised in whole or in part and at any time and from time to time while any
Warrants remain outstanding. In order to exercise the conversion privilege, the
Holder shall surrender to the Company, at its offices, this Warrant Certificate
accompanied by a duly completed Notice of Conversion in the form attached hereto
as Exhibit B. The Warrants (or so much thereof as shall have been surrendered
for conversion) shall be deemed to have been converted immediately prior to the
close of business on the day of surrender of such Warrant Certificate for
conversion in accordance with the foregoing provisions. As promptly as
practicable on or after the conversion date, the Company shall issue and shall
deliver to the Holder (i) a certificate or certificates representing the number
of shares of Common Stock to which the Holder shall be entitled as a result of
the conversion, and (ii) if the Warrant Certificate is being converted in part
only, a new certificate of like tenor and date for the balance of the
unconverted portion of the Warrant Certificate.
8. Voluntary Adjustment by the Company
The Company may, at its option, at any time during the term of
the Warrants, reduce the then current Purchase Price to any amount deemed
appropriate by the Board and/or extend the date of the expiration of the
Warrants.
9. Fractional Shares and Warrants; Determination of
Market Price Per Share
9.1 Anything contained herein to the contrary notwithstanding,
the Company shall not be required to issue any fraction of a share of Common
Stock in connection with the exercise of Warrants. Warrants may not be exercised
in such number as would result (except for the provisions of this paragraph) in
the issuance of a fraction of a share of Common Stock unless
6
<PAGE> 86
the Holder is exercising all Warrants then owned by the Holder. In such event,
the Company shall, upon the exercise of all of such Warrants, issue to the
Holder the largest aggregate whole number of shares of Common Stock called for
thereby upon receipt of the Purchase Price for all of such Warrants and pay a
sum in cash equal to the remaining fraction of a share of Common Stock,
multiplied by its Market Price Per Share (as determined pursuant to Section 9.2
below) as of the last business day preceding the date on which the Warrants are
presented for exercise.
9.2 As used herein, the "Market Price Per Share" with respect
to any class or series of Common Stock on any date shall mean the average
closing price per share of Company's Common Stock for the 20 trading days
immediately preceding such date. The closing price for each such day shall be
the last sale price regular way or, in case no such sale takes place on such
day, the average of the closing bid and asked prices regular way, in either case
on the principal securities exchange on which the shares of such Common Stock of
the Company are listed or admitted to trading or, if applicable, the last sale
price, or in case no sale takes place on such day, the average of the closing
bid and asked prices of such Common Stock on NASDAQ or any comparable system, or
if such Common Stock is not reported on NASDAQ, or a comparable system, the
average of the closing bid and asked prices as furnished by two members of the
National Association of Securities Dealers, Inc. selected from time to time by
the Company for that purpose. If such bid and asked prices are not available,
then "Market Price Per Share" shall be equal to the fair market value of such
Common Stock as determined in good faith by the Board.
10. Governing Law
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
7
<PAGE> 87
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed by its officers thereunto duly authorized and
its corporate seal to be affixed hereon, as of this ____ day of _________,
200__.
PRINCETON VIDEO IMAGE, INC.
By:
_______________________
Name: Brown F Williams
Title: Chairman
[SEAL]
Attest:
By:
_____________________
Name:
Title:
<PAGE> 88
EXHIBIT A
NOTICE OF EXERCISE
The undersigned hereby irrevocably elects to exercise,
pursuant to Section 2 of the Warrant Certificate accompanying this Notice of
Exercise, _______ Warrants of the total number of Warrants owned by the
undersigned pursuant to the accompanying Warrant Certificate, and herewith makes
payment of the Purchase Price of such shares in full.
Name of Holder ________________________
Signature ________________________
Address: ________________________
________________________
________________________
<PAGE> 89
EXHIBIT B
NOTICE OF CONVERSION
The undersigned hereby irrevocably elects to convert, pursuant to Section 7 of
the Warrant Certificate accompanying this Notice of Conversion, _______ Warrants
of the total number of Warrants owned by the undersigned pursuant to the
accompanying Warrant Certificate into shares of the Common Stock of the Company
(the "Shares").
The number of Shares to be received by the undersigned shall be calculated in
accordance with the provisions of Section 7.1 of the accompanying Warrant
Certificate.
Name of Holder: ________________________
Signature: ________________________
Address: ________________________
________________________
________________________
<PAGE> 90
[FORM TO BE USED FOR GROUP I]
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR THE LAWS OF ANY STATE. THEY MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED UNLESS THEY ARE REGISTERED UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
_______ Warrants
PRINCETON VIDEO IMAGE, INC.
WARRANT CERTIFICATE
This warrant certificate ("Warrant Certificate") certifies
that for value received in consideration for certain services rendered, and for
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, _________________________ or registered permitted assigns (the
"Holder") is the owner of the number of warrants ("Warrants") specified above,
each of which entitles the Holder thereof to purchase, at any time on or before
the Expiration Date (as hereinafter defined), one fully paid and non-assessable
share of Common Stock, no par value ("Common Stock"), of Princeton Video Image,
Inc., a New Jersey corporation (the "Company"), at a purchase price of $_______
per share of Common Stock in lawful money of the United States of America in
cash or by certified or cashier's check or a combination of cash and certified
or cashier's check (subject to adjustment as hereinafter provided).
1. Warrant; Purchase Price
Each Warrant shall entitle the Holder initially to purchase
one share of Common Stock of the Company and the purchase price payable upon
exercise of the Warrants (the "Purchase Price") shall initially be $_______ per
share of Common Stock. The Purchase Price and number of shares of Common Stock
issuable upon exercise of each Warrant are subject to adjustment as provided in
Article 6. The shares of Common Stock issuable upon exercise of the Warrants
(and/or other shares of common stock so issuable by reason of any adjustments
pursuant to Article 6) are sometimes referred to herein as the "Warrant Shares."
2. Exercise; Expiration Date
2.1 One-_________ (1/__) of the Warrants shall vest and become
exercisable on the first day of each month after the issuance hereof until all
of the Warrants are exercisable and upon such vesting shall be exercisable, at
the option of the Holder, in whole or in part at any
1
<PAGE> 91
time and from time to time on or before the Expiration Date, upon surrender of
this Warrant Certificate to the Company together with a duly completed Notice of
Exercise, in the form attached hereto as Exhibit A, and payment of an amount
equal to the Purchase Price times the number of Warrants to be exercised.
Notwithstanding anything to the contrary contained herein or in the Transaction
Documents (as such term is defined under the Reorganization Agreement referred
to herein), if the Purchaser (as such term is defined under the Reorganization
Agreement referred to herein) shall fail to comply with its obligations under
Section 7.1 of the Reorganization Agreement dated as of December ___, 2000 among
Presencia en Medios, S.A., Eduardo Sitt, David Sitt, Roberto Sonabend, Presence
in Media LLC, Virtual Advertisement LLC, PVI LA, LLC, the Company and Princeton
Video Image Latin America, LLC, and such failure is not cured within ten (10)
days after notice of such failure from the Holder or any member of the Seller
Group (as defined in the Reorganization Agreement referred to herein), then at
the end of such ten (10) day period, the Warrants shall automatically vest and
become exercisable. In the case of exercise of less than all the Warrants
represented by this Warrant Certificate, the Company shall cancel the Warrant
Certificate upon the surrender thereof and shall execute and deliver a new
Warrant Certificate for the balance of such Warrants.
2.2 The term "Expiration Date" shall mean 5:00 p.m. New
York time on _______________.
3. Registration and Transfer on Company Books
3.1 The Company shall maintain books for the registration
and transfer of the Warrants and the registration and transfer of the Warrant
Shares.
3.2 Prior to due presentment for registration of transfer
of this Warrant Certificate, or the Warrant Shares, the Company may deem and
treat the registered Holder as the absolute owner thereof.
3.3 Neither this Warrant Certificate, nor the Warrants
represented hereby, may be sold, assigned or otherwise transferred voluntarily
by the Holder, other than to a Permitted Transferee (a "Permitted Transfer"),
without the consent of the Company. As used herein, the following terms shall
have the following definitions. "Affiliate" shall mean a Person that directly,
or indirectly through one or more intermediaries, controls or is controlled by,
or is under common control with, another Person. "Permitted Transferee" means
(i) the Holder and its Affiliates, (ii) any direct or indirect equity holder of
any Person referred to in clause (i) and any Affiliate of one or more of such
equity holders, and (iii) in the case of any of the foregoing Persons in clause
(ii) who is an individual, Permitted Transferee shall include such individual's
immediate family, trusts solely or primarily for the benefit of such person or
such person's immediate family member, and corporations, partnerships, limited
liability companies or other entities in which such individual or such
individual's family members and/or trusts are the majority equity holders as the
case may be. For this purpose, "immediate family" of a person means the person's
spouse, parents, children, adopted children, stepchildren and grandchildren.
"Person" shall mean and include an individual, a corporation, a partnership, a
2
<PAGE> 92
trust, an unincorporated organization, a limited liability company, a joint
stock corporation, a joint venture, a government or any department, agency or
political subdivision thereof and any other entity. The Company shall register
upon its books any Permitted Transfer of a Warrant Certificate, upon surrender
of same to the Company with a written instrument of transfer duly executed by
the registered Holder or by a duly authorized attorney. Upon any such
registration of Permitted Transfer, new Warrant Certificate(s) shall be issued
to the transferee(s) and the surrendered Warrant Certificate shall be canceled
by the Company. A Warrant Certificate may also be exchanged, at the option of
the Holder, for new Warrant Certificates of different denominations representing
in the aggregate the number of Warrants evidenced by the Warrant Certificate
surrendered.
3.4 No sale, transfer, assignment, hypothecation or other
disposition of the Warrant Shares shall be made unless any such transfer,
assignment or other disposition will comply with the rules and statutes
administered by the Securities and Exchange Commission (the "Commission") and
(i) a registration statement under the Securities Act of 1933, as amended (the
"Act"), including such shares is currently in effect, or (ii) in the opinion of
counsel satisfactory to the Company a current registration statement is not
required for such disposition of the shares.
4. Reservation of Shares
The Company covenants that it will at all times reserve and
keep available out of its authorized capital stock, solely for the purpose of
issue upon exercise of the Warrants, such number of shares of capital stock as
shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that all shares of capital stock which shall be issuable upon
exercise of the Warrants shall be duly and validly issued and fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof, and that upon issuance such shares shall be listed on each
national securities exchange or automated over-the-counter trading system, if
any, on which the other shares of such outstanding capital stock of the Company
are then listed.
5. Loss or Mutilation
Upon receipt by the Company of reasonable evidence of the
ownership of and the loss, theft, destruction or mutilation of any Warrant
Certificate and, in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company, or, in the case of mutilation, upon
surrender and cancellation of the mutilated Warrant Certificate, the Company
shall execute and deliver in lieu thereof a new Warrant Certificate representing
an equal number of Warrants.
6. Adjustment of Purchase Price and Number of
Shares Deliverable
3
<PAGE> 93
6.1 The number of Warrant Shares purchasable upon the exercise
of each Warrant and the Purchase Price with respect to the Warrant Shares shall
be subject to adjustment as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its Common Stock payable in shares of its capital stock, (ii)
subdivide its outstanding shares of Common Stock through stock split or
otherwise, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, or (iv) issue by reclassification of its
Common Stock (including any reclassification in connection with a consolidation
or merger in which the Company is the continuing corporation) other securities
of the Company, the number and/or nature of Warrant Shares purchasable upon
exercise of each Warrant immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive the kind and number of Warrant Shares or
other securities of the Company which he would have owned or have been entitled
to receive after the happening of any of the events described above, had such
Warrant been exercised immediately prior to the happening of such event or any
record date with respect thereto. Any adjustment made pursuant to this paragraph
(a) shall become effective retroactively as of the record date of such event.
(b) In the event of any capital reorganization or any
reclassification of the capital stock of the Company or in case of the
consolidation or merger of the Company with another corporation (other than a
consolidation or merger in which the outstanding shares of the Company's Common
Stock are not converted into or exchanged for other rights or interests), or in
the case of any sale, transfer or other disposition to another corporation of
all or substantially all the properties and assets of the Company (any such
event, a "Triggering Event"), the Holder of each Warrant shall thereafter be
entitled to purchase (and it shall be a condition to the consummation of any
such reorganization, reclassification, consolidation, merger, sale, transfer or
other disposition that appropriate provisions shall be made so that such Holder
shall thereafter be entitled to purchase) the kind and amount of shares of stock
and other securities and property (including cash) which the Holder would have
been entitled to receive had such Warrants been exercised immediately prior to
the effective date of such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition; and in any such case appropriate
adjustments shall be made in the application of the provisions of this Article 6
with respect to rights and interest thereafter of the Holder of the Warrants to
the end that the provisions of this Article 6 shall thereafter be applicable, as
near as reasonably may be, in relation to any shares or other property
thereafter purchasable upon the exercise of the Warrants. The provisions of this
Section 6.1(b) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales, transfers or other
dispositions.
(c) Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant is adjusted, as provided in this Section 6.1, the
Purchase Price with respect to the Warrant Shares shall be adjusted by
multiplying such Purchase Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of Warrant Shares
purchasable upon the exercise of each Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of Warrant Shares
so purchasable immediately thereafter.
4
<PAGE> 94
6.2 No adjustment in the number of Warrant Shares purchasable
under the Warrants, or in the Purchase Price with respect to the Warrant Shares,
shall be required unless such adjustment would require an increase or decrease
of at least 1% in the number of Warrant Shares issuable upon the exercise of
such Warrant, or in the Purchase Price thereof; provided, however, that any
adjustments which by reason of this Section 6.2 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All final results of adjustments to the number of Warrant Shares and the
Purchase Price thereof shall be rounded to the nearest one thousandth of a share
or the nearest cent, as the case may be. Anything in this Section 6 to the
contrary notwithstanding, the Company shall be entitled, but shall not be
required, to make such changes in the number of Warrant Shares purchasable upon
the exercise of each Warrant, or in the Purchase Price thereof, in addition to
those required by such Section, as it in its discretion shall determine to be
advisable in order that any dividend or distribution in shares of Common Stock,
subdivision, reclassification or combination of shares of Common Stock, issuance
of rights, warrants or options to purchase Common Stock, or distribution of
shares of stock other than Common Stock, evidences of indebtedness or assets
(other than distributions of cash out of retained earnings) or convertible or
exchangeable securities hereafter made by the Company to the holders of its
Common Stock shall not result in any tax to the holders of its Common Stock or
securities convertible into Common Stock.
6.3 Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant or the Purchase Price of such Warrant Shares is
adjusted, as herein provided, the Company shall mail to the Holder, at the
address of the Holder shown on the books of the Company, a notice of such
adjustment or adjustments, prepared and signed by the Chairman of the Board,
Chief Financial Officer or Secretary of the Company, which sets forth the number
of Warrant Shares purchasable upon the exercise of each Warrant and the Purchase
Price of such Warrant Shares after such adjustment, a brief statement of the
facts requiring such adjustment and the computation by which such adjustment was
made.
6.4 The Company shall give notice to the Holder by registered
mail, if at any time prior to the expiration or exercise in full of the
Warrants, any of the following events shall occur:
(a) The Company shall authorize the payment of any dividend
payable in any securities upon shares of Common Stock or authorize the making of
any distribution to the holders of shares of Common Stock;
(b) The Company shall authorize the issuance to all holders of
Common Stock of any additional shares of Common Stock or of rights, options or
warrants to subscribe for or purchase Common Stock or any of any other
subscription rights, options or warrants;
(c) A dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, or sale or conveyance of
the property of the Company as an entirety or substantially as an entirety); or
5
<PAGE> 95
(d) A capital reorganization or reclassification of the Common
Stock (other than a subdivision or combination of the outstanding Common Stock
and other than a change in the par value of the Common Stock) or any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and that does not result in any reclassification or change of Common
Stock outstanding) or any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially an entirety.
Such giving of notice shall be initiated at least 10 business days prior to the
date fixed as a record date or effective date or the date of closing of the
Company's stock transfer books for the determination of the shareholders
entitled to such dividend, distribution, or subscription rights, or for the
determination of the shareholders entitled to vote on such proposed merger,
consolidation, sale, conveyance, dissolution, liquidation or winding up. Such
notice shall specify such record date or the date of the closing of the stock
transfer books, as the case may be. Failure to provide such notice shall not
affect the validity of any action taken in connection with such dividend,
distribution or subscription rights, or proposed merger, consolidation, sale,
conveyance, dissolution, liquidation or winding up.
7. Conversion Rights
7.1 In lieu of exercise of any portion of the Warrants as
provided in Section 2.1 hereof, the Warrants represented by this Warrant
Certificate (or any portion thereof) may, at the election of the Holder, be
converted into the nearest whole number of shares of Common Stock equal to: (1)
the product of (a) the number of shares of Common Stock then issuable upon the
exercise of the Warrants to be so converted and (b) the excess, if any, of (i)
the Market Price Per Share (as determined pursuant to Section 9.2) with respect
to the date of conversion over (ii) the Purchase Price in effect on the business
day next preceding the date of conversion, divided by (2) the Market Price Per
Share with respect to the date of conversion. For example, if the Market Price
per Share on the date of conversion is $4.00 and the Purchase Price is $2.00,
then the Holder would be entitled to receive 15,000 shares of Common Stock upon
conversion of 30,000 Warrants.
7.2 The conversion rights provided under this Section 7 may be
exercised in whole or in part and at any time and from time to time while any
Warrants remain outstanding. In order to exercise the conversion privilege, the
Holder shall surrender to the Company, at its offices, this Warrant Certificate
accompanied by a duly completed Notice of Conversion in the form attached hereto
as Exhibit B. The Warrants (or so much thereof as shall have been surrendered
for conversion) shall be deemed to have been converted immediately prior to the
close of business on the day of surrender of such Warrant Certificate for
conversion in accordance with the foregoing provisions. As promptly as
practicable on or after the conversion date, the Company shall issue and shall
deliver to the Holder (i) a certificate or certificates representing the number
of shares of Common Stock to which the Holder shall be entitled as a result of
the conversion, and (ii) if the Warrant Certificate is being converted in part
only, a new certificate of like tenor and date for the balance of the
unconverted portion of the Warrant Certificate.
6
<PAGE> 96
8. Voluntary Adjustment by the Company
The Company may, at its option, at any time during the term of
the Warrants, reduce the then current Purchase Price to any amount deemed
appropriate by the Board and/or extend the date of the expiration of the
Warrants.
9. Fractional Shares and Warrants; Determination of
Market Price Per Share
9.1 Anything contained herein to the contrary notwithstanding,
the Company shall not be required to issue any fraction of a share of Common
Stock in connection with the exercise of Warrants. Warrants may not be exercised
in such number as would result (except for the provisions of this paragraph) in
the issuance of a fraction of a share of Common Stock unless the Holder is
exercising all Warrants then owned by the Holder. In such event, the Company
shall, upon the exercise of all of such Warrants, issue to the Holder the
largest aggregate whole number of shares of Common Stock called for thereby upon
receipt of the Purchase Price for all of such Warrants and pay a sum in cash
equal to the remaining fraction of a share of Common Stock, multiplied by its
Market Price Per Share (as determined pursuant to Section 9.2 below) as of the
last business day preceding the date on which the Warrants are presented for
exercise.
9.2 As used herein, the "Market Price Per Share" with respect
to any class or series of Common Stock on any date shall mean the average
closing price per share of Company's Common Stock for the 20 trading days
immediately preceding such date. The closing price for each such day shall be
the last sale price regular way or, in case no such sale takes place on such
day, the average of the closing bid and asked prices regular way, in either case
on the principal securities exchange on which the shares of such Common Stock of
the Company are listed or admitted to trading or, if applicable, the last sale
price, or in case no sale takes place on such day, the average of the closing
bid and asked prices of such Common Stock on NASDAQ or any comparable system, or
if such Common Stock is not reported on NASDAQ, or a comparable system, the
average of the closing bid and asked prices as furnished by two members of the
National Association of Securities Dealers, Inc. selected from time to time by
the Company for that purpose. If such bid and asked prices are not available,
then "Market Price Per Share" shall be equal to the fair market value of such
Common Stock as determined in good faith by the Board.
10. Governing Law
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
7
<PAGE> 97
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed by its officers thereunto duly authorized and
its corporate seal to be affixed hereon, as of this ____ day of _________,
200__.
PRINCETON VIDEO IMAGE, INC.
By:
______________________________________
Name: Brown F Williams
Title: Chairman
[SEAL]
Attest:
By:
________________________________________
Name:
Title:
8
<PAGE> 98
EXHIBIT A
NOTICE OF EXERCISE
The undersigned hereby irrevocably elects to exercise,
pursuant to Section 2 of the Warrant Certificate accompanying this Notice of
Exercise, _______ Warrants of the total number of Warrants owned by the
undersigned pursuant to the accompanying Warrant Certificate, and herewith makes
payment of the Purchase Price of such shares in full.
Name of Holder ___________________________
Signature ___________________________
Address: ___________________________
___________________________
___________________________
<PAGE> 99
EXHIBIT B
NOTICE OF CONVERSION
The undersigned hereby irrevocably elects to convert, pursuant to Section 7 of
the Warrant Certificate accompanying this Notice of Conversion, _______ Warrants
of the total number of Warrants owned by the undersigned pursuant to the
accompanying Warrant Certificate into shares of the Common Stock of the Company
(the "Shares").
The number of Shares to be received by the undersigned shall be calculated in
accordance with the provisions of Section 7.1 of the accompanying Warrant
Certificate.
Name of Holder ___________________________
Signature ___________________________
Address:
___________________________
___________________________
___________________________
<PAGE> 100
[FORM OF WARRANT FOR GROUP J]
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR THE LAWS OF ANY STATE. THEY MAY NOT BE SOLD OR
OTHERWISE TRANS- FERRED UNLESS THEY ARE REGISTERED UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
_______ Warrants
PRINCETON VIDEO IMAGE, INC.
WARRANT CERTIFICATE
This warrant certificate ("Warrant Certificate") certifies
that for value received in consideration for certain services rendered, and for
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, _________________________ or registered permitted assigns (the
"Holder") is the owner of the number of warrants ("Warrants") specified above,
each of which entitles the Holder thereof to purchase, at any time on or before
the Expiration Date (as hereinafter defined), one fully paid and non-assessable
share of Common Stock, no par value ("Common Stock"), of Princeton Video Image,
Inc., a New Jersey corporation (the "Company"), at a purchase price of $_______
per share of Common Stock in lawful money of the United States of America in
cash or by certified or cashier's check or a combination of cash and certified
or cashier's check (subject to adjustment as hereinafter provided).
1. Warrant; Purchase Price
Each Warrant shall entitle the Holder initially to purchase
one share of Common Stock of the Company and the purchase price payable upon
exercise of the Warrants (the "Purchase Price") shall initially be $_______ per
share of Common Stock. The Purchase Price and number of shares of Common Stock
issuable upon exercise of each Warrant are subject to adjustment as provided in
Article 6. The shares of Common Stock issuable upon exercise of the Warrants
(and/or other shares of common stock so issuable by reason of any adjustments
pursuant to Article 6) are sometimes referred to herein as the "Warrant Shares."
2. Exercise; Expiration Date
2.1 The Warrants are exercisable, at the option of the Holder,
in whole or in part at any time and from time to time on or after the date
hereof and on or before the Expiration Date, upon surrender of this Warrant
Certificate to the Company together with a duly completed
1
<PAGE> 101
Notice of Exercise, in the form attached hereto as Exhibit A, and payment of an
amount equal to the Purchase Price times the number of Warrants to be exercised.
In the case of exercise of less than all the Warrants represented by this
Warrant Certificate, the Company shall cancel the Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate for
the balance of such Warrants.
2.2 The term "Expiration Date" shall mean 5:00 p.m. New York
time on _______________.
3. Registration and Transfer on Company Books
3.1 The Company shall maintain books for the registration and
transfer of the Warrants and the registration and transfer of the Warrant
Shares.
3.2 Prior to due presentment for registration of transfer of
this Warrant Certificate, or the Warrant Shares, the Company may deem and treat
the registered Holder as the absolute owner thereof.
3.3 Neither this Warrant Certificate, nor the Warrants
represented hereby, may be sold, assigned or otherwise transferred voluntarily
by the Holder, other than to a Permitted Transferee (a "Permitted Transfer"),
without the consent of the Company. As used herein, the following terms shall
have the following definitions. "Affiliate" shall mean a Person that directly,
or indirectly through one or more intermediaries, controls or is controlled by,
or is under common control with, another Person. "Permitted Transferee" means
(i) the Holder and its Affiliates, (ii) any direct or indirect equity holder of
any Person referred to in clause (i) and any Affiliate of one or more of such
equity holders, and (iii) in the case of any of the foregoing Persons in clause
(ii) who is an individual, Permitted Transferee shall include such individual's
immediate family, trusts solely or primarily for the benefit of such person or
such person's immediate family member, and corporations, partnerships, limited
liability companies or other entities in which such individual or such
individual's family members and/or trusts are the majority equity holders as the
case may be. For this purpose, "immediate family" of a person means the person's
spouse, parents, children, adopted children, stepchildren and grandchildren.
"Person" shall mean and include an individual, a corporation, a partnership, a
trust, an unincorporated organization, a limited liability company, a joint
stock corporation, a joint venture, a government or any department, agency or
political subdivision thereof and any other entity. The Company shall register
upon its books any Permitted Transfer of a Warrant Certificate, upon surrender
of same to the Company with a written instrument of transfer duly executed by
the registered Holder or by a duly authorized attorney. Upon any such
registration of Permitted Transfer, new Warrant Certificate(s) shall be issued
to the transferee(s) and the surrendered Warrant Certificate shall be canceled
by the Company. A Warrant Certificate may also be exchanged, at the option of
the Holder, for new Warrant Certificates of different denominations representing
in the aggregate the number of Warrants evidenced by the Warrant Certificate
surrendered.
2
<PAGE> 102
3.4 No sale, transfer, assignment, hypothecation or other
disposition of the Warrant Shares shall be made unless any such transfer,
assignment or other disposition will comply with the rules and statutes
administered by the Securities and Exchange Commission (the "Commission") and
(i) a registration statement under the Securities Act of 1933, as amended (the
"Act"), including such shares is currently in effect, or (ii) in the opinion of
counsel satisfactory to the Company a current registration statement is not
required for such disposition of the shares.
4. Reservation of Shares
The Company covenants that it will at all times reserve and
keep available out of its authorized capital stock, solely for the purpose of
issue upon exercise of the Warrants, such number of shares of capital stock as
shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that all shares of capital stock which shall be issuable upon
exercise of the Warrants shall be duly and validly issued and fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof, and that upon issuance such shares shall be listed on each
national securities exchange or automated over-the-counter trading system, if
any, on which the other shares of such outstanding capital stock of the Company
are then listed.
5. Loss or Mutilation
Upon receipt by the Company of reasonable evidence of the
ownership of and the loss, theft, destruction or mutilation of any Warrant
Certificate and, in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company, or, in the case of mutilation, upon
surrender and cancellation of the mutilated Warrant Certificate, the Company
shall execute and deliver in lieu thereof a new Warrant Certificate representing
an equal number of Warrants.
6. Adjustment of Purchase Price and Number of Shares
Deliverable
6.1 The number of Warrant Shares purchasable upon the exercise
of each Warrant and the Purchase Price with respect to the Warrant Shares shall
be subject to adjustment as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its Common Stock payable in shares of its capital stock, (ii)
subdivide its outstanding shares of Common Stock through stock split or
otherwise, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, or (iv) issue by reclassification of its
Common Stock (including any reclassification in connection with a consolidation
or merger in which the Company is the continuing corporation) other securities
of the Company, the number and/or nature of Warrant Shares purchasable upon
exercise of each Warrant immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive the kind and number of Warrant Shares or
other securities of the Company which he would have owned or have been entitled
to receive after the happening of any of the events described above, had such
Warrant
3
<PAGE> 103
been exercised immediately prior to the happening of such event or any record
date with respect thereto. Any adjustment made pursuant to this paragraph (a)
shall become effective retroactively as of the record date of such event.
(b) In the event of any capital reorganization or any
reclassification of the capital stock of the Company or in case of the
consolidation or merger of the Company with another corporation (other than a
consolidation or merger in which the outstanding shares of the Company's Common
Stock are not converted into or exchanged for other rights or interests), or in
the case of any sale, transfer or other disposition to another corporation of
all or substantially all the properties and assets of the Company (any such
event, a "Triggering Event"), the Holder of each Warrant shall thereafter be
entitled to purchase (and it shall be a condition to the consummation of any
such reorganization, reclassification, consolidation, merger, sale, transfer or
other disposition that appropriate provisions shall be made so that such Holder
shall thereafter be entitled to purchase) the kind and amount of shares of stock
and other securities and property (including cash) which the Holder would have
been entitled to receive had such Warrants been exercised immediately prior to
the effective date of such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition; and in any such case appropriate
adjustments shall be made in the application of the provisions of this Article 6
with respect to rights and interest thereafter of the Holder of the Warrants to
the end that the provisions of this Article 6 shall thereafter be applicable, as
near as reasonably may be, in relation to any shares or other property
thereafter purchasable upon the exercise of the Warrants. The provisions of this
Section 6.1(b) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales, transfers or other
dispositions.
(c) Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant is adjusted, as provided in this Section 6.1, the
Purchase Price with respect to the Warrant Shares shall be adjusted by
multiplying such Purchase Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of Warrant Shares
purchasable upon the exercise of each Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of Warrant Shares
so purchasable immediately thereafter.
6.2 No adjustment in the number of Warrant Shares purchasable
under the Warrants, or in the Purchase Price with respect to the Warrant Shares,
shall be required unless such adjustment would require an increase or decrease
of at least 1% in the number of Warrant Shares issuable upon the exercise of
such Warrant, or in the Purchase Price thereof; provided, however, that any
adjustments which by reason of this Section 6.2 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All final results of adjustments to the number of Warrant Shares and the
Purchase Price thereof shall be rounded to the nearest one thousandth of a share
or the nearest cent, as the case may be. Anything in this Section 6 to the
contrary notwithstanding, the Company shall be entitled, but shall not be
required, to make such changes in the number of Warrant Shares purchasable upon
the exercise of each Warrant, or in the Purchase Price thereof, in addition to
those required by such Section, as it in its discretion shall determine to be
advisable in order that any dividend or distribution in shares of Common Stock,
subdivision, reclassification or combination of shares of Common
4
<PAGE> 104
Stock, issuance of rights, warrants or options to purchase Common Stock, or
distribution of shares of stock other than Common Stock, evidences of
indebtedness or assets (other than distributions of cash out of retained
earnings) or convertible or exchangeable securities hereafter made by the
Company to the holders of its Common Stock shall not result in any tax to the
holders of its Common Stock or securities convertible into Common Stock.
6.3 Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant or the Purchase Price of such Warrant Shares is
adjusted, as herein provided, the Company shall mail to the Holder, at the
address of the Holder shown on the books of the Company, a notice of such
adjustment or adjustments, prepared and signed by the Chairman of the Board,
Chief Financial Officer or Secretary of the Company, which sets forth the number
of Warrant Shares purchasable upon the exercise of each Warrant and the Purchase
Price of such Warrant Shares after such adjustment, a brief statement of the
facts requiring such adjustment and the computation by which such adjustment was
made.
6.4 The Company shall give notice to the Holder by registered
mail, if at any time prior to the expiration or exercise in full of the
Warrants, any of the following events shall occur:
(a) The Company shall authorize the payment of any dividend
payable in any securities upon shares of Common Stock or authorize the making of
any distribution to the holders of shares of Common Stock;
(b) The Company shall authorize the issuance to all holders of
Common Stock of any additional shares of Common Stock or of rights, options or
warrants to subscribe for or purchase Common Stock or any of any other
subscription rights, options or warrants;
(c) A dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, or sale or conveyance of
the property of the Company as an entirety or substantially as an entirety); or
(d) A capital reorganization or reclassification of the Common
Stock (other than a subdivision or combination of the outstanding Common Stock
and other than a change in the par value of the Common Stock) or any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and that does not result in any reclassification or change of Common
Stock outstanding) or any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially an entirety.
Such giving of notice shall be initiated at least 10 business days prior to the
date fixed as a record date or effective date or the date of closing of the
Company's stock transfer books for the determination of the shareholders
entitled to such dividend, distribution, or subscription rights, or for the
determination of the shareholders entitled to vote on such proposed merger,
consolidation, sale, conveyance, dissolution, liquidation or winding up. Such
notice shall specify such record date or the date of the closing of the stock
transfer books, as the case may be. Failure to provide
5
<PAGE> 105
such notice shall not affect the validity of any action taken in connection with
such dividend, distribution or subscription rights, or proposed merger,
consolidation, sale, conveyance, dissolution, liquidation or winding up.
7. Conversion Rights
7.1 In lieu of exercise of any portion of the Warrants as
provided in Section 2.1 hereof, the Warrants represented by this Warrant
Certificate (or any portion thereof) may, at the election of the Holder, be
converted into the nearest whole number of shares of Common Stock equal to: (1)
the product of (a) the number of shares of Common Stock then issuable upon the
exercise of the Warrants to be so converted and (b) the excess, if any, of (i)
the Market Price Per Share (as determined pursuant to Section 9.2) with respect
to the date of conversion over (ii) the Purchase Price in effect on the business
day next preceding the date of conversion, divided by (2) the Market Price Per
Share with respect to the date of conversion. For example, if the Market Price
per Share on the date of conversion is $4.00 and the Purchase Price is $2.00,
then the Holder would be entitled to receive 15,000 shares of Common Stock upon
conversion of 30,000 Warrants.
7.2 The conversion rights provided under this Section 7 may be
exercised in whole or in part and at any time and from time to time while any
Warrants remain outstanding. In order to exercise the conversion privilege, the
Holder shall surrender to the Company, at its offices, this Warrant Certificate
accompanied by a duly completed Notice of Conversion in the form attached hereto
as Exhibit B. The Warrants (or so much thereof as shall have been surrendered
for conversion) shall be deemed to have been converted immediately prior to the
close of business on the day of surrender of such Warrant Certificate for
conversion in accordance with the foregoing provisions. As promptly as
practicable on or after the conversion date, the Company shall issue and shall
deliver to the Holder (i) a certificate or certificates representing the number
of shares of Common Stock to which the Holder shall be entitled as a result of
the conversion, and (ii) if the Warrant Certificate is being converted in part
only, a new certificate of like tenor and date for the balance of the
unconverted portion of the Warrant Certificate.
8. Voluntary Adjustment by the Company
The Company may, at its option, at any time during the term of
the Warrants, reduce the then current Purchase Price to any amount deemed
appropriate by the Board and/or extend the date of the expiration of the
Warrants.
9. Fractional Shares and Warrants; Determination of
Market Price Per Share
9.1 Anything contained herein to the contrary notwithstanding,
the Company shall not be required to issue any fraction of a share of Common
Stock in connection with the exercise of Warrants. Warrants may not be exercised
in such number as would result (except for the provisions of this paragraph) in
the issuance of a fraction of a share of Common Stock unless
6
<PAGE> 106
the Holder is exercising all Warrants then owned by the Holder. In such event,
the Company shall, upon the exercise of all of such Warrants, issue to the
Holder the largest aggregate whole number of shares of Common Stock called for
thereby upon receipt of the Purchase Price for all of such Warrants and pay a
sum in cash equal to the remaining fraction of a share of Common Stock,
multiplied by its Market Price Per Share (as determined pursuant to Section 9.2
below) as of the last business day preceding the date on which the Warrants are
presented for exercise.
9.2 As used herein, the "Market Price Per Share" with respect
to any class or series of Common Stock on any date shall mean the average
closing price per share of Company's Common Stock for the 20 trading days
immediately preceding such date. The closing price for each such day shall be
the last sale price regular way or, in case no such sale takes place on such
day, the average of the closing bid and asked prices regular way, in either case
on the principal securities exchange on which the shares of such Common Stock of
the Company are listed or admitted to trading or, if applicable, the last sale
price, or in case no sale takes place on such day, the average of the closing
bid and asked prices of such Common Stock on NASDAQ or any comparable system, or
if such Common Stock is not reported on NASDAQ, or a comparable system, the
average of the closing bid and asked prices as furnished by two members of the
National Association of Securities Dealers, Inc. selected from time to time by
the Company for that purpose. If such bid and asked prices are not available,
then "Market Price Per Share" shall be equal to the fair market value of such
Common Stock as determined in good faith by the Board.
10. Certain Amendments
If the warrant identified on Exhibit C attached hereto (the
"Parallel Warrant") or any portion thereof is amended or forfeited other than in
bona fide consideration of services to be rendered to the Company by the holder
thereof with the approval of the Company's Board of Directors, then an equal
portion of the Warrants shall be similarly amended or forfeited at the option of
the Holder upon payment by the Holder to the Company of such consideration, if
any, as is paid to the Company by the holder of the Parallel Warrant in
connection with such amendment or upon payment by the Company to the Holder of
such consideration, if any, as is paid to the holder of the Parallel Warrant by
the Company. If the consideration paid by or to the holder of the Parallel
Warrant is in a form other than cash or cash-equivalents, the consideration to
be paid by or to the Holder shall be calculated on the basis of the fair market
value of such consideration as reasonably determined in good faith by the
Company's Board of Directors. If no consideration is paid in connection with
such amendment or forfeiture, the Warrant shall, at the option of the Holder, be
amended or forfeited in the same fashion as the Parallel Warrant. The Company
shall give the Holder prompt written notice at its address reflected on the
records of the Company of any amendment or forfeiture referred to in this
Section 10.
11. Governing Law
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
7
<PAGE> 107
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed by its officers thereunto duly authorized and
its corporate seal to be affixed hereon, as of this ____ day of _________,
200__.
PRINCETON VIDEO IMAGE, INC.
By:
----------------------------------
Name: Brown F Williams
Title: Chairman
[SEAL]
Attest:
By:
---------------------------------
Name:
Title:
8
<PAGE> 108
EXHIBIT A
NOTICE OF EXERCISE
The undersigned hereby irrevocably elects to exercise,
pursuant to Section 2 of the Warrant Certificate accompanying this Notice of
Exercise, _______ Warrants of the total number of Warrants owned by the
undersigned pursuant to the accompanying Warrant Certificate, and herewith makes
payment of the Purchase Price of such shares in full.
Name of Holder
---------------------------
Signature
---------------------------
Address:
---------------------------
---------------------------
---------------------------
<PAGE> 109
EXHIBIT B
NOTICE OF CONVERSION
The undersigned hereby irrevocably elects to convert, pursuant to Section 7 of
the Warrant Certificate accompanying this Notice of Conversion, _______ Warrants
of the total number of Warrants owned by the undersigned pursuant to the
accompanying Warrant Certificate into shares of the Common Stock of the Company
(the "Shares").
The number of Shares to be received by the undersigned shall be calculated in
accordance with the provisions of Section 7.1 of the accompanying Warrant
Certificate.
Name of Holder:
---------------------------
Signature:
---------------------------
Address:
---------------------------
---------------------------
---------------------------
<PAGE> 110
EXHIBIT C
PARALLEL WARRANT
Warrant No. ____ dated _______________ in the amount of 100,000 shares (held by
Allen & Co.)
<PAGE> 111
[FORM OF WARRANT FOR GROUP K]
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR THE LAWS OF ANY STATE. THEY MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED UNLESS THEY ARE REGISTERED UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
_______ Warrants
PRINCETON VIDEO IMAGE, INC.
WARRANT CERTIFICATE
This warrant certificate ("Warrant Certificate") certifies
that for value received in consideration for certain services rendered, and for
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, _________________________ or registered permitted assigns (the
"Holder") is the owner of the number of warrants ("Warrants") specified above,
each of which entitles the Holder thereof to purchase, at any time on or before
the Expiration Date (as hereinafter defined), one fully paid and non-assessable
share of Common Stock, no par value ("Common Stock"), of Princeton Video Image,
Inc., a New Jersey corporation (the "Company"), at a purchase price of $_______
per share of Common Stock in lawful money of the United States of America in
cash or by certified or cashier's check or a combination of cash and certified
or cashier's check (subject to adjustment as hereinafter provided).
1. Warrant; Purchase Price
Each Warrant shall entitle the Holder initially to purchase
one share of Common Stock of the Company and the purchase price payable upon
exercise of the Warrants (the "Purchase Price") shall initially be $_______ per
share of Common Stock. The Purchase Price and number of shares of Common Stock
issuable upon exercise of each Warrant are subject to adjustment as provided in
Article 6. The shares of Common Stock issuable upon exercise of the Warrants
(and/or other shares of common stock so issuable by reason of any adjustments
pursuant to Article 6) are sometimes referred to herein as the "Warrant Shares."
2. Exercise; Expiration Date
2.1 The Warrants are exercisable, at the option of the
Holder, in whole or in part at any time and from time to time on or after the
date hereof and on or before the Expiration Date, upon surrender of this Warrant
Certificate to the Company together with a duly completed
1
<PAGE> 112
Notice of Exercise, in the form attached hereto as Exhibit A, and payment of an
amount equal to the Purchase Price times the number of Warrants to be exercised.
In the case of exercise of less than all the Warrants represented by this
Warrant Certificate, the Company shall cancel the Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate for
the balance of such Warrants.
2.2 The term "Expiration Date" shall mean 5:00 p.m. New York
time on _______________.
3. Registration and Transfer on Company Books
3.1 The Company shall maintain books for the registration and
transfer of the Warrants and the registration and transfer of the Warrant
Shares.
3.2 Prior to due presentment for registration of transfer of
this Warrant Certificate, or the Warrant Shares, the Company may deem and treat
the registered Holder as the absolute owner thereof.
3.3 Neither this Warrant Certificate, nor the Warrants
represented hereby, may be sold, assigned or otherwise transferred voluntarily
by the Holder, other than to a Permitted Transferee (a "Permitted Transfer"),
without the consent of the Company. As used herein, the following terms shall
have the following definitions. "Affiliate" shall mean a Person that directly,
or indirectly through one or more intermediaries, controls or is controlled by,
or is under common control with, another Person. "Permitted Transferee" means
(i) the Holder and its Affiliates, (ii) any direct or indirect equity holder of
any Person referred to in clause (i) and any Affiliate of one or more of such
equity holders, and (iii) in the case of any of the foregoing Persons in clause
(ii) who is an individual, Permitted Transferee shall include such individual's
immediate family, trusts solely or primarily for the benefit of such person or
such person's immediate family member, and corporations, partnerships, limited
liability companies or other entities in which such individual or such
individual's family members and/or trusts are the majority equity holders as the
case may be. For this purpose, "immediate family" of a person means the person's
spouse, parents, children, adopted children, stepchildren and grandchildren.
"Person" shall mean and include an individual, a corporation, a partnership, a
trust, an unincorporated organization, a limited liability company, a joint
stock corporation, a joint venture, a government or any department, agency or
political subdivision thereof and any other entity. The Company shall register
upon its books any Permitted Transfer of a Warrant Certificate, upon surrender
of same to the Company with a written instrument of transfer duly executed by
the registered Holder or by a duly authorized attorney. Upon any such
registration of Permitted Transfer, new Warrant Certificate(s) shall be issued
to the transferee(s) and the surrendered Warrant Certificate shall be canceled
by the Company. A Warrant Certificate may also be exchanged, at the option of
the Holder, for new Warrant Certificates of different denominations representing
in the aggregate the number of Warrants evidenced by the Warrant Certificate
surrendered.
2
<PAGE> 113
3.4 No sale, transfer, assignment, hypothecation or other
disposition of the Warrant Shares shall be made unless any such transfer,
assignment or other disposition will comply with the rules and statutes
administered by the Securities and Exchange Commission (the "Commission") and
(i) a registration statement under the Securities Act of 1933, as amended (the
"Act"), including such shares is currently in effect, or (ii) in the opinion of
counsel satisfactory to the Company a current registration statement is not
required for such disposition of the shares.
4. Reservation of Shares
The Company covenants that it will at all times reserve and
keep available out of its authorized capital stock, solely for the purpose of
issue upon exercise of the Warrants, such number of shares of capital stock as
shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that all shares of capital stock which shall be issuable upon
exercise of the Warrants shall be duly and validly issued and fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof, and that upon issuance such shares shall be listed on each
national securities exchange or automated over-the-counter trading system, if
any, on which the other shares of such outstanding capital stock of the Company
are then listed.
5. Loss or Mutilation
Upon receipt by the Company of reasonable evidence of the
ownership of and the loss, theft, destruction or mutilation of any Warrant
Certificate and, in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company, or, in the case of mutilation, upon
surrender and cancellation of the mutilated Warrant Certificate, the Company
shall execute and deliver in lieu thereof a new Warrant Certificate representing
an equal number of Warrants.
6. Adjustment of Purchase Price and Number of
Shares Deliverable
6.1 The number of Warrant Shares purchasable upon the
exercise of each Warrant and the Purchase Price with respect to the Warrant
Shares shall be subject to adjustment as follows:
(a) In case the Company shall (i) declare a dividend or
make a distribution on its Common Stock payable in shares of its capital stock,
(ii) subdivide its outstanding shares of Common Stock through stock split or
otherwise, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, or (iv) issue by reclassification of its
Common Stock (including any reclassification in connection with a consolidation
or merger in which the Company is the continuing corporation) other securities
of the Company, the number and/or nature of Warrant Shares purchasable upon
exercise of each Warrant immediately prior thereto shall be adjusted so that the
Holder shall be entitled to receive the kind and number of Warrant Shares or
other securities of the Company which he would have owned or have been entitled
to receive after the happening of any of the events described above, had such
Warrant
3
<PAGE> 114
been exercised immediately prior to the happening of such event or any record
date with respect thereto. Any adjustment made pursuant to this paragraph (a)
shall become effective retroactively as of the record date of such event.
(b) In the event of any capital reorganization or any
reclassification of the capital stock of the Company or in case of the
consolidation or merger of the Company with another corporation (other than a
consolidation or merger in which the outstanding shares of the Company's Common
Stock are not converted into or exchanged for other rights or interests), or in
the case of any sale, transfer or other disposition to another corporation of
all or substantially all the properties and assets of the Company (any such
event, a "Triggering Event"), the Holder of each Warrant shall thereafter be
entitled to purchase (and it shall be a condition to the consummation of any
such reorganization, reclassification, consolidation, merger, sale, transfer or
other disposition that appropriate provisions shall be made so that such Holder
shall thereafter be entitled to purchase) the kind and amount of shares of stock
and other securities and property (including cash) which the Holder would have
been entitled to receive had such Warrants been exercised immediately prior to
the effective date of such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition; and in any such case appropriate
adjustments shall be made in the application of the provisions of this Article 6
with respect to rights and interest thereafter of the Holder of the Warrants to
the end that the provisions of this Article 6 shall thereafter be applicable, as
near as reasonably may be, in relation to any shares or other property
thereafter purchasable upon the exercise of the Warrants. The provisions of this
Section 6.1(b) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales, transfers or other
dispositions.
(c) Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant is adjusted, as provided in this Section 6.1, the
Purchase Price with respect to the Warrant Shares shall be adjusted by
multiplying such Purchase Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of Warrant Shares
purchasable upon the exercise of each Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of Warrant Shares
so purchasable immediately thereafter.
6.2 No adjustment in the number of Warrant Shares purchasable
under the Warrants, or in the Purchase Price with respect to the Warrant Shares,
shall be required unless such adjustment would require an increase or decrease
of at least 1% in the number of Warrant Shares issuable upon the exercise of
such Warrant, or in the Purchase Price thereof; provided, however, that any
adjustments which by reason of this Section 6.2 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All final results of adjustments to the number of Warrant Shares and the
Purchase Price thereof shall be rounded to the nearest one thousandth of a share
or the nearest cent, as the case may be. Anything in this Section 6 to the
contrary notwithstanding, the Company shall be entitled, but shall not be
required, to make such changes in the number of Warrant Shares purchasable upon
the exercise of each Warrant, or in the Purchase Price thereof, in addition to
those required by such Section, as it in its discretion shall determine to be
advisable in order that any dividend or distribution in shares of Common Stock,
subdivision, reclassification or combination of shares of Common
4
<PAGE> 115
Stock, issuance of rights, warrants or options to purchase Common Stock, or
distribution of shares of stock other than Common Stock, evidences of
indebtedness or assets (other than distributions of cash out of retained
earnings) or convertible or exchangeable securities hereafter made by the
Company to the holders of its Common Stock shall not result in any tax to the
holders of its Common Stock or securities convertible into Common Stock.
6.3 Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant or the Purchase Price of such Warrant Shares is
adjusted, as herein provided, the Company shall mail to the Holder, at the
address of the Holder shown on the books of the Company, a notice of such
adjustment or adjustments, prepared and signed by the Chairman of the Board,
Chief Financial Officer or Secretary of the Company, which sets forth the number
of Warrant Shares purchasable upon the exercise of each Warrant and the Purchase
Price of such Warrant Shares after such adjustment, a brief statement of the
facts requiring such adjustment and the computation by which such adjustment was
made.
6.4 The Company shall give notice to the Holder by registered
mail, if at any time prior to the expiration or exercise in full of the
Warrants, any of the following events shall occur:
(a) The Company shall authorize the payment of any dividend
payable in any securities upon shares of Common Stock or authorize the making of
any distribution to the holders of shares of Common Stock;
(b) The Company shall authorize the issuance to all holders of
Common Stock of any additional shares of Common Stock or of rights, options or
warrants to subscribe for or purchase Common Stock or any of any other
subscription rights, options or warrants;
(c) A dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, or sale or conveyance of
the property of the Company as an entirety or substantially as an entirety); or
(d) A capital reorganization or reclassification of the Common
Stock (other than a subdivision or combination of the outstanding Common Stock
and other than a change in the par value of the Common Stock) or any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and that does not result in any reclassification or change of Common
Stock outstanding) or any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially an entirety.
Such giving of notice shall be initiated at least 10 business days prior to the
date fixed as a record date or effective date or the date of closing of the
Company's stock transfer books for the determination of the shareholders
entitled to such dividend, distribution, or subscription rights, or for the
determination of the shareholders entitled to vote on such proposed merger,
consolidation, sale, conveyance, dissolution, liquidation or winding up. Such
notice shall specify such record date or the date of the closing of the stock
transfer books, as the case may be. Failure to provide
5
<PAGE> 116
such notice shall not affect the validity of any action taken in connection with
such dividend, distribution or subscription rights, or proposed merger,
consolidation, sale, conveyance, dissolution, liquidation or winding up.
7. Conversion Rights
7.1 In lieu of exercise of any portion of the Warrants as
provided in Section 2.1 hereof, the Warrants represented by this Warrant
Certificate (or any portion thereof) may, at the election of the Holder, be
converted into the nearest whole number of shares of Common Stock equal to: (1)
the product of (a) the number of shares of Common Stock then issuable upon the
exercise of the Warrants to be so converted and (b) the excess, if any, of (i)
the Market Price Per Share (as determined pursuant to Section 9.2) with respect
to the date of conversion over (ii) the Purchase Price in effect on the business
day next preceding the date of conversion, divided by (2) the Market Price Per
Share with respect to the date of conversion. For example, if the Market Price
per Share on the date of conversion is $4.00 and the Purchase Price is $2.00,
then the Holder would be entitled to receive 15,000 shares of Common Stock upon
conversion of 30,000 Warrants.
7.2 The conversion rights provided under this Section 7
may be exercised in whole or in part and at any time and from time to time while
any Warrants remain outstanding. In order to exercise the conversion privilege,
the Holder shall surrender to the Company, at its offices, this Warrant
Certificate accompanied by a duly completed Notice of Conversion in the form
attached hereto as Exhibit B. The Warrants (or so much thereof as shall have
been surrendered for conversion) shall be deemed to have been converted
immediately prior to the close of business on the day of surrender of such
Warrant Certificate for conversion in accordance with the foregoing provisions.
As promptly as practicable on or after the conversion date, the Company shall
issue and shall deliver to the Holder (i) a certificate or certificates
representing the number of shares of Common Stock to which the Holder shall be
entitled as a result of the conversion, and (ii) if the Warrant Certificate is
being converted in part only, a new certificate of like tenor and date for the
balance of the unconverted portion of the Warrant Certificate.
8. Voluntary Adjustment by the Company
The Company may, at its option, at any time during the term of
the Warrants, reduce the then current Purchase Price to any amount deemed
appropriate by the Board and/or extend the date of the expiration of the
Warrants.
9. Fractional Shares and Warrants; Determination of
Market Price Per Share
9.1 Anything contained herein to the contrary
notwithstanding, the Company shall not be required to issue any fraction of a
share of Common Stock in connection with the exercise of Warrants. Warrants may
not be exercised in such number as would result (except for the provisions of
this paragraph) in the issuance of a fraction of a share of Common Stock unless
6
<PAGE> 117
the Holder is exercising all Warrants then owned by the Holder. In such event,
the Company shall, upon the exercise of all of such Warrants, issue to the
Holder the largest aggregate whole number of shares of Common Stock called for
thereby upon receipt of the Purchase Price for all of such Warrants and pay a
sum in cash equal to the remaining fraction of a share of Common Stock,
multiplied by its Market Price Per Share (as determined pursuant to Section 9.2
below) as of the last business day preceding the date on which the Warrants are
presented for exercise.
9.2 As used herein, the "Market Price Per Share" with
respect to any class or series of Common Stock on any date shall mean the
average closing price per share of Company's Common Stock for the 20 trading
days immediately preceding such date. The closing price for each such day shall
be the last sale price regular way or, in case no such sale takes place on such
day, the average of the closing bid and asked prices regular way, in either case
on the principal securities exchange on which the shares of such Common Stock of
the Company are listed or admitted to trading or, if applicable, the last sale
price, or in case no sale takes place on such day, the average of the closing
bid and asked prices of such Common Stock on NASDAQ or any comparable system, or
if such Common Stock is not reported on NASDAQ, or a comparable system, the
average of the closing bid and asked prices as furnished by two members of the
National Association of Securities Dealers, Inc. selected from time to time by
the Company for that purpose. If such bid and asked prices are not available,
then "Market Price Per Share" shall be equal to the fair market value of such
Common Stock as determined in good faith by the Board.
10. Certain Amendments
If the warrant identified on Exhibit C attached hereto (the "Parallel
Warrant") or any portion thereof is amended or forfeited other than in bona fide
consideration of services to be rendered to the Company by the holder thereof
with the approval of the Company's Board of Directors, then an equal portion of
the Warrants shall be similarly amended or forfeited at the option of the Holder
upon payment by the Holder to the Company of such consideration, if any, as is
paid to the Company by the holder of the Parallel Warrant in connection with
such amendment or upon payment by the Company to the Holder of such
consideration, if any, as is paid to the holder of the Parallel Warrant by the
Company. If the consideration paid by or to the holder of the Parallel Warrant
is in a form other than cash or cash-equivalents, the consideration to be paid
by or to the Holder shall be calculated on the basis of the fair market value of
such consideration as reasonably determined in good faith by the Company's Board
of Directors. If no consideration is paid in connection with such amendment or
forfeiture, the Warrant shall, at the option of the Holder, be amended or
forfeited in the same fashion as the Parallel Warrant. The Company shall give
the Holder prompt written notice at its address reflected on the records of the
Company of any amendment or forfeiture referred to in this Section 10.
11. Governing Law
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
7
<PAGE> 118
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed by its officers thereunto duly authorized and
its corporate seal to be affixed hereon, as of this ____ day of _________,
200__.
PRINCETON VIDEO IMAGE, INC.
By:
------------------------------------------
Name: Brown F Williams
Title: Chairman
[SEAL]
Attest:
By:
----------------------------------------
Name:
Title:
8
<PAGE> 119
EXHIBIT A
NOTICE OF EXERCISE
The undersigned hereby irrevocably elects to exercise,
pursuant to Section 2 of the Warrant Certificate accompanying this Notice of
Exercise, _______ Warrants of the total number of Warrants owned by the
undersigned pursuant to the accompanying Warrant Certificate, and herewith makes
payment of the Purchase Price of such shares in full.
Name of Holder
--------------------------
Signature
--------------------------
Address:
--------------------------
--------------------------
--------------------------
<PAGE> 120
EXHIBIT B
NOTICE OF CONVERSION
The undersigned hereby irrevocably elects to convert, pursuant to Section 7 of
the Warrant Certificate accompanying this Notice of Conversion, _______ Warrants
of the total number of Warrants owned by the undersigned pursuant to the
accompanying Warrant Certificate into shares of the Common Stock of the Company
(the "Shares").
The number of Shares to be received by the undersigned shall be calculated in
accordance with the provisions of Section 7.1 of the accompanying Warrant
Certificate.
Name of Holder:
--------------------------
Signature:
--------------------------
Address:
--------------------------
--------------------------
--------------------------
<PAGE> 121
EXHIBIT C
PARALLEL WARRANT
Warrant No. ____ dated _______________ in the amount of 100,000 shares (held by
Allen & Co.)
<PAGE> 122
SCHEDULE 1.2
FORM OF AGREEMENT TO BECOME MEMBER OF SELLER GROUP
<PAGE> 123
DISCLOSURE SCHEDULE TO
REORGANIZATION AGREEMENT
The following Schedules 3.1(a) through 3.21, inclusive (collectively
referred to as the "Disclosure Schedule") have been prepared in connection with
the Reorganization Agreement dated December 28, 2000 (the "Reorganization
Agreement"), by and among Presencia en Medios, S.A., Eduardo Sitt, David Sitt,
Roberto Sonabend, Presence in Media LLC, Virtual Advertisement LLC, PVI LA, LLC,
Princeton Video Image, Inc., and Princeton Video Image Latin America, LLC.
Unless otherwise defined in this Disclosure Schedule, terms defined in the
Reorganization Agreement shall have the same meaning when used herein.
Any event, fact, circumstance, condition, document or other matter
described in any portion of this Disclosure Schedule shall be deemed a
disclosure for all other portions of the Disclosure Schedule.
Headings have been inserted on this Disclosure Schedule for
convenience of reference only and shall to no extent have the effect of amending
or changing the express description of the representations and warranties of the
Reorganization Agreement or of this Disclosure Schedule as set forth in the
Reorganization Agreement.
<PAGE> 124
SCHEDULE 3.1(a)
CORPORATION ORGANIZATION
The Corporation is in the process of forming subsidiaries in Brazil and
Argentina.
The Corporation has never conducted business under any name other than its
present one.
<PAGE> 125
SCHEDULE 3.1(b)
ORGANIZATION
None.
<PAGE> 126
SCHEDULE 3.2
EQUITY INVESTMENTS
The Corporation is in the process of forming subsidiaries in Brazil and
Argentina which will be named Publicidad Virtual Latinoamerica, Ltda., and
Publicidad Virtual Argentina, S.A., respectively. In connection with the
formation of these subsidiaries, the Corporation has incurred costs and
expenditures in cash in the amount of $323,300 plus travel expenses for the
Brazilian subsidiary and $150,000 plus travel expenses for the Argentinian
subsidiary.
<PAGE> 127
SCHEDULE 3.3(b)
CAPITALIZATION
LLC-3 holds 95,000 shares of the capital stock of the Corporation, and the
Seller holds 5,000 shares of the capital stock of the Corporation.
LLC-2 has only one membership interest outstanding. LLC-1 is the holder of such
interest.
LLC-3 has only one membership interest outstanding. LLC-2 is the holder of such
interest.
<PAGE> 128
SCHEDULE 3.5
ABSENCE OF UNDISCLOSED LIABILITIES
The Corporation has committed to purchase airtime from Televisa for $20,000,000
pesos plus VAT, with such amount evidenced by a note. (See Schedules 3.6 and
3.21)
<PAGE> 129
SCHEDULE 3.6
ABSENCE OF CHANGES
The Seller contributed a portion of a payable (the "PV Payable") in the amount
of $5,000,000 pesos owed to it by the Corporation (such contributed portion of
the PV Payable equal to $2,000,000 pesos) to LLC-1 in exchange for the sole
membership interest of LLC-1. LLC-1 contributed this portion of the PV Payable
to LLC-2 in exchange for the sole membership interest of LLC-2. LLC-2
contributed this portion of the PV Payable to LLC-3 in exchange for the sole
membership interest of LLC-3. LLC-3 contributed this portion of the PV Payable
to the capital of the Corporation in exchange for 95,000 shares of capital stock
of the Corporation. Prior to the Closing, the Corporation may satisfy the
remaining portion of the PV Payable by paying the sum of $3,000,000 pesos to the
Seller.
The Corporation has incurred capitalized leases for various purchases not in
excess of $75,000 in the aggregate.
In connection with the Corporation's commitment to purchase airtime from
Televisa, the Corporation has issued a note to Televisa in the principal amount
of $23,000,000 pesos, which bears interest at TIIE plus 2%. Principal and
interest under this note are due in full on March 1, 2001. The Corporation also
has the ability to prepay this note.
The Corporation has an outstanding loan to David Sitt in the amount of $100,000
pesos and an outstanding loan to Roberto Sonabend in the amount of $100,000
pesos.
The Corporation has made outstanding loans to its employees (other than as
mentioned above to David Sitt and Roberto Sonabend) in an aggregate amount not
in excess of $15,000.
The Corporation paid bonuses in the amount of 15 days of compensation to its
employees in October 2000 and intends to pay year-end bonuses in the amount of
15 days of compensation to its employees. The Corporation also intends to
increase compensation paid to its employees by no more than 15-20% of their
current compensation. The Corporation's management may receive increases in
compensation in excess of the increase applicable to employees set forth in the
prior sentence.
The Corporation has made investments in respect of its proposed subsidiaries in
Brazil and Argentina as set forth in Schedule 3.2.
<PAGE> 130
SCHEDULE 3.7
TAX MATTERS
None.
<PAGE> 131
SCHEDULE 3.8
ASSETS
None
<PAGE> 132
SCHEDULE 3.9
INTELLECTUAL PROPERTY
The Corporation has registered its trademark and logo in the Republic of Mexico.
(See also item 5 of Schedule 3.19)
The Corporation licenses certain Intellectual Property from the Purchaser. No
representation is made with respect to any third party's rights with respect to
such Intellectual Property or as to whether the Corporation's use of such
Intellectual Property violates or infringes the rights of others.
<PAGE> 133
SCHEDULE 3.10
LITIGATION
The Corporation makes no representations as to whether the claims in any U.S.
lawsuits involving the Purchaser have any merit in the Republic of Mexico or
whether such lawsuits or any such claims would have any effect on the
Corporation.
<PAGE> 134
SCHEDULE 3.11
NO DEFAULTS
None.
<PAGE> 135
SCHEDULE 3.12
EMPLOYEES
Consultares Asociados Dasi, S.C. ("Dasi") provides employees and management
services to the Corporation. Dasi's employees are members of a labor union.
(See also item 16 of Schedule 3.19)
<PAGE> 136
SCHEDULE 3.13
COMPLIANCE
None.
<PAGE> 137
SCHEDULE 3.14
INSURANCE
Poliza Qb134730 De Comercial America Contra Perdidas O Danos Causados Cobertura
Dls. $266,831.73
1. Equipo De Computo Silicon Graphics
2. Computadora Sun Sparcstation
3. Computadora Acer Aspire
Computasora Acer Power
4. Computadora Dbm P200 Mmx
5. Computadora Dmb Pii-233
6. Servidor Dbm P200 Mmx
7. Computadora Pent-200
8. 2 Paneles De Parcheo Para Video
9. 2 Paneles De Parcheo Para Audio
10. 1 Monitor Sony Modelo Pvm-20n2u
11. Sistema Avid Mcxpress
12. 1 Tarjeta De Video Targa 2000
13. 2 Discos Duros 9gb Seagate
14. 1 Camara Digital Kodak
15. 1 Tarjeta Pcmcia
16. 1 Computadora Dbm Pii-300
17. 1 Computadora Dbm Pii-300
18. 1 Videocassettera Digital Formato D3
19. 1 Videocassettera Digital Formato D3
20. 1 Computadora Dell Precision 410
21. 1 Computadora Dell Dimensions Serie Hchg1
22. 1 Computadora Ibm Proii
23. 1 Computadora Soi (Silicon Graphics)
24. 1 Videocassettera Sony Thomson Modelo Ttv
25. 1 Camara Digital Marca Jvc
26. 1 Computadora Dbm P11-400
27. 3 Computadora Dbm Piii-450
28. 1 Computadora Dbm Celeron-400
29. 1 Fax Modem Us Robotics
Riesgos: Incendio, Humo, Corto Circuito, Defectos De Fabricacion, Errores De
Manejo, Actos Mai, Intencionados, Perdida O Danos Materiales Causados Por Robo,
Hundimiento De Terreno, Cuerpos Extranos, Otros Danos No Excluidos, Terremoto,
Granizo, Huelgas, Bandalismo, Hurto.
Poliza Mb111504 De Comercial America De Transportes Especifica Por Embarque Por
Dls. $116,000.00
<PAGE> 138
Poliza 7224 De Seguros Atlas Danos Materiales, Huelgas, Ciclon,
1. 1 Computadora Portatil Lap Top Powerbook
2. 1 Computadora Texas Instruments
3. 1 Impresora Hp Deskjet340
4. 1 Telefono Celular Motorola Star Tac
Poliza 0541365 De Gnp Por Una Central Norstar Ox32 Y Su Equipo
Poliza 330-0 De Seguros Bbv-Probursa, S.A. Por Dls. $58,579.00 Por Grabadora
Sony, Spare Station, 4 Equipos 65lc, Y Varios Danos Materiales, Huracan Huelgas
Inundacion, Terremoto, Robo, Etc.
Poliza 7016107 La Latinoamericana Seguros, S.A. Por Rocio Milagros Parodi
Poliza Qb126013 De Comercial America Videos D3
Poliza 4903869 De Gnp Por Automovil Nissan
Poliza 1 430 870 De Seguros Bbv-Probursa Incendio, Extension De Cubierta,
Terremoto, Robo, Valores, Y Responsabilidad Civil Oficina De Laureles.
Poliza Qb140202 De Comercial America Contenidos Ph, Incendio, Responsabilidad
Civil, Cristales, Robo Con Violencia.
Poliza 9320 Des Seguros Atlas Un Video Proyector, Una Consola Sony, Una
Grabadora, Sony 2 Audifonos Sony, Microfono De Condensador, 1 Microfono Vocal, 1
Rack Wagon Black, Un Brazo, Una Computadora Silicon Graphics, Una Computadora
Dimension 4100.
1 Poliza Go10038850 De Seguros Generali Vida Y Gastos Medicos Lic. Ramon Arnau.
1 Poliza Go10038851 De Seguros Generali Vida Y Gastos Medicos Lic. Juan Carlos
Llorden.
1 Poliza Go10038716 De Seguros Generali Vida Ing. Gerardo Iglesias.
1 Poliza Go10039193 De Seguros Generali Vida Y Gastos Medicos Lic. Socorro
Pelaez.
1 Tsuru Blanco Con Seguro De Gnp Poliza 4414358 Amplia
1 Jetta Rojo Con Seguro Gnp Poliza 5374738 Amplia
1 Jetta Plata Con Seguro Gnp Poliza 5374754 Amplia
1 Pointer Verde Con Seguro Gnp Poliza 5412551 Amplia
1 Pointer Plata Con Seguro Gnp Poliza 5412562 Amplia
<PAGE> 139
Publicidad Virtual, Ha Sido Informada Por Princeton Video Image, Que Los Equipos
L-Vis Estan Asegurados Por Ellos Mismos.
<PAGE> 140
SCHEDULE 3.15
CONFLICTS
None.
<PAGE> 141
SCHEDULE 3.18
CONSENTS OR APPROVALS
The Seller is required to provide a foreign investment notice to Mexican
authorities in connection with the transactions contemplated by the Transaction
Documents.
The Seller is required to obtain shareholder approval with respect to the
transactions contemplated by the Transaction Documents.
LLC-2 is required to obtain member approval with respect to the transactions
contemplated by the Transaction Documents.
<PAGE> 142
SCHEDULE 3.19
AGREEMENTS
1. Acta Constitutiva, poderes y subsecuentes asambleas.
2. Contratos con Televisa, S.A. de C.V.
3. Contratos con TV Azteca, S.A. de C.V.
4. Contratos con EPESA (Seleccion Nacional)
5. Registros de Marca
6. Contratos con los Duenos de los Derechos de varias peliculas
Mexicanas.
7. Contratos sub-licenciatario en Peru, Virtual Brokers,S.A.
8. Convenio Comercial con Traffic
9. Acuerdo con Kissinger, McLarty Associates
10. Contratos relevantes con Princeton Video Image, Inc.
11. Carta de intencion Sportshow
12. Convenio ilimitado de Trabajo con Javier Rodriguez
13. Comprobante pago de Impuestos sin erogaciones para remuneraciones
Trabajadores e Instituto Mexicano del Seguro Social (Consultores
Asociados DASI, S.C.)
14. Nomina Consultores Asociados DASI, S.C. con cargo a Publicidad
Virtual, S.A. de C.V.
15. Notas: Salarios y prestaciones adicionales de algunos empleados y
las prestaciones de los Ejecutivos Principales y el Presidente de
Consejo (copies of which have been provided to the Purchaser)
16. Acuerdos varios con sindicatos (Consultores Asociados DASI, SC. Y
Publicidad Virtual, S.A. de C.V.)
17. Nomina de Consultores Asociados DASI, S.C. por cuenta de Publicidad
Virtual, S.A. de C.V.
18. Contrato de Prestacion de Servicios con Asesoria en Logistica
Empresarial, S.A. de C.V.
19. Contrato de Arrendamiento financiero con Arrendadora Financiera
Mifel, S.A. de C.V.
20. Contratos de Arrendamiento con Corporacion Financiera de
Arrendamiento, S.A. de C.V.
21. Contrato de Asesoria entre Publicidad Virtual y Vace Publicidad,
S.A. de C.V., ademas de Convenio de Finiquito entre las mismas.
22. Declaracion Anual normal y complementaria por el ejercicio Fiscal
del ano 1998
<PAGE> 143
y declaracion Anual Normal en 1999.
23. Pago Provisional de Impuestos del mes de junio del 2000 por
Retenciones al Extranjero.
24. Pago Provisional de Impuestos del mes de junio del 2000 por otros
Impuestos.
25. Contrato de Prestacion de Servicios Administrativos y de alta
direccion con Consultores Asociados DASI, S.C.
26. Contrato de Prestacion de Servicios Profesionales con Conceptos y
Promociones, S.A. de C.V.
27. Contrato de prestacion de Servicios de recepcion de senales via
Satelite con Sky Entertainment Services.
28. Contratos Arrendamiento entre Plaza Corporativa Lomas, S.A. de C.V.
y Publicidad Virtual, S.A. de C.V.:
- Contrato de arrendamiento.
- Prestacion de servicios de estacionamientos.
- Prestacion de servicios y Mantenimiento.
29. Contrato de Arrendamiento entre Plaza Corporativa Lomas, S.A. de
C.V. y Proformax, S.A. de C.V.
30. Contrato de Subarrendamiento entre Proformax, S.A. de C.V. y
Publicidad Virtual, S.A. de C.V.
31. Convenio de Modificacion entre Publicidad Virtual y Plaza
Corporativa Lomas, S.A. de C.V
32. Contratos de Arrendamiento financiero con Arrendadora Financiera
Mifel, S.A. de C.V.
33. Contrato de Arrendamiento con Corporacion Financiera de
Arrendamiento, S.A. de C.V.
34. Carta Convenio con Edelman Mexico, S.A. de C.V.
35. Fianzas con: Fianzas MonterreyAetna y BBV Probursa
36. Contratos de deuda en efectivo con Publicidad Virtual Latinoamerica,
LTDA.
37. Acuerdo de Prestacion de servicios Publicitarios con Televisa, S.A.
de octubre del 2000.
38. Contratos Bancarios con: Santander Mexicano, S.A. de C.V., Republic
National Bank of New York (Mexico), S.A. y Banca Mifel, S.A.
39. Contrato Mutuo entre Presencia en Medios, S.A. de C.V. y Publicidad
Virtual, S.A. de C.V. (Sent by fax)
40. Contrato de Comision Mercantil entre Presencia en Medios, S.A. de
C.V. y Publicidad Virtual, S.A. de C.V.
41. Contrato de Reconocimiento de Adeudo entre Presencia en Medios, S.A.
de C.V.
<PAGE> 144
y Publicidad Virtual, S.A. de C.V.
42. Otros poderes:
- Poderes Notariales de Publicidad Virtual, S.A. de C.V.
otorgados a
- Escritura No. 51,078. Poder General a favor de Eduardo
Sitt, Roberto Sonabend y Brown Williams.
- Escritura No. 94,808. Poder para Pleitos y Cobranzes a
favor de Ramon Anau y Rene Galvez.
- Escritura No. 51,136. Poder General a favor de Humberto
Peresa Maya.
- Escritura No. 82,992. Poder General a favor de los
Licenciados: Bernando Gomez Vega, Alejandro Uhthoff,
Manuel M. Soto Gutierrez, Roberto Young Meler, Mario
Ponce Walraven, Horacio Rangel Ortiz, Heriberto Pedraza
Mendoza, Javier Uhthoff Orive, Consuelo Gonzalez y
Carlos Uhthoff Orive.
- Escritura No. 48,828. Poder que otorga Princeton Video Image,
Inc. A favor del Lic. Alfonso de Robina y Bustos.
43. See Schedule 3.2 regarding costs and expenditures relating to the
formation of subsidiaries in Brazil and Argentina.
<PAGE> 145
SCHEDULE 3.21
CONFLICTS OF INTEREST
The Seller and David Sitt guarantee certain leases and contracts of the
Corporation. The Corporation is required to reimburse the Seller for any losses,
liabilities or expenses in connection with such leases and contracts.
David Sitt, a shareholder of the Seller and an officer of the Corporation, and
Humberto Perea, the Corporation's accountant, are the sole shareholders of
Consultores Asociados Dasi, S.C., which provides management services to the
Corporation.
Vace Publicidad, S.A., ("Vace") holds an equity interest in the Seller. The
Corporation and Vace had previously entered into a consulting agreement which
was fully paid and terminated in 1998. (See item 21 of Schedule 3.19)
Alfredo Alchar holds an equity interest in the Seller. Mr. Alchar is the
Chairman and Chief Executive Officer of Comex, which is a customer of the
Corporation.
Jose Madriaga holds an equity interest in the Seller. Mr. Madriaga is a vice
president of BBVA Bancomer, which is a customer of the Corporation.
Eduardo Sitt holds an equity interest in the Seller. Mr. Sitt is a director of
BBVA Bancomer.
Alfonso Celorio Flores holds an equity interest in the Seller. Mr. Flores is an
officer of BBVA Bancomer.
See item 15 of Schedule 3.19.
See item 39 to 41, inclusive, of Schedule 3.19 for transactions between the
Corporation and the Seller. Of these items, the only outstanding transaction is
set forth in item 39 and related to the Corporation's liability to the Seller
(the "PV Payable") for $5,000,000 pesos. The PV Payable has been settled in part
by financing LLC-3's interest in the Corporation as described in Schedule 3.6.
Prior to Closing, the Corporation may satisfy the remaining portion of the PVI
Payable by preparing the sum of $3,000,000 pesos to the Seller.
<PAGE> 146
SCHEDULE 4.1
ORGANIZATION
(c) Jurisdictions where Purchaser is duly qualified and in good standing
to do business.
Purchaser, a New Jersey corporation, is qualified and in good
standing in New Jersey and New York.
(d) Other names that the Purchaser has conducted business under.
Princeton Electronic Billboard, Inc.
<PAGE> 147
SCHEDULE 4.2
SUBSIDIARIES
(a) Princeton Video Image Europe, N.V., with 90% of the outstanding
capital stock owned by Purchaser; Interactive Media, N.V. owns the remaining 10%
of the outstanding capital stock of Princeton Video Image Europe, N.V.
Encumbrances on capital stock or other equity interests of
subsidiaries.
None.
Outstanding subscription rights, options, warrants, convertible or
exchangeable securities or other rights relating to issued or unissued capital
stock or where Purchaser may be bound to issue or grant additional shares of
capital stock or other equity interests.
Warrant(s) to be issued to Frank Aernout, General Manager, for the
purchase of shares of Princeton Video Image Europe, N.V., pursuant to the
employment arrangement entered into by Princeton Video Image Europe, N.V. and
Mr. Aernout; such warrant shares are to be convertible to shares of Princeton
Video Image if an initial public offering of Princeton Video Image, Europe,
stock does not occur within a specified time to be set forth in the
documentation.
Voting trusts, stockholders agreements, proxies or other similar
commitments.
The Shareholder Agreement between Purchaser and Interactive Media,
N.V regarding Princeton Video Image Europe, N.V.
Other ownership interests of the Purchaser or its subsidiaries.
Purchaser owns 1,692,333 shares Pineapplehead, Ltd., an Australian
Company.
(b) Subsidiaries not in good standing, unlicensed or otherwise not
qualified to do business.
None.
<PAGE> 148
SCHEDULE 4.3
CAPITALIZATION
(b)(i) Description of the currently outstanding capital stock of the
Purchaser.
10,075,709 shares of common stock outstanding.
11,363 shares of Series A preferred stock outstanding.
12,834 shares of Series B preferred stock outstanding.
To the Purchaser's knowledge, the following are holders of 5% or
more of the Purchaser's Stock as of September 15, 2000 (table included in
the 10-K/A filed with the SEC on October 27, 2000):
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned(1)
Percent Number
------- ------
<S> <C> <C>
Enrique F. Senior(2) 12.0% 1,335,972
Allen & Company Incorporated(3) 11.6% 1,285,972
Eduardo Sitt(4) 6.6% 672,340
Kern Capital Management, LLC(5) 6.5% 656,100
Presencia en Medios, S.A. de C.V.(6) 6.2% 622,340
Brown F. Williams(7) 5.6% 576,908
</TABLE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to stock options and warrants currently exercisable or exercisable
within 60 days are deemed outstanding for computing the percentage
ownership of the person holding such options and the percentage ownership
of any group of which the holder is a member, but are not deemed
outstanding for computing the percentage ownership of any other person.
Except as indicated by footnote, and subject to community property laws
where applicable, the persons named in the table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
<PAGE> 149
Applicable percentage of ownership is based on 10,061,423 shares of Common
Stock outstanding as of September 15, 2000. 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.
(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 and 200,000 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 and as a placement agent in
connection with the Company's private placement of Common Stock on October
20, 1999, respectively. 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 50,000 shares of Common
Stock underlying options that were exercisable within 60 days of September
15, 2000. 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 and an additional
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. 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. 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 587,408 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 6 immediately below. Includes 50,000
shares of Common Stock underlying options that were exercisable within 60
days of September 15, 2000.
(5) Includes 656,100 shares of Common Stock held by Kern Capital Management,
LLC ("KCM"). Robert E. Kern, Jr. and David Kern are controlling members of
KCM and may be deemed the beneficial owner of the securities owned by KCM.
Robert E. Kern, Jr., David Kern and KCM excessively deny beneficial
ownership of the securities held by KCM.
<PAGE> 150
(6) Includes 587,408 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.
(7) Includes 12,401 shares of Common Stock owned by the Estate of Sandra
Williams, as custodian for Bronwyn Williams, Mr. and Mrs. Williams' minor
daughter, and 53,266 shares owned by the Estate of Sandra Williams, Mr.
Williams' wife. Also includes 321,241 shares of Common Stock and 190,000
shares of Common Stock underlying options that were exercisable within 60
days of September 15, 2000. 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 the
Estate of Sandra Williams, individually and as custodian for Bronwyn
Williams.
(ii) Outstanding warrants, option agreements, convertible securities
or other similar commitments:
Warrants:
--------
<TABLE>
<CAPTION>
WARRANT EXPIRATION NO. OF EXERCISE PRICE /
NUMBER DATE SHARES SHARE
------ ---- ------ -----
<S> <C> <C> <C>
37 11/03/03 13,600 $ 8.00
50 09/15/03 20,000 $ 8.00
52 11/04/04 13,600 $ 8.00
112 04/15/04 450,000 $ 8.00
120 3 years from Commencement 70,000 $20.00
Date (term defined in
Warrant)
127 9/3/05 6,000 $ 8.00
129 04/15/04 10,932 $ 8.00
131 02/09/06 28,226 $ 8.00
132 03/28/06 24,000 $ 8.00
133-141, 12/21/00- 21,572 $ 8.00
144 11/06/01
</TABLE>
<PAGE> 151
<TABLE>
<S> <C> <C> <C>
145 09/03/05 20,000 $ 4.50
174 02/28/04 2,000 $ 8.00
175 02/28/04 2,000 $ 8.00
176 02/28/04 2,000 $ 8.00
177 02/28/04 1,000 $ 8.00
178 04/29/04 22,200 $ 8.00
Representative's 12/16/02 380,000 $ 8.40
Warrants
10/22/06 200,000 $ 6.05
12/16/02 20,000 $ 8.40
</TABLE>
See also 4.23 below with regard to Allen & Company warrants to be issued
for services rendered related to the Transaction, and see 4.19(j) with regard to
warrants which may be issued to Endeavor with regard to a consulting
arrangement.
Options:
Options for the purchase of the common stock of the Company currently
outstanding equal 2,393,307 shares, of which 1,772,497 are exercisable.*
See also 4.2 above with regard to the Aernout warrant pertaining to
Princeton Video Image Europe, N.V., which warrant shares possibly may be
convertible to shares of Purchaser.
*Does not include option grants approved by the Princeton Video Image
Compensation Committee under the Incentive Stock Option Plan on December 20,
2000: Options for 350,000 shares granted to employees at an exercise price equal
to the stock's closing price on Friday, December 15, 2000 (the fair market value
as defined under the Plan); Options for 195,000 shares granted to
Vice-Presidents of the Company at an exercise price again equal to the stock's
closing price on Friday, December 15, 2000 (the fair market value as defined
under the Plan).
(x) Preemptive or similar rights to purchase or acquire shares of
capital stock.
None.
<PAGE> 152
(y) Agreement, restriction or encumbrance (such as a right of first
refusal, right of first offer, proxy, voting agreement, etc.) with respect
to the sale, voting or transfer of any shares of capital stock of the
Purchaser (whether outstanding or issuable upon conversion or exercise of
outstanding securities) to which the Purchaser is a party or which the
Purchaser has knowledge of except as contemplated by this Agreement.
None.
Repurchase Agreements.
The Purchaser is subject to the terms and conditions of the
issued and outstanding shares of Series A and B Preferred Stock for the
repurchase thereof.
Agreements or arrangements pursuant to which the Purchaser is required to
register shares of its Common Stock or any other equity securities under the
Securities Act.
The Purchaser may be required to register certain shares of its Common
Stock in accordance with Warrants issued to Allen & Company (580,000 shares
total) and to Barington Capital (20,000 shares total).
<PAGE> 153
SCHEDULE 4.6
ABSENCE OF UNDISCLOSED LIABILITIES
(b) Obligations or liabilities of any nature (matured or unmatured, fixed
or contingent) which were not provided for or disclosed in the Purchaser
Financial Statements.
None.
<PAGE> 154
SCHEDULE 4.7
ABSENCE OF CHANGES
(a)-(k) Material Changes.
None.
<PAGE> 155
SCHEDULE 4.8
TAX MATTERS
Federal, state and local tax returns not filed by the Purchaser or its
subsidiaries.
None.
<PAGE> 156
SCHEDULE 4.9
ASSETS
Encumbrances, other than Permitted Encumbrances, on property and assets.
None.
<PAGE> 157
SCHEDULE 4.10
INTELLECTUAL PROPERTY RIGHTS
(a) List of Purchaser's and Subsidiaries' material Intellectual Property
Rights.
Patents.
Patent No. 5,264,933, which relates to basic pattern recognition video
insertion technology, was issued on November 23, 1993, will expire on January
28, 2012 and was assigned to Purchaser on January 22, 1992.
Patent No. 5,543,856, which relates to the use of remote insertion of
images that might be useful in a narrow casting application, was issued on
August 6, 1996, will expire on October 27, 2013 and was assigned to Purchaser on
October 22, 1993.
Patent No. 5,627,915, which relates to a pattern recognition system using
templates, was issued on May 6, 1997, will expire on January 31, 2015 and was
assigned to Purchaser on January 30, 1995.
Patent No. 5,808,695, which relates to a method of tracking scene motion
for live video insertion systems, was issued on September 15, 1998 and will
expire on December 29, 2015 and was assigned to Purchaser on December 27, 1995.
Patent No. 5,892,554, which relates to inserting live and moving objects
into scenes, was issued to Purchaser on April 6, 1999, will expire on November
28, 2015, and was assigned to Purchaser on March 31, 1998.
Patent No. 5,953,076, which relates to techniques for occlusion
processing, was issued on September 14, 1999 and will expire on June 12, 2016.
Patent No. 6,100,925, which relates to techniques for combining camera
sensors with image processing, was issued on August 8, 2000, and will expire on
November 25, 2017.
Trademarks.
L-VIS (TM), C-TRAK (TM)
License Grants to Purchaser.
David Sarnoff Research Center, Inc. David Sarnoff Research Center, Inc.
("Sarnoff") has granted the Purchaser a worldwide license to practice Sarnoff's
technology related to the electronic recognition of landmarks, including an
exclusive license covering the specific fields of television advertising and
television sports. The Purchaser has also been granted a non-exclusive license
for use of the Sarnoff technology in all other fields relating to sports or
advertising,
<PAGE> 158
including video production, local video insertion, private networks, medical and
scientific applications and uses by the United States Department of Defense or
any other United States government agency.
General Electric Company. General Electric Company ("GE") granted the
Purchaser a five-year non-exclusive, worldwide license relating to all GE
patents on equipment for electronic recognition of selected landmarks; altering
images in television programs for advertising purposes; or any purpose in
television programs the principal focus of which is sports, as of July 1996.
Theseus Research, Inc. Theseus Research, Inc. ("Theseus") has granted the
Purchaser a non-exclusive, worldwide license to use and sell Theseus' patented
technology for the warping of images in real time.
(b)Third party ownership rights, title, interest, claims in or liens on
any of the Purchaser's or its Subsidiaries' material Intellectual Property
Rights.
See Section 4.11 below regarding litigation regarding Purchaser's
Intellectual Property Rights.
<PAGE> 159
SCHEDULE 4.11
LITIGATION
Princeton Video Image, Inc. v. Scidel USA Ltd. (1999).
Sportvision, Inc. and Fox Sports Productions, Inc. v. Princeton Video
Image, Inc. (1999).
<PAGE> 160
SCHEDULE 4.12
NO DEFAULTS
(a) Default concerning the Purchaser's and Subsidiaries' respective
articles of incorporation or bylaws, or under any note, indenture, mortgage, or
any other material contract, agreement or instrument to which the Purchaser or
its Subsidiaries are a party or by which they or any of their respective
properties are bound or affected.
None.
(b) Default with respect to any order, writ, injunction, judgment or
decree of any court or any federal, state, municipal or other domestic or
foreign governmental department, commission, board, bureau, agency or
instrumentality.
None.
<PAGE> 161
SCHEDULE 4.13
EMPLOYEES
(a) Contracts with labor unions.
None.
<PAGE> 162
SCHEDULE 4.14
COMPLIANCE
(a) Non-compliance with any laws, ordinances, regulations and orders
applicable to their respective businesses or the ownership of their respective
assets.
None.
(b) Governmental licenses and permits necessary or required to enable them
to carry on their respective businesses as now conducted and as presently
proposed to be conducted which have not been acquired.
None.
<PAGE> 163
SCHEDULE 4.15
INSURANCE
Description of each insurance policy maintained by the Purchaser and
its subsidiaries with respect to their properties, assets and business.
Insurance Carrier: Chubb Insurance
Policy Period: November 1, 2000 - November 1, 2001
Coverage
Domestic Package
General Liability
General Aggregate
Products/Completed Ops.
Advertising injury
Each Occurrence
Damage to Rented Premises
Medical Expense Limit
Employee Benefits Liability (Claims Made)
Electronics B&O (Claims Made)
Commercial Property
Commercial Automobile
Ocean Marine Policy
Workers Compensation
International Package Policy
General Liability
Products/Completed Ops.
Advertising Injury
Each Occurrence
Damage to Rented Premises
Medical Expense Limit
Automobile Liability
Foreign Voluntary Workers Comp
Umbrella Liability
<PAGE> 164
Insurance Carrier: Travelers
Policy Period: December 8, 2000-November 1, 2001
Mobile Equipment Coverage
Insurance Carrier: Lloyds of London
Policy Period: December 16, 2000-November 1, 2001
Directors and Officers Liability
Insurance Carrier: TIG
Policy Period: December 16, 2000-November 1, 2001
Excess Directors & Officers
<PAGE> 165
SCHEDULE 4.16
CONFLICTS
None.
<PAGE> 166
SCHEDULE 4.17
No Consents or Approval Required
Consent, approval or authorization of, or declaration to, or filing
with, any Person (governmental or private) required for the valid authorization,
execution, delivery and performance by the Purchaser of the Transaction
Documents or for the valid sale and delivery of the shares of Purchaser's Common
Stock and Purchaser's Warrants included in the Purchase Price.
Majority shareholder consent/approval in accordance with NASDAQ rules.
<PAGE> 167
SCHEDULE 4.19
AGREEMENTS
(a) List of all material contracts, commitments and agreements,
written or oral, and all contracts, commitments and agreements, written or oral
which cannot be terminated by the Purchaser or its Subsidiaries on less than
one-year's notice, to which the Purchaser or its Subsidiaries is a party.
See pertinent portions of filings with the Securities and Exchange
Commission attached hereto as Addendum 1.
License Agreement, to be executed, between Purchaser and Al Faher
Information & Services, Dubai, UAE.
License Agreement, dated December 28, 2000, between Purchaser and
Virtual Media Lab, Inc., Seoul, South Korea.
(a) Contract or contracts for the future purchase of fixed assets or
for the future purchase of materials, supplies or equipment in excess of $75,000
individually or $300,000 in the aggregate.
None.
<PAGE> 168
(b) Contract or contracts for the employment of any officer,
individual employee or other Person on a full-time basis or any contract with
any Person on a consulting basis in excess of $75,000 per year or $300,000 per
year in the aggregate.
<TABLE>
<CAPTION>
Current Annual Compensation
Name and Principal
Position Year Salary Bonus
-------- ---- ------ -----
<S> <C> <C> <C>
Brown F Williams 2000 $250,000 To be determined
Chairman of the Board by the Board of
Directors
Dennis P. Wilkinson 2000 $300,000 To be determined
President and Chief by the Board of
Executive Officer Directors
Lawrence L. Epstein 2000 $160,000 To be determined
Vice President, by the Board of
Finance and Chief Directors
Financial Officer
Samuel A. McCleery 2000 $160,000 To be determined
Vice President of by the Board of
Business Development Directors
Paul Slagle 2000 $175,000 To be determined
Vice President of by the Board of
Sales and Marketing Directors
</TABLE>
Other Employees, Grouped by Salary Range:
<TABLE>
<CAPTION>
Number of Employees Salary Range
------------------- ------------
<S> <C>
9 $75,000 - $89,999
8 $90,000 - $109,999
5 $110,000 - $155,000
</TABLE>
Note: For Princeton Video Image Europe, N.V., Managing director's annual salary
is $145,800. (Based on conversion of the salary from euros to dollars at
the currency exchange rates in effect on 12/15/00).
<PAGE> 169
(c) Bonus, pension, profit-sharing, retirement, stock purchase,
stock option, hospitalization, medical insurance or similar plan, contract or
understanding in effect with respect to employees or any of them or the
employees of others.
Bonus Plan
Amended 1993 Stock Option Plan
Medicare & Dental
Long term Disability
Short Term Disability
401K Plan
Group Life Policy
(d) Agreement or indenture relating to the borrowing of money or to
the mortgaging, pledging or otherwise placing of a lien on any assets of the
Purchaser.
Letter of Credit from Paine Webber in the approximate amount of
$60,000; this is additional surety for a security deposit on leased property.
Capitalized Lease Agreement & Purchase Money Security Interest, The
Associates, Truck & Truck Body, September 30, 1999, in the principal amount of
$71,154.
(e) Loan or guaranty of any obligation for borrowed money or
otherwise.
None.
(f) Lease or leases or agreement or agreements under which the
Purchaser or any Subsidiary is lessee of or holds or operates any property, real
or personal, owned by any other party requiring payments of more than $75,000
per year individually or $300,000 per year in the aggregate.
All real property leases have been previously provided to Sellers.
(g) Lease or agreement under which the Purchaser or any Subsidiary
is lessor of or permits any third party to hold or operate any property, real or
Personal, owned or controlled by the Purchaser or any Subsidiary.
None.
(h) Agreement or agreements or other commitment for capital
expenditures in excess of $75,000 per year individually or $300,000 in the
aggregate.
None.
<PAGE> 170
(i) Contract, agreement or commitment under which the Purchaser or
any Subsidiary is obligated to pay any broker's fees, finder's fees or any such
similar fees, to any third party.
First Union Securities, Inc., under an agreement of August 23, 2000,
subject to consummation, if any, of a financing transaction.
Allen & Company Letter Agreement dated June 14, 2000, as amended.
(j) Contract, agreement or commitment under which the Purchaser or
any Subsidiary has issued, or may become obligated to issue, any shares of
capital stock of the Purchaser or any Subsidiary or any warrants, options,
convertible securities or other commitments pursuant to which the Purchaser or
any Subsidiary is or may become obligated to issue any shares of its capital
stock.
Other than the Reorganization Agreement and Related Transactional
Documents:
The outstanding Warrants and Options set forth in response to
Section 4.3(b) above.
Purchaser has a consulting arrangement with Endeavor, which
has not been reduced to writing, pursuant to which it will pay
Endeavor a commission for its services in common stock,
warrants or options, rather than cash.
See 4.2 with regard to the employment arrangement between
Princeton Video Image Europe, N.V. and Mr. Aernout.
Allen & Company Letter Agreement dated June 14, 2000, as
amended.
Allen & Company for providing fairness opinion on this
transaction.
(k) Any other material contract, agreement, arrangement or
understanding.
None.
(l) Contract or agreement prohibiting it from freely engaging in any
business or competing anywhere in the world.
None.
<PAGE> 171
Addendum 1
1) Research Agreement dated November 1, 1990 between the Company and David
Sarnoff Research Center, Inc., as amended by Agreement dated August 9, 1991,
letter dated July 1, 1992, Letter Agreement dated July 9, 1992, letter dated
November 30, 1992 and Agreement dated June 26, 1995 and effective as of December
31, 1993 (Incorporated by reference to Exhibit 10.4 to the Company's
Registration Statement on Form SB-2 (Registration No. 333-37725) which became
effective on December 16, 1997).
2) License Agreement dated as of July 24, 1996 between the Company and the
General Electric Company (Incorporated by reference to Exhibit 10.5 to the
Company's Registration Statement on Form SB-2 (Registration No. 333-37725) which
became effective on December 16, 1997).
3) Letter Agreement dated May 1, 1993 between the Company and Grupo Sitt, as
amended by Letter Agreement dated June 25, 1993 (Incorporated by reference to
Exhibit 10.6 to the Company's Registration Statement on Form SB-2 (Registration
No. 333-37725) which became effective on December 16, 1997).
4) License Agreement dated as of March 1, 1994 between the Company and
Publicidad Virtual, S.A. de C.V. (Incorporated by reference to Exhibit 10.7 to
the Company's Registration Statement on Form SB-2 (Registration No. 333-37725)
which became effective on December 16, 1997).
5) License Agreement dated December 18, 1995 between the Company and Theseus
Research, Inc. (Incorporated by reference to Exhibit 10.9 to the Company's
Registration Statement on Form SB-2 (Registration No. 333-37725) which became
effective on December 16, 1997).
6) Second Amended and Restated Registration Rights Agreement dated as of
February 2, 1996, as amended by agreement dated October 20, 1997 and by
agreement dated October 30, 1997 (Incorporated by reference to Exhibit 10.10 to
the Company's Registration Statement on Form SB-2 (Registration No. 333-37725)
which became effective on December 16, 1997).
7) Employment Agreement dated January 24, 1997 between the Company and Brown F
Williams (Incorporated by reference to Exhibit 10.11 to the Company's
Registration Statement on Form SB-2 (Registration No. 333-37725) which became
effective on December 16, 1997).
8) Employment Agreement dated March 4, 1997 between the Company and Samuel A.
McCleery (Incorporated by reference to Exhibit 10.13 to the Company's
Registration Statement on Form SB-2 (Registration No. 333-37725) which became
effective on December 16, 1997).
9) Lease Agreement dated July 16, 1997 between the Company and Princeton South
at Lawrenceville One (Incorporated by reference to Exhibit 10.20 to the
Company's Registration Statement on Form SB-2 (Registration No. 333-37725) which
became effective on December 16, 1997).
<PAGE> 172
10) Nonrecourse Promissory Note dated July 31, 1997 of Brown F Williams in favor
of the Company (Incorporated by reference to Exhibit 10.21 to the Company's
Registration Statement on Form SB-2 (Registration No. 333-37725) which became
effective on December 16, 1997).
11) Pledge Agreement dated July 31, 1997 between the Company and Brown F
Williams (Incorporated by reference to Exhibit 10.22 to the Company's
Registration Statement on Form SB-2 (Registration No. 333-37725) which became
effective on December 16, 1997).
12) Nonrecourse Promissory Note dated July 31, 1997 of Samuel A. McCleery in
favor of the Company (Incorporated by reference to Exhibit 10.23 to the
Company's Registration Statement on Form SB-2 (Registration No. 333-37725) which
became effective on December 16, 1997).
13) Pledge Agreement dated July 31, 1997 between the Company and Samuel A.
McCleery (Incorporated by reference to Exhibit 10.24 to the Company's
Registration Statement on Form SB-2 (Registration No. 333-37725) which became
effective on December 16, 1997).
14) Assignment dated January 22, 1992 by Roy Jonathon Rosser and Martin Leach to
the Company regarding a patent (Incorporated by reference to Exhibit 10.25 to
the Company's Registration Statement on Form SB-2 (Registration No. 333-37725)
which became effective on December 16, 1997).
15) Assignment dated October 22, 1993 by Roy Jonathon Rosser and Brown F
Williams to the Company regarding a patent (Incorporated by reference to Exhibit
10.26 to the Company's Registration Statement on Form SB-2 (Registration No.
333-37725) which became effective on December 16, 1997).
16) Assignment dated January 30, 1995 by Roy Rosser, Subhodev Das, Yi Tan and
Peter von Kaenel to the Company regarding a patent (Incorporated by reference to
Exhibit 10.27 to the Company's Registration Statement on Form SB-2 (Registration
No. 333-37725) which became effective on December 16, 1997).
17) Employment Agreement, dated as of February 5, 1998, between the Company and
Lawrence Epstein (Incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K filed with the Securities and Exchange Commission on
February 11, 1998).
18) Letter Agreement dated November 5, 1998 between the Company and CBS Sports,
a division of CBS Broadcasting, Inc. (Incorporated by reference to the Company's
Current Report on Form 8-K filed with the Securities and Exchange Commission on
November 17, 1998).
19) Employment Agreement dated November 23, 1998 between the Company and Dennis
P. Wilkinson (Incorporated by reference to the Company's Current Report on Form
8-K filed with the Securities and Exchange Commission on December 2, 1998).
20) Amendment Agreement dated January 1, 1999 between the Company and Publicidad
Virtual, S.A. de C.V. amending the License Agreement dated March 1, 1994
(Incorporated by
<PAGE> 173
reference to the Company's Current Report on Form 8-K filed with the Securities
and Exchange Commission on April 5, 1999).
21) Stock Purchase Agreement dated January 1, 1999 between the Company,
Presencia en Medios, S.A. de C.V. and Eduardo Sitt. (Incorporated by reference
to the Company's Current Report on Form 8-K filed with the Securities and
Exchange Commission on April 5, 1999).
22) Binding Letter of Intent between NFL International, a division of NFL
Enterprises L.P., and the Company, executed on January 6, 1999 (Incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-QSB for
the quarter ended December 31, 1998, filed on February 12, 1999).
23) Letter Agreement, dated July 19, 1999, between the Company and CanWest
Global Communications Corporation (Incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K filed with the Securities and Exchange
Commission on August 18, 1999).
24) Agreement dated August 9, 1999, between the Company and CBS Sports, a
division of CBS Corporation (Incorporated by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K filed with the Securities and Exchange
Commission on October 28, 1999).
25) Agreement dated August 31, 1999, between the Company and Sistemas de
Publicidad Virtual, S.A. de C.V. (Incorporated by reference to Exhibit 10.3 to
the Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1999 filed on November 15, 1999).
26) Employment Agreement dated September 30, 1999, between the Company and Paul
Slagle (Incorporated by reference to Exhibit 10.4 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1999, filed on November
15, 1999).
27) Form of Subscription Agreement dated October 20, 1999 between the Company
and various subscribers (Incorporated by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1999,
filed on February 14, 2000).
28) Placement Agency Agreement dated October 13, 1999 between the Company and
Allen & Company Incorporated (Incorporated by reference to Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1999,
filed on February 14, 2000).
29) Warrant Certificate dated October 20, 1999 issued to Allen & Company
Incorporated (Incorporated by reference to Exhibit 10.4 to the Company's
Quarterly Report on Form 10-Q for the quarter ended December 31, 1999, filed on
February 14, 2000).
30) Amended 1993 Stock Option Plan (Incorporated by reference to Exhibit 10.5 to
the Company's Quarterly Report on Form 10-Q for the quarter ended December 31,
1999, filed on February 14, 2000).
31) Letter Agreement dated April 21, 2000 between the Company and NFL
International, a
<PAGE> 174
division of NFL Enterprises, L.P. (Incorporated by reference to Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
2000, filed on May 12, 2000).
<PAGE> 175
SCHEDULE 4.21
CONFLICTS OF INTEREST
(a) Officers or directors of Purchaser or any of its Subsidiaries or
stockholders owning 5% or more of the Purchaser's outstanding stock with any
direct or indirect interest in any entity which does business with the Purchaser
or any of its Subsidiaries.
Enrique Senior
Eduardo Sitt
John Torkelsen
(b) Officers or directors of Purchaser or any of its Subsidiaries or
stockholders owning 5% or more of the Purchaser's outstanding stock with any
direct or indirect interest in any property, asset or right which is used by the
Purchaser or any of its Subsidiaries in the conduct of their respective
businesses.
None.
(c) Officers or directors of Purchaser or any of its Subsidiaries or
stockholders owning 5% or more of the Purchaser's outstanding stock or any of
its Subsidiaries with any direct or indirect interest in any contractual
relationship with the Purchaser or its Subsidiaries other than as an employee,
director or stockholder.
Allen & Company, in which Enrique Senior has an interest, has had
and has contractual relationship with the Purchaser, as described in the
Purchaser's required filings with the Securities and Exchange Commission and as
described herein.
Entities, in which John B. Torkelsen has an interest, have had
contractual relationships with the Purchaser, as described in the Purchaser's
required filings with the Securities and Exchange Commission.
Presencia en Medios, an entity in which Eduardo Sitt has an
interest, has had and has contractual relationships with the Purchaser, as
described in the Purchaser's required filings with the Securities and Exchange
Commission and as described in the Reorganization Agreement.
<PAGE> 176
SCHEDULE 4.23
BROKERS OR FINDERS
Agents, brokers, investment bankers or other persons entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement based on
arrangements made by or on behalf of the Purchaser or any of its Subsidiaries.
Upon closing of the transaction, Purchaser will issue to Allen & Company
warrants for the purchase of 100,000 shares of the common stock of Purchaser for
acting as financial advisor in this transaction; such warrant shall be
exercisable at a price per share of common stock under each warrant equal to
110% of the average price per share of common stock of Purchaser for the ten
(10) days immediately preceding the closing of the transaction under the
Reorganization Agreement, with such warrants to be exercisable for a period of
five years from the closing date.
Upon delivery of a fairness opinion with regard to this transaction,
Purchaser will issue to Allen & Company warrants for the purchase of 100,000
shares of the common stock of Purchaser; such warrant shall be exercisable at a
price per share of common stock under each warrant equal to 110% of the average
price per share of common stock of Purchaser for the ten (10) days immediately
preceding the delivery of the fairness opinion, with such warrants to be
exercisable for a period of five years from the closing date. If Allen and
Company does not provide a fairness opinion with regard to the transaction, it
will not be entitled to receive the warrants.
<PAGE> 177
SCHEDULE 5.10
FORM OF EMPLOYMENT AGREEMENT
<PAGE> 178
SCHEDULE 5.11
FORM OF CONSULTANT SERVICES AGREEMENT
<PAGE> 179
CONSULTANT SERVICES AGREEMENT
THIS CONSULTANT SERVICES AGREEMENT (the "Agreement") by and among
Publicidad Virtual, S.A. de C.V., a Mexican Limited Liability Company (the
"Company"), Presencia en Medios, S.A., a Mexican corporation (the "Consultant
Services Organization" or "CSO")(collectively referred to as the "Parties"), is
made this ____ day of _________, 2001.
WHEREAS, the Company and the Consultant Services Organization wish to
enter into an agreement whereby the CSO: (a) agrees to provide certain
consulting services to the Company; (b) agrees to make David Sitt and Roberto
Sonabend available for employment by the Company's [Payroll Service Company];
and (c) agrees to not compete with the Parent and its Subsidiaries, as set forth
herein; and
WHEREAS, Princeton Video Image, Inc., a corporation formed under the
laws of the State of New Jersey, USA, is the Parent corporation of the Company
(the "Parent"); and
WHEREAS, the Parent, as an inducement for the CSO to enter this
Agreement, will guaranty the obligations of the Company with regard to payments
due to the CSO for its services hereunder; and
WHEREAS, the execution and delivery hereof is a condition precedent to
the obligations of the interested parties to close the transactions set forth in
the Reorganization Agreement, dated December _________, 2000, by and among the
CSO, Eduardo Sitt, David Sitt and Roberto Sonabend, Presence in Media, L.L.C.,
Virtual Advertisement, L.L.C., PVI LA, L.L.C., the Parent and Princeton Video
Image, Latin America, L.L.C. (the "Reorganization Agreement"); and
WHEREAS, all terms not defined herein shall have the meanings assigned
to them in the Reorganization Agreement;
NOW therefore, in consideration of the premises, mutual covenants and
promises contained herein, the Parties hereby agree as follows:
1. Agreement of CSO.
1.1. Availability of Certain Employees. As an inducement for
the Company to enter into this Agreement, the CSO shall make Messrs. David Sitt
and Roberto Sonabend available to work for the Company under separate agreements
between the Company or its Affiliate and the respective individual. The Parties
recognize and agree that execution and delivery of the agreements between the
Company or its Affiliate
<PAGE> 180
and both Mr. Sitt and Mr. Sonabend is a condition precedent to the obligations
created under this Agreement.
1.2. Consultant Services. The CSO agrees to provide the
following consulting services to the Company: (a) providing guidance, advice and
assistance in the development of the Company's existing and prospective
customers and (b) developing and maintaining relations with third Parties to
further the Company's objectives (the "Services"). Such Services shall be
provided from time to time as reasonably requested by the Company and as may be
consistent with the time and resources that the CSO is able to devote to the
Company. In providing the Services hereunder, the CSO shall consult with and
report to the Board of Directors of the Company or the Parent.
2. Non-Disclosure. The CSO shall not, at any time during or after
the Term of this Agreement, divulge, furnish or make accessible to anyone (other
than in the regular course of business of the Company) or use for its own
account or for the account of any other person any knowledge or information with
respect to confidential or secret processes, inventions, discoveries,
improvements, formulae, plans, materials, devices or ideas or other know-how,
whether patentable or not, with respect to any confidential or secret
development or research work or with respect to any other confidential or secret
aspects of the Company's business (including, without limitation, customer
lists, supplier lists and pricing arrangements with customers or suppliers)
(collectively, the "Confidential Information"). This Section 2 shall not apply
to any information that (i) is or becomes generally available to the public
other than as a result of a disclosure directly or indirectly by the CSO or its
officers, directors, agents, representatives or personnel, or its independent
contractors, or (ii) is or becomes available to the CSO or its officers,
directors, agents, representatives or personnel on a non-confidential basis from
a person other than the Company or its officers, directors, agents,
representatives or personnel, or its independent contractors, who, to the CSO's
knowledge after due inquiry, is/are not and was/were not bound by a
confidentiality obligation to the Company and is/are not and was/were not
otherwise prohibited from transmitting such information to the CSO.
Upon termination of this Agreement, the CSO shall promptly deliver to
the Company all books, memoranda, plans, records and written data of every kind
relating to the business and affairs of the Company and all copies of
Confidential Information that are then in the possession and control of the CSO
or in the possession or control of any of its officers, directors, agents, or
employees.
3. Non-Competition.
3.1. Term and Scope. The Company and the CSO agree that the
services rendered by the CSO are unique and irreplaceable. In addition to and in
furtherance of this Agreement, the Company on the one hand and the CSO on the
other hand agree that the CSO will have, and prior to the date hereof did have,
access to the Confidential Information and that preserving the proprietary
nature of the Confidential Information is of utmost importance to the Company.
By giving the CSO an opportunity
2
<PAGE> 181
or incentive to breach its obligations to the Company under Section 2 of the
Agreement, any relationship between the CSO and a competitor of the Company or
any Subsidiary during or following the Term of this Agreement will potentially
cause the Company irreparable injury, regardless of the circumstances under
which the Term ends, and even if the CSO is terminated by the Company for Cause
(as hereinafter defined). Therefore, in light of the reasons set forth herein,
the CSO agrees that during the Initial Term of this Agreement and for a period
of six months thereafter (the term of the Non-competition Obligation), the CSO
shall not, directly or indirectly, through any other person, firm, corporation
or other entity (whether as an officer, director, employee, partner, consultant,
holder of equity or debt investment, lender or in any other manner or capacity):
(a) in Central America and South America, design,
manufacture, sell, market, offer to sell or supply
video or television technology similar to that being
developed or sold by the Purchaser and any Subsidiary
of the Purchaser on the Closing Date for any reason;
(b) solicit, induce, encourage or attempt to induce or
encourage any employee of the Purchaser or any
Subsidiary of the Purchaser to terminate his or her
employment with the Purchaser or any Subsidiary of
the Purchaser or to breach any other obligation to
the Purchaser or any Subsidiary of the Purchaser;
(c) solicit, interfere with, disrupt, alter or attempt to
disrupt or alter the relationship, contractual or
otherwise, between the Purchaser or any Subsidiary of
the Purchaser and any customer, potential customer,
or supplier of the Purchaser or Subsidiary of the
Purchaser; or
(d) engage in or participate in any business conducted
under any name that shall be the same as or similar
to the name of the Purchaser, any Subsidiary of the
Purchaser or any trade name used by such Persons.
3.2 Acknowledgment and Agreement as to Scope. The terms and
scope as set forth hereinabove, except for the period to which this provision is
applicable, shall have the same meaning and effect as the provisions included at
Section 8.7 of the Reorganization Agreement. The CSO acknowledges that the
geographic, activity and time limitations contained in this Section 4 are
reasonable in scope and are reasonably required for the adequate protection of
the Company's business. In the event that any such geographic, activity or time
limitation is deemed to be unreasonable by a court of competent jurisdiction,
the CSO shall submit to the reduction of said geographic, activity or time
limitation, in accordance with Section 18, to the maximum extent to which such
paragraph will reach as interpreted by the court in light of the intent of the
Parties as
3
<PAGE> 182
exhibited in this Section 3. In the event that the CSO is in violation of the
restrictive covenants set forth in this Section 3, then the time limitation for
such covenants shall be extended for a period of time equal to the pendency of
any proceedings brought to enforce such covenants, including any appeals taken
as part of such proceedings. This Section 3 is to be specifically governed by
the laws of Mexico, without regard to its conflicts of laws principles, and
shall not be deemed unenforceable, restricted or otherwise limited except with
specific reference to the law of Mexico. In addition, if the Purchaser shall
fail to comply with its obligations under Section 7.1 of the Reorganization
Agreement, and such failure is not cured within ten (10) days after notice of
such failure from any member of the Seller Group, then CSO's obligations under
this Section 3 shall immediately terminate.
3.3 Effect of Breach.
(a) Violation by the CSO. In the event of a breach of the
Non-competition obligations under this Section 3 by
the CSO, or by Mr. Sitt or Mr. Sonabend under their
respective Employment Agreements, or by the Seller
Group or any member thereof under the Reorganization
Agreement, then the CSO shall forfeit any right or
entitlement to any benefit of Section 5.2 hereof,
regarding payment of the Contingent Service Fee. In
the event of a breach by either Mr. Sitt or Mr.
Sonabend of the non-competition obligations under his
or their respective Employment Agreements, the CSO
shall forfeit fifty percent (50%) of the Commission
Override Fee payable under Section 5.3, such portion
of the Commission Override Fee being attributable to
the person who commits such breach. The forfeiture of
the Contingent Service Fee and, if applicable, the
Commission Override Fee shall occur from the initial
act of competition in violation of this Section 3.
(b) Violation by the Company. In the event that the
Company terminates this Agreement without Cause or if
the Parent or the Company or any of their respective
Affiliates breaches an obligation under the
Transaction Documents and fails to cure such breach
within 10 days after notice from the CSO, then the
CSO's obligations under this Section 3 shall
terminate.
4. Remedies.
4.1 Irreparable Harm to the Company. The CSO acknowledges that
irreparable injury would result to the Company if the provisions of Section 2 or
3 were not specifically enforced and agrees that the Company shall be entitled
to any appropriate
4
<PAGE> 183
legal, equitable or other remedy, including injunctive relief, with respect to
any failure to comply with the provisions of said Sections 2 or 3.
4.2. Limitation of CSO's Liability. The CSO will not be liable
for any breach of this of this Agreement, other than for a breach due to fraud
or intentional misconduct, including the willful failure to perform under this
Agreement for a period of thirty days following receipt of notice from the
Company relating to such failure to perform. In the event of any such breach,
the CSO's liability will be limited to five percent (5%) of the Contingent
Service Fee for the year prior to the year of the breach. The Company shall have
no rights to offset any amounts payable to the CSO hereunder against any
liability owed by the CSO or any member of the Seller Group under any of the
Transaction Documents, other than for the CSO's liability, if any, arising from
an act or acts of fraud or intentional misconduct arising under the first two
sentences of this Section 4.2.
5. Fees.
5.1 Service Fees. The Company shall pay to the CSO a
Contingent Service Fee calculated and payable in accordance with Section 5.2
below and a Commission Override calculated and payable in accordance with
Section 5.3 below.
5.2 Contingent Service Fee. The Company shall pay to the CSO,
not later than January 31, or as soon thereafter as practicable, of each year
2001 through 2004 (subject to closing of the transactions contemplated under the
Reorganization Agreement, and if such closing occurs after January 31, 2001,
then the first payment shall be due thirty (30) days after closing, or as soon
thereafter as practicable), for a total of four (4) payments, an aggregate
amount equal to (i) ten percent (10%) of the Adjusted Operating Cash Flow for
the preceding calendar year if Adjusted Operating Cash Flow is greater than $0
but less than $1,000,000, or (ii) twenty percent (20%) of Adjusted Operating
Cash Flow for the preceding calendar year if Adjusted Operating Cash Flow is
$1,000,000 or greater but less than $2,000,000, or (iii) thirty percent (30%) of
Adjusted Operating Cash Flow for the preceding calendar year if Adjusted
Operating Cash Flow for such year is $2,000,000 or greater; provided, however,
the maximum Contingent Service Fee for any given year shall not exceed
$1,200,000; provided, further, that if the closing price of the Common Stock of
Princeton Video Image, Inc., the Company's Parent, as reported on the Nasdaq
National Market or other market, is equal to or greater than $12.00 per share
(such price being adjusted to account for stock splits, stock dividends, or
similar actions by the Company's Parent) on seventy five (75) days during any
given year, the maximum Contingent Service Fee for such year shall not exceed
$900,000. Subject to Section 5.5, the Contingent Service Fee due to the CSO
under this Section shall be determined in good faith by the Board of Directors
of the Company and the Parent.
5.3 Commission Override Fee. In addition to the Contingent
Service Fee set forth in Section 5.2 above, the Company shall pay to the CSO a
commission
5
<PAGE> 184
based upon the Adjusted Operating Cash Flow of the Company for each year as
calculated in accordance with subsections 5.3(a) through (d) below; such
Commission Override Fee shall be payable not later than January 31, or as soon
thereafter as practicable, of each year 2002 through 2005, for a total of four
(4) payments; provided however, that the obligation to pay such Commission
Override Fee under this Section 5.3 is contingent upon the continued employment
by the Company or its Affiliate of Messrs. Sitt and Sonabend, as provided in the
next two sentences. If either Mr. Sitt or Mr. Sonabend or both of them shall
cease to be employed by the Company or its Affiliate at any time during the
Term, the Commission Override Fee (a) shall be reduced by fifty percent (50%) of
the amount calculated in the following sentence if one individual ceases to be
employed by the Company or an Affiliate, or (b) shall no longer be payable if
both Messrs. Sitt or Sonabend cease to be employed by the Company or an
Affiliate, except if the Company terminates Mr. Sitt and/or Mr. Sonabend without
Cause or Mr. Sitt and/or Mr. Sonabend terminate their employment for Good
Reason, as such terms are defined under their respective Employment Agreements,
dated _____________, between respectively, Mr. Sitt and Mr. Sonabend and [the
Payroll Services Company]. Notwithstanding the foregoing, in the event that Mr.
Sitt or Mr. Sonabend dies or becomes disabled during the Term, with disability
defined in accordance with the respective Employment Agreements, then the
Commission Override Fee shall be prorated at the time of the next calculation of
the Commission Override Fee for the period during the preceding calendar year in
which the respective Employee performed services for the Company. The payments
due under this Section 5.3 shall be based upon the following schedule:
(a) on January 31, 2002, or as soon thereafter as
practicable, the Company shall pay to the CSO, in
United States currency, a commission equal to four
percent (4%) of the Company's Adjusted Operating Cash
Flow for the preceding calendar year plus the
Commission Override Fee based on the Company's
Adjusted Operating Cash Flow for the preceding
calendar year;
(b) on January 31, 2003, or as soon thereafter as
practicable, the Company shall pay to the CSO, in
United States currency, a commission equal to six
percent (6%) of the Company's Adjusted Operating Cash
Flow for the preceding calendar year plus the
Commission Override Fee based on the Company's
Adjusted Operating Cash Flow for the preceding
calendar year;
(c) on January 31, 2004, or as soon thereafter as
practicable, the Company shall pay to the CSO, in
United States currency, a commission equal to eight
percent (8%) of the Company's Adjusted Operating Cash
Flow for the preceding calendar year plus the
Commission Override Fee
6
<PAGE> 185
based on the Company's Adjusted Operating Cash Flow
for the preceding calendar year;
(d) on January 31, 2005 (and January 31 of subsequent
years during any extension of this Agreement as
provided in Section 6.2 hereof), or as soon
thereafter as practicable, the Company shall pay to
the CSO, in United States currency, a commission
equal to eight percent (8%) of the Company's Adjusted
Operating Cash Flow for the preceding calendar year
plus the Commission Override Fee based on the
Company's Adjusted Operating Cash Flow for the
preceding calendar year.
Subject to Section 5.5, the Commission Override Fee due to the CSO
under this Section shall be determined in good faith by the Board of Directors
of the Company and of the Parent.
5.4 Definitions Applicable to Section 5. The following
capitalized terms as used in this Section shall have the meanings specified
below:
(a) "Affiliate Specified Services", as used in this
Section, shall mean all services which are of the
type which the Company and the Parent provide to
unaffiliated third parties as their primary business
focus, are performed for or at the request of the
Company by Parent or its Subsidiaries or any
Affiliate of the Company and which the CSO, David
Sitt or Roberto Sonabend agree are Affiliate
Specified Services, such agreement not to be
unreasonably withheld. For purposes of this
definition, Affiliate Specified Services shall
include video production, programming, video
insertion, hardware sales, hardware installation and
repair, and other similar services and sales and
licenses of software, know-how, developments and
other intellectual property (collectively, "IP") if
such IP is developed for the Company and is not made,
sold or licensed or otherwise made available by the
Parent or its Subsidiaries (other than the Company)
or any Affiliate of the Company to any unaffiliated
third parties, and shall exclude general and
administrative, technical assistance, research and
development, advisory, know-how, training (at
Parent's U.S. based locations, in accordance with
Parent's past practice), consulting and other similar
services, and sales and licenses of IP except as
specifically provided above, and except to the extent
necessary and appropriate for the delivery of the
Affiliate Specified Services.
7
<PAGE> 186
(b) "Company Specified Services", as used in this
Section, shall mean all services which are performed
by the Company for or at the request of Parent or its
Subsidiaries or any Affiliate of the Company and
which the CSO, David Sitt or Roberto Sonabend agree
are Company Specified Services, such agreement not to
be unreasonably withheld.
(c) "Specified Services", as used in this Section, shall
mean Affiliate Specified Services and Company
Specified Services.
(d) "Operating Cash Flow", as used in this Section, shall
mean all of the Company's operating revenue in Mexico
and all of the Company's operating revenue with
respect to Specified Services, less all of the
Company's operating expenses incurred with respect to
operations in Mexico and all of the Company's
operating expenses with respect to Specified
Services, except depreciation, amortization, taxes,
interest, and the Contingent Service Fee. Operating
Cash Flow shall not include (i) revenues recognized
or expenses incurred by the Company with respect to
operations of the Company in any location other than
Mexico, except for revenues and expenses with respect
to Specified Services, it being understood that
operations in Mexico shall include any operating
revenues received by or due to the Company and
operating expenses incurred by the Company with
respect to all programs produced or broadcast in
Mexico, (ii) any extraordinary items of revenue or
expense, (iii) employee profit sharing expense to the
extent incurred by the Company (directly or
indirectly through reimbursement thereof to Princeton
Video Image, Latin America, L.L.C., or to any other
Affiliate of the Company) as required under the laws
of Mexico, and (iv) any income or charge resulting
from the consummation of transactions contemplated
hereby and the Transaction Documents other than the
fees pursuant to Section 11 of the Reorganization
Agreement.
(e) "Adjusted Operating Cash Flow", as used in this
Section, shall mean Operating Cash Flow excluding any
revenue received or due from the Parent or any of its
Subsidiaries or any Affiliate of the Company (other
than Specified Services) or any expense paid or
payable by the Company to the Parent or any of its
Subsidiaries or any Affiliate of
8
<PAGE> 187
the Company (other than Princeton Video Image, Latin
America, L.L.C., or any other Affiliate of the
Company, solely in respect of services included in
Operating Cash Flow in accordance with past practices
between the Company and Consultares Asociados Dasi,
S.C., and other than Specified Services), and shall
be adjusted to include depreciation and amortization
relating to the Company's operations in Mexico, but
not any increase in the amount thereof resulting from
the consummation of the transactions contemplated
hereby and under the Reorganization Agreement by and
between Princeton Video Image, Inc. and Presencia en
Medios, S.A., et. al. and other instruments executed
in accordance therewith, and such other adjustments
as the Parties may agree, with such approval not to
be unreasonably withheld.
(f) Operating Cash Flow and Adjusted Operating Cash flow
shall be calculated in accordance with US GAAP,
provided that if there is a material difference in
the aggregate amount of Operating Cash Flow and/or
Adjusted Operating Cash Flow (other than as a result
of timing differences in the recognition of revenue
and expenses and other than the adjustment referred
to in 5.4(d)(iii) above) under Mexican GAAP and US
GAAP, the parties will in good faith negotiate
whether, in light of the circumstances and
assumptions under which the Contingent Service Fee
and the Commission Override Fee were agreed upon, an
adjustment should be made to the amount of Operating
Cash Flow and/or Adjusted Operating Cash Flow, and if
so the amount of any such adjustment, and any dispute
with respect thereto shall be resolved by the
Compensation Committee of the Parent's Board of
Directors.
5.5 Dispute Resolution Under Section 5. In the event of any
dispute among any of the Parties hereto with regard to the calculation of the
Contingent Service Fee and/or the Commission Override Fee, the Parties agree to
the following method of resolving any such dispute:
(a) As soon as practicable, but in no event later than
fifteen (15) Business Days following the CSO's
receipt of the calculation of the Contingent Service
Fee or the Commission Override Fee for the given
year, the CSO shall notify the Company that the CSO
either accepts or disagrees with the Company's
calculations. In the event that the CSO accepts the
Company's calculations in writing,
9
<PAGE> 188
those calculations shall be final, binding and
unappealable by the Parties.
(b) In the event that the CSO disagrees with the
Company's calculations, the written notice of
disagreement that the CSO sends to the Company shall
also set forth the basis of the CSO's disagreement
and, if practicable, the CSO's own calculation of the
Contingent Service Fee or the Commission Override
Fee.
(c) The Parties agree to attempt in good faith to
negotiate a resolution to their dispute. If the
Parties reach an agreement, they shall set forth the
agreed-upon amounts of the Contingent Service Fee or
the Commission Override Fee, the Operating Cash Flow
and Adjusted Operating Cash Flow in a writing signed
by the Parties (a "Settlement Agreement"), and the
calculations set forth in such Settlement Agreement
shall be final, binding and unappealable by the
Parties.
(d) In the event that a Settlement Agreement is not
executed by the Parties within ten (10) Business Days
following the date on which the Company receives the
CSO's written notice of disagreement under this
Section, the Parties hereby agree to retain an
independent auditor selected by mutual agreement of
the Parties. The independent auditor shall, within
ten (10) Business Days following the retention, send
to the CSO and the Company a written statement
setting forth its calculation of the Contingent
Service Fee or the Commission Override Fee, the
Operating Cash Flow and Adjusted Operating Cash Flow,
as well as the basis for such calculation. Following
the retention of the independent auditor and prior to
the issuance of the independent auditor's statement,
the Parties agree to promptly provide the independent
auditor with any and all documents and information,
financial or otherwise, reasonably requested by the
independent auditor. In the event that the
independent auditor is not provided with such
documents and/or information by either the Company or
the CSO with sufficient promptness to allow the
independent auditor to complete the required
calculations within such 10-day period, the
independent auditor is hereby authorized to withdraw
by sending a written notice to the CSO and the
Company stating which of the Parties has failed to
provide the requested documents and/or
10
<PAGE> 189
information, and the Parties agree that the
calculations of the Party that did not fail to
provide such documents and/or information shall be
deemed to be the final, binding and unappealable
calculations of such figures for purposes of this
Agreement. In the event that the independent auditor
resigns for any reason and fails to state in writing
to the Parties which of the Parties has failed to
provide the documents and/or information requested by
the auditor (or in the event that the auditor states
that both Parties failed to provide such documents
and/or information), the Parties agree that they will
promptly select a new independent auditor in
accordance with the terms of this Section and the
resolution of their dispute shall proceed in
accordance herewith. The independent auditor's
calculation of the Contingent Service Fee or the
Commission Override Fee, the Operating Cash Flow and
Adjusted Operating Cash Flow shall be final, binding
and unappealable by the Parties. The fees and
expenses associated with any such audit shall be
borne as the auditor determines.
6. Term.
6.1. Term of Agreement. Except as specifically provided
herein, and unless renewed as provided in Section 6.2 hereof, this Agreement
shall terminate on December 31, 2004 (the "Initial Term").
6.2 Renewal. The term of this Agreement shall be extended
automatically for a period of one year following the expiration of the Initial
Term and shall be automatically extended thereafter for additional periods of
one year for so long as Mr. Sitt and/or Mr. Sonabend serve as officers of the
Company, unless either Party notifies, in writing, the other Party of the intent
that the Agreement shall not be extended, with such notice of non-renewal to be
given at least ninety (90) days prior to the expiration of the then current
Term. In the event that the Agreement is renewed as provided for in this Section
6.2, then only the Commission Override Fee, as calculated and payable under
Section 5.3, with such calculation to be at the rate set forth in Section 5.3(d)
above. Upon conclusion of the Initial Term and the payment of all Contingent
Services Fees and/or Commission Override Fees due for such Initial Term, the
provisions pertaining to the Contingent Service Fee shall become null and void.
Any reference to the Term herein shall include the Initial Term and any Renewal
Term or either such Initial Term or any Renewal Term, as appropriate in the
context.
6.3 Termination.
11
<PAGE> 190
(a) The CSO may terminate this Agreement at any time upon
one hundred and twenty (120) days prior written
notice to the Company; provided however, that any
termination by the CSO without Good Reason shall
relieve the Company only of the obligation to pay the
Contingent Service Fee under Section 5.2 hereof.
(b) The Company may terminate this Agreement only for a
breach of the non-competition provisions contained
herein (for "Cause"), in which event the termination
will be immediately effective; provided, however,
that any such termination under this Section 6.3(b)
shall be operative only with regard to the Contingent
Service Fee. The provisions of this Agreement
pertaining to Commission Override Fee shall remain in
full force and effect.
7. Representations And Warranties of the CSO.
7.1 The CSO represents and warrants to the Company as of the
date of this Agreement as follows:
7.1.1 Existence and Power. The CSO is duly organized
and validly existing under the laws of Mexico, with corporate power and
authority to engage in the business in which it is engaged, and is duly
authorized and lawfully entitled to carry on its business as now carried on and
that the CSO shall remain so organized and in good standing throughout the Term.
7.1.2 Power and Authority to Contract. The CSO has
the power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. Such execution and delivery by the CSO and
the consummation of such transactions on the part of the CSO have been duly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the CSO are necessary to authorize the execution and delivery of
this Agreement by the CSO or the consummation by the CSO of the transactions
contemplated hereby. Moreover, execution and delivery of this Agreement and
consummation of the transactions contemplated hereby do not and will not result
in any breach or default, or require consent, under any decree, mortgage,
agreement, indenture or other instrument binding upon the CSO.
7.1.3 Valid and Binding Obligation. This Agreement
constitutes, and each instrument to be executed and delivered by the CSO in
accordance herewith shall constitute, the valid and legally binding obligation
of the CSO, enforceable against the CSO in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, and other laws
affecting creditors' rights and by principles of equity.
12
<PAGE> 191
7.1.4 Access to Information. The Company has had
access to any and all material information, including all documents, records and
books, pertaining to the CSO that it deems necessary or appropriate to enable it
to determine whether to enter into this Agreement.
8. Representations And Warranties of the Company.
8.1 The Company represents and warrants to the CSO as of
the date of this Agreement as follows:
8.1.1 Incorporation and Good Standing. The Company is
a limited liability company, duly organized and validly existing under the laws
of Mexico, with corporate power and authority to engage in the business in which
it is engaged, and is duly authorized and lawfully entitled to carry on its
business as now carried on.
8.1.2 Power and Authority to Contract. The Company
has the power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. Such execution and delivery by
the Company and the consummation of such transactions on the part of the Company
have been duly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Company are necessary to authorize the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the transactions contemplated hereby. Moreover, execution and
delivery of this Agreement and consummation of the transactions contemplated
hereby do not and will not result in any breach or default, or require consent,
under any decree, mortgage, agreement, indenture or other instrument binding
upon the Company.
8.1.3 Valid and Binding Obligation. This Agreement
constitutes, and each instrument to be executed and delivered by the Company in
accordance herewith shall constitute, the valid and legally binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency, and other
laws affecting creditors' rights and by principles of equity.
8.1.4 Access to Information. The Company has had
access to any and all material information, including all documents, records and
books, pertaining to the CSO that it deems necessary or appropriate to enable it
to determine whether to enter into this Agreement.
9. Representations And Warranties of the Parent.
9.1 The Parent represents and warrants to the CSO as of the
date of the this Agreement as follows:
13
<PAGE> 192
9.11 Incorporation and Good Standing. The Parent is a
corporation, duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, with corporate power, and authority
to engage in business in which it is engaged, and is duly authorized and
lawfully entitled to carry on its business as now carried on.
9.12 Power and Authority to Contract. The Parent has
the power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. Such execution and delivery by the Parent
and the consummation of such transactions on the part of the Parent have been
duly authorized by all necessary corporate action and no other corporate
proceedings on the part of the Parent are necessary to authorize the execution
and delivery of this Agreement by the Parent or the consummation by the Parent
of the transactions contemplated hereby. Moreover, execution and delivery of
this Agreement and consummation of the transactions contemplated hereby do not
and will not result in any breach or default, or require consent, under any
decree, mortgage, agreement, indenture or other instrument binding upon the
Parent.
9.13 Valid and Binding Obligation. This Agreement
constitutes, and each instrument to be executed and delivered by the Parent in
accordance herewith shall constitute, the valid and legally binding obligation
of the Parent, enforceable against the Parent in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency, and other
laws affecting creditors' rights and by principles of equity.
9.14 Access to Information. The Parent has had access
to any and all material information, including all documents, records and books,
pertaining to the CSO that it deems necessary or appropriate to enable it to
determine to enter into this Agreement.
10. Guaranty of the Company's Obligations. In consideration of the
benefits which will accrue to the Parent, and as an inducement for and in
consideration of the CSO entering this Agreement with the Company, Parent
hereby, irrevocably and unconditionally, guarantees the collection of all of the
Company's obligations to the CSO hereunder. The Parent and the Company, jointly
and severally, agree that, during the Term of this Agreement, neither the Parent
nor any Subsidiary, nor any Affiliate of the Company, will conduct any business
operations in Mexico in competition with, as a joint venture, partnership or
otherwise with the Company and the Company shall be the exclusive entity through
which the Parent and all Affiliates of the Company operate in Mexico. The Parent
and the Company, jointly and severally, agree that, during the Term of this
Agreement, they will make and will cause the Company to make good faith and
commercially reasonable efforts to maintain, develop and expand the business of
the Company which is subject to the Contingent Service Fee and the Commission
Override Fee. The Parent further agrees that it will, and will cause the
Company's Affiliates to, license IP to the Company and shall, and shall cause
the Company's Affiliates to, provide upgrades and training with respect thereto
in accordance with the Company's past
14
<PAGE> 193
practices, and amounts payable in respect of the foregoing shall not be treated
as an expense in respect of Affiliated Specified Services except as specifically
provided in Section 5.4(a).
11. Assignment. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of the Company and the Parent, including
upon any sale of all or substantially all of the Company's or the Parent's
assets, or upon any merger or consolidation of the Company or the Parent with or
into any other entity (including, without limitation, any change in control of
the Company or the Parent). Insofar as the CSO is concerned, this Agreement,
being personal, may not be assigned, and any such purported assignment shall be
void and of not effect; provided, however, that the CSO may assign to third
parties the right to receive payment under this Agreement.
12. Entire Agreement. This Agreement (as amended from time to time) and
the other writings referred to herein or delivered pursuant hereto, which form a
part hereof, contain the entire agreement among the Parties with respect to the
subject matter hereof and supersede all prior and contemporaneous arrangements
or understandings with respect thereto.
13. Notices. All notices, requests, consents and other communications
hereunder to any Party shall be deemed to be sufficient if contained in a
written instrument delivered in person or duly sent by overnight courier,
facsimile transmission or first class registered or certified mail, return
receipt requested, postage prepaid, addressed to such Party at the address set
forth below or such other address as may hereafter be designated in writing by
the addressee to the addresser listing all Parties:
If to the CSO, to:
Presencia en Medios, SA de CV
Palmas # 735-206
Mexico, DF 11000
MEXICO
Attn: Eduardo Sitt
With a copy (which shall not constitute notice) to:
Fried Frank Harris Shriver & Jacobson
One New York Plaza
New York, NY 10004
Facsimile: 212-859-4000
Attn: Joseph A. Stern, Esq.
If to the Company, to:
Publicidad Virtual, S.A. de C.V.
Paseo de los Laureles 458-301
15
<PAGE> 194
Bosque de las Lomas C.P. 05120
Mexico, DF
MEXICO
Attn: Chairman of the Board of Directors
With a copy (which shall not constitute notice) to:
Smith, Stratton, Wise, Heher & Brennan
600 College Road East
Princeton, New Jersey 08540
Facsimile: 609-987-6651
Attn: Richard J. Pinto, Esquire
With a copy (which shall not constitute notice) to:
Princeton Video Image, Inc.
15 Princess Road
Lawrenceville, New Jersey 08648
Facsimile: 609-912-0044
Attn: Chairman of the Board of Directors
All such notices and communications shall be deemed to have been given in the
case of (a) facsimile transmission, on the date sent, (b) personal delivery, on
the date of such delivery, (c) overnight courier, on the day following delivery
to such courier, and (d) mailing, on the third day after the posting thereof.
14. Modification. The terms and provisions of this Agreement may not be
modified, changed, supplemented or amended, or any of the provisions hereof
waived, temporarily or permanently, except upon a written instrument duly
executed by or on behalf of each Party hereto.
15. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement. Facsimile signatures shall be accepted as originals.
16. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of New Jersey, unless otherwise stated herein, without
regard to its conflict of laws principles.
16
<PAGE> 195
18. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any Party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
19. Arbitration. Any dispute that arises under this Agreement (other
than as set forth in Section 5.5 and other than as set forth in Section 19.1
immediately below) shall be referred by either party to arbitration, which shall
be conducted in accordance with the rules of the American Arbitration
Association (the "Rules"), and which shall take place in Princeton, New Jersey.
In the event of an arbitration involving only two of the parties hereto, there
shall be three arbitrators of whom each of the claimant and the respondent shall
select one in accordance with the Rules. The two named arbitrators shall select
a third arbitrator to serve as presiding arbitrator within thirty (30) calendar
days of the selection of the second arbitrator. In the event of an arbitration
involving more than two parties, there shall be three arbitrators who shall be
jointly nominated by the parties. If any arbitrator has not been named within
the time limits specified herein and in the Rules, such appointment shall be
made by the American Arbitration Association upon the written request of any
claimant or respondent within thirty (30) calendar days of such request. The
decision of such arbitrators shall be binding, final and unappealable by the
parties. The fees and expenses associated with any such arbitration shall be
borne as the arbitrators determine.
19.1 Exception to Arbitration. Other than as provided in
Sections 5.5 and 19 of this Agreement, the Courts of the United States of Mexico
shall have exclusive jurisdiction of and be the exclusive forum for adjudicating
any claim by the Company that the CSO has committed any breach of Section 1.2 of
this Agreement, pertaining to the provision of Services by the CSO.
20. Judgment Currency, etc.
(a) All references herein to currency shall be references to the
currency of the United States of America. All payments made pursuant to this
Agreement shall be made in United States dollars.
(b) The Company and Parent, jointly and severally, agree to indemnify
the CSO against any loss incurred by the CSO as a result of any judgment or
order being given or made for any amount due hereunder and such judgment or
order being expressed and/or paid in currency (the "Judgment Currency') other
than United States dollars and as
17
<PAGE> 196
a result of any variations as between (i) the rate of exchange at which the
United States dollar amount is converted into the Judgment Currency for the
purpose of such judgment or order, and (ii) the rate of exchange at which the
CSO is able to purchase United States dollars with the amount of the Judgment
Currency actually received by the CSO. The foregoing indemnity shall constitute
separate and independent obligations of the Company and Parent and shall
continue in full force and effect notwithstanding any such judgment or order as
aforesaid. The term "rate of exchange" shall include any premiums and costs or
exchange payable in connection with the purchase of, or conversion into the
relevant currency.
21. Further Assurances. The Parties hereto shall, subsequent to the
date hereof, execute and deliver such further documentation, and take such
further action, in each case without cost to any other Party, as shall be
reasonably requested by such other Party to further evidence and perfect the
completion of the transactions contemplated hereby.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed on their behalf on the day and date first set forth above.
PUBLICIDAD VIRTUAL, S.A. de C.V.
By:_____________________________
Name:___________________________
Title:__________________________
PRESENCIA EN MEDIOS, S.A.
By:_____________________________
Name:___________________________
Title:__________________________
PRINCETON VIDEO IMAGE, INC.
By:_____________________________
Name:___________________________
Title:__________________________
18
<PAGE> 197
SCHEDULE 6.14
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE> 198
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is
entered into as of ____________, by and among Princeton Video Image, Inc. (the
"Company"), a New Jersey corporation, and each of the Persons who are named in
Schedule A to this Agreement, as amended from time to time (collectively, the
"Investors").
PRELIMINARY STATEMENTS
A. As of the date hereof, Presencia en Medios, S.A., a Mexican
corporation and one of the Investors, owns shares of Common Stock and Warrants.
B. The Company and the Investors and certain Persons related to each of
them have entered into the Reorganization Agreement dated as of December __,
2000 (the "Reorganization Agreement"), pursuant to which such Investors are
acquiring shares of Common Stock and Warrants simultaneously with the execution
hereof.
C. The Company and certain of the Investors are entering into
Employment Agreements (the "Employment Agreements") simultaneously with the
execution hereof; in connection with their Employment Agreements, the Company is
granting Warrants to such Investors.
D. In connection with their acquisition of Common Stock and Warrants
pursuant to the Reorganization Agreement and their receipt of Warrants in
connection with their Employment Agreements, the Investors have requested that
the Company grant them registration rights on the terms and conditions set forth
in this Agreement.
E. The Company has determined that it is advisable and in the Company's
best interest to grant all of the Investors registration rights on the terms and
conditions set forth in this Agreement and has agreed to do so.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto hereby agree as follows:
1. Definitions. Unless the context otherwise requires, the terms
defined in this Section 1 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms herein defined. Terms defined in the Preliminary Statements
shall have the meanings assigned to such terms therein.
"Agreement" means this Registration Rights Agreement.
"Board" means the Board of Directors of the Company.
<PAGE> 199
"Common Stock" means the common stock, no par value, of the Company.
"Commission" means the United States Securities and Exchange
Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" means the record or beneficial owner of any Registrable
Security.
"Holders of a Majority of the Registrable Securities" means the Person
or Persons who are the Holders of greater than 50% of the shares of Registrable
Securities then outstanding.
"Person" includes any natural person, corporation, trust, association,
company, partnership, joint venture and other entity and any government,
governmental agency, instrumentality or political subdivision.
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registrable Securities" means (1) all Common Stock or other equity
securities of the Company currently held, acquired on the date hereof or
hereafter acquired by the Investors, (2) all Common Stock or other equity
securities of the Company issued or issuable upon exercise of the Warrants
currently held, acquired on the date hereof or hereafter acquired by the
Investors, and (3) any securities issued or issuable with respect to the Common
Stock referred to in clauses (1) and (2) above by way of a stock dividend or
stock split or in connection with a combination of shares, reclassification,
recapitalization, merger or consolidation or reorganization; provided, however,
that such shares of Common Stock shall only be treated as Registrable Securities
if and so long as they (i) have not been sold to or through a broker or dealer
or underwriter in a public distribution or a public securities transaction; (ii)
have not been sold in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act under Section 4(1) thereof so that
all transfer restrictions and restrictive legends with respect to such Common
Stock are removed upon the consummation of such sale and the seller and
purchaser of such Common Stock receive an opinion of counsel for the Company,
which shall be in form and content reasonably satisfactory to the seller and
buyer and their respective counsel, to the effect that such Common Stock in the
hands of the purchaser is freely transferable without restriction or
registration under the Securities Act in any public or private transaction; or
(iii) have not been sold pursuant to Rule 144.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act or any similar successor rule.
"Securities Act" means the Securities Act of 1933, as amended.
-2-
<PAGE> 200
"Warrants" means any and all warrants, options or convertible or
exchangeable securities issued by the Company, and currently held, acquired on
the date hereof or hereafter acquired by the Investors, which are exercisable,
convertible or exchangeable for Common Stock or other equity securities of the
Company.
2. Demand Registration Rights.
2.1 Grant of Demand Registration Rights.
2.1.1 Subject to the terms of this Agreement and
Sections 8.5 and 9.4 of the Reorganization Agreement, at any time from and after
the date hereof, the Company agrees that the Holder or Holders (the "Requesting
Holder" or "Requesting Holders," as the case may be) shall have the right to
make a total of five (5) requests for registration under the Securities Act of
no less than 150,000 shares of Registrable Securities then held by them (which
number shall be adjusted to reflect any change in the Company's capitalization,
at any time from and after the date hereof, by reason of a reclassification,
recapitalization, reorganization, stock split, reverse stock split, repurchase
of shares or otherwise) on Form S-1 or any similar long-form registration or, if
available, on Form S-2 or Form S-3 or any similar short-form registration
provided, however that the Requesting Holders may not make more than two (2)
requests which result in Demand Registrations in any calendar year. Each such
request for registration must specify the number of Registrable Securities
requested to be registered, the anticipated price per share for such offering
and whether such registration is to be in the form of an underwritten offering.
2.1.2 Within ten (10) days after receipt of any
request for registration by the Requesting Holder or Requesting Holders, as the
case may be, pursuant to Section 2.1.1, the Company shall give written notice of
such requested registration to all other Holders of Registrable Securities and
will use its best efforts to cause to be included in such registration all
Registrable Securities with respect to which the Company has received written
requests for such inclusion not later than thirty (30) days after such other
Holder's receipt of the Company's notice. All registrations referred to in this
Section 2 shall be referred to as "Demand Registrations." If the number of
Registrable Securities to be offered in a Demand Registration is restricted, the
number of shares to be included in such offering shall be determined pursuant to
the provisions of Section 2.3 or Section 2.4, as the case may be.
2.2 Selection of Underwriter(s). If the Requesting Holder or
Requesting Holders, as the case may be, elect to have the offering of
Registrable Securities pursuant to a Demand Registration be in the form of an
underwritten offering, the Holders of a Majority of the Registrable Securities
to be included in such offering shall select and obtain the investment banker or
investment bankers and manager or managers that will administer the offering
(subject to the approval of the Company, not to be unreasonably withheld or
delayed).
-3-
<PAGE> 201
2.3 Priority on Underwritten Demand Registration.
(a) The number of Registrable Securities to be included in a
Demand Registration may be reduced if and to the extent that the underwriter of
securities included in the registration statement shall be of the opinion that
such inclusion would adversely affect the marketing of the securities to be sold
therein; provided, however, that the percentage of the reduction of such
Registrable Securities shall be no greater than the percentage reduction of
securities of other selling stockholders, as such percentage reductions are
determined in the good faith judgment of the Company.
(b) In a Demand Registration in which the Company
participates, such registration statement will include, first, the securities
proposed by the Company to be sold for its own account and, second, the
Registrable Securities subject to any reduction pursuant to Section 2.3(a)
hereof.
(c) In a Demand Registration in which the Company or other
selling shareholders participate, if the aggregate number of shares actually
offered by the Requesting Holders with respect to such registration is less than
75% of the aggregate number of shares such Requesting Holders initially
requested to be offered as a result of a reduction pursuant to Section 2.3(a)
hereof, then such registration shall not count as a Demand Registration
hereunder and such Requesting Holders shall retain their rights hereunder with
respect to the number of Demand Registrations without a reduction as a result of
such registration.
(d) The Requesting Holders may abandon a Demand Registration
at any time. An abandoned Demand Registration shall not count as a Demand
Registration and such Requesting Holders shall retain their rights hereunder
with respect to the number of Demand Registrations without a reduction as a
result thereof if such Requesting Holders, at their option, pay all fees and
expenses in connection with such abandoned registration.
2.4 Limitations on Demand Registration. Notwithstanding any
other provision in this Agreement, the Company shall not be required to effect
any Demand Registration at any time when another registration statement (other
than on Form S-8) of the Company (A) is reasonably foreseen by the Board to be
filed with the Commission within thirty (30) days after the date of request for
Demand Registration, (B) has been filed and not yet become effective, or (C) has
become effective less than six (6) months prior to the date of the request for
Demand Registration.
2.5 Postponement of Demand Registration by the Company. The
Company may postpone for up to 180 days the filing of a registration statement
for a Demand Registration if the Company has delivered a certificate to the
Holders of the Registrable Securities stating that the Board, acting in good
faith, has determined that pursuance of such Demand Registration would be
seriously detrimental to the Company and its shareholders; provided, however,
that in the event of any such postponement, the
-4-
<PAGE> 202
Requesting Holder or Requesting Holders, as the case may be, shall be entitled
to withdraw the request for such Demand Registration and, if such request is
withdrawn, such request shall not count as a Demand Registration hereunder; and
provided, further, that the Company may not exercise its rights under this
Section 2.5 more than once in any twelve-month period.
3. Piggyback Registration Rights.
3.1 Grant of Piggyback Registration Rights. Subject to the
terms of this Agreement and Sections 8.5 and 9.4 of the Reorganization
Agreement, at any time from and after the date hereof at which the Company shall
determine to file a registration statement under the Securities Act (other than
on Form S-4, S-8 or a registration statement on Form S-l covering solely an
employee benefit plan) in connection with the proposed offer and sale for money
of any of its securities whether or not for its own account and/or on behalf of
selling stockholders, the Company agrees promptly to give written notice of its
determination to all Holders. Upon the written request of a Holder given within
thirty (30) days after the receipt of such written notice from the Company, the
Company agrees to use its best efforts to cause all such Registrable Securities,
the Holders of which have so requested registration thereof, to be included in
such registration statement and registered under the Securities Act, all to the
extent requisite to permit the sale or other disposition of the Registrable
Securities to be so registered. All registrations of Registrable Securities
referred to in this Section 3 may be referred to as "Piggyback Registrations."
There is no limitation on the number of Piggyback Registrations which the
Company is obligated to effect. No Piggyback Registration shall relieve the
Company of its obligation to effect Demand Registrations.
3.2 Underwritten Piggyback Registration. If the registration
of which the Company gives written notice pursuant to Section 3.1 is for a
public offering involving an underwriting, the Company agrees to so advise the
Holders as a part of its written notice.
3.3 Priority on Piggyback Registration.
(a) The number of Registrable Shares to be included in a
Piggyback Registration may be reduced if and to the extent that the underwriter
of securities included in the registration statement shall be of the opinion
that such inclusion would adversely affect the marketing of the securities to be
sold therein; provided, however, that the percentage of the reduction of such
Registrable Securities shall be no greater than the percentage reduction of
securities of other selling stockholders, as such percentage reductions are
determined in the good faith judgment of the Company.
(b) In a Piggyback Registration in which the Company
participates, such registration statement will include, first, the securities
proposed by the Company to be sold for its own account and, second, the
Registrable Securities subject to any reduction pursuant to Section 3.3(a)
hereof.
-5-
<PAGE> 203
4. Registration Procedures. If and as often as the Company is required
by the provisions of Section 2 or Section 3 hereof to include shares of
Registrable Securities held by various Holders in a registration statement filed
under the Securities Act, the Company, at its expense and as expeditiously as
possible, agrees to:
4.1 Registration Statement; Period of Effectiveness. In
accordance with the Securities Act and all applicable rules and regulations,
prepare and file with the Commission a registration statement with respect to
such securities (provided that, before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company will furnish to
the counsel selected by the Holders of a Majority of the Registrable Securities
covered by such Registration Statement copies of all such documents to be filed,
which documents will be subject to review of such counsel) and use its best
efforts to cause such registration statement to become and remain effective for
a period of ninety (90) days (or, if such registration statement has been filed
on Form S-3, for a period of one (1) year) and prepare and file with the
Commission such amendments and supplements to such registration statement and
the prospectus contained therein as may be necessary to keep such registration
statement effective and such registration statement and prospectus accurate and
complete during such period of time;
4.2 Agreements and Other Actions. Enter into such customary
agreements (including, if applicable, an underwriting or purchase agreement) and
take such other actions as the Holders of a Majority of the Registrable
Securities being sold or the underwriters, if any, reasonably request in order
to expedite or facilitate the disposition of such Registrable Securities;
4.3 Copies of Registration Statement, Prospectus, Other
Documents. Furnish to the Holders of Registrable Securities participating in
such registration and to the underwriters of the securities being registered
such number of copies of the registration statement and each amendment and
supplement thereto, preliminary prospectus, final prospectus and such other
documents as such underwriters and Holders may reasonably request in order to
facilitate the public offering of such securities;
4.4 Blue Sky Qualification. Use its best efforts to register
or qualify the securities covered by such registration statement under such
state securities or blue sky laws of such jurisdictions as such participating
Holders and underwriters may reasonably request, except that the Company shall
not for any purpose be required to execute a general consent to service of
process or to qualify to do business as a foreign corporation in any
jurisdiction where it is not so qualified, or to subject itself to taxation in
any such jurisdiction;
4.5 Notification of Filing and Effectiveness. Notify the
Holders participating in such registration, promptly after it shall receive
notice thereof, (i) of the date and time when such registration statement, any
pre-effective amendment, the prospectus or any prospectus supplement thereto or
post-effective amendment to the
-6-
<PAGE> 204
registration statement has been filed and, with respect to such registration
statement or any post-effective amendment thereto, when the same has become
effective; and (ii) of any request by the Commission or state securities
authority for amendments or supplements to the registration statement or the
prospectus related thereto or for additional information;
4.6 Preparation of Amendments and Supplements at Holders'
Request. Prepare and file with the Commission, promptly upon the request of any
such Holders, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for such Holders, is required under
the Securities Act or the rules and regulations thereunder in connection with
the distribution of the Registrable Securities by such Holders;
4.7 Correction of Statements or Omissions. Notify such
Holders, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, upon discovery that, or upon the discovery
of the happening of any event as a result of which, the prospectus included in
such registration statement contains an untrue statement of a material fact or
omits any fact necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, and, at the request of
any Holder, the Company will prepare and furnish to such Holder a reasonable
number of copies of a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
4.8 Listing. Unless at least 80% of the members of the
Company's Board of Directors agree otherwise, use its best efforts to cause all
such Registrable Securities to be listed on the Nasdaq National Market, provided
that the Registrable Securities shall be listed on each exchange, if any, on
which similar securities issued by the Company are then listed;
4.9 Transfer Agent. Provide a transfer agent and registrar for
all such Registrable Securities not later than the effective date of the
Registration Statement;
4.10 Stop Orders, Proceedings. Advise such Holders, promptly
after it shall receive notice or obtain knowledge thereof, of the issuance of
any stop order by the Commission suspending the effectiveness of such
registration statement or the initiation or threatening of any proceeding for
that purpose and promptly use its best efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be issued;
4.11 Inspection. Make available for inspection upon request by
any Holder covered by such registration statement, by any managing underwriter
of any distribution to be effected pursuant to such registration statement and
by any attorney, accountant or other agent retained by any such Holder or any
such underwriter, all financial and other records,
-7-
<PAGE> 205
pertinent corporate documents and properties of the Company, and cause all of
the Company's officers, directors and employees to supply all information
reasonably requested by any such Holder, underwriter, attorney, accountant or
agent in connection with such registration statement;
4.12. Legal Opinion and Comfort Letter. Obtain an opinion from
the Company's counsel and a "comfort" letter from the Company's independent
public accountants in customary form and covering such matters as are
customarily covered by such opinions and "comfort" letters delivered to
underwriters in underwritten public offerings, which opinion and letter shall be
reasonably satisfactory to the underwriters, if any, and to the Holders of a
Majority of the Registrable Securities, and furnish to each Holder participating
in the offering and to each underwriter, if any, a copy of such opinion and
letter addressed to such Holder (in the case of the opinion) and underwriter (in
the case of the opinion and the "cold comfort" letter);
4.13. Compliance. Comply with all applicable rules and
regulations of the Commission, and make generally available to its security
holders, as soon as reasonably practicable after the effective date of the
registration statement (and in any event within 16 months thereafter), an
earning statement (which need not be audited) covering the period of at least
twelve consecutive months beginning with the first day of the Company's first
calendar quarter after the effective date of the registration statement, which
earning statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
4.14. Marketing. Make reasonably available its officers,
employees and personnel and otherwise provide reasonable assistance to the
underwriters (taking into account the needs of the Company's businesses and the
requirements of the marketing process) in the marketing of Registrable
Securities in any underwritten offering; and
4.15 Incorporated Documents. Promptly prior to the filing of
any document which is to be incorporated by reference into the registration
statement or the prospectus (after the initial filing of such registration
statement) provide copies of such document to counsel for the selling holders of
Registrable Securities and to each managing underwriter, if any, and make the
Company's representatives reasonably available for discussion of such document
and make such changes in such document concerning the selling holders prior to
the filing thereof as counsel for such selling holders or underwriters may
reasonably request.
5. Expenses. Except as set forth in Section 2.3(d), with respect to
each inclusion of shares of Registrable Securities in a registration statement
pursuant to Section 2 or Section 3 hereof, the Company agrees to bear all fees,
costs and expenses of and incidental to such registration and the public
offering in connection therewith; provided, however, that the Holders
participating in any such registration agree to bear their pro rata share of any
applicable underwriting discount and commissions.
-8-
<PAGE> 206
The fees, costs and expenses of registration to be borne as provided in
the preceding sentence shall include, without limitation, all registration,
filing, listing, and NASD fees, printing expenses, expenses incurred in
connection with any road show, fees and disbursements of counsel and accountants
for the Company, fees and disbursement of counsel for the underwriter or
underwriters, if any, of the securities to be offered (if the Company and/or
selling Holders who have requested registration of their Registrable Securities
are otherwise required to bear such fees and disbursements), all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which such securities are to be registered or
qualified, reasonable fees and disbursements of one firm of counsel for the
Holders who have requested registration of their Registrable Securities, to be
selected by the Holders of a majority of the shares of Registrable Securities to
be included in such registration, and the premiums and other costs of policies
of insurance against liability arising out of such public offering.
6. Underwriting Agreements. In the event any Demand Registration or
Piggyback Registration under this Agreement is an underwritten offering, the
right of any Holder to participate therein, and the inclusion of such Holder's
Registrable Securities therein, shall be subject to such Holder's agreeing to
enter into, together with the Company, an underwriting agreement with the
underwriter or underwriters selected for such underwriting.
7. Indemnification.
7.1 Indemnification by Company. The Company hereby agrees to
indemnify and hold harmless each Holder of Registrable Securities which are
included in a registration statement (and any officer, director, employee,
associate, affiliate, controlling Person, legal counsel and accountants thereof)
pursuant to the provisions of this Agreement from and against, and agrees to
reimburse such Holder (and any officer, director, employee, associate,
affiliate, controlling Person, legal counsel and accountants thereof) with
respect to, any and all claims, actions (actual or threatened), demands, losses,
damages, liabilities, costs or expenses to which such Holder may become subject
under the Securities Act or otherwise, insofar as such claims, actions, demands,
losses, damages, liabilities, costs or expenses arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in such registration statement, any prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
the Company will not be liable in any such case to the extent that any such
claim, action, demand, loss, damage, liability, cost or expense is caused by an
untrue statement or alleged untrue statement or omission or alleged omission so
made in strict conformity with written information furnished by such Holder
specifically for use in the preparation thereof.
-9-
<PAGE> 207
7.2 Indemnification by Holders. Each Holder of shares of
Registrable Securities which are included in a registration statement pursuant
to the provisions of this Agreement hereby agrees, severally and not jointly, to
indemnify and hold harmless the Company, its officers, directors, legal counsel
and accountants and each Person who controls the Company within the meaning of
the Securities Act, from and against, and agrees to reimburse the Company, its
officers, directors, legal counsel, accountants and controlling Persons with
respect to, any and all claims, actions, demands, losses, damages, liabilities,
costs or expenses to which the Company, its officers, directors, legal counsel,
accountants or such controlling Persons may become subject under the Securities
Act or otherwise, insofar as such claims, actions, demands, losses, damages,
liabilities, costs or expenses are caused by any untrue statement of any
material fact contained in such registration statement, any prospectus contained
therein or any amendment or supplement thereto, or are caused by the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance upon and in
strict conformity with written information furnished by such Holder specifically
for use in the preparation thereof. Notwithstanding the foregoing, no Holder
shall be obligated hereunder to pay more than the net proceeds realized by it
upon its sale of Registrable Securities included in such registration statement.
7.3 Indemnification Procedure. Promptly after receipt by a
party indemnified pursuant to the provisions of Section 7.1 or Section 7.2 of
notice of the commencement of any action involving the subject matter of the
foregoing indemnity provisions, such indemnified party will, if a claim therefor
is to be made against the indemnifying party pursuant to Section 7.1 or Section
7.2, notify the indemnifying party of the commencement thereof; but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to an indemnified party otherwise than under this Section 7 and
shall not relieve the indemnifying party from liability under this Section 7
unless such indemnifying party is prejudiced by such omission. In case any such
action is brought against any indemnified party and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any other
indemnifying parties similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party, and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel (in which case the indemnifying party shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties). Upon the permitted assumption by the indemnifying party of the defense
of such action, and approval by the
-10-
<PAGE> 208
indemnified party of counsel, the indemnifying party shall not be liable to such
indemnified party under Section 7.1 or Section 7.2 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof (other than reasonable costs of investigation) unless: (i) the
indemnified party shall have employed separate counsel in connection with the
assertion of legal defenses in accordance with the proviso to the next preceding
sentence; (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time; (iii) the indemnifying party and its counsel do not actively
and vigorously pursue the defense of such action; or (iv) the indemnifying party
has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. No indemnifying party shall be liable to an
indemnified party for any settlement of any action or claim without the consent
of the indemnifying party, and no indemnifying party may unreasonably withhold
its consent to any such settlement. No indemnifying party will consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability with respect to such claim or
litigation.
7.4 Contribution.
7.4.1 If the indemnification provided for in Section
7.1 or Section 7.2 is held by a court of competent jurisdiction to be
unavailable to a party to be indemnified with respect to any claims, actions,
demands, losses, damages, liabilities, costs or expenses referred to therein,
then each indemnifying party under any such Section, in lieu of indemnifying
such indemnified party thereunder, hereby agrees to contribute to the amount
paid or payable by such indemnified party as a result of such claims, actions,
demands, losses, damages, liabilities, costs or expenses in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
statements or omissions which resulted in such claims, actions, demands, losses,
damages, liabilities, costs or expense, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. If, however, the allocation provided in the
second preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative faults but also the relative benefits of the indemnifying party and the
indemnified party as well as any other relevant equitable considerations. The
parties hereto agree that it would not be just and equitable if contributions
pursuant to this Section 7.4 were to be determined by pro rata allocation or by
any other method of allocation which does not take account of the equitable
considerations referred to in the preceding sentences of this Section 7.4.1.
-11-
<PAGE> 209
Notwithstanding the foregoing, the amount any Holder shall be obligated to
contribute pursuant to this Section 7.4 shall be limited to an amount equal to
the per share public offering price (less any underwriting discount and
commissions) multiplied by the number of shares of Registrable Securities sold
by such Holder pursuant to the registration statement which gives rise to such
obligation to contribute (less the aggregate amount of any damages which such
Holder has otherwise been required to pay in respect of such claim, action,
demand, loss, damage, liability, cost or expense or any substantially similar
claim, action, demand, loss, damage, liability, cost or expense arising from the
sale of such Registrable Securities).
7.4.2 No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution pursuant to this Section 7.4 from any person
who was not guilty of such fraudulent misrepresentation.
7.4.3 The indemnification and contribution required
by this Section 7 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
8. Rule 144. The Company shall take all actions reasonably necessary to
enable holders of Registrable Securities to sell such securities without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144, or (ii) any similar rule or regulation hereafter
adopted by the Commission including, without limiting the generality of the
foregoing, filing on a timely basis all reports required to be filed by the
Exchange Act. Upon the request of any Holder, the Company will deliver to such
holder a written statement as to whether it has complied with such requirements.
9. Form S-3. The Company agrees to take such measures and file such
information, documents and reports, as shall be required of it by the Commission
as a condition to the use of Form S-3. The Company also covenants to use its
best efforts to qualify for the use of Form S-3.
10. Shareholder Information. The Company may request each Holder of
Registrable Securities as to which any registration is sought to be effected
pursuant to this Agreement to furnish the Company with such information with
respect to such Holder and the distribution of such Registrable Securities as
the Company may from time to time reasonably request in writing and as shall be
required by law or by the Commission in connection therewith, and each Holder as
to which any registration is sought to be effected pursuant to this Agreement
agrees to furnish the Company with such information.
11. Additional Registration Rights. The Company may grant registration
rights, pari passu with the rights granted in Section 2 and Section 3 of this
Agreement, to persons who become holders of other securities of the Company
subsequent to the date of this Agreement; provided, however, the Company shall
not be obligated to seek or obtain the
-12-
<PAGE> 210
consent of the Investors in order to do so subject to the provisions of Sections
2.3 and 3.3 hereof.
12. Forms. All references in this Agreement to particular forms of
registration statements are intended to include, and shall be deemed to include,
references to all successor forms which are intended to replace, or to apply to
similar transactions as, the forms herein referenced.
13. Standstill. To the extent requested by the managing underwriter of
any registration effected pursuant to Section 3 and offered by the Company, each
Holder will defer the sale of Registrable Shares for a period commencing twenty
(20) days prior and terminating one hundred twenty (120) days after the
effective date of the registration statement, provided that any principal
shareholders of the Company who also have shares included in the registration
statement will also defer their sales for a similar period.
13. Miscellaneous; Termination of Rights.
13.1 Termination. The rights and obligations of the Holders
under this Agreement shall terminate at such time when, pursuant to clause (k)
of Rule 144, the Holders are no longer subject to the volume limitations
contained in clauses (c), (e), (f) and (h) of Rule 144 as determined by counsel
to the Holders.
13.2 Waivers and Amendments.
13.2.1 With the written consent of the Holders of a
Majority of the Registrable Securities, the obligations of the Company to the
Investors and the rights of the Investors under this Agreement may be waived
(either generally or in a particular instance, either retroactively or
prospectively and either for a specified period of time or indefinitely), and
with the same consent the Company may enter into a supplementary agreement for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of any supplemental agreement or
modifying in any manner the rights and obligations hereunder or thereunder of
the Investors and the Company; provided, however, that no such waiver or
supplemental agreement shall reduce the aforesaid proportion of Registrable
Securities, the Holders of which are required to consent to any waiver or
supplemental agreement, without the consent of all of the Holders; and provided,
further, that, without the consent of any of the Holders, the Company may, from
time to time, amend this Agreement in any manner that, viewed in its entirety,
is ameliorative of, or provides all of the Holders with rights that are superior
to or of greater benefit to such Holders than, the rights that such Holders hold
prior to the date of any such amendment. Upon the effectuation of each such
waiver, consent or agreement of amendment or modification, the Company agrees to
give prompt written notice thereof to the Holders who have not previously
consented thereto in writing. Neither this Agreement nor any provision hereof
may be changed, waived, discharged or terminated orally or by course of dealing,
but only by a statement in writing signed by the
-13-
<PAGE> 211
party against which enforcement of the change, waiver, discharge or termination
is sought, except to the extent provided in this Section 13.2. Specifically, but
without limiting the generality of the foregoing, the failure of any Investor at
any time or times to require performance of any provision hereof by the Company
shall in no manner affect the right of any such Investor at a later time to
enforce the same. No waiver by any party of the breach of any term or provision
contained in this Agreement, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such breach, or a
waiver of the breach of any other term or covenant contained in this Agreement.
13.2.2 Notwithstanding the foregoing and without the
consent of any other Holders, the rights and obligations of any Holder under
this Agreement may be transferred to any transferee to whom Registrable
Securities are transferred; provided, however, that: (i) such transfers are in
compliance with all other documents and agreements between the Company and the
Holder making such transfer; (ii) the Holder making such transfer provides the
Company with written notice of the transfer of such Registrable Securities at or
prior to such transfer, advising the Company of the name and address of the
proposed transferee and identifying the securities to be transferred; and (iii)
such proposed transferee agrees in writing to be bound by all of the provisions
of this Agreement. In such event, such transferee shall be added to Schedule A
and become an Investor under this Agreement.
13.3 Effect of Waiver or Amendment. Each Investor acknowledges
that by operation of Section 13.2 the Holders of a Majority of the Registrable
Securities will, subject to the limitations contained in such Section 13.2, have
the right and power to diminish or eliminate certain rights of all of the
Investors under this Agreement.
13.4 Rights of Investors Inter Se. Each Investor shall have
the absolute right to exercise or refrain from exercising any right or rights
which such Investor may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver of any obligation of the Company
under this Agreement and to enter into an agreement with the Company for the
purpose of modifying this Agreement or any agreement effecting any such
modification, and such Investor shall not incur any liability to any other
Investor with respect to exercising or refraining from exercising any such right
or rights.
13.5 Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
delivered, or mailed first class postage prepaid, registered or certified mail.
13.5.1 If to any Investor, addressed to such Investor
at its last known address set forth on the Company's corporate records, or at
such other address as such Investor may specify by written notice to the
Company; or
-14-
<PAGE> 212
13.5.2 If to the Company, at 15 Princess Road,
Lawrenceville, New Jersey 08648, Attention: __________, or at such other address
as the Company may specify by written notice to the Investors.
Each such notice, request, consent and other
communication shall, for all purposes of the Agreement, be treated as being
effective or having been given when delivered, if delivered personally, or, if
sent by mail, at the earlier of its actual receipt or three (3) days after the
same has been deposited in a regularly maintained receptacle for the deposit of
U.S. mail, addressed and postage prepaid as aforesaid.
13.6 Severability. Should any one or more of the provisions of
this Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, all other provisions of this
Agreement and of each other agreement entered into pursuant to this Agreement
shall be given effect separately from the provision or provisions determined to
be illegal or unenforceable and shall not be affected thereby.
13.7 Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto, whether so
expressed or not and, in particular, shall be binding upon and inure to the
benefit of and be enforceable by the Holder or Holders at the time of any of the
Registrable Securities. Subject to the immediately preceding sentence, this
Agreement shall not run to the benefit of or be enforceable by any Person other
than a party to this Agreement and its successors and assigns.
13.8 Headings. The headings of the sections, subsections and
paragraphs of this Agreement have been inserted for convenience of reference
only and do not constitute a part of this Agreement.
13.9 Choice of Law. It is the intention of the parties that
the internal substantive laws, without regard to the laws of conflicts, of the
State of New Jersey should govern the enforceability and validity of this
Agreement, the construction of its terms and the interpretation of the rights
and duties of the parties.
13.10 Consent to Jurisdiction. The parties hereto hereby
irrevocably submit to the exclusive jurisdiction of any New Jersey State or
Federal court sitting in the State of New Jersey, for any action or proceeding
arising out of or related to this Agreement, and the parties hereto hereby
irrevocably agree that all claims in respect of any such action or proceeding
may be heard and determined in New Jersey State court or, to the extent
permitted by law, in such Federal court. The parties hereto hereby irrevocably
waive, to the fullest extent they may effectively do so, the defense of an
inconvenient forum to the maintenance of any such action or proceeding.
13.11 Entire Agreement. This Agreement constitutes the entire
agreement
-15-
<PAGE> 213
among the parties hereto pertaining to the subject matter hereof and supersedes
any and all prior or contemporaneous agreements or understandings of the parties
relating to the subject matter hereof. All such agreements shall terminate and
be of no further force or effect.
13.12 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
with the same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
-16-
<PAGE> 214
IN WITNESS WHEREOF, each of the parties hereto has caused this
Registration Rights Agreement to be executed personally or by a duly authorized
representative thereof as of the day and year first above written.
BY THE COMPANY:
PRINCETON VIDEO IMAGE, INC.
By:
----------------------------
Name:
Title:
BY THE INVESTORS:
-------------------------------
-------------------------------
-------------------------------
-17-
<PAGE> 215
Schedule A
<PAGE> 216
SCHEDULE 6.16
FORM OF STOCK OPTION AGREEMENT
<PAGE> 217
PRINCETON VIDEO IMAGE, INC.
STOCK OPTION AGREEMENT
OPTIONEE: _____________ INCENTIVE STOCK OPTION SHARES: _____________________
ADDRESS: _____________ NON-QUALIFIED STOCK OPTION SHARES: _________________
_____________ EXERCISE PRICE: ____________________________________
DATE OF GRANT: ______________________________________
EXPIRATION DATE: ___________________________________
VESTING SCHEDULE: Subject to the additional provisions of this Stock Option
Agreement (this "Agreement") and the 1993 Stock Option Plan (the "Plan"), as
amended, of Princeton Video Image, Inc. (the "Company"),
MONTHLY VESTING: One thirty-sixth (1/36) of the total number of shares subject
to this Agreement shall vest and shall become exercisable on and after the first
day of the first month following the Date of Grant and an additional one
thirty-sixth (1/36) of the total number of shares subject to this Agreement
shall vest and shall become exercisable on and after the first day of each
subsequent month, until all of the shares are exercisable.
1. Grant of Option. Pursuant to the terms of this Agreement, the
Company hereby grants to the above named Optionee an option (the "Option") to
purchase the total number of shares of Common Stock of the Company ("Shares")
set forth above, at the Exercise Price and in accord with the Vesting Schedule
set forth above, and in all respects subject to the terms, definitions and
provisions of the Plan, a copy of which is attached hereto and which is
incorporated by reference herein. Unless otherwise defined, the terms defined in
the Plan shall have the same defined meanings in this Agreement.
2. Method of Exercise. The Option shall be exercised by the completion
and execution of a notice in the form attached as Exhibit A. The notice shall be
signed by Optionee, shall be delivered in person or by certified mail to the
President or Chief Financial Officer of the company and shall be accompanied by
payment of the exercise price in cash or check. The Option may not be exercised
for a fraction of a Share. The Option may not be exercised and no Shares will be
issued unless such exercise and issuance shall comply with all relevant
provisions of law and the requirements of any automated quotation system or
stock exchange upon which the Shares may then be listed. Assuming such
compliance, for income tax purposes the shares shall be considered transferred
to Optionee on the date on which the Option is exercised with respect to such
Shares. Prior to the issuance of Shares upon exercise of the Option, Optionee
must pay or make adequate provision for any applicable federal or state
withholding obligation of the Company.
3. Termination of Status as an Employee or Consultant. In the event of
termination of Optionee's Continuous Status as an Employee or Consultant,
Optionee may, but only within ninety (90) days after the date of such
termination (but in no event later than the Expiration Date), exercise the
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 this
Option within the time specified herein, this Agreement shall terminate.
4. Breach by Employee. In the event the Employee should breach the
non-competition provisions set forth at Section 9 of the Employment Agreement,
dated _____________, between Employee and Newco (the "Employment Agreement"),
then any vested but unexercised and/or any unvested options hereunder shall be
forfeit and any rights of Employee hereunder shall lapse and become null and
void.
5. Special Remedies Available to Employee. If the Purchaser (as defined
in the Reorganization Agreement referred to herein) shall fail to comply with
its obligations under Section 7.1 of the Reorganization Agreement, dated
December __, 2000, between Princeton Video Image, Inc., and Presencia en Medios,
et al. (the "Reorganization Agreement"), and such failure is not cured within
ten (10) days after notice of such failure from Employee or any member of the
Seller Group, as defined under the Reorganization Agreement, then
notwithstanding anything to the contrary contained herein or in the Plan or in
the Transaction Documents (as defined in the Reorganization Agreement), at the
end of such ten (10) day period, all stock options subject to this Stock Option
Agreement which are not then vested shall immediately vest. Additionally, if any
event pertaining to a change in control of the Company, as specified in Section
4(g) of the Employment Agreement, occurs, then all unvested options hereunder
shall immediately vest and become exercisable in accordance with the terms of
Section 4(g) and 4(h) of the Employment Agreement, which sections are
incorporated by reference as if set forth herein at length.
6. Death or Disability of Optionee. Subject to Section 4 above and
notwithstanding the provisions of Section 3 above, in the event of Optionee's
death or the termination of Optionee's consulting relationship or Continuous
Status as an Employee as a result of Optionee's total and permanent disability
(as defined in Section 22(c)(3) of the Code), Optionee's estate or Optionee (as
the case may be) may, but only within twelve (12) months from the date of death
or such termination (but in no event later than the Expiration Date), exercise
the Option to the extent Optionee was entitled to exercise it at the date of
death or such termination. To the extent that Optionee was not entitled to
exercise the Option at the date of death or such termination, or if Optionee's
estate or Optionee does not exercise the Option to the extent so entitled within
the time specified herein, this Agreement shall terminate.
7. Non-Transferability of Option. 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
<PAGE> 218
Optionee, only by Optionee. The terms of this Agreement shall be binding upon
the executors, administrators, heirs successors and assigns of Optionee.
8. Term of Option. Notwithstanding any provision herein to the
contrary, the Option may not be exercised more than ten years from the Date of
Grant, and may be exercised during such term only in accordance with the Plan
and the terms of this Agreement.
9. Incentive Stock Options. The Option is intended to qualify as an
incentive stock option ("ISO") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") with respect to the Incentive
Stock Option Shares. To the extent that the aggregate fair market value of the
Incentive Stock Option Shares (determined for each Share as of the grant date of
the option covering such Share), together with the aggregate fair market value
of Common Stock subject to any additional ISOs held by Optionee, for which such
options are exercisable for the first time by the Optionee in any calendar year
exceeds $100,000, or any of the terms or conditions of this Option are
inconsistent with the requirements imposed by the Code for treatment of this
Option as an ISO, the Incentive Stock Option Shares shall be considered
Non-Qualified Stock Option Shares.
10. Early Disposition of Stock. If Optionee is an Employee Optionee
understands that, if Optionee disposes of any Shares received under this Option
within two (2) years after the date of this Option or within one (1) year after
such Shares were transferred to Optionee, Optionee will be treated for federal
income tax purposes as having received ordinary income at the time of such
disposition in an amount generally measured as the difference between the price
paid for the Shares and the lower of the fair market value of the Shares at the
date of exercise or the fair market value of the Shares at the date of
disposition. The amount of such ordinary income may be measured differently if
Optionee is an officer, director or 10% shareholder of the Company, or if the
Shares were subject to a substantial risk of forfeiture at the time they were
transferred. Any gain recognized on such a premature sale of the shares in
excess of the amount treated as ordinary income will be characterized as capital
gain. Optionee hereby agrees to notify the Company in writing within thirty (30)
days after the date of any such disposition. The notice shall include Optionee's
name, the number, Exercise Price, exercise date, sales price of the Shares so
disposed, and the date of disposition. Optionee understands that if Optionee
disposes of such Shares at any time after the expiration of such two-year and
one-year holding periods, any gain on such sale will be treated as long-term
capital gain.
11. Tax Consequences. Optionee understands that any of the foregoing
references to taxation are based on federal income tax laws and regulations now
in effect. Optionee has reviewed with Optionee's own tax advisors the federal,
state, local and foreign tax consequences of the transactions contemplated by
this Agreement. Optionee is relying solely on such advisors and not on any
statements or representations of Company or any of its agents. Optionee
understands that the Optionee (and not the Company) shall be responsible for
Optionee's own tax liability that may arise as a result of the transactions
contemplated by this Agreement.
PRINCETON VIDEO IMAGE, INC.
By: ____________________________
Name: __________________________
Title: _________________________
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES HEREUNDER
IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF
THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THE
OPTION, THE PLAN, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING
SCHEDULE DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED EMPLOYMENT
OR CONSULTING FOR ANY PERIOD AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR
THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTING
RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
THIS OPTION HAS BEEN GRANTED PURSUANT TO AN AMENDMENT TO THE COMPANY'S 1993
AMENDED STOCK OPTION PLAN AUTHORIZING AN INCREASE IN THE NUMBER OF SHARES
RESERVED FOR ISSUANCE UNDER THE PLAN. THE AMENDMENT WAS ADOPTED BY THE COMPANY'S
BOARD OF DIRECTORS ON APRIL 5, 2000 AND IS BEING SUBMITTED TO THE SHAREHOLDERS
OF THE COMPANY FOR RATIFICATION. NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO
THE CONTRARY, IN THE EVENT THAT THE AMENDMENT IS NOT RATIFIED BY THE COMPANY'S
SHAREHOLDERS ON OR BEFORE APRIL 5, 2001, NONE OF THE OPTION SHARES UNDER THIS
AGREEMENT WILL BE ELIGIBLE FOR TREATMENT AS QUALIFIED INCENTIVE STOCK OPTION
SHARES UNDER THE INTERNAL REVENUE CODE.
Optionee acknowledges receipt of a copy of the Plan, represents that
Optionee is familiar with the terms and provisions thereof, and hereby accepts
the Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board or
of the Committee upon any questions arising under the Plan. Optionee further
agrees to notify the Company upon any change in the residence address indicated
above.
_______________________________________
Optionee Signature
_______________________________________
2
<PAGE> 219
Optionee's Social Security Number
Dated: ______________________
3
<PAGE> 220
EXHIBIT A
NOTICE OF EXERCISE OF STOCK OPTION
TO: Princeon Video Image, Inc (the "Company")
In accordance with the terms of the Stock Option Agreement, dated
_______________________(the "Option"), between the Company and
_____________________________________ (print name of Optionee), I hereby
exercise the Option to purchase _____shares of Common Stock of the Company at $
_______ per share (total exercise price of $ ____________), effective today's
date by delivery of this notice and payment of the total exercise price.
Attached is cash or a check payable to the Company for the total
exercise price of the shares being purchased. The undersigned confirms the
representations made in the Option.
Please prepare the stock certificates in the following name(s):
__________________________________________________
__________________________________________________
(If the shares of Common Stock are to be registered in name other than
that of Optionee, please provide proof acceptable to the Company of such
person's legal right to exercise the Option, if applicable, and to own the
shares of Common Stock of the Company issued hereunder.)
Sincerely,
_____________________________________
Signature
_____________________________________
Print Name
__________________________
Date
Letter and consideration received
On _______________________
Princeton Video Image, Inc.
By: __________________________
Name: ________________________
Title: _________________________
4
<PAGE> 221
SCHEDULE 6.17(a)
FORM OF CORPORATION'S LETTER
<PAGE> 222
[LETTERHEAD OF PUBLICIDAD VIRTUAL]
Date
Presencia en Medios, SA de CV
Palmas # 735-206
Mexico DF 11000
MEXICO
Attn: Eduardo Sitt
Re: Reorganization Agreement dated as of December __, 2000 by and
among Presencia en Medios, S.A., Eduardo Sitt, David Sitt and
Roberto Sonabend, Presence in Media LLC, Virtual Advertisement LLC,
PVI LA, LLC, Princeton Video Image, Inc., and Princeton Video Image
Latin America, LLC (the "Reorganization Agreement")
Gentlemen:
This letter is to confirm that in consideration of the
Reorganization Agreement and the transactions contemplated thereby and by the
other Transaction Documents (as such term is defined in the Reorganization
Agreement), Publicidad Virtual, S.A. de C.V (the "Corporation") will pay
Presencia en Medios, SA de CV ("Presencia") two million (2,000,000) Pesos,
lawful currency of the United States of Mexico. This amount shall be payable in
whole or in part at any time, with the timing of such payments to be made as the
Corporation's cash position allows, as determined in the Corporation's sole good
faith discretion, provided that this amount shall be paid in full not later than
December 31, 2001. The amount payable hereunder shall be reduced by the sum of
(a) the aggregate of all amounts paid by the Corporation to Presencia after the
date of the Reorganization Agreement and prior to the Closing Date (as such term
is defined in the Reorganization Agreement), other than payments ("Specified
Payments") of not more than three million (3,000,000) Pesos by the Corporation
to Presencia., in respect of the Corporation's payable after giving effect to
the two million (2,000,000) Pesos of capital (as described in the first item
listed on Schedule 3.6 to the Reorganization Agreement), and (b) the excess of
any amounts over three million Pesos (3,000,000), minus the aggregate of
Specified Payments, owed by the Corporation to Presencia on the Closing Date,
other than payments required under this letter and the provisions of the
Consulting Services Agreement dated as of ___________, 2001 between Presencia
and the Corporation and other than any indemnification obligation in respect of
guarantees referred to in Schedule 3.21 of the Reorganization Agreement.
Notwithstanding any other provision of this letter agreement, Princeton Video
Image, Inc. is not guaranteeing this obligation of the Corporation, and
Presencia shall have no right, claim or entitlement against Princeton Video
Image, Inc. for this obligation of the Corporation and shall have no right to
enforce any judgment against the Corporation in any currency other than Pesos.
Very truly yours,
